NextEra Advisors blog

PJM Capacity Auction: Impact on Business Energy Costs

NextEra Advisors — Thu, 31 Jul 2025 04:15:00 GMT

Energy Insights: What Your Company Needs to Know about the PJM Capacity Auction

Energy costs can dramatically influence your company's bottom line, and understanding the PJM Interconnection, LLC (PJM) capacity auction can unlock valuable insights that shape your company's energy strategy. PJM capacity auctions set the price for capacity throughout the PJM territory. Capacity is a key component of your energy costs, and the recent results from the auctions make it more important than ever to understand the implications. There are several ways that PJM capacity auctions impact energy costs for businesses, and knowing how to plan around them can help your company mitigate risks and capitalize on opportunities.

What is PJM?

PJM is a regional transmission organization and is the largest power grid operator in the United States. It coordinates the movement of wholesale electricity for 13 states and the District of Columbia. Acting as a neutral, independent party, PJM operates a competitive wholesale electricity market and manages the high voltage electricity grid to ensure reliability for more than 65 million customers.

How the PJM Capacity Auction Impacts Your Company’s Energy Strategy

During a PJM capacity auction, power generators offer their energy capacity to be purchased by electricity suppliers such as local utilities and other competitive energy retailers. These auctions set prices for future delivery, with both buyers and sellers negotiating the cost of keeping enough energy available to meet peak demands. With ever increasing demand and limited capacity, prices have continued to climb in the short term. This market based process ensures the reliability of electricity supplies, satisfying the growing demand for electricity in the United States. However, it also significantly influences the rates at which companies procure electricity, and this can impact your company in the following ways.

Price Variability: The auction outcome dictates the price for future electricity capacity, with fluctuations from one auction to the next that can potentially affect your company's energy budget. This may mean increased electricity costs during high price auctions or savings when prices are favorable.
Budget Predictability: Knowing auction results is essential to position your company to budget effectively. With energy costs driving a significant portion of operational expenses in most businesses, understanding the expected price ranges helps maintain financial stability.
Strategic Energy Decisions: A comprehensive understanding of auction outcomes can help your company strategize around its energy consumption. Adopting energy efficient practices, negotiating favorable supply contracts, or investing in alternative energy sources can help mitigate risks associated with price volatility.

Consulting with Energy Experts: A Strategic Move

The PJM capacity auction is held in advance of the delivery year to ensure there is sufficient power supply to meet future demand. Regulatory changes and market conditions can impact the timing and outcomes of these auctions. The Federal Energy Regulatory Commission also plays a significant role in approving changes to market designs and rules that impact auction outcomes. For instance, this year FERC approved PJM’s proposal to set a price cap and price floor for its next two capacity auctions.

Failing to monitor and account for auction outcomes can lead to budgetary surprises and can greatly impact profitability. As electricity costs continue to rise, strategizing around capacity auctions offers a competitive edge. Skillfully navigating the landscape of energy pricing components requires in depth knowledge of energy markets and regulatory requirements. Insights from energy experts can protect your company from unfavorable auction outcomes and empower your company to make informed decisions that maximize cost efficiency.

Leverage Expertise with an Energy Consultant

NextEra Advisors — Thu, 05 Sep 2024 04:15:00 GMT

In the evolving energy sector, energy consultants provide valuable expertise that guides organizations toward achieving their energy objectives.

When to Hire an Energy Consultant for your Business

In today's dynamic business landscape, optimizing energy consumption is not just about cost savings, it is a strategic imperative for resilience and competitiveness. Businesses face increasingly complex energy challenges, from navigating regulatory requirements to making large energy decisions for efficiency gains. This is where hiring an energy consultant becomes an intelligent business decision and investment. Energy consultants, such as NextEra Advisors, offer invaluable expertise and resources to help organizations of all sizes achieve their energy goals efficiently and effectively. Whether you are aiming to reduce operational costs or navigate the complexities of energy procurement, understanding when and why to engage an energy consultant can significantly impact your bottom line and long term success.

What is an Energy Consultant?

In today’s energy landscape, energy consultants, or advisors, serve as a valuable resource for businesses. Consultants and advisors specialize in evaluating, strategically planning, and implementing holistic energy solutions. Their expertise spans a broad spectrum of energy management practices, ensuring optimized energy usage. The primary objective is to assist clients in reducing costs and meeting regulatory requirements. Energy advisors provide strategic and practical insights, making them helpful in navigating the complex world of energy for businesses.

Energy Consultants Bring a Holistic Approach

When managing your energy needs, choosing to utilize a business energy consultant is a pivotal decision. However, it is important to acknowledge that consultants can vary in their approach and effectiveness. Leading energy advisors, such as NextEra Advisors, adopt a holistic, strategic approach, meticulously examining your entire energy ecosystem to deliver tailored, comprehensive energy solutions. They leverage their extensive industry networks to source top opportunities from a diverse array of vendors. This vendor agnostic stance ensures they are not confined to a single solution or provider. Instead, they conduct thorough comparisons of multiple options, presenting you with the most advantageous choices.

Benefits of Energy Consulting Services

1. Comprehensive energy assessments

Energy consultants begin with a detailed assessment of your current energy use. They analyze historical data, conduct on site audits, and use advanced tools to identify inefficiencies. From lighting and HVAC systems to industrial processes and building envelopes, every aspect is scrutinized. This thorough assessment uncovers all opportunities for energy savings, laying the groundwork for a robust energy strategy.

