The New Energy Evolution

The New Energy Evolution

Growing markets, new technologies, and geopolitical events are transforming the oil and gas business and reshaping the energy landscape. Today, I’ll explore some of the broader reaches of that landscape and consider the defining factors that promise to influence the role of energy in the 21st Century.

The message I want to leave with you today is that the challenge of supplying energy to the world's economies today and in the future is immense, but there is good reason to be confident about our ability to continue to meet this critical objective.

The evolving changes that are underway in how industry finds and develops new energy supplies are creating a new reality for all of us – a reality that presents significant challenges and places a premium on sound management systems and decision making.

The petroleum industry has demonstrated it is a master of change throughout our history. Collectively, companies in our industry have gone from producing less than three billion barrels of oil equivalent energy in 1930 to supplying nearly 50 billion barrels annually today.

The contributions that we and our predecessors in this industry have made to peoples the world over are even more remarkable when you consider the astonishing benefits this ample, reliable energy supply has brought to societies through greater economic prosperity, improved standards of living, unprecedented mobility, and a kaleidoscope of petroleum and petrochemical products.

The challenge we face, as have our predecessors, is sustaining this record of success in the future. We all know that providing affordable and reliable energy supplies is vital to the progress, prosperity, and well-being of the world’s citizens. At Energy concerns, we understand what it means to take on the world’s toughest energy challenges.

In the coming decades, meeting the expected increase in global energy demand will require a broad portfolio of energy options. At the same time, hydrocarbon fuels – and more particularly oil and gas – are likely to remain the primary energy source through the middle of the century. That said, it is absolutely vital that we pursue policies and actions that reflect the facts and realities of national and international energy markets.

To ensure that we have enough energy in the coming years, we need to avoid wishful thinking. We need to face the energy future realistically and be committed to steps that will address energy issues in practical ways. In my view, it is important for each of us to consider the consequences if we fail to meet the world's need for safe, affordable, and reliable energy.

The petroleum industry is a long-term business. The new supplies of petroleum the world utilizes today is available because of decisions and risk undertaken by our company and others in this industry 5, 10, and even 15 years ago. Similarly, the decisions we make today related to exploration, development, production, transportation, refining, and distribution will likely affect results for many, many years – even decades into the future.

At Energy concerns, we devote substantial resources and effort to recognizing, analyzing, and understanding these long-term dynamics. Though we never claim an ability to predict the future, we are always working to identify and analyze the trends and issues most likely to affect the long-term world energy environment. Through this effort, we develop a planning framework based on what we see as the outlook for energy.

Each year, my company updates our outlook for future energy demand and supply. We measure our views against those of others, including the International Energy Agency and the U.S. Department of Energy. There is a well-established relationship between energy demand growth and economic growth. You cannot have economic growth without reliable, affordable energy supplies.

Among other things, we look at global population trends, as the number of energy uses is obviously important in determining how much energy we will need. A quarter century from now, the world's population is expected to be about 8 billion people – 30 percent higher than today. Ninety-five percent of the increase will occur in developing countries. Developing countries are also expected to growth their economies about two times faster than industrialized countries. Some 85 percent of the world's population live in developing countries, where GDP per capita is only 6 percent of that in the developed world.

Some 1.6 billion people have no access to electricity, 18 percent lack access to safe drinking water and 2.8 billion are without proper sanitation. This presents all of us in the global community with opportunities and responsibilities. While today the developing world represents a little more than a quarter of the world GDP, by 2020 its share will rise to more than a third.

All in all, we believe global economic growth will continue at just under 3 percent per year, or roughly the same pace as the past 20 years. We expect global demand for all forms of energy to grow at about 1.7 per year on average, rising more than 50 percent from about 220 million oil-equivalent barrels per day currently to 335 million oil-equivalent barrels daily by 2030. That is a huge amount of energy beyond what we use today. To put that in perspective, such an increase in oil-equivalent demand would be about ten times the current output of Saudi Arabia.

Oil and gas will continue to be the world’s primary sources of energy through 2030, accounting for about 60 percent of the energy supply. For oil, we expect an average annual growth rate of about 1.5 percent through 2030 driven by transportation demand. Oil is used for everything from the fuel that goes into cars, trucks, airplanes, and ships to the asphalt in the roadways and runways.

We also expect ongoing shifts in oil demand growth among regions in the world. For example, oil demand in the mature markets of North America, Western Europe, and Japan is forecast to grow on average at less than half a percent per year.

On the other hand, China – which had growth in oil demand of about 15 percent in 2004, accounting for almost one-third of the increase in global oil demand last year – has a much higher long-term growth rate, closer to 4 percent per year on average, and a large part of that growth will come in the transportation sector. At that rate, China will represent about 14 percent of world oil demand by 2030 – twice its share today.

So the demand growth for oil will continue at a steady pace globally, but the centroid is beginning to shift from North America and Europe to the East, primarily driven by transportation and concentrated in Asia Pacific.

We see demand for natural gas rising over 2 percent per year, increasing to a 25 percent share of total energy by 2030. Because gas is both economically and environmentally attractive, it is a preferred fuel for power generation in many markets. This has made natural gas the fastest-growing source of conventional energy.

Now some people might assume that, as an oil company, we may have simply extrapolated "business as usual" and ignored the potential for efficiency in energy alternatives. But that is not the case. In fact, our outlook includes ongoing gains in energy efficiency offsetting growth in demand about 1 percent per year based upon such things as aggressive assumptions for the introduction of advanced vehicles, particularly hybrids here in the United States.

We've assumed solar and wind, with continued mandates and subsidies, will grow at a 10 percent annual rate – or more than five times as fast as hydrocarbon energy supplies.

Nevertheless, the world’s growing economies and transportation needs will result in continued demand for petroleum – a plentiful, reliable, affordable, and easily transportable form of energy. Just as important as the global increase in the energy demand will be the location of the natural resources to meet that energy need. Europe and North America will continue to have substantial energy resources available within their regions, but both will increasingly draw upon imports. The energy supplies that these consuming areas will use will increasingly come from the Middle East and Africa, as well as Russia and the Caspian.

