Month: February, 2015
Can you remember what was going on in your life exactly one year ago? I sure can because the energy markets were nuts. At this time last year, we were in the middle of a winter that brought historically cold temperatures, incredibly high natural gas consumption, and record high energy prices. The result was record low amounts of natural gas in storage. Low storage levels – a storage deficit – leads to high prices and high volatility. We reasonably expected that storage levels would recover slowly over a 36 month period, as would price volatility. This prediction was blindsided by a mild summer with low electric demand (requiring less natural gas-fired generation) and unexpected, record-setting natural gas production. Natural gas prices gradually declined until a large sell-off in late December led to natural gas prices falling off a cliff to a new, lower trading range (see Chart One).
Economics 101 tells you that with a storage deficit, we see an increase in prices while a surplus causes prices to decrease. The two charts below show historic and forecasted storage levels. The lower portion of each chart – the red bars – shows the relative deficit and surplus levels. The reversal of market conditions is evident by looking at the regions circled in red. In March 2014, storage deficits were expected to continue well into 2016, but by January 2015, storage deficits were erased and are expected to continue that way for quite some time, even showing a slight surplus by November 2015.
The unforeseen improvement in storage levels has reduced natural gas prices from the high of approximately $5.00 per dekatherm (DTH) to the current low of $2.65/DTH (50% decrease). On the electric side, we have seen accounts that received 12 month fixed-price offers of $0.12 per kilowatt hour (KWH) in April 2014 receiving the same contracts at a rate of $0.085/KWH. The past year has perfectly demonstrated the impact that natural gas storage has on energy prices. The question is no longer how did we get here, it’s where are we going?
Dan Levin, VP Energy Markets
But it should be!
Luxury, low-income, high-rise, low-rise, pre-war, modern, condominium, or coop – regardless of borough or building type, there is something we New Yorkers have in common: we are all deprived of fresh air!
I’m not saying that fresh air is an endangered species in NYC, nor am I trying to portray those scenes from Total Recall where anyone who steps outside turns into this guy. In fact, as part of the City’s Greener, Greater Buildings Plan, New York progressed by leaps and bounds with respect to overall air quality (Thanks, Bloomberg!). What I’m talking about here is indoor air quality (IAQ).
Based upon this engineer’s experience, more than 95% of all buildings – at least those which possess mechanical ventilation – are not properly ventilated. This is caused by simple physics: air, just as all other gases, will take the path of least resistance. No matter how large a fan you put on that shaft, air will always want to travel from the upper floor registers and leakage areas before it will travel from that farthest register (i.e., typically those on the first three floors). As a result, most buildings as a whole are grossly over-ventilated while tenant spaces on the lower floors, such as kitchens and bathrooms, are not ventilated at all. Not only is this a major health and safety concern, but it is (technically) illegal.
If you live in a multi-dwelling building, you have the right to proper ventilation. What gives you this right? Well, it’s the combination of the following three policies:
- New York City Building Code
- New York City Mechanical Code
- And most importantly, the Multiple Dwelling Law (MDL), which is usually the most stringent.
The solution is simple – balance the ventilation system! In the majority of cases, balancing can be accomplished with a basic 3-step process:
- Clean the shaft/duct – remove all dirt, debris, and grease
- Seal the shaft/duct – now that the shaft is clean, repair the shaft and seal all leaks
- Test, adjust, and balance (TAB) the system – this is an iterative process which begins with the installation of constant airflow regulators (otherwise known as CARs) within each register followed by flow testing and fan adjustments (increase or decrease speed)
However, in order to be successful, owners must treat the situation like any other substantial alteration: HAVE IT PROFESSIONALLY DESIGNED AND MONITORED!
Remember: no matter what your contractor tells you, this work DOES require permitting, and per NYC Building Code, a balancing report for close out! This means that any design/filing should come standard with these requirements in addition to performance specifications.
I thought I knew everything about New Zealand until I got there. Energy is no different. Let me explain.
I love to travel. My old approach could aptly be described as ‘educated improvisation’. It relied on sizing up the possibilities and risks in advance, my ability to think on my feet, and having the guts to grab opportunities when they presented themselves. I often did a lot of research to get the lay of the land but very modest amounts of actual pre-booking. I liked to think I did a pretty good job of maximizing my time abroad with just the right combination of prep and spontaneity. I was wrong.
We see the same approach to energy all the time. It’s pretty common for an owner or operator to take on energy in-house. Between the maintenance staff, the property manager, a compliance department and maybe even some engineers, they feel like they’ve got energy covered. Even when surprises pop up, they’re dealt with one way or another. After all, these are smart people with plenty of resources at their disposal. How could that not work?
Back to my story. Awhile back I found myself in Auckland doing some research on which direction to head in next. The list of amazing things available to do in New Zealand is massive, so I was trying to find a way to both narrow it down and to have a general route that hit as many of the high points as I could. As I was pondering the problem of too many opportunities and the lack of time and resources to pursue them all, I noticed that there was a travel desk at the place I was staying. On a whim, I decided to talk to the woman at the desk. Thank god I did.
I outlined for her a variety of things which had stood out to me from my reading while she asked questions about my broader interests. She endorsed a number of things I’d already found, but also strongly urged me to try something I’d read about but hadn’t had a particular interest in. Initially I thought she missed the mark. Looking back I realize that this was the tipping point of my vacation. In short, a brief conversation with an expert in her field led me to the single most exhilarating experience of my life.
Now, I’m not saying that any part of managing energy is comparable to an aerobatic stunt plane ride over New Zealand. What I am suggesting is that tackling a problem without an expert means missing out, big time. The woman at the desk was able to look beyond my perception of the options and really assess my priorities. I realized that there may be something to this whole outside help thing. Without an expert who can ask the right questions and piece together a solution from your answers, you lack the guidance you need to get to your destination, which in the case of energy, is a cost-effective and simple strategy.
Years later, I am a private pilot, and I can trace this big change in the course of things back to my decision to trust her advice. The lesson I learned is that you don’t always have to seek advice because you need it. You might be perfectly capable of doing just fine on your own. Sometimes you should seek advice and take it because of the fresh directions it’ll take you in and perhaps nudge you into reaching for the sky instead of just trodding the path in front of you.