Energy
  sErvices

Inflation and spiraling costs have impacted us all. The price of gasoline, the cost of eggs, bacon and most other basic needs for food and transportation have exploded in the last few years. To combat these inflationary pressures, employees, unions and workers across all industries are expecting needed salary increases just to commute to work and put food on the table. Many municipalities are wondering, “What can we focus on to make some positive impacts and get a WIN?”

One of the major budget line items for most municipal governments (often just behind salaries and pensions) are their electricity and natural gas payments. Not a surprise to any CBO: utility increases in Arizona have shot up dramatically in the last few years. All the Investor-Owned Utilities (IOUs), such as Southwest Gas, Arizona Public Service (APS) and Tucson Electric Power Company, have seen commercial electricity rate increases skyrocket. From 2020 to 2021, Arizona’s average electricity price increased by 6%, making this the third largest increase in the western United States. The chart below further proves the upward trend of average electricity prices by comparing prices from 2005 to 2021.
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Many experts believe that with the mandated transition to more renewable energy production, the significant upward trend in utility rate increases will continue well into the future. Even as current rates rise, IOUs are slated to continue the upward trajectory on costs. Imagine your total utility bill doubling in the next few years.

According to KAWC, Southwest Gas increased rates in 2023 by 7.6% for residential customers and 13.7% for small business customers. Additionally, the Phoenix Business Journal reports that APS expects an average residential customer monthly bill increase of 13.6%. APS President Ted Geisler told KTAR News 92.3 FM’s Arizona’s Morning News that a proposed monthly base rate increase of at least 23% is necessary but likely won’t make its way to customers.

It is easy to focus on electricity rate increases, but with current energy policies and global market dynamics, natural gas prices have risen at an even faster pace than electricity with residential consumers experiencing upwards of a 36% increase since 2020.
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So, if you are a city manager or city council member, what can you do to blunt these massive utility cost increases? Doing nothing or hoping the problem will go away is not a strategy. Leading cities across Arizona, including the City of Yuma, City of Tucson, City of Sierra Vista and Town of Gilbert, showcase how cities and towns can proactively combat the impact of rising utility costs with investments in modernization, efficiency and sustainability.

The City of Yuma, for example, made strides toward its mission to enhance sustainability by modernizing City facilities with exterior and interior lighting upgrades, park lighting improvements, HVAC and pool boiler replacements, smart building controls and pool pump variable frequency drive and solar array installations. This project relieves approximately $6 million in general funds over the lifecycle of the new equipment, achieving $434,555 in just the first year.

Most municipalities have contemplated energy and sustainability initiatives for years, but the required upfront capital, staff resource constraints, stakeholder coordination and complex analysis makes it hard to get projects off the ground. Cities may take several approaches, but there is one approach that is proven to be the most effective for completing projects in less time, with fewer resources and with lower risk.

Compared to “piece-mealing” projects one at a time or waiting for equipment to break down, a design/build energy services approach allows a city to look at energy holistically and through the lens of the long term. Bundling all pieces of the puzzle together–rather than one or two at a time, as typically done in traditional construction methods–comprehensively addresses deferred maintenance needs, as well as resiliency and sustainability goals. What’s more, is the legislative availability of streamlined procurement options available, which make it easy to competitively procure a single-point of accountability without hiring multiple consulting firms, and incurring all the incremental costs and delays associated with a traditional 4-5 year+ construction/retrofit process.

If energy efficiency and sustainability (plus blunting budget-busting utility increases) are on your to-do list and you are looking for reasons to prioritize energy infrastructure projects in 2023, read on:

TOP REASONS TO ACT NOW

• PRICE & TIMELINE CERTAINTY
  • According to CBRE, construction cost escalations have seen double digit increases for the last two years and are anticipated to escalate. If your city has constructed any facilities or has done any significant construction projects recently, you know firsthand the risks, delays, budget overruns, litigation, etc., that can result.
    