The interdependence of these future energy movements between supplying countries and consuming countries both for oil and increasingly for liquefied natural gas – will raise important issues for ensuring energy development in less-industrialized and in some cases less politically stable areas of the world.

As an aside, I recognize that there is a perception by some in the United States that this country can achieve energy independence. In my view, that expectation is unrealistic. But more importantly, holding that view can be counterproductive. It can distract us from focusing on the reality of the need to deal with U.S. interdependence in the global energy market – an interdependence that will persist well into the future.

Moreover, there is just no escaping the fundamentals of the way energy consumption is currently met. And that is that about 80 percent of the energy requirements in 2030 will be met by fossil fuels, reflecting their scale, cost-competitiveness, and flexibility. But the challenge of providing adequate energy will be considerable, even for those of us who have witnessed the industry's remarkable progress and success over time. Finding and producing these supplies will require a tremendous effort that will occupy the best minds in our industry for a generation.

While alternative forms of energy will make more of a contribution to energy supply over this period, even with the expected double-digit growth rates for wind and solar energy, driven primarily by government subsidies and mandates, their contribution to global energy needs will still be in the 1 percent range by 2030. Now some will ask if we might be understating the roles for solar or wind or hydrogen in our outlook. I can understand the question, because these and biofuels have huge federal subsidies designed to accelerate their market penetration.

There are several reasons behind our view of these alternative energy sources. Ethanol from corn, for example, is neither an economic nor an energy-efficient choice. Moreover, it relies on using significant land areas – land that would otherwise go to food crops or forest cover.

To give you some perspective, if we tried to replace just 10 percent of the gasoline the United States will use in 2020 with corn-based ethanol, we would need to plant an area equivalent to Illinois, Indiana, and Ohio just to grow the grain needed as feedstock. The difficulty of that can be appreciated when you realize that this area is about one-sixth of the land we currently use in the United States for growing crops.

Solar and wind have other challenges. Wind power is usually more expensive than power supplied via fossil fuels using today's technologies, though its costs can be competitive under ideal conditions.

It is constrained by being site-limited, intermittent, and subject to growing objections due to its undesirable visual and noise impacts on the landscape. Solar power is an energy source of significant potential. But it is currently far more expensive than fossil fuels. It also suffers from being intermittent. After all, the sun does go down every day.

And what about hydrogen?  Let me say that the jury is still out on hydrogen's long-term potential. But a few points are important for consideration. First, hydrogen is not an energy source. It does not exist freely in nature. Before it can be used as a fuel, it must be separated from something else, such as oil or natural gas or water. Liberating hydrogen from oil and gas is well understood, but is expensive, and the process requires considerable energy. Liberating hydrogen from water is also understood, but it is even more expensive and energy consuming.

And then there is the matter of new infrastructure to efficiently get such a new fuel into the broad consumer marketplace. We do not yet have practical and economic ways to make hydrogen available for use as a fuel in cars, trucks and buses. It does not have the inherent energy contained in an equal volume of petroleum, it is not easily stored, and there is today no fuels infrastructure to generate, distribute, and dispense it. Additionally, the potential risks associated with widespread use of hydrogen by the consuming public need to be highlighted, evaluated, and dealt with to ensure safe use.

I have recited these various practical issues because they are often overlooked by well-intentioned people who, while genuinely concerned about the environment and our energy future, do not always consider or understand the complexity and scale of the energy system.

What all of this means – and without disparaging the importance of working on alternative energy approaches – is that for decades to come the key issue in energy will be how to find and produce sufficient conventional energy to support global economic activity and prosperity for a growing world population.

Our immediate and ongoing task is to replace the decline in existing production from established and mature producing areas. To give you an example, today, the established production areas in North America, Europe and parts of Latin America and the Far East supply about 80 percent of Energy concerns's production. By 2010, this proportion will fall to about 60 percent.

We must add additional supply capacity to both replace the decline in current production plus meet a continual growth in demand for oil and natural gas. The search for these new supplies has led my company and others to largely undeveloped and physically challenging parts of the world.

Some of these areas are remote from major consuming markets and lack sufficient infrastructure to build new bases for long-term operations. Others are even more challenging and have no transportation system to move produced volumes to the market. The places where most new production will come from are increasingly in countries where we in the private sector have not historically operated.

Though these realities make doing business more challenging in many ways, they can all be successfully addressed by applying the proper business fundamentals and by playing to the traditional strengths of our companies and our industry. In the case of Energy concerns, production from the growth areas of Africa, the Middle East, Russia and the Caspian will increase from 20 percent of today’s volumes to about 40 percent of 2010 volumes.

All the international oil companies are pursuing large, high-quality resources – all are looking for petroleum in areas that offer the promise of new discoveries and future production. But since its inception, the petroleum industry has faced and overcome challenges that at the time may have seemed insurmountable. And today, we have a new set of technical and geopolitical challenges. Many of the new resources are in ever-deeper water and more-difficult environments ranging from arctic conditions to jungle conditions and distant from the major consuming markets.

For example, we are working to produce oil in the Caspian Sea, which is both relatively remote to major fabrication facilities and ice-bound during several winter months. This area is only slightly more hospitable than the conditions we face in developing our project offshore Sakhalin Island in the Far North East of Russia. And offshore Africa, we routinely discover oil in many thousands of feet of water.

The response to these new challenges is technology. Technology is the lifeblood of our ability to pursue opportunities in new geographic locations and ever-harsher climates. My own company’s approach and business strategies are underpinned by a strong commitment to technology and our belief that technology is vital in rising to the challenge of providing reliable and affordable energy supplies to the world. Technical advances in both exploration and production have underpinned our industry-leading success in finding more resources and in producing them economically.

As a corporation, we spend about $600 million a year on research and development across the whole range of technical disciplines. This investment advances emerging technologies that will have a significant and lasting impact on our corporation and the industry. These advances are necessary to lower the cost of resource finding and development, reduce risk in investment decisions and provide safer, more-reliable operations.