During this analysis, energy consultants employ a variety of techniques and tools. For instance, NextEra Advisors utilizes a comprehensive energy analytics software called NextEra360™, designed and developed by NextEra Analytics, a subsidiary of NextEra Energy Resources. This tool simulates different scenarios and identifies the most effective energy saving measures. The software also considers factors such as the age and condition of equipment, occupancy patterns, and operational schedules. By taking an all-inclusive view, inefficiencies can be identified and addressed to drive substantial energy and cost savings.

By leveraging industry knowledge, energy consultants can benchmark your energy performance against similar organizations within your industry. This benchmarking provides valuable context, helping you understand how your energy use compares to industry standards and best practices. Armed with this information, you can set realistic and ambitious energy-saving goals.

2. Tailored energy strategies

Following the assessment, energy consultants develop a strategy tailored to your specific needs and goals. This strategy might include a mix of energy saving technologies like LED lighting and high efficiency HVAC systems, along with renewable energy options. Consultants also recommend operational changes and behavioral modifications that can lead to significant savings. The result is a customized plan that addresses all aspects of your energy usage, ensuring comprehensive improvements.

For example, a manufacturing plant might benefit from upgrading its machinery to more energy efficient models and implementing a real time energy monitoring system to track and manage energy use. An office building, on the other hand, might achieve significant savings through improved insulation, advanced lighting controls, and employee engagement programs that promote energy saving behaviors.

In addition to recommending specific technologies and practices, energy consultants develop a phased implementation plan. This plan prioritizes initiatives based on factors such as cost effectiveness, ease of implementation, and potential impact on energy use. By breaking the strategy into manageable steps, consultants facilitate comprehensive energy improvements without overwhelming resources.

3. Cost savings and ROI

Energy advisors consider your entire energy profile to maximize your return on investment. They identify cost effective measures and help you navigate incentives and rebates, reducing upfront costs. Through thorough assessments, such as utility bill analysis, energy advisors can uncover billing errors that save organizations thousands annually, lowering energy bills and enhancing the financial performance of your energy initiatives. NextEra Advisors offers a complimentary utility bill analysis, which has historically saved corporations significant amounts. For instance, Elmira College received a 22,000 dollar refund from their utility for past overpayments and is saving 30,000 dollars annually from this free audit. Business energy consultants are well versed in the financial aspects of energy management. They conduct detailed cost benefit analyses to evaluate the potential return on investment for various energy saving measures, considering initial costs, expected savings, maintenance expenses, equipment lifespan, and potential increases in energy prices.

A key advantage of engaging energy consultant services is their expertise and commitment to staying current with available incentives, rebates, and financing options. Governments and utilities often offer programs to encourage energy efficiency and renewable energy adoption, providing financial incentives that can significantly reduce project costs. Consultants guide you through the options, ensuring you take full advantage of these opportunities.

By focusing on both immediate and long term financial benefits, consultants help you achieve the best possible return on investment for your energy initiatives. This financial prudence ensures that energy improvements are not only sustainably responsible but also economically sound.

4. Energy planning

Energy consultants assist in developing long term energy plans that go beyond immediate fixes. They help set and achieve goals like increasing reliance on holistic energy sources. This forward thinking approach can support your company’s regulatory compliance.

For many organizations, energy goals go beyond enhancing long term profitability by reducing energy costs; it is also about mitigating regulatory risks and attracting and retaining customers and investors. Energy consultants help you define and pursue these goals, integrating energy transition into your overall business strategy.

In addition to setting strategic energy objectives, energy consultants play a pivotal role in formulating internal policies, procedures, and reporting mechanisms essential for attaining and monitoring energy progress. They offer expert guidance on best practices and provide recommendations to help you communicate your achievements to a broad range of stakeholders.

5. Navigating regulatory requirements

Energy regulations are continually evolving, necessitating vigilant compliance. Energy advisors not only stay informed of the latest incentives but also keep current with regulatory changes, ensuring your energy strategy aligns and pivots accordingly. Their expertise aids in navigating the complexities of energy regulations, thereby mitigating the risk of fines and legal complications.

Compliance with energy regulations is paramount for avoiding legal penalties and enhancing your organization’s reputation. Energy consultants diligently monitor developments in energy policy at local, national, and international levels, keeping you informed about relevant changes and their potential impact on your operations.

Beyond ensuring compliance with existing regulations, energy consultants offer strategic advice on preparing for future regulatory trends. For instance, they may recommend investing in renewable energy or implementing energy efficiency improvements in anticipation of escalating energy costs. By proactively adapting to regulatory changes, you can minimize compliance risks and position your organization for sustained success.

6. Vendor neutrality

Another strategic advantage of working with an energy consultant is their vendor neutrality. A good consultant provides unbiased recommendations. Their primary goal is to identify the best solutions for your needs, ensuring you get the most effective and cost efficient options.

Vendor neutrality is vital for ensuring that your energy strategy is based on objective analysis and tailored to your specific circumstances. Energy advisors evaluate a wide range of technologies and solutions, considering factors such as performance, cost, reliability, and compatibility with your existing operations. This impartial approach ensures that the recommendations are in your best interest, rather than being influenced by commercial considerations.

