Case Study Danville

7/28/2019 Case Study Danville

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A Case Study of Danville Utilities:Utilizing Industrial Assessment Centers to Provide EnergyEfficiency Resources for Key Accounts



Introduction

A Case Study o Danville Utilities 1

IntroductionDanville Department of Utilities (DU) provides electric-ity, gas, water, sewer, and telecommunications servicesto customers in south central Virginia. Within its 500square mile service territory, DU has identi ed 70 keyaccounts that consume a signi cant amount of the elec -tric, natural gas, or water services that DU sells on theretail market each year. These 70 key accounts includeschools, government agencies, large commercial busi-nesses, and industrial manufacturers.

DU became concerned about its key accounts customers because of electricity market deregulation in Virginia.Virginia Senate Bill (SB) 1269 called for the phasing inof electricity deregulation between 2002 and 2005. Thelegislation associated with deregulation allowed manyelectricity consumers to purchase the generation portion

of their electricity from a supplier other than their util-ity. 1* While DU was not vulnerable to losing customersto competing energy suppliers because the deregulationlegislation protects municipal utilities, the deregulationcaused wholesale power costs to skyrocket.

Along with deregulation, the expiration of an existinglong-term contract led to an 80-percent increase in thecost of DU’s electricity. For its key accounts custom -ers, this meant signi cant increases in operating costs,which could put key accounts customers at risk for going out of business. In 2005, key accounts customers

saw a 40-percent increase in their energy costs. Thesehigher costs threatened to push key accounts to movetheir operations to other locations outside of Danville’sservice area.

The prospect of losing its key accounts customersconcerned DU, as it relies heavily on key accounts for revenue. These customers had been enjoying very low

public power electricity rates that DU had historically provided. DU needed to hedge the price increase to en-

sure that its customers would be able to stay competitiveand purchase their energy from the city-owned utility.

* Electricity market deregulation inVirginia has been halted because o concerns with the efect o market

deregulation on electricity prices.Instead o lowering prices throughcompetition, some analysts arguethat deregulation has increased electricity prices. Other expertsclaim that the price increases aredue to recent energy market pricevolatility.

Location of DOE’s IACs - http://www1.eere.energy.gov/industry/bestpractices/industrial_assessment_center_locations.html


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Solution: Industrial Assessment Centers

Solution: IndustrialAssessment CentersDU found help in the U.S. Department of Energy’s(DOE) Industrial Technologies Program (ITP). ITP

provides assistance to utilities and industrial custom-

ers through a variety of programs, one of which is theuniversity-based Industrial Assessment Center (IAC)

program.

The IAC program helps businesses that are located with -in 150 miles of an IAC and spend between $100,000and $2 million on energy annually. IACs performone- or two-day energy audits where data is collectedat each manufacturing site as a basis for assessmentrecommendations. After identifying potential savingsopportunities, plans are developed to help the consumer reduce energy usage. IACs have helped DU’s custom-ers improve their facilities’ energy ef ciency throughlean manufacturing, improved process management, andswitching to batch production runs, among other meth-ods identi ed by the North Carolina State Universityand West Virginia University IACs. IACs take a systemsapproach to energy ef ciency, looking at ways to saveenergy in motors, boilers, and compressed air systems,along with exploring ways to reduce energy loss throughvarious heat-transfer or exchange strategies. In additionto energy ef ciency, IACs also identify ways to improve

plant productivity, minimize wastewater, and prevent

pollution.2

ITP leverages student and faculty resources at IACuniversities to minimize assessment costs. This allowsITP to provide the assessment service at low- or no-cost

to utilities and industrial energy consumers. In additionto utility and industry improvements, the IACs providetraining to help students become energy management

professionals.

DU discovered the IAC program in 2004 during itssearch for resources that would help mitigate the loom-ing rate increase. Despite its discovery of these resourc-es, DU was unsure of the level of expertise the IACs hadto offer. Kevin Martin, DU’s key accounts manager, saidthere were initial concerns about the lack of practical ex -

perience from an academic provider and wariness about potential hurdles created by government bureaucracy.However, those fears were quickly abated when the rstIAC report was produced. The report demonstrated ahigh-level of knowledge and savvy, practical solutionsto energy reductions.

However, DU recognized the value of the IAC resource because the utility did not have an audit program andthe IAC resources were free. The ability to utilize a

Danville Utilities,the Industrial Assessment Center,and Non-Electric Energy Sources

DU provides both natural gas and electricity service to many customers. Natural gas did notpresent a signi cant cost issue compared toelectricity because natural gas markets in Virginiahad been deregulated for years. Natural gasprices also tend to be relatively volatile; therefore,customers have come to expect increasingprices. Additionally, the ability to store naturalgas for times of peak demand reduce capacity constraints compared to electricity.