    Not to mention the other delays created by supply chain disturbances, with many components often taking up to 12 months to arrive. The combined impact of inflation and delays are costing billions, forcing many cities to defer decision making or cancel projects altogether. By the time projects are ready to be pursued, it’s common for cities to see projects at double the cost than was originally budgeted in years prior.
    
    Acting NOW, with a streamlined design/build approach, puts you in the driver’s seat and ensures you can lock down–and stand behind–the budgets and timelines you promise to stakeholders.
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• GRANTS, INCENTIVES, REBATES
  • More funding is available today from grants, incentives and rebates than ever before. Ranging from federal, state, local and private sector programs, municipalities have a chance to free up or stretch the impact of capital funds without taking on any debt. Finding a partner who has deep expertise in helping your city secure incremental funds is imperative. The money is out there.
  • In addition to the billions in ARPA stimulus cities must obligate before December 2024, you can now also tap into an additional $370 billion from the Inflation Reduction Act (IRA) for clean energy generation, efficiency measures, improvements to water/wastewater facilities and EV charging infrastructure. IRA funds can help fund approximately one-third of the cost of solar for your city with direct payment tax incentives. Lighting, HVAC, battery storage and many other types of “electrification” also qualify for potential grants.
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• EFFICIENCY - STILL YIELDS MUCH LOW-HANGING FRUIT
  • It’s common for cities to think they’ve done all the low-hanging fruit there is to do if you have completed a few efficiency upgrades over the last decade. Even in relatively new facilities or buildings that meet LEED standards, run times and automation settings often get modified or overridden with time. Plus, technology improvements have changed drastically in just the last few years, particularly when it comes to ventilation standards or the electrification of natural gas-consuming equipment.
    
    By optimizing your current infrastructure to peak efficiency and today’s standards, you can reduce your facilities’ utility consumption by 30%-40% or more.
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• PIECEMEAL & BREAKDOWN APPROACHES DON’T WORK
  • When it comes to energy, piecemeal approaches or waiting for things to break leads to unintended consequences with a variety of negative impacts, including staff resource strain, comfort and productivity issues, emergency repair cost, etc. Furthermore, the stacking order for pursuing building efficiency and renewable energy projects is critically important to avoid alternative energy system oversizing, another common pitfall of a piecemeal approach.
    
    Having a single point of accountability for the energy analysis, design, implementation and overall savings assurance gets your projects off the ground without the risks of aforementioned budget overruns and delays. A comprehensive approach also allows you to reduce the load of your facilities first and then properly size solar energy and storage solutions to precisely meet the needs of your now more efficient facilities. The technology to achieve Zero-Net Energy and Carbon Neutrality is available today, however, these ambitious goals can only be achieved with a well-planned, comprehensive perspective.
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Find a city that has had success with a comprehensive energy program and ask them about their process. Ask for a sample RFP and adopt the document for your needs. Once you drive a competitive process, select a design/build partner and conduct a citywide assessment. You will then have the tools and data to align a scope of work and funding plan specifically targeting your stakeholder and city needs. Before proceeding with program implementation, you’ll be equipped with a whole picture perspective to make intelligent long-term decisions that best serve your city’s interest today, tomorrow and for the next twenty years. Act NOW, and you can capture a big WIN in the next year or two for your city, while striving to address the numerous other longer term challenges city leaders face today.

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Author: Thomas Jackson is Corporate Vice President for Sales & Major Projects for Climatec Energy Services. He holds a degree in Energy Resource Management & currently serves on the Board of Advisors for Sustainability & Technology at Eastern Illinois University. Climatec is a wholly owned LLC as part of the Robert BOSCH family of companies.

Inflation and spiraling costs have impacted us all. The price of gasoline, eggs, bacon and most other basic needs have exploded in the last few years–and the state budget deficit further compounds these inflationary pressures. In response, employees, unions and workers across industries are expecting needed salary increases just to commute to work and put food on the table. Many school districts are wondering, “What can we focus on to make positive impacts and get a WIN?”