Consultants frequently possess extensive networks of industry contacts, providing them with access to a wide range of products and services. This enables them to identify and procure optimal solutions tailored to your specific needs, leveraging their industry relationships to secure advantageous terms and conditions.

7. Project management and implementation

Along with constructing energy strategies and conducting energy audits, energy consultants also oversee implementation from start to finish, coordinating with stakeholders to ensure timely and successful completion. Client engagement programs often pair your organization with a dedicated client manager, accountable for your success and supported by a team that handles day to day operations. Leveraging extensive supplier networks and sophisticated bidding platforms, consultants source high quality products and services needed to achieve your renewable and sustainability goals.

Transparency is key in this process. Experts break down proposal complexities to reveal the true costs, risks, and benefits of each bid, reviewing and negotiating to secure the best solution. Effective project management ensures your energy initiatives are completed on time, within budget, and to high standards. Consultants provide ongoing support, conducting site visits and inspections to address any issues and optimize results, helping you achieve your energy goals efficiently and effectively.

Utilizing a Business Energy Consultant

In the rapidly evolving energy sector, businesses benefit from strategic guidance to optimize energy use and meet their energy goals. Business energy consultants offer a holistic approach with tailored solutions that address your unique energy needs. While specific technologies are important, energy consultants integrate these elements into a cohesive strategy, helping you invest in long term energy efficiency. NextEra Advisors, a member of the NextEra Energy family of companies, has been a trusted advisory group for the last 25 years and is known for its unbiased approach. With a firm commitment to objectivity, NextEra Advisors leverages the vast resources and expertise of NextEra Energy, the largest and most diverse portfolio of power generation and infrastructure solutions, to offer customized energy consulting services to large commercial, industrial, institutional, and governmental organizations. Clients trust this team to deliver tailored solutions and strong support in achieving their energy related goals. By understanding the benefits that energy consultants bring, you can make informed decisions to enhance your organization’s energy performance. Their unbiased and independent approach, combined with detailed assessments, tailored strategies, and effective project management, ensures meaningful energy savings. Whether you aim to reduce costs, comply with regulations, or enhance your brand reputation, energy consultants provide the expertise and support needed to succeed in the ever changing energy landscape.

*Center for Climate and Energy Solutions

Campus Lighting System Upgrades Save Time and Money

NextEra Advisors — Mon, 26 Aug 2024 04:15:00 GMT

Higher Education Lighting Projects

With operation and maintenance costs at college campuses perpetually on the rise, administrators are looking for ways to cut overhead and limit financial strain on students. The Department of Energy (DOE) calculates lighting in institutional facilities, including universities, may consume up to one third of a building’s total energy costs. That’s why institutions are increasingly investigating lighting system upgrades to improve efficiency and save money.

Lighting upgrades can take on many forms, from exchanging fluorescent lights with energy efficient LEDs to completely replacing outdated fixtures. This can be daunting considering the size of a college campus. But, the efficiency and dependability of LED lighting is hard for administrators to ignore when considering ways to lower maintenance costs. In many cases, LEDs are 50 percent more efficient than fluorescent lights and most LED fixtures have a useful life of at least 50,000 hours.

Benefits of Commercial Lighting Upgrades

LED lighting is practical for college campuses because it works well for many installations including walkways, buildings, parking lots, gymnasiums, and administrative offices. Often existing lighting fixtures will accept LED bulbs with no further technology changes. Also adding controls, daylight or motion sensors or adjusting lighting color and intensity can bring additional benefits beyond direct energy savings like:

Increasing student safety and productivity
Burning less energy and producing less heat
Eliminating student exposure to UV emissions.

LED Lighting Upgrades Can Reduce Energy Costs and Consumption

If fixture upgrades or retrofits are necessary, campus administrators can expect for these enhancements to pay for themselves in a relatively short amount of time. According to the Energy Cost Savings Council, lighting upgrades in institutional facilities have an average project payback period of just over two years, with a 45 percent return on investment per year.

A lighting system upgrade offers many opportunities to address bottom line concerns. The NextEra Advisors team can help you develop a customized lighting strategy, tailored to your organization’s unique needs.

25 Years Strong: Driving Business Energy Strategy

NextEra Advisors — Wed, 24 Jul 2024 04:15:00 GMT

The energy market has undergone substantial transformations over the past 25 years. From advancements in technology to changes in regulations, the landscape has shifted dramatically. As we celebrate the 25th anniversary of NextEra Advisors, we have seen our client needs change and how we’ve innovated and expanded to remain a trusted source for energy expertise.

NextEra Advisors began as a traditional electricity and natural gas supply broker, securing the best possible energy supply contracts for our clients. But as the dynamics of the energy markets evolved, so did we. Our services expanded, our knowledge deepened, and our role transitioned. We moved from solely focusing on negotiating energy supply deals to providing a comprehensive range of services and advice to diverse businesses, earning a reputation as a leading energy advisor.

Starting from electric and natural gas procurement to all other forms of energy, our experiences have shaped our identity and transformation over the last 25 years.

Early Years: The Foundation of Energy Procurement

In its early years, NextEra Advisors focused on electric and natural gas procurement, using insights and market knowledge to develop robust strategies that balanced opportunities and risks for businesses investing in energy. Lindt Chocolate, a long-standing client and leading global chocolate manufacturer, took advantage of this expertise for many years. Driven by its strategic sourcing principles, Lindt worked with NextEra Advisors for its electricity procurement, adhering to a plan with fixed electricity prices for budget stability. However, with escalating market volatility and a potential 40 percent rise in energy costs, NextEra Advisors advised Lindt on the increasing dependence on natural gas and the opportunities that a milder winter might present to reduce costs.

