Energy and Utilities Case Studies

Transcription

1 Energy and Utilities Case Studies The class will be divided into small teams, and each team will be assigned one of the following case studies to work through. There are three 45-minute sessions: Day 1: Review cases as a group. Create team assignments, and teams break off to begin to work through their case. Day 2: Teams finalize their responses and prepare for presentations Day 3: Each team presents its findings and recommendations

2 Case # 1: Who needs water, anyway? Backdrop: Your land-grant university is located in a region where natural gas fracking is a dominant industry with important economic benefits to the community. The university enjoys a positive working relationship with Western Energy, which operates dozens of wells near campus and has pledged a significant donation to the Department of Geology and Geophysics. At the same time, a large percentage of students opposes fracking and have petitioned the Administration to sever ties with Western Energy. Sierra Club is very active on campus, and the University wants to avoid disruptive, highly publicized protests. The Situation: Campus water is supplied by the city, whose wells depend on a shallow aquifer that is at risk due to over-extraction and pollution caused by fracking. The City has just given Facilities Management a heads up that their water quality tests have not passed DNR standards, and major upgrades are needed within the next 12 months to combat rising pollutant concentrations. Though the drinking water is still safe to drink, the Department of Natural Resources requires the university to post a written notice in all buildings, alerting occupants about the situation. The university administration is concerned about how students and faculty will receive these written notices, and impact on student recruitment. Also, the City s emergency water system upgrades will increase rates, resulting in a 25% increase to campus buildings. Facilities Management has determined that a Reverse Osmosis unit on campus would allow the University to better control its own water quality. This $6 Million project was not in the 5-year capital plan. How would the team address this situation? Identify the internal and external stakeholders and how are they affected. Who should be on the team(s) to address this issue? What are some immediate, near-term, and long-term actions that Facilities Management can take? What recommendations might FM make to university administration?

3 Case # 2: Designs on Safety Backdrop: A major upgrade of the Student Union complex is underway, and the project includes an expansion of the building s utilities to serve additional heating and cooling load. The existing boiler and electric chiller are located in an already-cramped basement of the aging structure, and building maintenance staff have long-complained that working conditions are difficult: temperatures routinely reach over 100 degrees around the steam boilers, and some workspaces and platforms are too small to work comfortably. The Design and Construction (D&C) group plans call for an additional boiler and chilled water pump in that same space. According to the drawings, the new equipment can fit with no violations of minimum clearance requirements. In another building where similar cramped conditions exist in the utilities room, a Maintenance employee suffered a back injury last year while working on a narrow platform, forcing her to reach repeatedly for her tool kit at awkward angles. Rank-and-file Maintenance employees feel that fancy lobbies and classroom technology are given higher priority than the utilities work areas. From the D&C perspective, the installations meet all applicable codes, and this is the first time they re hearing about the back injury. They are tasked to deliver buildings on time and within budget, and it s true that they face pressure to make the public amenities as impressive as possible to compete with other universities. The Situation: Maintenance is demanding that D&C to rework the plans in the Student Union to improve the working conditions around these utilities in the basement. The project budget does not have room for design revisions at this late stage, and the president has signaled that it s very important for this project to be complete before a major donor event in that facility in two months. Tensions are rising, and front line supervisors have informed the Facilities Management senior management team that they re hearing rumblings of a work stoppage planned to take place within a week. There would likely be broad media coverage of the protest. Identify the internal and external stakeholders and how are they affected. How would you involve them in the resolution of this situation? What are the immediate, near-term, and long-term actions that Facilities Management should take? What suggestions would your team offer to address the root cause(s) of this crisis?