One of the major budget line items for most school districts (often just behind salaries and pensions) are electricity and natural gas. Not a surprise to any CBO: utility increases in California have shot up dramatically in the last few years. All the Investor-Owned Utilities (IOUs), such as Southern California Edison (SCE), Pacific Gas and Electric (PG&E) and San Diego Gas & Electric (SDGE) have seen commercial electricity rates skyrocket. Over the past three years, SCE has surged by 42.3%¹, PG&E has escalated by 64.4%², and despite being one of the most expensive utility providers, SDGE has seen an increase of 23.3%³. While it is shown that SDGE's rate has decreased from 2023 to 2024, this was only due to one-time refunds. It is expected that their rates will rebound at the end of 2024. The chart below shows historical commercial rates from 2014-2024 for the main three California electric utility providers.

Most recently, electricity rates at IOUs have risen faster than inflation. Many experts believe that with the mandated transition to renewables, plus the move to the "electrification" of vehicles and HVAC equipment, the significant upward trend in utility rate increases will continue well into the future. Even as current rates rise by five times the average growth, IOUs are slated to continue the upward trajectory on costs. Imagine your total utility bill doubling in the next three years.

PG&E has already proposed additional rate increases of up to 25% that began in 2023 for commercial, industrial and agricultural customers. Sempra Energy, the parent company of SDGE, is paying its investors the highest profits recorded, funded by ratepayers who face one of the highest per-unit electricity prices in the county. These are just the facts.

It is easy to focus on electric price increases, but1 current US energy policies and global market dynamics have made natural gas prices rise at an even faster pace. Over the past three years, commercial customers in California have seen natural gas prices increase by 79%⁴. Commercial customers are likely to continue to see a rise in prices, predicted by the post-2020 price increase trend observable in the chart below.

So, if you are a superintendent, chief business official or board member, what can you do to blunt these massive utility cost increases? Doing nothing or hoping the problem will go away is not a strategy. Rowland Unified School District stands as a notable example, successfully completing six phases of a comprehensive districtwide program dedicated to enhancing infrastructure efficiency, promoting renewable clean energy generation and creating an optimal learning environment. Across these six phases, the program will yield an impressive $38 million in savings for the District's operating budget and reduce greenhouse gas emissions (GHG) by 73,036 metric tons per year. The initiative has transformed classrooms into more comfortable spaces, setting the District on a trajectory for long-term success.

This program is not isolated; numerous districts across California are adopting a holistic approach to address their infrastructure needs, some examples include:

• Corona-Norco Unified School District is tackling utility rate increases head-on with four phases of energy efficiency improvements and a solar power purchase agreement. The District will realize $114 million in savings with more to come when new solar is online.
• Konocti Unified School District will capture $20.2 million throughout the implementation of two project phases, easing the financial strain on their general fund.
• Castro Valley Unified School District coupled solar with HVAC modernizations to generate more than $16 million in savings for its general fund.

Most districts have considered energy and sustainability initiatives for years, but challenges such as required upfront capital, staff resource constraints, stakeholder and community coordination and complex analysis make it hard to get projects off the ground. While school districts may adopt various approaches, there is one method proven to be the most effective in completing projects in less time, with fewer resources and lower risk.

Compared to “piece-mealing” projects one at a time or waiting for equipment breakdowns, the design/build energy services approach offers a holistic view of energy needs over the long term. This method involves bundling all components together, addressing deferred maintenance needs, as well as resiliency and sustainability goals comprehensively. Unlike traditional construction methods that typically tackle one or two projects at a time, this approach allows for a more efficient and streamlined process. Legislative provisions enable the use of streamlined procurement options, making it easy to competitively secure a single point of accountability without the need of multiple consulting firms to help avoid incurring incremental costs and applying traditional construction methods to retrofit modernizations.

If energy efficiency, sustainability and mitigating budget-busting utility increases are on your to-do list, and you are seeking compelling reasons to prioritize energy infrastructure projects in the future, read on:

FIVE REASONS TO ACT NOW

1. PRICE & TIMELINE CERTAINTY
   1. According to CBRE, construction cost escalations have seen double-digit increases for the last three years and are anticipated to continue escalating at higher than pre-pandemic norms. If your district has recently undertaken any significant construction projects, you are likely familiar with firsthand challenges such as risks, delays, budget overruns, litigation and more.
      