Balancing Lindt's need for budget certainty and flexibility, NextEra Advisors implemented a three year energy buying strategy, which allowed for cost management and purchasing opportunities. With constant monitoring, daily reports and monthly update meetings, NextEra Advisors ensures the success and necessary strategic adjustments of the plan. This customized strategy has continued to deliver on the objectives Lindt strives for as it prudently expands operations in the next decade.

Shifting Towards Energy Efficiency and Demand Response

Improving energy efficiency has been a cornerstone of US energy policy in the last decade. Advances in industrial processes, enhanced building codes and standards, and the adoption of energy management systems have reduced energy consumption in manufacturing and other sectors. With these advancements, NextEra Advisors began helping clients understand when their facilities used the most energy and how to make strategic adjustments to yield significant financial benefits. One key area where NextEra Advisors has made a substantial difference is load management, which allows businesses to optimize their energy usage to avoid excessive costs during peak times.

A prime example of NextEra Advisors' impact can be seen with Heartland Fabrication, a steel manufacturing company, which faced a 50 percent increase in capacity tag costs. NextEra Advisors helped Heartland develop an energy strategy that utilized peak notifications to reduce energy consumption and costs. As a result, Heartland took advantage of 5 PJM peak days over the year, reducing energy consumption by 427 kW and saving over 11,000 dollars, nearly a penny per kWh. By leveraging NextEra Advisors’ expertise, Heartland reduced their operating costs without making large scale changes or altering their existing equipment.

Brightening the Path Towards Renewable Energy

In 2015, New York first launched community solar as part of the Shared Renewables Program. To help its New York clients navigate this new program, NextEra Advisors introduced community solar consulting services that same year.

During this time, one of NextEra Advisors’ clients, a New York State housing authority, approached NextEra Advisors after being overwhelmed by offers from various companies for onsite solar installation. They needed guidance on financing, solar solutions, risk assessment and procurement. After reviewing their desired outcomes and current proposal for onsite installation, NextEra Advisors recommended community solar based on the housing authority's financial goals and timeline.

Through NextEra Advisors’ consultation and multiple community solar bids, the housing authority secured a comprehensive contract that mitigated future risks. They achieved 12 percent savings on their utility bills, exceeding the standard 10 percent bill credit, and have the potential to save up to 189,000 dollars over the course of the contract.

Offsite Renewables Consulting

The physical and virtual power purchase agreement renewables markets have grown significantly, driven by increased corporate energy management. Technological advancements and declining costs of renewable technologies have made PPAs and VPPAs more attractive. However, market volatility, regulatory challenges, contract complexities and regional resource availability have left many companies struggling to navigate this market with success.

When NextEra Advisors became part of the NextEra Energy family of companies, the largest and most diverse portfolio of power generation and infrastructure solutions, it strengthened its expertise to assist commercial businesses in navigating offsite renewables through strategic planning, financial modeling, risk management, contract negotiation, technical and regulatory support, market insights and energy reporting. Our expertise helps businesses align renewable energy projects with broader objectives, manage risks and ensure regulatory compliance, ultimately optimizing the benefits of offsite renewable energy procurement.

Integrated Energy Optimization Approach

Leveraging its expertise, NextEra Advisors expanded its portfolio in 2022 to include engineering services such as energy efficiency initiatives, building management systems, energy analytics, and fleet electrification services. By continually advancing its integrated energy optimization approach, these technologies reveal cost effective energy opportunities across all departments and functional areas for businesses.

Building on these advancements, NextEra 360™ enhances analytical capabilities by providing a comprehensive energy optimization platform. It processes approximately 23 billion data points daily, overseeing around 30 GW of renewables in operation and 160 billion dollars in total assets. This vast analytical power delivers highly customized and actionable insights, enabling businesses to make informed decisions and optimize their energy strategies.

Artemis Advisor, developed in 2023 by NextEra Advisors in collaboration with NextEra Analytics, further amplifies these analytical capabilities. This proprietary renewable marketplace automates the data driven evaluation of offsite renewable projects. Artemis streamlines the bidding process, offers detailed market comparisons, and reports on portfolio performance, helping organizations identify the best energy options efficiently and cost effectively.

Furthermore, fleet electrification represents an economical and reliable choice for organizational fleets. NextEra Advisors provides strategic planning that identifies suitable assets and collaborates closely with clients to design, construct, and maintain the necessary EV infrastructure that fits with their holistic energy efforts. This ensures a seamless transition to electric vehicles.

Combining these advanced tools with our comprehensive service offerings, NextEra Advisors helps commercial businesses seamlessly integrate various energy technologies to find economical solutions that fit within and strengthen their energy mix. Our expertise uncovers hidden opportunities for efficiency, driving success in the energy optimization landscape.

Celebrating 25 Years

The energy market has seen profound changes over the last 25 years, driven by technological innovation, policy shifts and evolving market dynamics. As we celebrate our 25th anniversary, we reflect on the incredible journey we've undertaken alongside our clients and look forward to a successful future.

We’ve grown into a leading energy advisory firm, evolving to meet the ever changing needs of those we serve, but our mission remains the same, to help businesses achieve their energy objectives in a cost effective and energy efficient way.