For example, in Qatar, the integration of our new technology into project planning and execution has led to a substantial reduction in the cost of producing and transporting liquefied natural gas, allowing this new source of energy supply to become economic for markets here in the U.S. Further advances in large new ship designs will soon significantly lower the cost of delivery, opening up more markets in which these resources can compete.

The years ahead present significant challenges as we work to increase the world’s production base and to maintain the financial strength required to pursue these important opportunities. The shift to new areas with evolving relationships and roles, and to resources that pose increased technological demands, are challenges the industry has faced before.

However, the history of our industry and the experience of my company in adjusting to such changes in technology, geopolitics, market forces, and social expectations convince me to remain optimistic.

But it is essential to understand that for the next several decades the United States and the rest of the world will need increasing amounts of oil and gas to meet energy needs and to underpin economic growth.

What are the geopolitical and national political implications of that reality?

First and foremost, the rest of the world and the United States will increasingly need energy from the Middle East. This is not a matter of ideology or politics – it is simply inevitable. By some estimates, about 50 percent of proved worldwide oil and gas reserves reside in the Middle East. Saudi Arabia alone has about one-fifth of the world’s oil reserves. We need to accept the reality of this rather than undertake expensive and risky steps trying to avoid it.

Without question, the key to managing the risks for America’s and the world’s energy future is to broaden the base of geographic locations from which we get our oil and gas. There are other regions that will be increasingly important as suppliers of petroleum. Sub-Saharan Africa will be one of these, as will Russia and the Caspian. Very heavy oil from Venezuela is also an important source.

As a country, we need to think carefully about the nature of our relationships with countries in these regions, as well as those in the Middle East. We will also need to muster the political will, based on a realistic energy outlook, to allow further development of the energy resources to be found right here in the United States. This includes those that may be offshore California and Florida, in the Rocky Mountains and in northern Alaska.

If we do not explore and develop energy from prospective areas here in the United States, the consequence will be even greater dependence on energy from areas such as the Middle East. We must remain committed to use energy more efficiently by ensuring that competitive markets are in place to provide the necessary free-market incentives.

The energy industry must have not only the incentive, but also timely and visible government support, for investment in new regasification and pipeline facilities. For example, we must ensure that liquefied natural gas, commonly called LNG, can be brought to this country to meet growing natural gas demand.

The energy investments required to meet the world’s growing demand will be huge. The International Energy Agency estimates about $200 billion in investment will be needed each year to develop and supply the oil and gas that the world will need through 2030. My company can and will do much to contribute in this massively important effort. And we recognize the expectations of us by the public.

Since its inception, my company has worked to conduct its business in keeping with the highest standards of corporate citizenship.

Today, after more than 120 years since its founding and with operations in more than 200 countries and territories, my company must continue to do many things well to remain a successful global organization.

We understand our responsibility to create sustainable shareholder value, continuously improve our operations, and provide a wide range of quality products to our customers. We also recognize the public's interest in the many ways that we affect the communities and societies where we have operations.

In managing the corporation's day-to-day activities throughout the world, we work to ensure that our operations are safe, reliable, and environmentally responsible. And in keeping with our long-standing and clearly stated approach to ethics, we are committed to honesty, candor, and integrity in reporting our business results to shareholders and the public.

As the world's largest private energy supplier, our primary responsibility to society is to do our job well. We believe that the role we play in providing energy for a growing world economy helps improve living conditions for all peoples and is perhaps the most tangible expression of our deep commitment to corporate citizenship at its best.

Today's petroleum industry operates in a fiercely competitive global marketplace.

As I said at the outset, the challenge of supplying energy for the future of our world is immense – but there is good reason to be confident about our ultimate success.

When I look to the future, I can only wonder at what challenges and new solutions through technology await the petroleum industry in the 21st Century.

But this much is certain: Energy concerns will be there to address any challenge and to serve responsibly by taking on the world’s toughest energy challenges.

Thank you for your attention.

ENERGY AUDIT Procedure

ENERGY AUDIT Procedure

Energy Audits

Good energy management begins with an energy audit
Effective management of energy-consuming systems can lead to significant cost and energy savings as well as increased comfort, lower maintenance costs, and extended equipment life. A successful energy management program begins with a thorough energy audit.
The energy audit evaluates the efficiency of all building and process systems that use energy. The energy auditor starts at the utility meters, locating all energy sources coming into a facility. The auditor then identifies energy streams for each fuel, quantifies those energy streams into discrete functions, evaluates the efficiency of each of those functions, and identifies energy and cost savings opportunities.
Audit activities, in general order, include:

• Identify all energy systems
• Evaluate the condition of the systems
• Analyze the impact of improvements to those systems
• Write up an energy audit report

The report documents the use and occupancy of the building and the condition of the building and building systems equipment. The report also recommends ways to improve efficiency through improvements in operation and maintenance items (O&M), and through installation of energy conservation measures (ECM).

Degrees of Thoroughness
Audit levels, in order of increasing complexity are:
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·  Level 1-The walk-through audit. The walk-through audit is a tour of the facility to visually inspect each system. The walk-through includes an evaluation of energy consumption data to analyze energy use quantities and patterns, as well as to provide comparisons with industry averages, or benchmarks, for similar facilities. This is the least costly audit, but a level 1 audit can yield a preliminary estimate of savings potential and a list of low-cost savings opportunities through improvements in operational and maintenance practices. The level 1 audit information may be used for a more detailed audit later if the preliminary savings potential appears to warrant further auditing activity.

·  Level 2-Standard audit. The standard audit quantifies energy use and losses through a more detailed review and analysis of equipment, systems, operational characteristics, and on-site measurements and testing. Standard energy engineering calculations are used to analyze efficiencies and calculate energy and cost savings based on improvements and changes to each system. The standard audit will also include an economic analysis of recommended ECMs.

