Weather conditions, such as occasional daily and annual variations in temperature and moisture, have obvious temporary effects on energy bills. Heating costs rise when it is cold and dry, while cooling costs rise when it is hot and humid. Weather changes associated with climate change are expected to have long-term permanent impacts on those costs by causing weather extremes and changes to how power is produced.

On-site power storage is becoming a realistic possibility. However, as with most opportunities to cut energy costs, the devil may be in the contractual details. If contract terms are not specified clearly, it could be a bunch of hocus pocus.

The cost of battery power (measured in dollars per storable kilowatt-hour, $/kWh) has been rapidly falling. The cost of solar panels has also dropped, making its renewable power competitive, after the inclusion of incentives and subsidies. But solar panels only generate power when the sun shines. If some of that power could be stored, it may help trim a building’s peak load and provide off-peak power.

The US Department of Energy (DOE) defines a microgrid as “a group of interconnected loads and distributed energy resources within clearly defined electrical boundaries that acts as a single controllable entity with respect to the grid. A microgrid can connect and disconnect from the grid to enable it to operate in both grid-connected or island-mode.”

A major university approached Luthin Associates to develop a plan to reduce its greenhouse gas emissions by 30% over a ten-year period. Luthin worked directly with facilities, financial services, students, and faculty to create a sustainability committee. The committee developed a Whole Health Energy Plan that would enable the customer to meet its goals and increase the sustainability of its campuses, which comprised more than 40 buildings and over 3 million square feet.

After conducting a benchmarking study for a chain of hardware stores, 5 found that one of the client’s locations used considerably more energy per square foot than any of their other stores.

Orbit City, the Jetsons’ hometown, gets all its power from renewable energy. When the wind blows and the sun shines, it makes the electricity that keeps the city humming. But what happens at night, or when the air is still?

When the sun and wind provide more power than needed, the excess is used to electrolyze water into hydrogen and oxygen, with no carbon emissions. When sun and wind power are insufficient, stored hydrogen feeds into fuel cells whose only output is power and water vapor. While this may sound like science fiction, all the components needed to make it happen have been around for decades.

In 2012, a global leader in the explosives industry was seeking an end-to-end energy advisory service to provide a holistic strategy for reducing and controlling energy costs. The client decided to work with 5 based on the experiences of the team and the personal reputation of Todd Clift, 5’s Senior Energy Advisor in Central Texas. As is the case with all new client engagements, 5 took the time to analyze and understand the client’s usage patterns, peak demand, operational needs, and long-term goals.

Not only did 5 create and implement a procurement strategy that has been modified and utilized several times since that first year, but the team also performed a tax audit and found that the client was eligible for a tax rebate after a predominant use study showed that more than 51% of their operations were related to manufacturing. 5 engaged the help of a licensed professional engineer to complete the predominant use study and assisted the client in requesting a refund from the previous four years through the state comptroller.

5 is proud to serve this innovative client with procurement, demand-side management, and other cost-saving initiatives as this industry leader continues to expand and innovate.

I am pleased to forward 5’s first quarter overview of the energy market. For the most part, energy markets stabilized in Q1 2015, a significant change after the collapse in oil and natural gas prices experienced in Q4 2014. The following chart shows how electricity and natural gas prices have moved during Q4 2014 and Q1 2015. While electricity prices were flat in PJM and NYISO, they continued to decline (albeit at a slower rate) in ERCOT. We also saw a continued move down in the price of NYMEX natural gas. These trends continued in April.

If there’s one constant in the energy business, it’s that things are always changing: Only 6 years ago, who would have thought that the average price of natural gas would drop by about 67%? Remember when some people thought the U.S. was running out of oil – until new extraction techniques reversed that Doomsday scenario? Or when everybody said, “you can’t economically store electricity,” and now battery prices are beginning to plunge?

I am pleased to forward 5’s fourth quarter overview of the energy market. Our last letter started with the statement “The speed and scope of changes in the energy market continues to astound us.” The trend continues. Q4 featured a spectacular sell off in crude oil. The price dropped from June highs of $112 per barrel for Brent and $105 per barrel for WTI to $62 per barrel for Brent and $59 per barrel for WTI in December. This sell off continued in January, with crude falling down to almost $45 per barrel. In this issue, we focus on increased volatility in natural gas and power driven, in part, by the drop in oil and natural gas prices in Q4, and two other significant topics, (i) new evidence of the energy market’s fundamental transformation, and (ii) the GOP’s sweeping victory in the November elections.