We are grateful for the relationships we've built, the clients we’ve helped and the progress we've made together. Thank you to all our clients for allowing us to walk alongside you in your energy journey.

*Center for Climate and Energy Solutions

Avoid These 3 Energy Contract Renewal Mistakes

NextEra Advisors — Wed, 22 May 2024 04:15:00 GMT

While most organizations are aware of the importance of managing their energy strategy, many struggle to get the best rate when it comes time to renew their contract. We see it all the time, once the energy contract is signed it’s filed away only to be reviewed when the deadline is at hand. During the rush to get the contract renewed before it expires, errors and missed opportunities happen that can wreak havoc on an energy budget.

Don’t let that be you. Energy spend is typically one of the largest line items in your budget and it deserves the same amount of attention. If you want to be proactive, you should be looking at contracting opportunities 18 months or more prior to expiration. To avoid costly errors, you must actively work on your renewal at least six months prior to the expiration date. By making note of key milestone dates, you’ll ensure you have time to explore options, review pricing proposals and get paperwork in order without being pressed against a deadline.

Starting early can also help you avoid these three expensive consequences:

High utility or rollover rates. All too often when companies wait until the last minute to renew, they find themselves missing the enrollment window and facing higher utility or roll over rates or missing out on re-enrollment altogether.
Negotiating your contract during the fall and winter months. Not only are fall and winter peak times for higher rates, but they are commonly corporate budgeting months. By renewing early, you’ll have your energy spend locked in before budget season. Knowing what your energy input will be helps you budget more accurately and focus on year-end initiatives—a win-win!
Unexpected roadblocks. During the renewal process, unexpected problems may arise that can take time to figure out, including unidentified meters, complex current contracts and credit check issues. If time is short, you may fail to get a new contract in place.

Our experienced team of energy advisors can help you avoid the last-minute pitfalls of rushing to renew your energy contract.

Energy Purchasing: What to do in a Volatile Energy Market

NextEra Advisors — Fri, 01 Mar 2024 05:15:00 GMT

Over the past year, there have been notable advancements in the market. In 2022, we observed a strong economic recovery, with several sectors beginning to bounce back from the difficulties caused by the global pandemic. As we entered 2023, the market started to show signs of softening. Last year brought about some challenges and obstacles that resulted in a more cautious investor sentiment. Although economic growth remained positive, it began to moderate compared to the rapid pace seen in the previous years. The combination of this slower growth and concerns about inflation and rising interest rates resulted in some market turbulence.

The current market conditions indicate a favorable trend, characterized by its stability and relatively low levels compared to recent years. Nevertheless, it is essential to acknowledge the impending factors that could introduce unpredictability, potentially escalating market volatility in the upcoming year. Therefore, exercising caution is imperative, and engaging energy advisors becomes crucial when building and executing an innovative, dynamic energy strategy with a focus on cost savings.

Based on Your Contract's Expiration Date Your Price Offers Will Differ.

Having maintained a long-term contract amidst the COVID-19 period, you might find energy prices seem to be on the higher side.
If you are transitioning from short-term contracts, you may find the current prices to be quite enticing, especially if you signed a contract in 2022.

ERCOT - North Hub Energy Annual Forwards chart: this chart shows the energy annual forwards for the North Hub in the ERCOT market, covering the years from 2019 to 2026.

How you purchase energy for your next contract renewal can bring your organization costly repercussions, or long-term advantages.

With a volatile and ever-changing energy market, relying on the familiar by renewing the same energy contract with a “set it and forget it” approach is not recommended in most cases. How you purchase energy for your next contract renewal can bring your organization costly repercussions, or long-term advantages. Whether your energy contract is up now, in six months or in a year, making strategic, data-driven, and well-timed energy strategy choices now can pay big dividends well into the future. That is why, when it comes to energy buying, it’s critical to be an energy price-maker, not a price-taker.

What You Can Do Now

Focus on what you can control
There are many costs that make up your total energy supply price; ancillaries, capacity and transmission are just a few. In some regions, these costs can make up nearly half of your total energy supply rate, but with some strategic planning, you can reduce these costs. Programs like Peak Load Management, Demand Response and energy efficiency initiatives can reduce your energy expenses.
Be a price-maker, not taker
Price-makers keep their finger on the pulse of the energy market and make strategic decisions to lock in long-term, low energy rates when opportunities arise. Rather than trying to time the market for a fixed-price energy contract, you can execute an energy procurement plan that allows you to take advantage of future buying opportunities without fully exposing yourself to price risk. Purchasing portions of energy over time will mitigate energy price fluctuations that come from being “all in” with a 100% fixed supply contract or a 100% index contract. This strategy strikes a balance between establishing budget certainty and managing energy purchases to drive energy cost reduction.
Engage a NextEra Advisors energy consultant
NextEra Advisors can help you stay focused on the fundamentals in the marketplace and avoid gut decisions when data-driven insights would serve you better. Our process is grounded in a deep understanding of supply and demand drivers in commercial energy markets. We utilize data and analytics to help you think more objectively and make fact-based decisions regarding commercial and industrial energy procurement. We take the time to understand your unique business needs and craft an energy plan that meets your budget and risk management objectives. Once we help you craft a unique energy strategy, we continue to remain engaged with you and your team–alerting you to market trends and future opportunities.