·  Level 3-Computer simulation. The level 3 audit is the most expensive level of energy audit and is most often warranted for complex facilities or systems. The audit includes more detailed energy use by function and a more comprehensive evaluation of energy use patterns. Computer simulation software is used to predict building system performance and accounts for changes in weather and other conditions. The goal is to build a base for comparison that is consistent with the actual energy use of the facility. The auditor will then make changes to improve the efficiency of various systems and measure the effects compared to the baseline. This method also accounts for interactions between systems to help prevent overestimation of savings.

The Audit Process
The first step is to determine which audit is appropriate for a facility, given the complexity of its systems and buildings. Then, information may be collected on the structural and mechanical components that affect building energy use and the operational characteristics of the facility. Much of this information can be collected prior to the site visit. Evaluating energy use and systems before going on-site helps identify potential savings and makes best use of time spent on-site.

The audit consists of three distinct steps: preliminary data collection and evaluation, site visit, and analysis and reporting. An estimate of the time for each step can be made. Allocating time for each step leads to a more comprehensive and useful audit report. The following sections describe the tasks associated with each step of the audit process.

Preliminary Data Collection
A pre-site review of building systems and their operation should generate a list of specific questions and issues to be discussed during the actual visit to the facility.
This preparation will help ensure the most effective use of your on-site time and minimize disruptions to building personnel. A thorough pre-site review will also reduce the time required to complete the on-site portion of the audit.
The first task is to collect and review two years worth of utility energy data for all fuels, including electricity, natural gas, fuel oil, and any other delivered fuels. This information is used to analyze operational characteristics, calculate energy benchmarks for comparison to industry averages, estimate savings potential, set an energy reduction target, and establish a baseline to monitor the effectiveness of implemented measures.
Several steps must be taken to ensure you have all the information required to do a thorough and accurate evaluation of energy consumption data.

• Make sure you receive copies of all monthly utility bills (for all meters) and delivered fuel invoices.
• Sort utility bills by building or by meter and organize them into 12-month blocks using the meter-read dates.
• Locate all meters and sub-meters. If numerous meters are used, label them on a site plan.
• Determine which building or space is served by which meter.
• Calculate the conditioned area (in square feet) for each building.

Use a computer spreadsheet to enter, sum, and calculate benchmarks and to graph utility information. Record energy units (kWh, therms, gallons, etc.), electric demand (kW), and cost for each fuel type. Units of production (number of units, occupied rooms, students, persons served, etc.) should also be included when energy use depends on production. Relationships between energy use and those factors that drive energy use can be determined by analyzing the data. Some of these factors include occupancy, sales volume, floor area, and outdoor temperatures.

The Energy Use Index
The Energy Use Index (EUI) is expressed in British Thermal Units/square foot/year (BTU/ft²/yr) and can be used to compare energy consumption to similar building types or to track consumption from year to year in the same building. The EUI is calculated by converting annual consumption of all fuels to BTUs, then dividing by the area (gross square footage) of the building. EUI is a good indicator of the relative potential for energy savings. A comparatively low EUI indicates less potential for large energy savings.
By tracking the EUI using a rolling 12-month block, building performance can be evaluated based on increasing or decreasing energy use trends. This method requires a minimum of two years of energy consumption data to establish the trend line.

To calculate BTUs and cost per square foot, the heated (or cooled) area to be calculated must be determined for each building. Blueprints can be used to obtain the dimensions of each floor, or the outside of the building (gross area) can be measured. The total building area is found by multiplying this area by the number of floors. Basement areas and mechanical rooms are not usually included as conditioned areas.

Load Factor
Evaluating use (kilowatt-hours [kWh]), power (kilowatts [kW]), and power factor charges separately can be useful in evaluating the impact of demand and power factor penalties on the monthly electric bill. Rescheduling or alternating run times of larger equipment can lower demand costs. Power factor correction devices can have paybacks of less than two years. Although demand and power factor correction measures save little energy, the significant cost savings and relatively short payback periods make them attractive in the audit analysis.
There is a difference between billing and actual demand on the utility bill. Actual demand is the value registered on the meter and should be used to evaluate power requirements and load factor for the facility. Billing demand is the amount of demand for which the facility is billed. Rate schedules that include a ratchet clause, power factor adjustment, or first block of kW at no charge can cause billing and actual demand to differ.
Load factor (LF) is the relationship between electric use (kWh) and demand (kW). LF is commonly calculated by dividing the monthly electric use by the demand by the number of hours in the billing period. This gives a ratio of average demand to peak demand and is a good indicator of the cost savings potential of shifting some electric loads to off-peak hours to reduce overall demand.
The theoretical maximum load factor for a facility that consumes electricity at a steady rate at the highest demand registered on the demand meter is 1 (one). An LF of 1 indicates that there is no variation in consumption or time of day peaks in demand. Most facilities don't operate 24 hours a day, so load factors will normally be considerably lower than the theoretical maximum. For facilities with high load factors, the only way to reduce demand is by installing more efficient electrical equipment.
A low load factor is a good indication that a facility has demand peaks at some time in the billing period. The causes of these demand peaks need to be identified and controlled.

Operation of nonessential equipment can be restricted during peak demand periods and rescheduled for operation during off peak hours. Many energy management control systems (EMCS) have demand limiting and load shedding capabilities that can help maintain acceptable load factors. The important thing is to monitor the load factor and establish what is normal for each facility, noting any significant changes in the electric use consumption and load factor.

Analyzing Energy Data
Graphs and consumption data must be analyzed to understand how energy is used at the facility and which factors influence consumption the most. This is done by identifying how each energy using system in the building operates during the year. Annual energy use is allocated to either base or seasonal loads, and equipment is matched to each category.

Energy data should be organized into a presentation that includes graphs, tables, and pie charts, which make it easier to see consumption trends and understand how each building uses energy. Presented visually, the information is more appealing and easier to understand than text-only format.