      Not to mention the other delays created by supply chain disturbances for energy-related equipment. While lead times for HVAC are starting to improve, it’s still common to see certain components take up to 6-12 months to arrive. The combined impact of inflation and delays are costing billions, forcing many districts to defer decision-making, value engineering or cancel projects altogether. By the time projects are ready to be pursued, it’s common for districts to see projects costing 1.5-2 times more than was originally budgeted in years prior.
      
      Acting NOW, with a streamlined design/build approach, puts you in the driver’s seat and ensures you can lock down–and stand behind–the budgets and timelines you promise to stakeholders.
      ‍
2. GRANTS, INCENTIVES, REBATES
   1. More funding is available today from grants, incentives and rebates than ever before. Ranging from federal, state, local and private sector programs, districts have a chance to free up or stretch the impact of capital funds without taking on any debt. Finding a partner who has deep expertise in helping you secure incremental funds is imperative. The money is out there.
      
      In addition to the billions in ESSER III stimulus that must be obligated before September 30, 2024, there is an opportunity to access an additional $370 billion from the Inflation Reduction Act (IRA) direct pay incentives. These funds can be directed toward clean energy generation, efficiency measures and EV charging infrastructure. With the IRA, districts could receive reimbursements of up to 30-70% of their initial investment, enabling the implementation of renewable solutions such as solar, EV charging, electric buses and other energy and water efficiency. Lighting, HVAC, battery storage and many other types of “electrification” also qualify for potential grants.
      ‍
3. EFFICIENCY - STILL YIELDS MUCH LOW-HANGING FRUIT
   1. It’s common for school districts to think they’ve done all the low-hanging fruit there is to do if you have completed a few efficiency upgrades over the last decade. Even in relatively new facilities or buildings that meet LEED standards, run times and automation settings often get modified or overridden with time. Plus, technology improvements and Title 24 building code standards have changed drastically in just the last few years, particularly when it comes to ventilation standards or the electrification of natural gas-consuming equipment.
      
      By optimizing your current infrastructure to run more efficiently and replacing outdated equipment with technology that meets today’s standards by investing in smart building technology, you can reduce the utility consumption of your existing facilities by anywhere from 30% to 40% or more.
      ‍
4. PIECEMEAL & BREAKDOWN APPROACHES DON’T WORK
   1. When it comes to energy, adopting piecemeal approaches or waiting for issues to arise can lead to unintended consequences, resulting in various negative impacts such as staff resource strain, comfort and productivity issues and emergency repair costs. Additionally, the order in which building and renewable energy projects are pursued is crucial to avoid oversizing alternative energy systems – a common pitfall of piecemeal strategies.
      
      Opting for a single point of accountability for energy analysis, design, implementation and overall savings assurance allows projects to commence without the risks of budget overruns and delays. A comprehensive approach not only enables you to reduce the load of your facilities initially but also facilitates the precise sizing of solar energy and storage solutions to meet the needs of now more efficient facilities. While the technology for achieving Zero-Net Energy and Carbon Neutrality is available today, realizing these ambitious goals requires a well-planned, comprehensive perspective.
      ‍
5. THE COST OF DOING NOTHING‍
   1. The cost of doing nothing can have serious effects. By acting now, you avoid financial consequences down the line. Utility rates and construction costs will continue rising, the negative impacts compounding over the years. But the cost of inaction goes beyond the general fund.
      