The energy market is complex and continually changing – especially during these uncertain times. It can be difficult to interpret the myriad factors that influence the energy industry and how those changes impact your energy costs. NextEra Advisors energy analysts and consultants are working with clients like you, providing real-time insight and developing a cost-efficient energy strategy that achieves business objectives and evolves alongside a changing market.

How to Approach Energy Projects to Maximize Savings and Reduce Energy Consumption

NextEra Advisors — Wed, 21 Jun 2023 04:30:00 GMT

Commercial profitability is a simple equation, revenue in versus expenses out. Energy is one of the largest expenditures a company can have and a key variable in maintaining control and balance of this equation. Achieving favorable energy rates is typically a great starting point, but you must also look at energy conservation.

From ensuring customer and employee safety in parking lots to leading the charge for reducing major operational expenses, facilities managers can be tasked with evaluating buildings for a multitude of reasons.

Whether you’ve had energy management tacked onto your existing role, or it has been one of the many ‘hats’ you’ve worn for years, juggling multiple responsibilities at once can make it tough to keep track of all the details. It can be challenging to know if you are making progress toward your energy and cost reduction goals and how your projects and upgrades will affect the bottom line.

The energy industry is continually shifting and fundamental changes are taking place today that have significant impacts on future energy costs. As a facilities manager of a commercial property, you are likely pulled in many different directions each day. Below are a few tips to help you work smarter when it comes to energy solutions.

Three Ways to Reduce Energy Costs & Consumption

1. Commercial Energy Audit

Before beginning your energy and cost reduction initiatives, get a baseline on your building(s), system efficiency and the cost of the facility’s operations.

This information is feasible through a commercial energy audit. The American Society of Heating, Refrigerating, and Air-Conditioning Engineers (ASHRAE) has a 3-tiered audit. Consider performing a Level 1 audit for smaller energy projects. Before your more extensive projects and significant investments, conduct a Level 3 audit. Along with getting an energy baseline, an ASHRAE Level 3 audit also identifies areas of energy improvement, appropriate actions to take to reach your sustainability goals, and provides data to drive your project actions forward.

Without a proper audit, you might be putting your budget towards energy optimization projects that aren’t getting you to your end goal.

2. Benchmarking and Reporting

If you can’t measure it, can you manage it? Measuring your energy consumption allows your business to establish a benchmark and move towards the implementation of holistic energy programs. Understanding how your building(s) performance ranks relative to past energy usage, as well as group peers, is integral when setting up targets for top performance.

With top-performing energy analytic tools, it’s easier than ever to go above and beyond preventive maintenance and make data-driven change through your sustainability projects while reducing energy costs.

A tool like NextEra 360™, a comprehensive energy optimization software platform, empowers businesses to improve operational efficiency, and energy procurement and energy decisions.

3. Energy-Efficient Lighting

Replacing high energy-consuming lights with more efficient technology is a practical investment that delivers cost efficiency and improved tenant, worker or client experience in your facility.

With lighting accounting for up to one-third of a building’s energy usage¹, the cost savings potential of a lighting upgrade is significant. However, less than 3% of U.S. businesses have made the conversion to energy-efficient light bulbs, such as LED lighting², one of today’s most energy-efficient and rapidly evolving lighting technologies, making it ideal for commercial and industrial use.

The U.S. Department of Energy suggests that upgrading to more energy-efficient lighting products may cut your bill in half. That deserves your attention.

While a facility-wide lighting upgrade or retrofit may present viable options, you don’t have to take an all-or-nothing approach to reap rewards. Making a few changes to an outdated lighting system through lamp replacements, adding controls, or adjusting lighting color and intensity can bring numerous benefits beyond direct energy savings.

Benefits of Energy-Efficient Lighting

Provide better illumination, increasing worker safety, and productivity
Burn less energy, produce less heat, and require less maintenance
Durability and longer lifespan for lamps
Achieve International Energy Conservation Code (IECC) lighting requirements for LEED^® goals
Increase property value
Earn rebates and tax incentives at the local, state and/or federal level that offset initial investment

With the potential of reducing energy usage by 50-75%, a lighting upgrade could be the first energy project your business tackles³.

Energy-Efficient HVAC Systems

According to the U.S. Department of Energy, over 35% of a commercial building’s electricity use is consumed by its heating, ventilation, and air conditioning system (HVAC). In many cases, the systems and controls are running inefficiently, causing facilities to lose a significant amount of money.

We understand HVAC is one of the largest potential sources of wasted energy, and together we work with you to develop a strategy that maximizes the efficiency of your system and reduces your energy costs. Follow these three steps towards optimization and watch your company’s bottom line increase over time.

System tune-up: With a simple tune-up, you can bring your existing equipment up to peak performance.
System controls: By replacing obsolete controls to increase functionality, this allows the system to respond to external factors, such as building occupancy or weather conditions.
System replacement: By replacing aged equipment with high-efficiency, properly sized equipment, you can improve performance and increase occupant comfort.