Looking at Loads
Base loads consist of energy-using systems that consume a continuous amount of energy throughout the year. The base load can be established by drawing a horizontal line across a graph of energy consumption or cost at the average point of lowest consumption for each energy type (see figure on page 31). The base load is that portion of consumption or cost below the line. Base loads include lighting, office equipment, appliances, domestic hot water, and ventilation. High base loads indicate that energy management efforts should be focused in these areas.
Seasonal loads, such as heating and air conditioning, are identified as the portion of consumption or cost located above the line used to establish base loads on the graph. Seasonal loads can be the result of changes in weather or operation of the building.
High seasonal loads may reveal opportunities to reduce consumption by making improvements to the heating and air conditioning equipment, temperature controls, the building envelope, or to other systems which are affected by seasonal operation.
After utility use has been allocated to seasonal or base loads, the auditor should prepare a list of the major energy-using systems in the building and estimate the time when each system is in operation throughout the year. The list will help identify how each system uses energy and potential savings.
Those building systems with the greatest savings potential are easier to discover when the seasonal and base loads are understood. Building systems such as heating, cooling, lighting, and hot water can then be targeted for more detailed data collection.
One of the easiest ways to evaluate energy data is to watch for the trends in use, demand, or costs over time. Either graphing two or more years of monthly data on one graph or graphing only the annual totals for several years can help.
Another useful method for evaluating monthly data is a rolling summary where a new 12-month total is calculated each month by dropping the oldest month and adding the newest.

This curve will remain relatively flat if there are no significant changes in energy use. Even though each monthly figure is an annual total, any sudden change is the result of that month's operation. This is a good graph to see the overall consumption trends of the facility. A gradual increase, for example, may indicate that occupancy or production has increased, or that system efficiency is slowly degrading.

Another useful method for evaluating monthly data is a rolling summary where a new 12-month total is calculated each month by dropping the oldest month and adding the newest.

Building Profile
Obtaining mechanical, architectural, and electrical drawings and specifications for the original building as well as for any additions or remodeling work that may have been done is the first step to creating a building profile. Any past energy audits or studies should be reviewed.
The auditor can use this information to develop a building profile narrative that includes age, occupancy, description, and existing conditions of architectural, mechanical, and electrical systems. The profile should note the major energy-consuming equipment or systems and identify systems and components that are inherently inefficient.
Having several copies of a simple floor plan of the building will be useful for notes during the site visit. A separate copy should be made for noting information on locations of HVAC equipment and controls, heating zones, light levels, and other energy-related systems. If architectural drawings are not available, emergency fire exit plans are usually posted on each floor; these plans are a good alternative for a basic floor plan.
A site sketch of the building or complex should also be made. The sketch should show the relative location and outline of each building; name and building number of each building; year of construction of each building and additions; dimensions of each building and additions; location, fuel type and identification numbers of utility meters; central plants; and orientation of the complex.
While completing the pre-site review, the auditor should note areas of particular interest and write down any questions about the lighting systems and controls, HVAC zone controls, or setback operation. Other questions may regard equipment maintenance practices. At this point the auditor should discuss preliminary observations with the building manager or operator by phone. The building manager or operator should be asked about their interest in particular conservation projects or planned changes to the building or its systems. The audit should be scheduled when key systems are in operation and when the building operator can take part.

Potential ECM and O&M procedures can be developed during this preliminary research phase. These can be discussed with the building operator or manager at the time of the site visit.

The Site Visit
The site visit will be spent inspecting actual systems and answering specific questions from the preliminary review. A full day should be allocated on-site for each building. The amount of time required will vary depending on the completeness of the preliminary information collected, the complexity of the building and systems, and the need for testing equipment.

Prior to touring the facility, the auditor and building manager should review the auditor's energy consumption profiles. The building manager can provide occupancy schedules, O&M practices, and plans that may have an impact on energy consumption. This kind of information can help identify times when building systems such as lighting, recirculating pumps, or outside air ventilation can be turned off and temperatures set back.

Analysis and Reporting
Post-site work is a necessary and important step to ensure the audit will be useful. The auditor needs to evaluate the information gathered during the site visit, research possible conservation opportunities, organize the audit into a comprehensive report, and make recommendations on mechanical, structural, operational and maintenance improvements.
Immediately after the audit, the auditor should review and clarify notes from the site visit and complete information obtained during the audit so it isn't forgotten. More copies of the floor plan can be used to clean up notes for permanent records. Photos should be labeled, identified, and matched to a floor plan.
Proposed ECM and O&M lists should be reviewed. Measures lacking potential should be eliminated and an explanation provided. Preliminary research on potential conservation measures should be developed along with energy savings calculations and cost estimates.
After the retrofit options are analyzed, the cost effectiveness of each ECM needs to be determined. A number of methods have been developed to provide a uniform method of comparison.
The least complicated of these methods is referred to as simple payback (SPB). SPB is calculated by dividing the cost of the retrofit by the energy cost savings. The result is the number of years after which the investment will have paid for itself. Those projects with the shortest paybacks are assumed to be the most cost effective.
Simple Payback =
First Cost/Energy Savings
SPB is the easiest method to use and does not require any consideration of future value factors such as discount rates, inflation and other annual costs during the life of the measure.

Other more sophisticated types of payback analyses involve consideration of changes in operating costs, return rates on money invested, fuel cost escalations, and life cycle costing. The two other most common economic evaluation methods used in energy audit reports include net present value and life cycle cost.

The Audit Report
The audit report should be prepared keeping in mind the various audiences that will be using each section. Each section should be customized to most effectively reach that audience.
Audiences for audit reports may include:

• Administrator/superintendent
• Facilities and plant managers
• Comptroller
• Plant engineer
• O&M

