Alternative Fuel – What option is the best fit?
How Monadnock Community Hospital analyzed alternative fuels, moving away from heavy oils to a more economical, environmentally friendly and cost-effective energy solution.
In 1923, in a summer home donated by Robert Parmelee, “The Peterborough Hospital” opened its doors. Mr. Parmelee’s dream of a community-supported hospital became a reality when Monadnock Community Hospital (MCH) took the reins and became an integral part of the healthcare community in the Monadnock Region. The hospital’s major strength is the ability of the physicians and staff to offer extensive services utilizing state-of-the-art technology, while maintaining the personalized care of a community hospital. With a dedicated community and strong leadership, MCH is able to meet the ever-changing requirements of today’s healthcare environment.
As part of their organizational culture to continuously improve quality while reducing costs, MCH launched a comprehensive initiative to review their energy consumption. Focusing on a goal to attain ENERGY STAR recognition while embracing the values of the Healthy Hospitals Initiative, the leadership of MCH considered doing business differently across a broad spectrum of initiatives. In addition to improvements that included a reduction of chemicals, food waste, the use of specific fabrics in furniture, and providing healthy choices of food, MCH has made vast energy improvements to the campus as well. Energy upgrades to lighting, motion sensors, type of fixtures and lamps, along with a steam trap program throughout the building, have enabled MCH to receive over $100,000 in rebates. MCH was one of the first hospitals in the State of New Hampshire to receive national recognition through the Healthy Hospitals Initiative and qualify for ENERGY STAR certification. As a result they have been using their experiences to teach other hospitals through various webinars and training sessions. Due to the improvement in their bottom line and reduction of their energy usage and emissions, they are helping other hospitals benefit from this process now.
Finding a cleaner, cost-effective fuel alternative
MCH succeeded in reducing their energy costs and emissions in part through help provided by their energy supplier, Santa Buckley Energy. (SBE) had been supplying the hospital with #4 heating oil for a number of years. In an effort to reduce their emissions and overall energy costs, Thomas Humphrey, Director of Facility Operations and Richard Scheinblum, Vice President of Finance, CFO, began the process of eliminating their use of heavy oils. To ensure they made the right decision for the future of the hospital, they began with a thorough analysis of multiple products. Fuel sources that initially piqued their interest were unconventional natural gas in the form of Liquid Natural Gas (LNG) and Compressed Natural Gas (CNG). However, concerns about each product lingered throughout their evaluation process.
“If it wasn’t for your advice and the education you gave us, we’d probably be on Compressed Natural Gas right now,” Rich said. When people asked Tom, “Why didn’t you go to CNG?” Tom said, “I was at the 11th hour and about to accept CNG when a call came in from SBE.” Tim Costello, President of SBE asked “Why don’t you consider going to propane?” Tom initially thought the price wouldn’t even be comparable to CNG but it turns out it was. When considering all of the variables required to deliver CNG (compression facilities, the commodity, transportation and off-loading infrastructure) the cost became rather large. MCH also realized the timing of the CNG trailers wouldn’t meet their needs.
Ultimately the list of reasons why not to use CNG kept growing, including:
- Lack of supply liquidity – there just aren’t that many companies selling the product and they could be in danger of getting cut-off from supply
- Initial cost of entry into the CNG market is prohibitive due to a high fixed cost for the infrastructure and trailers needed to deliver the product
- There is no traditional fixed priced option – commodity cost is based on the pipeline city gate, which tends to be volatile in the winter months
- Variable price prohibited MCH from establishing a reliable budget
- With trucks having to transport the product long distances, the logistics of getting the product delivered in extreme weather conditions was a concern
- Lingering concerns about several 4000 PSI compressed natural gas trucks adjacent to buildings in use by patients and staff
So why did MCH choose propane?