      Delaying infrastructure upgrades also impacts staff and student well-being. A confluence of factors, including overcrowded classrooms, endless hours and heavy workloads are straining teachers and staff, compromising their well-being and potentially hindering student success. Teachers, according to studies, already experience stress on par with ER personnel. Delaying infrastructure improvements amplifies these strains, impacting workforce efficiency and increasing likelihood of burnout and turnover. Moreover, old systems are not reliable. They are prone to malfunctioning, compromising the safety of your students and staff. In extreme cases, malfunctions can have legal implications. Inaction is a gamble for stakes no educator is willing to risk.
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Many have acted on these 5 reasons, developing proven blueprints for creating healthy learning environments that boost the health and resiliency of their organizations. Find a peer district that has had success with a comprehensive energy program and ask them about their process. Ask for a sample RFP and adopt the document for your needs to conduct a competitive selection process that meets federal and state requirements. Once you select a design/build energy services partner, you will be in a position to conduct a districtwide assessment. You will then have the tools and data to align a scope of work and funding plan options specifically tailored to your stakeholder and district needs.

Before proceeding with program implementation, you’ll be equipped with a whole-picture perspective to make intelligent long-term decisions that best serve your district’s interest today, tomorrow and for the next 20 years. Whether you pursue multiple phases of work overtime or want to bite off the whole apple through one comprehensive program, acting now will help you capture a big WIN in the next year or two for your facilities and your bottom line.

Author: Thomas Jackson is Corporate Vice President for Sales & Major Projects for Climatec Energy Services. He holds a degree in Energy Resource Management & currently serves on the Board of Advisors for Sustainability & Technology at Eastern Illinois University. Climatec is a wholly owned LLC as part of the Robert BOSCH family of companies.

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¹  Image Source: Based on analysis of General Service TOU-GS-3-E tariff

²  Image Source: Based on analysis of Business B-10 TOU tariff

³ Image Source: Based on analysis of General Service AL-TOU tariff

⁴ Image Source: US Energy Information Administration, 2024

Earth Day is here! In celebration, Climatec is highlighting a handful of school districts that are reducing their carbon footprints and generating savings by making energy efficiency improvements. From HVAC replacements to automated lighting systems to solar panel shade structures, infrastructure improvements are having as much of a positive impact on environmental health as they are on districts’ bottom lines.

San Benito High School District (SBHSD): This Earth Day, PG&E is putting a spotlight on the Hollister High School Haybalers at SBHSD for their environmental stewardship. Since partnering with Climatec in 2017, the District installed brand new rooftop and ground mount Solar PV structures, modernized LED lighting systems, new HVAC units, building automation systems and more. These improvements save 1,626 metric tons of greenhouse gas emissions annually, equivalent to removing362 cars from the road, preserving 26,879 trees from deforestation or powering 316 homes. The solar panel systems alone have generated an estimated 8,100 MWh of electricity to date – providing an estimated $19 million in lifecycle savings to SBHSD’s general fund. The District supplemented funding for these improvements with Proposition 39 funding and federal subsidies through the Inflation Reduction Act (IRA).
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‍Crane Unified School District (Crane ESD): This Yuma City, AZ-based school district has made significant strides towards enhancing energy efficiency since 2019. It performed LED light modernizations and installed new HVAC units complete with Needlepoint Bipolar Ionization technology. These units maximized air quality in classrooms and across facilities during COVID-19, ensuring students could return to school safely. The improvements were funded through utility incentives, tax-exempt lease purchases and District capital, including COVID-related funding.
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‍Rowland Unified School District (RUSD): Since 2016, RUSD has implemented improvements, including modernized HVAC systems, building automation systems, interior and exterior LED lights and solar shade and parking structures. Not only do these improvements make buildings safer for students, but they also reduce an astounding 163,342,618 pounds of CO2 emissions. This environmental benefit equates to 16,728 cars being removed from roads, 7,170,113 gallons of gas preserved, 1,223,205 trees prevented from being deforested or 14,637 homes being powered! The District also looks forward to projected savings of $43.7 million over the lifespan of its equipment.
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These sustainability champions are just a few examples of Climatec customers paving the path towards a greener future. Creative funding resources like tax credits and federal subsidies through the IRA make it easier for public agencies to leave a lasting impact. 

As this Earth Day kicks off, we will continue supporting and celebrating the public agencies prioritizing environmental sustainability and fiscal solvency for the health of their organizations and communities