The following outlines the basic components of a well-organized audit report:
1. Executive Summary
The executive summary should be a simple, straightforward, and to the point explanation of the current situation and recommended improvements, outlining the advantages of those improvements. The executive summary should include a brief introduction to the facility and describe the purpose of the audit and overall conclusions. An executive may read no further than this one- or two-page introduction, so a list of recommended actions is essential.
2. Building Information
This section provides a general background of the facility, the mechanical systems, and operational profile. A description of the building envelope, age and construction history, operating schedules, number of employees, occupancy patterns, and a discussion of the operation and maintenance program should be included.
The building information section should also contain a floor plan, selected photos of the facility and mechanical systems, a description of energy types used in the plant, and a description of the primary mechanical systems and controls.
3. Utility Summary
The utility summary provides energy accounting information for the last two years as well as selected charts and graphs. The charts and graphs should be easy to understand and demonstrate the overall consumption patterns of the facility.
Actual monthly consumption by fuel type may be of more interest to the engineering and maintenance staff while annual costs or dollar-savings information may be more appropriate for administrative personnel. Pie charts of energy use and cost by fuel type can offer compelling documentation of overall energy uses and expenses. The utility summary also includes reports of overall facility benchmarks, energy use indices, and comparisons with industry averages. A copy of the utility rate schedules and any discussion or evaluation of rate alternatives for which the facility may qualify can be part of this section.
4. ECMs
The ECM section summarizes the energy conservation measures that meet the financial criteria established by the facility owner or manager. The report should provide the estimated cost, estimated savings, and simple payback for each measure in a summary chart. A one- or two-page description of each energy conservation measure and support calculations should follow this summary chart. The description should describe each ECM and include energy use and savings calculations, as well as economic analysis and provide any assumptions that were made regarding operation or equipment efficiency. ECMs that were considered but did not meet financial criteria should also be identified.
5. O&M measures
Observations include items that will reduce energy consumption and costs, address existing problems, or improve practices that will help prolong equipment life of systems not being retrofit. Cost and savings estimates of each O&M recommendation are listed.
6. Appendices

Information in this section may include floor plans and site notes; photos; audit data forms; motor, equipment, and lighting inventories; and equipment cut sheets of existing or recommended systems.

Followup
The building manager should review the audit report with the auditor to become familiar with ECMs and methods of funding the ECMs. The building manager must also understand how to provide training for building operators and occupants to improve the operating efficiency of the building.
Energy audits provide the information that energy managers need to identify energy consumption patterns and components of a facility and document existing conditions, Energy conservation opportunities can be identified and prioritized. By taking an open-minded and methodical approach to the audit process, it is possible to identify and avoid unnecessary expenditures in most facilities while improving building operation and comfort. Occupants will welcome the improvements and management will appreciate the reduced energy costs.

What is Focus on Energy?

What is Focus on Energy?Helping businesses make smart, energy efficient decisions is our mission. All types of businesses, large and small, can benefit from Focus on Energy's energy efficiency expertise. Focus on Energy works with eligible Wisconsin businesses to install cost effective energy efficiency and renewable energy projects. Its efforts help businesses manage rising energy costs, promote in-state economic development, protect our environment and control the state's growing demand for electricity and natural gas. For more information, visit About Us.

What can Focus do for you?

• Show you practical ways to implement energy strategies
• Reward your business with financial incentives for these strategies
• Suggest energy tips that are no-cost or low-cost
• Offer training opportunities on energy efficiency

Want quick tips right now? Take a look at tips to save money on electricity and natural gas.

Who do we serve?
Agriculture & Rural Businesses
Commercial Businesses (including healthcare, hospitality, food service, grocery)
Industrial Businesses (pulp/paper, plastics, metals, wastewater, food processing)
Schools & Government Facilities
Apartments & Condos
New Business Construction

Ways to Save Energy
How will your business handle the rising energy prices this year? View the presentation and fact sheets below to identify no-, low- and moderate-cost options to increase your business's bottom line and lower its energy usage. Each step taken will help manage rising natural gas and electric costs now and in the future.

Steps That Businesses Can Take To Manage

Steps That Businesses Can Take To Manage

Rising Electric Costs

You can reduce electricity use at your facility and manage rising electricity prices more effectively. This action list will help you get started. If you do not have the expertise in-house, work with Energy Savers and local experts such as contractors and product and service providers to complete energy saving projects.

This fact sheet identifies no cost, low cost and moderate cost options to increase your businesses’ energy efficiency. Each step you take will help you manage rising electricity costs

now and in years to come.

NINE ACTIONS THAT WILL REDUCE ELECTRICITY USE

1. Turn off lights and equipment when not in use

2. Program setback thermostats and energy management systems correctly

3. Install the most efficient lighting equipment and incorporate control devices

4. Maintain HVAC equipment regularly

5. Check other equipment regularly and ensure it is operating properly

6. Install variable speed drives

7. Purchase energy efficient equipment

8. Monitor monthly energy bills

9. Get employees involved in saving energy

1. TURN IT OFF! (NO COST ACTION)

Turn off electric lights when they are not needed and take advantage of natural daylight whenever

possible. Turn off office equipment at night and on weekends. Set the energy saving "sleep mode" to activate at the end of each day, or install timers that do the job for you and your staff.

2. MAKE SURE SETBACK THERMOSTATS AND ENERGY MANAGEMENT SYSTEMS ARE

PROGRAMMED CORRECTLY (NO / LOW COST ACTIONS)

You can save two percent on air conditioning costs for each degree you raise the thermostat.

Instead of relying on staff to adjust temperatures properly, use setback thermostats or energy management systems (ES) to manage your facility's energy use. If you have an ES installed, make sure it is set correctly and operating properly. If you do not have either system, you should install setback thermostats at a minimum. If you need help, hire an expert to help you adjust the settings.

3. INSTALL THE MOST ENERGY EFFICIENT LIGHTING OPTIONS AVAILABLE AND

INCORPORATE CONTROL DEVICES (LOW /MEDIUM COST ACTIONS)

Energy efficient lighting options are available for all business needs. Install compact fluorescent

bulbs in task lights and high performance T8 lamps and ballasts and/or pulse start metal halide systems in larger applications. Also, do not forget to install lighting control systems, including day-lighting controls, occupancy sensors and timers. Lighting controls turn lights down or off when they are not needed. Convert exit lights to LED (light-emitting diode) which use only two to three watts and can last up to 20 years.

