Building Management Hawaii June/July 2013 - (Page 12)
Solar & More
Beyond PV …
The Power Of The Negawatt
Using negawatts to boost PV financial returns.
By Miles Kubo
I
n the past few years, the explosive
growth of solar energy installations
in Hawaii has been phenomenal.
Our conditions are more than
ideal—abundant sunshine, moderate
temperatures, high utility rates,
rising fuel costs, sizable tax credits,
accelerated depreciation, declining
panel prices, low interest rates,
abundant finance capital and the
state’s clean-energy initiative.
Businesses and residents who
invested in photovoltaic (PV) systems
have insulated themselves against
future increases in electricity rates
and will earn a good return-oninvestment. It doesn’t get much better
than that! Or, does it?
Well, yes, it does … in fact, it gets
much better. To get the most out of
energy investments, it is important to
think beyond PV power, and to invest
in negawatt power (aka “negative
megawatt”). A negawatt represents
the watt that is never used. It is a
measure of the electricity saved by
increasing efficiency or reducing
consumption as a business practice.
For example, replacing a 60-watt
incandescent light bulb with a 10-watt
LED lamp that provides the same light
output will eliminate 50 wasted watts
per hour. Over a year, the elimination
of wasted energy from just one light
bulb will result in savings of about
440 kilowatt hours, worth about
$150 in Hawaii. On a grander scale,
replacing energy-intensive airconditioning equipment can result
in the elimination of millions of
wasted kilowatts, saving hundreds of
thousands of dollars.
The critical question is, “Does
it cost more to invest in energyefficiency products to generate
negawatts or to invest in PV power to
generate new megawatts?” In other
words, which energy investment
provides the better economic return?
If you chose the negawatt, then
you’re right. Generally, the financial
returns on energy-efficiency
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June - July 2013
BMH
projects are noticeably better than
PV investment returns. While a PV
project in Hawaii might yield a 15
percent to 30 percent internal-rateof-return (IRR), a lighting-efficiency
project can provide significantly
higher IRRs of 50 percent to 75
percent, or more.
Why then is everyone rushing to
PV? One reason is that negawatts are
invisible and difficult to objectify. It
is hard to “see” what one is getting,
except perhaps in the monthly utility
bill. On the other hand, PV systems
are viewed by some as “sexy” and the
new status symbol.
Fortunately, it is not an “either-or”
decision. In fact, the best thing to do
is a combination of both—to reduce,
then produce. This practice will
yield the highest return for energy
investments. After all, what good is
it to generate new electricity from the
sun, if it is simply wasted on lighting
up a 60-watt incandescent light bulb
when a 10-watt LED will do the job?
Case Study:
Hosoi Garden Mortuary
To illustrate the point, the Hosoi
Garden Mortuary in Honolulu
recently renovated its building and
invested in a PV array and lighting
efficiency. Both will protect the
business against future unexpected
utility price surges—a savvy strategy.
The company installed a
SunPower PV system—one of the
most powerful panels available—
that generates approximately
150,000 kilowatt hours (kWh) of
electricity each year. The system
cost approximately $550,000.
With investment tax credits and
depreciation benefits, the estimated
PV investment return over 20 years
is 27 percent.
In addition, the company invested
approximately $32,000 in a lighting
upgrade that saves about 60,000
kilowatt hours (kWh) of electricity
each year. Receiving energy-
efficiency rebates from Hawaii
Energy, the estimated investment
return over 10 years is 63 percent.
The lighting project, while only a
small fraction of the total cost of the
PV project (6 percent), will generate
about 40 percent as much of annual
kWh savings as the PV system. When
combined as a hybrid-energy project,
the overall return-on-investment will
increase to 32 percent. This is the
power of the negawatt.
In some instances, the reductions
in energy consumption have resulted
in the ability to install a smaller PV
array, saving money on the cost of the
PV system.
The importance of a hybrid project
is that the cash flow from energy
savings will help support repayment
of debt for the PV system. In essence,
the payments needed for the project
can come entirely from the cash flow
from the project. How great is that?
Imagine being able to implement
energy and capital improvement
projects and not have to dip into your
pocket to pay for them.
Some PV financiers have learned
that efficiency projects will enhance
value and are now including
conservation measures in power
purchase agreements (PPA) to boost
returns. This helps the consumer
by simplifying the way they pay for
energy conservation measures and
renewable energy.
When considering renewable
PV power, remember that a good
project can become a great project by
including negawatt power.
Miles Kubo is executive
vice president and COO of
Energy Industries LLC,
a Hawaii energy services
company that specializes
in energy cost reduction
and renewable energy for
the commercial building
market. He holds an
MBA in finance from The
Wharton School of the University of Pennsylvania.
www.buildingmanagementhawaii.com
http://www.buildingmanagementhawaii.com
Table of Contents for the Digital Edition of Building Management Hawaii June/July 2013
Special Section: BIA Renaissance Awards
Solar & More - Made In The Shade
Solar Options For Condos
Beyond PV…The Power Of The Negawatts
Solar On The Highrise
On The Farm With PV
The Reality Of Exploring Solar
Steep-Slope Solar
Concrete & Asphalt - Fresh Surfaces for Work & Play
Pavement Maintenance 101
Asphalt Alternatives
Rocky Road
Pavement Preservation
Painting Top 5 Painting Tips
Painting & Exterior Finishes
Lead & Rules
On Site: Renting Delinquent Units
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