Nonetheless, DU has leveraged IAC resources tofocus on a variety of customer energy sources,in addition to electricity. These include naturalgas, fuel oil, and propane. DU has found thatcustomers are not necessarily interested in theenergy form being addressed, but rather they

want to see the biggest return on investmentfor whatever energy ef ciency measures areimplemented in their plants.



Benefits and Challenges


free, turn-key audit program convinced DU that part -nering with the IAC at North Carolina State Universitywould help the utility provide an additional service toits key accounts industrial customers. In the rst year,20 of DU’s customers asked for an energy assessment.Although there was not enough time for a full assess-ment to be completed at each of the 20 plants withinthe rst year, the utility and IAC collaborated to obtainimportant energy use information from each plant andimplement some energy savings recommendations.These immediate results further convinced DU that theIACs were the right resource to help its industrial energycustomers address increasing energy costs. Additionally,the majority of plants that were not able to have an as -sessment completed in the rst year have had the oppor -tunity to work with the North Carolina State UniversityIAC in subsequent years.

Benefits and ChallengesThe synergistic effect of combining IAC, utility, andindustry resources are evident to DU. If an IAC is suc-cessful in identifying ways to save energy at a plant,the utility and industrial customer are also successful intheir respective businesses. The utility receives impor -tant information about energy consumption sources and,consequently, can work better with industry to reduceenergy demand and consumption in many cases. Theindustrial energy consumer is successful through im-

proved operations and reduced operating costs, poten-tially improving both pro tability and competitiveness.The IAC bene ts from the successful implementationof projects, which the students and center can mentionin their success portfolios. The IAC also bene ts fromthe feedback received regarding the implementation of energy saving recommendations.

Enhancing the relationship between the utility and itsindustrial customers is another signi cant bene t of

partnering with an IAC. Because the utility can establisha channel of communication with a customer by offering

cost-saving services for free, the customer becomes in-terested in working with and interacting with the utilityon a consistent basis. The utility can put itself forwardas the local energy ef ciency expert and the best organi -zation to go to when a customer is facing energy prob-lems. Meanwhile, the utility can better understand theneeds of its customers and the challenges they face andcan then continuously enhance the service it provides toall of its key accounts customers.

DU has found the IAC component very easy to inte-grate into its operations. Initially, DU plays the role of amarketer for the IACs. After the utility receives interestfrom an industrial customer, the IAC is contacted to

provide the assessment service. Once the assessment iscomplete, DU helps its customers implement the energysaving measures identi ed by the IAC. DU’s follow-up role ensures that the energy consumer’s assess-ment questions are answered and that the IAC remainsinformed of the energy savings recommendations thatwere implemented. By keeping in regular contact withan industrial plant, DU also serves as an ongoing com-munication link between industry and the IAC, even if

plant personnel changes occur.

Convincing a business to implement the suggestedenergy ef ciency measures is the most dif cult step inthe audit process. Although DU nds it easy to convince

plant-level staff that the energy ef ciency improvementsshould be made, DU struggles to convince corporatedecision-makers to get involved. Unfortunately, plantmanagers often do not have the time or resources to ef-fectively present an ef ciency project to corporate deci -sion-makers. To help with this challenge, the utility and


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Protecting and Growing Danville’s Economy

IACs package energy ef ciency information for plantmanagers to provide to their corporate decision-makers.The rst component of these resources is the in-depthreport provided by the IAC, which details a number of energy ef ciency recommendations for a plant. Theutility steps in to help digest these IAC reports. Becausethese reports can cover many years of energy ef ciencyimprovement projects, breaking them down into priorityitems is essential. Allowing plant managers to presentthe highest priority items from these reports increasesthe success that plant managers have in obtaining corpo-rate buy-in to implement the energy ef ciency measuresoutlined in the report.

Another challenge for DU is lost revenue. As businesses become more ef cient, they consume less energy and pay less money to their energy utility. Utilities often provide nancial support to their customers to make

these energy ef ciency upgrades on top of this loss of revenue. Many utility mangers would argue that spend-ing money to lose revenue is a poor business model.

DU, however, found that although it may lose somerevenue through its energy ef ciency program, it ex -

perienced signi cant reductions in variable costs, suchas fuel and maintenance. DU also sidestepped a large

portion of the ef ciency program’s costs by leverag -ing federal resources through the IAC. Furthermore,

because the IAC does such a thorough job in identifying potential energy ef ciency measures, especially low- or

no-cost measures, DU does not need to offer rebates or nancial incentives to get its customers to implement

the identi ed measures.

Protecting and GrowingDanville’s EconomyAn important and challenging issue many towns arefacing across the United States is how to protect their economies. As businesses become more mobile, movingfrom state to state and country to country, this challenge

becomes increasingly dif cult. DU has taken steps tohelp protect and grow its economy through energy ef-

ciency, and is working to balance its utility interestswith local business interests to support local economicsustainability.