4. MAINTAIN HEATING, VENTILATING AND AIR CONDITIONING EQUIPMENT REGULARLY (LOW COST ACTION)

Follow all manufacturers’ guidelines for maintaining heating, ventilating and air conditioning (HVAC) equipment. Have HVAC systems serviced regularly. Change air filters monthly. Basic maintenance makes a difference: you can cut up to 30 percent of fan energy use and up to ten percent of space conditioning energy use. Clean the space around your heating, water heating or cooling system to prevent debris from being pulled into burners or filters. Insulate hot water pipes and air ducts to minimize losses.

Steps That Businesses Can Take To Manage

Rising Natural Gas Costs

You can reduce natural gas use at your facility. This Focus on Energy action list will

help you get started. If you do not have the expertise in-house, work with Focus on Energy

and local experts such as contractors and product and service providers to complete energy saving projects.

This fact sheet identifies no-cost, low-cost and moderate cost options to increase your

businesses’ energy efficiency. Each step you take will help you manage rising natural gas

costs now and in years to come.

SIX ACTIONS THAT WILL REDUCE NATURAL GAS USE

1. Install setback thermostats or check settings of existing units

2. Ensure energy management systems are working properly

3. Install boiler system controls

4. Maintain steam systems

5. Optimize hot water systems

6. Install heat recovery units

1. INSTALL SETBACK THERMOSTATS OR CHECK SETTINGS ON EXISTING UNITS

(NO / LOW COST ACTIONS)

If you have not installed setback thermostats in your small to medium sized facility, you are

wasting energy and money. Install these inexpensive units now. They ensure that you are

not over-heating buildings during non-operating hours. If setback thermostats are installed,

double check their settings and reset them if necessary to match seasonal operating hours

and temperature requirements. You can reduce natural gas use by one percent for every one

degree Fahrenheit you set back the thermostat.

2. ENSURE THE ENERGY MANAGEMENT SYSTEM IS WORKING PROPERLY

(NO / LOW COST ACTIONS)

If your medium to large facility has an energy management system (ES), make sure it is set

correctly and operating properly. ES often are set incorrectly, which wastes energy and money.

If a qualified staff member cannot adjust your system, hire an expert to do it for you. The

savings will be substantial: you can reduce natural gas use by up to 20 percent by using an

ES correctly.

3. INSTALL BOILER SYSTEM CONTROLS (LOW / MODERATE COST ACTION)

If your building or process uses a boiler, install system controls. These controls, such as outdoor temperature resets, manage the boiler's operating temperature. They trim natural gas use during fall, spring and some winter warm spells. The benefits of installing boiler controls are substantial: you will reduce the boiler's natural gas use by 15 percent to 20 percent for non-condensing boilers and up to 40 percent for condensing boilers.

4. MAINTAIN STEAM SYSTEMS (LOW /MODERATE / HIGH COST ACTIONS)

Many school, commercial, industrial and government buildings operate steam systems and will save energy by taking the following actions. For example, a typical industrial facility can reduce steam system related natural gas use by 20 percent.

1. Reduce steam system leaks. Repair leaks in steam piping, condensate return lines and fittings. Wasted steam equals wasted energy.

2. Insulate piping and valves. Examine piping and valves and insulate them. If existing insulation is damaged, replace it immediately. Un-insulated pipes lose heat and cause the boiler to use more natural gas than necessary.

3. Test steam traps, replace defective traps, and maintain existing ones. Malfunctioning steam traps waste steam and result in higher boiler fuel consumption. You can reduce your boiler's natural gas use from five percent to ten percent. Simple payback is often one year or less.

4. Tune-up boilers every three to six months. Do not ignore basic maintenance; keep steam systems operating at peak efficiency and you will manage energy costs more effectively. Routine maintenance can reduce facility energy use by two percent.

5. Implement additional, longer term boiler modifications. Several actions will further increase boiler efficiency. These equipment modifications include: 1) adjusting boiler operations by adding stack economizers; 2) maximizing condensate return; 3) automating blow-down and recovering heat from the blow-down stream; 4) recovering flash steam heat; and 5) installing automatic

burner controls. These actions will pay for themselves in one to three years.

5. OPTIMIZE HOT WATER SYSTEMS (NO / LOW / MODERATE COST ACTIONS)

You can take several actions to reduce both natural gas and water use.

1. Minimize use. Many businesses can find ways to reduce hot water use. Install low flow, high efficiency pre-rinse sprayers at dishwashing stations in food service operations, replace full flow showerheads in lodging facilities and locker rooms with low flow units and upgrade laundry systems.

2. Adjust hot water temperatures. Unless high temperature levels are required by code, set water heater temperatures to 120°F. Each 10 degree Fahrenheit reduction in water temperature will generally save three to five percent on water heating costs.

3. Insulate hot water pipes. Add inexpensive insulation to all hot water piping and reduce heat loss.

4. Install more efficient hot water systems. If you are considering a change, make sure you install energy (and water) efficient units.

6. INSTALL HEAT RECOVERY SYSTEMS (MODERATE TO HIGH COST ACTIONS)

Many businesses and farm operations should consider installing heat recovery systems to capture waste heat from refrigeration equipment, boilers, driers, furnaces and other manufacturing processes. This waste heat can then be used to meet other heating or hot water needs and displace the need for natural gas. If you already have a heat recovery system, make sure it is working properly.

BUSINESS-SPECIFIC STEPS FOOD SERVICE OPERATIONS

• Water heating accounts for up to 17 percent of a restaurant's energy use. Install low flow high efficiency pre-rinse sprayers at dishwashing stations to reduce energy and water use and costs.

• Turn down or turn off gas-powered cooking equipment during slow periods.

LODGING

• Space and water heating together to account for 49 percent of a lodging business's energy use. Install low flow showerheads in guest rooms and pre-rinse sprayers in food service areas. Also consider installing new laundry technologies such as an ozone system or a water reclamation system to recover hot water from wash water.

AGRICULTURAL BUSINESSES

• Dairy operations can install heat recovery tanks to capture waste heat from refrigeration systems and reuse it to meet space or water heating needs.

• A new generation of window film products helps greenhouses cut winter natural gas use, often substantially.

MANUFACTURING CUSTOMERS

• Heat recovery systems will help you reduce energy waste and improve the efficiency of your operation or process. If you were postponing these projects because the project economics seemed weak, it is time to reexamine them.

