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Don’t Let the Clock Run out on DMP Incentives

January 18, 2015

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In March 2014, NYSERDA and Con Edison kicked off a very generous, but short-term, program to cut 125 MW off the utility’s summer peak demand. Unlike most existing energy-related incentive programs focused on reducing energy use i.e., kWh, the Demand Management Program (DMP) only rewards kW reductions. Also, it only applies if those reductions are both permanent and occur between 2 PM and 6 PM on weekdays between June 1 and September 30.

Incentive programs pre-dating DMP continue to provide funding for energy and peak demand reduction. Customers may apply for such incentives for both the original programs and DMP for any energy measure that yields both kWh and kW reductions. The net result may be a significant incentive boost. For a recent lighting upgrade, the DMP addition doubled the standard incentive and customers may see a quadruple of the incentive for other technologies.

The increase in funding from DMP varies widely depending on the type of measure, ranging from approximately $500/kW for switching to non-electric cooling to $2,600/kW for thermal storage. Funding for any given measure is capped at 50% of the total installation cost except for Demand Response Enablement, which has a 75% cap.  A minimum of a 50 kW reduction is required per application, but reductions at small facilities may be aggregated.  More details about the DMP are available at: https://www.nyserda.ny.gov/All-Programs/Programs/Demand-Management-Program

Here’s the kicker. To secure the additional funds, a project must be installed and operational by June 1, 2016. Working backward, assuming a 6-month time frame to cover auditing, design, procurement, and installation, means many projects need to start before the end of 2015. For larger or more complex projects, a longer development period may be required.

Why is all this extra money being offered now? Due to a variety of factors, it is possible that one or both nuclear power plants at Indian Point within Westchester County may be shut down in the next few years. As one contingency against such a loss of generation, a big reduction in summer peak demand is being sought, and a great deal of money is on the table. Such financial “bank shots” are unlikely to be seen again for a long time, if ever.

While many large institutions and owner-occupied facilities have been running the court on the standard incentive programs for years, much of commercial real estate has limited its involvement to lighting upgrades during tenant changes and build-outs. Many old and inefficient packaged HVAC units serving such spaces are approaching, or beyond their useful lifespan. Under its Local Law 87 (LL87), New York City requires all buildings over 50,000 square feet to perform energy audits over the next few years. However, those who wait until the last minute to audit may miss out on opportunities to replace the old units before they finally conk out.

In the last 20 years, the Seasonal Energy Efficiency Ratios (SEER) for such machines have nearly doubled, meaning they use about half as much energy to provide the same cooling as their ancestors. Getting up to 50% of the installation cost now is a good way to cover the eventual cost to replace those clunkers. Since tenants that have their own packaged units usually pay for their own electricity used for cooling, offering a high-efficiency HVAC system is an added perk to spark interest. Additionally, gas and steam-fired cooling systems installed back in the ’90s may be reaching the end of their useful lifespan. Now is a good time to replace them with another gas or steam system to secure a DMP incentive.

NYC power customers are advised to accelerate their LL87 compliance by having their energy consultants identify, and help them act on energy upgrades that take advantage of DMP funding – before it’s gone.

Topics: Newsletters
Luthin Associates

Written by Luthin Associates

Founded in 1994, Luthin Associates provides energy advisory services to all industry sectors in the New York Tri-state region and beyond. In 2019, Luthin Associates joined forces with 5, an innovative energy advisory firm comprised of energy innovators, commodity traders, analysts, engineers, and former energy supplier executives. As part of the 5 family of companies, Luthin Associates provides strategic advice on energy-related matters including procurement, demand-side management, rate optimization, regulatory intervention, benchmarking, bill auditing, RFP management, sustainability planning services, renewable power, and distributed generation.