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UPMC: Centralized Energy Management And Capital Set-Aside Fund

  • UPMC is committed to reducing energy use by 20% by 2020 from a 2011 baseline.
  • Energy efficiency projects funded by the UPMC capital set-aside must show five year simple payback.

Centralizing Energy Management at UPMC

UPMC needed to approach energy management holistically in order to achieve significant reductions across the building portfolio. The hospital system centralized the energy management the creation of the Corporate Energy and Environmental Engineering (CEEE) Department. Department members possess key skills including:

  • Deep knowledge of the engineering and regulatory aspects of hospital operation
  • Understanding of energy commodities markets
  • Financial acumen to produce functional energy budgets
  • Expertise to evaluate emerging technologies
  • Familiarity with third-party funding opportunities for energy efficiency projects (such as grants, utility incentives and rebates)

Initiating the Capital Set-Aside

The 2012 federally mandated phase-out of T12 lamps spurred initial funding for lighting retrofits on the UPMC campus. UPMC armed the CEEE Department with dedicated internal capital (up to $5 million/year) for energy efficiency, which eliminated competition for funding with clinical expenditures, and created a “welcome mat” at each facility as facility managers and building engineers sought funding for their long-shelved energy projects. In addition to lighting upgrades, the capital set-aside funds projects including building retro-commissioning and insulating covers for steam pipes, valves and fittings. UPMC is also piloting low temperature geothermal to heat and cool a wing of one of their rural hospitals.

Proposed projects must meet corporate ROI hurdles and have a five-year simple payback in order to be considered for funding. With numerous UPMC facilities now lining up to implement energy efficiency projects in their buildings, the CEEE Department has the luxury of piloting a project in a single facility to test its efficacy and cost effectiveness before rolling it out more broadly to other buildings.

Success breeds success: a history of energy-saving projects attracted grants and other external funding for additional projects. UPMC has benefitted from over $ 3.4 million dollars of external energy efficiency project funding since 2010, including funds from Pennsylvania Energy Development Authority; electric utility funding via Pennsylvania’s 2010 Electricity Demand Reduction Law (Act 129); and revenue from participation in the Federal Energy Regulatory Commission’s (FERC)-endorsed Demand Response program. The low temperature geothermal pilot project was endorsed and partially funded by the Pennsylvania Department of Environmental Protection.

Stabilizing Energy Costs Supports Energy Efficiency Projects

Though not a direct energy use reduction strategy, the CEEE Department also takes advantage of open market commodity energy purchases, which produce reliable pricing forecasts, allow senior management to employ layering and financial economic strategies, and ultimately minimizes the effects of historically volatile price swings on electricity and natural gas. The added security of more stable utility costs provides confidence Return on Investment projections for energy efficiency projects will be accurate.

Opportunities for energy conservation improvements are communicated to building engineers at each UPMC facility during the monthly meetings of the Facilities Engineering Council, an organization formed and led by UPMC’s VP of Facilities and Support Services. Facility staff at individual buildings are encouraged submit project ideas to the CEEE Department.

UPMC measures success based upon an accounting of energy units (and thus carbon emissions) forever eliminated from their operations. To do this, UPMC adopted a zero-base budget approach using 2010 as the baseline year. From this base, carbon emissions forever eliminated through engineered conservation would be summed and aggregated ---2010 as the base year equals zero, 2011 equals base year + N1, 2012 equals base year + N1 + N2, and so on.

When the first full year had elapsed, the CEEE Department returned approximately $1 million to the Fiscal Year 2012 bottom-line, and engineered through energy conservation the prevention of 11 million tons of carbon dioxide from entering the community’s air.

By July 2011, after just eight months of formal existence, 7 million kilowatt hours of power plant electric generation, and 14 million cubic feet of natural gas formerly required by UPMC healthcare facilities annually, were forever eliminated.

By June 2012, the $5 million dedicated annually to engineered energy and environmental conservation projects eliminated another four million kilowatt hours, and the combustion of another 2.7 million cubic feet of natural gas.