Benefits of Commercial HVAC Optimization

Reduce energy consumption
- Reduce energy costs. Lowering operation costs; both immediate and long-term
Enhance overall quality, comfort level and climate control
Increase the longevity and efficiency of your equipment
Avoid unexpected costly repairs or replacements by staying ahead of inevitable system updates
Gain peace of mind knowing the work is being done by a highly experienced engineering and implementation team

An obvious place to start any energy project is with NextEra Advisors. We recommend performing a feasibility audit to understand your options and evaluate your ROI. Once complete, our team of energy advisors can help you develop a customized strategy, tailored to your organization’s unique needs. We offer a variety of customized business solutions aimed at increasing energy efficiency and providing cost savings for enterprises and businesses of all sizes. We take you from start to finish and guide you through every step of your energy projects.

¹ energy.gov
² energy.gov/energysaver/save-electricity-and-fuel/lighting-choices-save-you-money/led-lighting
³ https://www.energy.gov/eere/why-energy-efficiency-upgrades

How to Reduce Energy Bills by Lowering Transmission and Capacity Costs

NextEra Advisors — Thu, 10 Mar 2022 05:15:00 GMT

The energy price volatility that is taking place today has commercial and industrial business leaders exploring ways to lower energy costs. A commercial electricity price is influenced by several factors. There are conditions that cannot be controlled, such as weather and fundamental market conditions, and there are elements that can be controlled. In this blog, we discuss two costs on your energy bill, beyond commodity rate, that can help you lower commercial energy costs.

About Transmission Costs

There has been a lot of recent movement in transmission costs within regions of PJM. This year, the capacity auction that was originally slated for January 25, 2022 was moved to May 1, 2022. In addition, the Federal Energy Regulatory Commission (FERC) is reverting to the previous market design for the May 1, 2022 auction; a backward-looking Net Energy & Ancillary Services Revenue Offset rather than forward-looking. The result could lead to an increase in charges to end-users. The extent of these changes is currently unknown.

In PJM, the mechanism that transmission owners use to recover their annual transmission costs, and revenue requirements from PJM customers, is called Network Integration Transmission Service (NITS). NITS charges can change as costs associated with operation and maintenance, tax, cost of capital or rate base and transmission owner cost of services fluctuate.

How Transmission Costs Are Calculated

Each local distribution company within PJM has a network transmission service peak load contribution (PLC) requirement. Like capacity tag costs, NITS (and Transmission Enhancement Charges) are calculated based on a customer’s peak-load demand and are referred to as the Transmission Tag, or Transmission PLC. The transmission tag uses the following formula:

Your Network Service Peak Load (NSPL) is calculated based on the highest demand hour(s) of the year and can be decided upon by the local distribution utility.

How capacity charges are calculated

The capacity charge is one cost that can be affected by proper management. Your capacity charge is made up of two main components: capacity cost and capacity tag.

Capacity cost: The generation price set per kilowatt-hour

Capacity tag: The total kilowatt-hours used by a facility on the peak hour(s) of the peak day(s)

What You Can Do to Reduce Costs

There are ways that commercial customers can take action to reduce and control transmission and capacity costs. Depending on your risk budget tolerance, it may make sense for you to “pass through” these costs so that you can manage them through demand reduction measures to obtain lower tags. By effectively predicting the potential peak day(s), companies can temporarily reduce their electricity usage to lower their tags for the next capacity year. A reduction in the transmission and capacity tag will help mitigate the increase in the costs going forward and generate savings.

Delayed PJM Capacity Auction May Increase Your Transmission Costs

NextEra Advisors — Fri, 11 Feb 2022 05:15:00 GMT

PJM Interconnection is a regional transmission organization (RTO) that coordinates the movement of wholesale electricity for 13 states–Delaware, Illinois, Indiana, Kentucky, Maryland, Michigan, New Jersey, North Carolina, Ohio, Pennsylvania, Tennessee, Virginia, West Virginia–and the District of Columbia. Acting as a neutral, independent party, PJM operates a competitive wholesale electricity market and manages the high-voltage electricity grid to ensure reliability for more than 65 million customers.

PJM’s annual capacity market, called the Reliability Pricing Model (RPM), is held in advance of the delivery year and ensures long-term grid reliability by securing the appropriate amount of power supply resources needed to meet predicted energy demand in the future.

After a meeting between the Federal Energy Regulatory Commission (FERC) and PJM in December 2021, the capacity auction that was originally slated for January 25, 2022 was moved to May 1, 2022. The change stems from efforts to comply with a March 18 FERC order ruling that the existing default market seller offer cap was unjust and unreasonable.

In the meeting, the Operating Reserve Demand Curve (ORDC)/Penalty Factors docket was discussed with the intent to improve market design by reviewing such things as:

Implementing new Reserve Constraint Penalty Factors (RCPFs) – this is the maximum cost that can be imposed in order to meet reserve requirements
Shape of the ORDC
Tier 1 and Tier 2 Products
Net Energy & Ancillary Services (E&AS) Revenue Offset

FERC determined that PJM had not demonstrated that its existing penalty factors and ORDCs are wrong. FERC recently changed the reserve market design and is reverting to the previous market design for the May 1, 2022 auction; a backward-looking Net Energy & Ancillary Services Revenue Offset rather than forward-looking.

The result could lead to an increase or decrease in obligations and/or charges. The extent of these changes is currently unknown.

A Background on Transmission Costs

As a regional transmission organization, the delayed PJM capacity auction can directly affect transmission costs. Transmission is the act of moving electrical energy from power plants to electrical substations. Electricity travels at nearly the speed of light, arriving at a destination at almost the same moment it is produced. When transmission lines are connected, they form what we know as “the grid”. This infrastructure may or may not be owned and/operated by your local utility.

