Part VII
At this point, I want to discuss a couple of interesting details about running the business of Distributed Generation. For example, our company had to have an entire department dedicated to the billing process. To review the business model, we built a DG system on the building’s roof, at our cost and based solely on our responsibility in operating and maintaining it. The building owner and tenants would do absolutely nothing in connection with the system. However, the building owner would need some economic impetus to agree to allow the system to be built and attached to the building.
The business model was to generate electricity, for primary power (not back-up), and thermal energy. These two or three commodities – electricity and “heat” (depending on whether it is hot or cold water – or both) were sold to the building at the same price as the owner would otherwise have to pay to the utility companies who deliver electricity, as well as steam and gas, in order to produce hot and/or cold water at the building. We would have to carefully measure our outputs, and then bill the building accordingly. And, of course, we would then pay the building our “rent,” which was 7.5% of all commodities generated on-site and sold to the building.
This was an intense and difficult task for many reasons. Actually, the electricity was the easiest to measure – we just went off an approved electric meter we installed at the site. But, to measure hot water, this was a little less clear. We had to come up with a formula of gas usage relative to the efficiency of the building’s existing boilers, in order to calculate how much gas the building otherwise would have used, in order to have delivered the actual hot water it consumed. This was a different concept and somewhat “gray,” but we usually would be able to explain it to the satisfaction of the building owner, and, more importantly, the chief engineer, on whom the owner relied in these matters.
Even more difficult is the process of calculating charges for cold water production and delivery to the building. Some buildings actually purchase cold water from a “chilled water loop,” which is an underground system operated by a third-party owner in the business of generating chilled water and delivering it to its customer buildings, in some downtown city areas. But, most buildings produce their own cold water, with a “chiller,” which is a big, heavy piece of equipment (most buildings have at least two of these) that either uses hot water, or steam, to produce – believe it or not – cold water, or, the other type of chiller, which is most common in the west coast areas, uses great amounts of electricity for its powerful motors in a compressor system, which produces the cold water.
When cold water was necessary (because there wasn’t enough hot water alone to meet the PURPA rule described in Part IV), we designed the system to take the hot water “waste stream” from our engines, and we installed the first kind of chiller (described above) to produce cold water. We would then integrate our system with the building, to deliver the cold water to the building’s existing systems. We would have to carefully measure what we delivered, not in quantity of water, per se, but in BTU’s (a measurement of cold energy units). So, we would have to carefully measure the amount of BTU’s, or cold therms, the building otherwise would have produced, and, we would have to account for losses along the way in transferring BTU’s from our system to the building’s – ouch! This would then yield a net amount we would charge the building.
In any event, as complicated, arduous and difficult as all of this was, the bottom line was that we believed in all of the good that our efforts could bring forth, and we felt that the business could be viable and, in time, stand on its own. And, we remained excited about this business we had created!
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