4 Case # 3: Privatization of facilities Backdrop: The Utilities enterprise at a large public university is a self-sustaining unit funded by billing each building for their steam, electricity, and water usage. Utilities maintains excellent safety, reliability and service to the campus, and thanks to careful fuel management and other operational decisions, they have avoided major billing rate changes over the years. However, the addition of several large new buildings on campus is straining capacity and its aging asset fleet requires major renewal projects that have been deferred due to budget cuts from the state. The Utilities group has aggressively pursued renewable energy goals and have committed to eliminate coal usage within ten years. CO2 emissions have been reduced by almost 20% just in the last year. Some of the renewable energy sources are currently more expensive than coal, but over the long term these fuels offer lower cost and greater energy security. These initiatives are popular with students and the community. The Situation: The university is weighing an offer from Acme Electric to purchase its Utilities enterprise. Acme Incorporated is a large for-profit utility that has completed similar utilities purchases at two other universities within the last 5 years. Under the terms of the proposed deal, Acme would pay a very large upfront fee, and they d own and maintain all energy infrastructure (a large combined heat and power plant, utilities distribution lines, and chiller plants). It s a 25-year contract, at the end of which Acme may elect to extend the term, or sell the assets back to the University for a nominal price. The initial purchase would give the university a generous endowment that could fund significant academic programs. All current Utilities employees would be offered a position (not necessarily the one they are in now) at Acme at their current salary, but Acme s benefit package is less generous. Just as with a regular offcampus utility company, Acme determines their billing rates to the campus and decides how to operate the plants and what fuels to use. The university did negotiate a cap on rate increases at 6% each year, which is higher than increases the university has historically implemented. At the other two universities, there have been no service complaints about Acme, but Acme has increased the billing rates by the maximum allowed, every year so far. Your team is part of the evaluation committee, representing Facilities Management. What factors should influence the university s decision on privatization? From Facilities Management perspective, what are the pros and cons? Identify the internal and external stakeholders and how would be impacted. How would you involve them in the decision? What short term and long term risks do you see with privatization, and what risk mitigations would you recommend?`

5 Case # 4: Distributed Generation: Distributed benefits? Your team is responsible for district energy enterprise that provides all of the heating and cooling for campus, as well as most of its electricity (the balance of electricity is purchased from the grid). All of your customers buildings are metered, so the academic colleges, athletics, and a large research park are each billed for their usage of steam, water, sewer, and electricity. Your overhead costs (staff, maintenance, renewal, and debt service) are built into your rates, and apportioned to customers based on their energy usage. Your campus enjoys great reliability and resiliency of the electrical generation and distribution network, thanks to two major projects in the last 8 years: a $53MM project to add two new steam turbine generators, and also a $25MM project to take your electrical distribution underground (after a major storm devastated your overhead distribution network a few years back). These improvements were paid with 15-year bonds, and you had to hike electric rates by 7% to all customers (since the capacity and network improvements benefit all) to cover the debt service. The Research Park is your largest consumer of electricity. You ve just learned that the Research Park has begun contract negotiations with a solar + energy storage developer, that will allow them to generate their own electricity. They will still draw some load at night and cloudy days, but this solar project is expected to reduce their electric bill by 80% or more. The project will also help the Research Park promote its sustainability. How does this solar project affect Utilities? Your other customers? What s the most fair way to handle stranded costs? Recommendations on how to address this situation now? Could it have been avoided?

6 Case #5 Actually, Toto, we ARE in Kansas. Your utilities enterprise features a centralized combined heat and power (CHP) plant that supplies underground steam tunnels and a mostly underground electrical distribution network. Your power plant also features 4 natural gas reciprocating generators. The recip generators are capable of providing backup power to about five buildings at any given time. It s 4:30 PM on an early April Friday, and a tornado just hit campus 15 minutes ago. What you know so far: All lives spared, thankfully. There are no reported fatalities. You have conflicting reports about which campus buildings were damaged and how badly. Within the Utilities enterprise, the on-campus water treatment plant has some structural damage to the building shell, but internal systems appear intact. Based on the paint damage your water plant manager can see from the ground, the elevated water storage tower was probably battered by a considerable amount of large debris. Electrical power is out campus-wide and the boilers in your CHP plant all tripped offline. You are the Utilities crisis response team. Walk us through your immediate, near-term, and long-term response.

7 Presentation Prep What are some of the contributing problems: what led to this situation? Do your solutions create new concerns/complications, and how might you proactively address them? These are whole-institution issues; how can the Utilities and Energy team best involve college-wide resources for a more comprehensive response

8 Presentation guidance Consider sharing speaking roles 5-8 minutes each team appoint a timekeeper Visual aids (flip chart, projector) are great-- let me know what you need! Costumes not required, but extra points for live music.

9 Case Study # Worksheet Assumptions Where team feels like lacks critical information in your case, consider some possibilities and share any assumptions you re making outside the information given in the case. Challenges and Actions What issues will your university need to address, who does it affect, what actions do you recommend, and how would you prioritize Challenges and Actions Key Players Immediate / Urgent Near Term (<6mos) Long Term / Ongoing