In PJM, the mechanism that transmission owners use to recover their annual transmission costs and revenue requirements from PJM customers is called Network Integration Transmission Service (NITS).

NITS charges can change as costs associated with operation and maintenance, tax, cost of base, and transmission owner cost of services fluctuate. Any changes to NITS rates must be approved by FERC before they can be charged to the customer.

How Transmission Costs Are Calculated

Each local distribution company within PJM has a network transmission service peak load contribution (PLC) requirement. Similar to capacity tag costs, NITS (and Transmission Enhancement Charges) are calculated based on a customer’s peak-load demand and are referred to as the Transmission Tag, or Transmission PLC. The transmission tag uses the following formula: (Peak Load Value x Transmission Rate $/MW-day x # of Days in term)/Forecast Term Volume).

How You Can Reduce Transmission Costs

There are ways that PJM commercial customers can take action to reduce and control transmission costs. Depending on your risk tolerance, it may make sense for you to “pass-through” these costs so that you can manage them through demand reduction measures and obtain a lower transmission PLC. Your Network Service Peak Load (NSPL) is calculated based on the highest demand hour(s) of the year and can be decided upon by the local distribution utility. Companies that can reduce energy usage during certain peak hours will see a reduction in their NSPL, which is used to calculate the total transmission cost.

NextEra Advisors works with clients on ways to reduce these costs and structure energy supply contracts that maximize the transmission PLC reduction.

How Ingrained Behaviors Can Lead to Unnecessary Energy Costs

NextEra Advisors — Mon, 27 Dec 2021 05:15:00 GMT

Human beings are creatures of habit. It’s in our nature to follow familiar behaviors and beliefs–even when these things may lead to poor outcomes. We are conditioned to repeat unhealthy behaviors or hold on to outdated beliefs simply because they are familiar to us, and familiarity feels comfortable and safe. But familiarity doesn’t always equal productivity or enable positive outcomes. If we want our lives, careers, and organizations to evolve, our beliefs and behaviors must evolve as well.

Luckily, we humans also have free will. We can learn new skills and adapt to changing environments if we choose to. We can break unproductive habits and alter restricting beliefs. We can let go of what no longer serves to make way for emerging information, technologies, resources, and habits that help us achieve our goals and realize our dreams.

You may be wondering what all this has to do with your energy costs. The fact is that the habits you’ve formed and the decisions you make in your professional life can greatly impact your organization’s energy outcomes. With a volatile and ever-changing energy market, relying on the familiar by renewing the same energy contract with a “set it and forget it” approach could result in costly repercussions.

Here are some common ways that ingrained behaviors can impact your energy costs.

Mean Reversion

Mean reversion (or reversion to the mean) is a financial concept that says, when costs fluctuate higher or lower than the long-term norm, they will ultimately return to their expected, long-understood state. The data demonstrate that price performance will almost always revert to the mean. Here’s how this plays out in your energy contract. When energy pricing falls well below the historical average, and you have a “set it and forget it” approach, you are not compelled to make a move and lock in the lower pricing. This can result in a missed opportunity for savings because it is likely that prices will rise back to the mean.

Loss Aversion

Loss aversion is an ingrained behavior where we are so fearful of a loss that we focus more on avoiding the loss than we do on making gains. When we put more value on a potential loss, this may cause us to miss an opportunity to gain. This comes into play in energy procurement when energy prices drop, and we do not take advantage of lower prices because we believe that prices will go even lower, so we hesitate to act. Rather than seeing the opportunity to save (gain), we fear acting too soon and “losing” more savings because we think pricing will continue to drop. This also works relative to an organization’s budget. If prices are up over the amount we have budgeted, then we may wait to see if the prices will drop so we don’t “lock in a loss”. That unfavorable budget variance can be painful, so we may ignore market fundamentals in the hope of recovering ground.

Anchoring

We can also become fixated on a particular price which stifles our ability to seize opportunities. For example, you may be focusing on your last contract price, a budget target, a price someone else may have locked in. We all do it; we anchor to a number and lose the flexibility to make positive changes. If our new contract price is 50% higher than our last contract price, we are inclined to wait and hope that the price comes back down. We may discount the fundamentals that led to the price increase.

How NextEra Advisors can help you avoid these decision-making pitfalls

NextEra Advisors can help you stay focused on the fundamentals in the marketplace and avoid gut decisions when data-driven insights would serve you better. Our process is grounded in a deep understanding of supply and demand drivers in commercial energy markets. We utilize data and analytics to help you think more objectively and make fact-based decisions regarding commercial and industrial energy procurement. We take the time to understand your unique business needs and craft a procurement plan that meets your budget and risk management objectives. Once we help you craft a unique energy strategy, we continue to remain engaged with you and your team–alerting you to market trends and future opportunities.

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About Transmission Costs

How Transmission Costs Are Calculated

How capacity charges are calculated

What You Can Do to Reduce Costs

Delayed PJM Capacity Auction May Increase Your Transmission Costs

A Background on Transmission Costs

How Transmission Costs Are Calculated

How You Can Reduce Transmission Costs

How Ingrained Behaviors Can Lead to Unnecessary Energy Costs

Here are some common ways that ingrained behaviors can impact your energy costs.

Mean Reversion

Loss Aversion

Anchoring

How NextEra Advisors can help you avoid these decision-making pitfalls