FUEL SWITCHING – Turning Energy Into Revenue

Wesleyan University, founded in 1831, is a liberal arts university located along the Connecticut River in Middletown, CT.  It has approximately 2,900 full time undergraduate and 400 graduate students. The campus consists of 340 buildings spread out over 360 acres.

The university has a strong commitment to energy efficiency, as evidenced by its $18 million in related investments on campus over the past 7-10 years.  The university has deftly combined short payback energy products with long term upgrades to allow for a blended return that has improved facilities and comfort, while lowering annual operating costs. Wesleyan has received $5.1 million in incentives for the upgrades and since 2006 has decreased its energy spend by $3 million. Along with lowering operating costs, the university has been able to turn energy into revenue by utilizing their fuel switching capabilities.

sbe_casestudy_image1At one time, Wesleyan operated its central boiler plant on a schedule of oil and natural gas use.  Heavy #6 oil would be burned in the peak three or four winter months, and natural gas would be burned the rest of the year when the campus steam load was lower.  When Peter Staye moved into the Director of Utilities Management position in 2005, he decided to investigate an option that his oil provider, Santa Buckley Energy (SBE), had been promoting to integrate his boiler fuel management.  Peter put out an RFP and chose SBE based upon its experience with both fuels, the positive relationship that existed, and the uniqueness of the SBE offering.

During a visit to Wesleyan, Tim Costello, President of Santa Buckley Energy, asked Peter how the fuel management program was working out for the university. Peter stated, “We couldn’t be happier. Our relationship with Santa has grown as the energy needs of the university become more diverse and complex.” He said, “We used to buy oil all winter and burn it until we ran out, then switch to gas. Now with the help of SBE, we essentially arbitrage the two against each other so we are always ensured the best price and actually generate a revenue stream.”

Peter lists the following benefits to SBE’s “BTU” approach to dual fuel contracting:

  • Both products are sold and delivered by SBE – no worries about having to find a supplier for the alternate fuel when a switch occurs
  • Flexibility in switching – fuel switching is an opportunity option, not an obligation
  • The price is fixed up front based upon a fuel use schedule – the price remains fixed for authorized fuel switches unlike interruptible contracts that require the user to find and pay for an alternate fuel supply
  • Reasonable notice for switch opportunities
  • Ability to switch with notice in case of emergency from planned fuel
  • A single bill with both fuels billed in common units of measure (MMBtu)
  • Mutual benefit aspect to the sharing mechanism that encourages more switching opportunities

Volatile prices in New England make retaining the dual fuel optionality more valuable than ever.  Under Peter’s guidance and an experienced boiler plant team, Wesleyan has reaped benefits in this especially harsh winter.  This winter the university will reap $150,000 in its share of fuel switching benefits, switching over to oil when natural gas spot market prices made selling their gas a profitable opportunity.

sbe_casestudy_image2“Having a partner with insight into the physical markets to identify opportunities in a timely fashion is critical” Peter said, “The added benefit of having a sole source provider is also pertinent because the products we need are secure and available at a fixed price. And the transition between the two is seamless.”

In addition, by burning oil on those coldest, high demand days, the university lowered its peak day demand for distribution charges with the gas utility by 650 CCF.  This will save $1,400/mo. for the next 12 months.  Along with the savings, being able to cycle through the oil in the tanks is another benefit of fuel switching.

Peter has been in the business of energy procurement long enough to understand the relative prices for oil and natural gas have flipped many times over the past 25 years.  While it may appear now that natural gas is most economical, that may not remain the case. Due to the daily volatile pricing for natural gas in New England, there are many opportunities to sell out of gas and replace with oil at a profit, while maintaining a budget fixed price.

Peter is extremely pleased with the “BTU” program that has turned his boiler plant into an asset. “Consistency, integrity and transparency are a few of the key attributes of Santa Buckley. I am also very impressed with the professionalism throughout the organization at all levels.” Peter said. “Other companies present their products and offerings but they don’t measure up, overall they are not as complete. Santa Buckley’s BTU program is exceptional, we are nothing but pleased and satisfied.”