When proposals came in for alternative fuel sources, the propane price was very attractive. It was able to be purchased at a fixed rate, they knew they could count on SBE as a steady and reliable supplier and the project would have a relatively short return on investment. “When undertaking any project, we aim for a ROI within 3 to 5 years. Going to propane would take 4 to 4 ½ years for it to pay for itself, so it made sense.” Rich said, “The addition of propane has also given us options and we wanted to do the right thing from an environmental stand point and get off heavy oil.” He continued to say, “From a business standpoint, eliminating the variables associated with the other products such as price swings and potential supply challenges just made sense. Caring for patients is our primary concern and that’s where we want to keep our focus. Propane didn’t present any of the issues other fuel sources did and ultimately was the best choice.”
Some of the benefits of propane are:
- Domestically produced so they will always have supply
- Has fixed price options, which allows for secure budgets
- A stable industry and a product with proven technology
- Large volume can be stored in tanks underground so they didn’t lose any space around the building
- Much cleaner burning. There is no soot buildup which provides better heat transfer, making the boilers more efficient
What happened to the heavy oil?
With an existing oil infrastructure in place, Tom decided to go to a dual fuel option using propane and #2 heating oil. Moving from the previous #4 oil and going to #2 heating oil gave them an option that is more economical, environmentally friendly and abundant in supply. Having an option to burn either fuel source benefits them tremendously because the boilers always need to be running so they never sacrifice the high level of patient care they provide. “We have a hospital to run which requires system stability 24-7-365. Daily critical needs such as sterilization of equipment and maintaining temperature never diminish as we care for our patients round the clock.” Rich said.
When asked his thoughts on having the dual fuel choices, Tom said, “Having dual fuel is such a relief! If I have a failure in my delivery system, whether it be product supply or my own system, I can go right over to the other fuel source in a seamless transition. And we actually needed to because we had some minor issues with our vaporizer and switched right to oil without experiencing any downtime.” SBE has been right there to serve MCH with whatever product they need, whenever they need it. Tom proclaimed, “Having one supplier is huge, you guys are just a phone call away for any product we need and you deliver. As a facility manager, having one phone call to make to a company you can count on to deliver what’s needed is critical. That’s a huge benefit.”
More choices, more control
The energy solutions recommended by SBE have helped MCH in many ways. Besides the savings from a more cost-effective fuel source in propane, the dual fuel option with #2 heating oil ensures they always have a steady fuel supply to keep the boiler room operating. And it’s running cleaner and more efficiently which will further help MCH as it gets validated as an ENERGY STAR hospital. MCH also has more control of their energy costs because both products have fixed rate options, which allows them to set an accurate budget each year. “It’s really important for me to fix my budget. Knowing that on day one it’s going to cost me X amount of dollars for energy, it’s one less thing to worry about.” Rich said, “If we get swings costing us hundreds of thousands of dollars we’re talking about people’s jobs here. That’s huge for us to take that out of the equation as we fix a budget for our energy costs. The ability to lock up a propane and heating oil price ensures we can operate on the amount we budget for.”
Another added benefit of SBE’s unique dual fuel program is that the locked-in prices are like having a price cap at no cost. MCH can set a budget number on their max cost but it can get better through fuel switching. If the market price for the alternate fuel becomes significantly lower than the contracted fuel, they can work with SBE to switch to the alternate fuel, share the benefits and actually operate below the set budget. Tom said, “Having SBE as our energy manager allows us to fix a budget. But their expertise and constant monitoring of the energy markets enables us to get the lowest cost available to this organization based upon our volume.”
The partnership between MCH and SBE has set a great example for organizations looking to the future for more economical, environmentally friendly and cost-effective energy solutions. The rigorous evaluation of multiple fuel sources that MCH conducted gave them a better understanding of what would best fit their long term needs and budget. And the 75 years of energy experience from SBE provided the education and recommendations needed to make the best choice for the future of the hospital. Tom said, “We have been seeing the use of heavy oils start to go away in neighboring states, the future of supply is becoming uncertain, facility managers may need to take a look at what we’re doing here to enable them to run efficiently and effectively in the future.”