LEARN MORE

Focus on Energy can help you with these steps to take control of your business's natural gas usage. We offer fact sheets, case studies and technical data sheets on many of the energy saving actions and technologies discussed in this action list. We sponsor a variety of training courses and seminars statewide that are open to all business customers.

We can answer your energy efficiency questions, provide assistance, make recommendations and connect you with local contractors who can help. Call 818-270-6319 or visit

www.energysavers2.com.

Energy Use Self Assessment

Energy Use Self Assessment

 This self audit will create a basic inventory and assessment of the major energy-consuming equipment in your facility. Focus on Energy can assist you in developing energy efficient practices or research the installation of new energy efficient equipment. Please choose the appropriate answer or fill in the blanks.

CUSTOMER INFORMATION:

Company name: Parent Company: (if different from above) Address: City / State / Zip: Building contact name: E-mail: Contact phone: Fax: Building -check one: 􀂉 Owned 􀂉 Leased Required utility information: Electric Utility: ______________________________________________ Electric Account#: ________________________________ Utility Rep Name: ____________________________________ Required utility information: Natural Gas Utility: ______________________________________________________ Gas Account#: ___________________________________ Utility Rep Name: ____________________________________ BUILDING INFORMATION: Building Use (check all that apply): 􀂉 Hotel/Motel 􀂉 Office 􀂉 Retail 􀂉 Warehouse 􀂉 Manufacturing 􀂉 Other:________________ Typical Operating Hours Per Day (indicate am/pm): Mon: ____ to _____ Tue: ____ to _____ Wed: ____ to _____ Thr: ____ to _____ Fri: ____ to ____ Sat: ___ to ____ Sun: ____ to ____ Age of Bldg:_______________ Total Sq.Footage:___________ (do not include basement unless occupied) # of stories/floors:___________ Exterior Description: ____________________________ Windows: 􀂉 Newer, insulating glass 􀂉 Functional 􀂉 Leaky/drafty Qty:_____________ Size:___________(total sq/ft.) Doors: 􀂉 Newer, insulating glass 􀂉 Functional 􀂉 Leaky/drafty Qty:_____________ Size:___________(total sq/ft.) Is there insulation on/in the attic or ceiling nearest the roof? 􀂉 Yes 􀂉 No If possible, describe composition, condition & thickness: Any plans for upgrading or expanding this facility? 􀂉 No 􀂉 Yes Briefly describe plans and date:_______________________ _________________________________________________________________________________________________ Please mail form to: Energy Savers-Small Commercial ♦

9420 Reseda Blvd

♦ Northridge, CA 91324 Direct questions to 818-270-6319

Page 2

HEATING, VENTILATING AND AIR CONDITIONING: Please check applicable types of equipment in the building and if available give additional information: TYPE Qty. MAKE MODEL SIZE BTU/H OR KW AGE/YEAR 􀂉 Boiler 􀂉 Forced Air Furnace 􀂉 Roof top unit 􀂉 Split System 􀂉 PTAC/PTHP 􀂉 Chiller 􀂉 Heat Pump 􀂉 Cooling tower 􀂉 Electric baseboard 􀂉 Other:___________ Who maintains equipment? 􀂉 Staff Member 􀂉 Outside Contractor Contact Name:________________________________ Phone #: Describe make up air / ventilation systems / exhaust fans that supply & exhaust building air: Temperature Control: (check all that apply) 􀂉 Bldg Automation System 􀂉 Standard Thermostats(s) 􀂉 Programmable Thermostat(s) Temperature settings during occupied hours: Winter_______°F / Summer_______°F Temperature adjusted during occupied hours? 􀂉 Yes 􀂉 No WATER HEATING: Please check applicable types of equipment in the building and if available give additional information: TYPE MAKE MODEL Storage Tank Size (gallons) Temperature set to °F AGE/YEAR 􀂉 Natural gas water heater 􀂉 Electric water heater 􀂉 Boiler w/ indirect water heater 􀂉 Other:__________ Does facility have showers? 􀂉 No 􀂉 Yes Approximately how many?____________________ Energy Use Self Assessment Please mail form to: Energy Savers-Small Commercial ♦

9420 Reseda Blvd

♦ Northridge, CA 91324 Direct  questions to 818-270-6319

Page 3

LIGHTING: Description of Lighting Fixture Quantity of Fixture Type of Fixture Controlled by Exit Signs 􀂉 Incandescent 􀂉 Fluorescent 􀂉 LED 􀂉 Switch 􀂉 Timer 􀂉 Sensor Incandescent Lights 􀂉 Switch 􀂉 Timer 􀂉 Sensor 4ft. Fluorescent Lights with 1 or 2 lamp 􀂉 T-12 􀂉 T-8 􀂉 Switch 􀂉 Timer 􀂉 Sensor 8ft. Fluorescent Lights with 3 or 4 lamp 􀂉 T-12 􀂉 T-8 􀂉 Switch 􀂉 Timer 􀂉 Sensor LAUNDRY / COOKING EQUIPMENT: Laundry # of Washers:____________ # of Dryers:______________ Average Loads per day:________________ Cooking # of Ovens:____________ # of Refrigerators:___________ # of Freezers:___________________ VENDING / ICE MACHINES: # of Snack Machines:___________________ # of Cold Beverage Machines:_________________ # of Ice Machines:___________ 􀂉 Air Cooled 􀂉 Water Cooled Make:____________________ Model:___________________ SWIMMING / WATER FACILITIES: Pool Type Pool Heater Information TYPE MAKE MODEL Efficiency BTU/H Rating AGE/YEAR Lap Pool Activity Pool Whirlpool Children’s Pool Other:____________ Using heat recovery from a dehumidifier to heat pool water? 􀂉 Yes 􀂉 No 􀂉 Don’t know OTHER: Do you have numerous motor, pumps and pools/vats in the building? 􀂉 Yes 􀂉 No Briefly describe any other special equipment required for your operations:

Energy Use Self Assessment