Even with the price increases faced by DU in 2005, theutility remains competitive with other area utilities andenergy providers. Regarding competition, Kevin Martin,DU’s key accounts manager, stated:

“Our prices are competitive. We are about the same as others in our region, but our reliability and

service are still at the top. I think [the threat o los-ing customers due to higher prices] exists or every energy supplier, but price is not always the only ac-tor. Each customer has to be evaluated individually.For example, reliability to some customers is their

primary concern. What good are low costs i outagescost you $65,000 per hour and your power goes out every month? Especially i your business model isbased on reliability, like the data centers.”

Danville, as a city, is also very interested in maintainingits business base. Danville lost a large employer over a

time period that spanned from 1996 to 2002. The em - ployer was Dan River, Inc.—a textile manufacturer thatemployed 12,000 in Danville at the height of its suc-cess in the 1960s and 1970s. When the business beganclosing its doors in 1996, employment dropped to 2,000

people. Those 2,000 jobs were eliminated by 2007.

To help the community rebound, Danville’s Of ce of Economic Development worked on solutions to alleviateDanville’s employment woes. The Of ce of Economic



Protecting and Growing Danville’s Economy


Development started to gain signi cant traction in 2004and has since added 4,600 manufacturing jobs, 1,000commercial jobs, and attracted $1.5 billion in capitalinvestment.

Danville is repositioning itself to be the region’s busi-ness hub and is partnering with Pittsylvania County, by

which the city is surrounded, to provide businesses witheasy access to services. Virginia is unique among all of the states because counties and independent cities aretreated as completely separate entities. This separationoften leads to an adversarial relationship between the

jurisdictions, and city-county cooperation for economicdevelopment in Virginia is often nonexistent. Since2001, however, Pittsylvania County and the City of Danville have partnered in purchasing land for businessdevelopment and have prepared the land to have im-mediate access to city services of electricity, gas, sewer,

water, and broadband. The City of Danville and Pitt -sylvania County are developing a 3,500-acre business/

industrial park to attract a large manufacturer that wouldemploy thousands and invest more than $1.0 billion incapital. For each of these city-county projects, costs andrevenues are shared on an equal basis between the two

jurisdictions, and management oversight of the proper -ties is done by a joint city/county authority.

Businesses are encouraged to locate in Danville as aresult of state and local nancial incentives, includingemployment bonuses and technology grants. Danville’sOf ce of Economic Development also commented onthe business community’s response to the DU/IAC as-sessment partnership, stating that businesses are opento the assessments and grateful for them. The partner -ship of the City of Danville, the Danville Department of Utilities, the North Carolina State University and WestVirginia University Industrial Assessment Centers, andPittsylvania County is a prime example of how orga -

nizations can team up to create attractive opportunitiesfor manufacturing businesses. Thus far, the partnershiphas proven to be an effective model for success in theDanville area.

For More Information

Advanced Vehicle Research Centerhttp://www.avrc.com

Danville Department o Utilitieshttp://www.danvilleutilities.com

Danville Ofce o Economic Developmenthttp://www.discoverdanville.com/

Industrial Assessment Center Programhttp://iac.rutgers.edu

North Carolina State University IAChttp://www.mae.ncsu.edu/Centers/IAC/

West Virginia IAC http://www2.cemr.wvu.edu/~wwwiac/

Local Businesses Helping DanvilleUtilities to Save Energy

The Advanced Vehicle Research Center (AVRC)conducts research on alternative-energy sourcesand applications for vehicles, and receives utility services from DU. One of the speci c services

AVRC offers is the conversion of conventionalgasoline or diesel internal combustion engine vehicles into fuel-electric hybrid vehicles.

Although it may seem a role reversal, DU isleveraging AVRC’s expertise to help the company save energy. DU utilizes AVRC’s technology tohelp the company convert a number of its service

vehicles to gas-electric hybrids. This conversion will help DU save money on fuel costs and willlead to the more effective use of the electricgrid, as DU charges its vehicles overnight. As anadded bonus, AVRC will be able to apply what

it has learned from converting DU vehicles tofuel-electric hybrids and ensure the successfuldeployment of future products.

1State of Virginia Legislative Information System, SB 1269 Electric Utility Restructuring Act, April 1999.http://leg1.state.va.us/cgi-bin/legp504.exe?991+sum+SB1269

2 EERE-ITP, Industrial Assessment Centers, March 2007.http://www1.eere.energy.gov/industry/bestpractices/iacs.html

Special thanks to Kevin Martin, Key Accounts Manager at Danville Utilities, and Jeremy Stratton, Director o

Economic Development or the City o Danville, who provided the majority o in ormation or this case study.

Case Study Danville

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