Part II
I’m sure that most people of consciousness in the environmental space would agree that Distributed Generation (DG)/Combined Heat & Power (CHP) is a great thing and should be applied wherever feasible. In fact, many of us can envision a world where the majority of electricity, as well as thermal energy, is produced on-site, and the GRID becomes more of a supplementary, back-up or redundant system.
In my own experience, I spent more than three years working in a rather progressive and outstanding start-up company in the energy field. We built CHP systems, but unlike most before us, devised a rather clever and unique business model/value proposition, which we conveyed to owners of real estate we targeted to serve: lease us some space on your roof that has never before been used nor generated income, and we will build, own and operate a CHP system to serve the building and its tenants, which would provide economic benefits to the owner.
Further, we signed long-term leases (15+ years), provided all of the capital to construct and operate these systems, and we were responsible for the fuel (natural gas) and the servicing of the equipment. The owner and tenants would not notice anything different, and would enjoy the same services as before. In the process, all parties stood to benefit – frankly, the tenant benefitted the least, as he didn’t see any savings in energy costs, a component of most gross office leases, but instead saw no changes. Nonetheless, for tenants wanting to be in a “green” building, that was a perceived benefit to the owner in attracting and retaining tenants.
We built these systems on top of major commercial office buildings (literally, in most cases, on the roofs, hoisted up by huge cranes or lifted by helicopters). We interconnected to both the building’s electricity system (and, therefore, to the GRID, as well) and to the heat and/or cooling systems (sounds impossible, but we could actually turn the heat into cold water, which buildings use for air conditioning). We could then provide “discounts” or other monetary savings on these commodities (electricity, hot water/steam and/or cold water, depending on the building).
While all of this probably sounds too good to be true, it really was a great business model that did work under certain conditions, and should have worked on a sustained basis, but unfortunately, did not succeed in the long run (the reasons for which I will discuss in subsequent parts of this article). Despite all of the good that could come out of this program (using less energy, emitting less pollution, saving money), in many ways the implementation of the plan was like spitting into the wind, or paddling in a canoe upstream in category 5 whitewater rapids. Instead of proponents shepherding us in, as we hoped for, there were antagonists everywhere.
In this series, I will describe the various roadblocks to success in our business, with the overall goal of raising awareness, in an effort to help the cause for future generations of “Independent Power Producers.” Just like the real necessity to enact major structural changes in our country at this point in time (such as tort reform and other logical, common-sense changes), the rules for DG and other similar initiatives need to be changed, eased and reformatted, in order to incentivize and otherwise attract more of these practices, which should produce an overall benefit to all parties.
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