RENEWABLE ENERGY STRATEGIES FOR MANUFACTURERS

BEN D.S. COLLINSRENEWABLE ENERGY DEPARTMENT SUPERVISOR

414.831.1421GREEN@PIEPERPOWER.COMWWW.PIEPERRENEWABLE.COM

TOPICS

• Energy Efficiency Measures• Renewable Energy

Technologies– Solar

• Photovoltaics• Thermal

– Wind

• Reducing Operating Costs– Photovoltaic Case study

ENERGY EFFICIENCY MEASURES

• Where is energy used?

U.S. Energy Use by Sector

32%

18%

21%

29%

Industrial/Manufacturing

Commercial

Residential

Transportation

ENERGY EFFICIENCY MEASURES

• Where is energy used?

ENERGY EFFICIENCY MEASURES

What should be addressed:

• Motor Loads (54%)

• Lighting (10%)• HVAC (12%)

RE TECHNOLOGIES - SOLAR

Photovoltaics (Distributed Generation - DG)• Urban Locations

– Virtually Silent– Low Maintenance

• Lowers Peak Energy Usage• Lessens the immediate need to upgrade

distribution infrastructure

RE TECHNOLOGIES - SOLARSolar Thermal (Water or Space Heating)• Urban Locations

– Virtually Silent– Low Maintenance

• Can directly address:– Process heating needs (11%)– HVAC (12%)

RE TECHNOLOGIES - WIND

Wind (DG)• Rural Locations

– Siting

• Maintenance of 2%-5% of Installed cost

• Lowers Energy Consumption from the Utility

REDUCING OPERATING COSTS

Motor Upgrades and VFD’s• Reduce motor related energy use by 20%

Lighting Retrofits:• Reduce lighting energy use by 30%

Renewable Technologies lower overall consumption for 20-50 years

REDUCING OPERATING COSTS

Photovoltaic Case Study:

Key AssumptionsCost of System Per kW (dc) $6,000 Federal Income Tax Rate 30% State Income Tax Rate 7.9%Electricity rate year one ($/kWh) $0.13Solar electric buyback rate NAEstimated electricity price inflation rate (%/yr) 5.95%Expected output degradation (%/year) 0.50%Discount rate (used only in NPV) 2.9%

DefinitionsNPV or Net Present ValueNPV is the sum of the present values of the annual cash flows minus the initial investment. The annual cash flows are the Net Benefits (revenues minus costs) generated from the investment during its lifetime. These cash flows are discounted or adjusted by incorporating the time value of money.

IRR or Internal Rate of ReturnIRR is the discount rate that makes the project have a zero Net Present Value (NPV).IRR is an alternative method of evaluating investments without estimating the discount rate. IRR takes into account the time value of money by considering the cash flows over the lifetime of a project.

REDUCING OPERATING COSTS

Photovoltaic Case Study:

Solar electric systems rated module capacity (kW dc) 20.00 Estimated output year one (kWh/yr) 23,121

Estimated installed cost $120,000Focus Incentive after Income Tax Payments (if any) $17,948Federal Tax Credit or Treasury Payment $36,000WE Grant and Expected Production Buydown $0Alliant Non Profit, Govt and School Grant $0USDA and other federal incentives $0Other first cost incentives $0System cost after first cost incentives $66,052Value of 5-year accelerated depreciation $38,658System Cost after all incentives $27,394Value of year 1 to year 10 power production $37,369

Economics10 year discounted NPV -$9,23625 Year discounted NPV $42,83310 Year IRR 0.3%25 Year IRR 9.2%If IRR has #NUM! or "#DIV/0!"error, then xcel is unable to determine the IRR

Years to cost recovery, "0" Means > 30 years 10.0Environment

CO2 emission reduction per year (tons/year) 25.6

Energy Production, Cost, Economics and EnvironmentProduction

Cost

- Assumes $1.25/kWh FOE Incentive 25% max - 30% maximum

- Direct Reduction in Operating Costs

REDUCING OPERATING COSTS

Photovoltaic Case Study:

Cumulative Cash Flow

$(120,000)

$(80,000)

$(40,000)

$-

$40,000

$80,000

$120,000

$160,000

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31

Years

RE STRATEGIES FOR MANUFACTURERS

• First Step is Reduction through Energy Efficiency

• Renewable Energy Technologies:– Can help reduce operating costs– Need to be part of long-term strategic planning– “Right thing to do”

QUESTIONS?