Energy Moves to the Front Burner

Massachusetts's Jiminy Peak Mountain Resort was already bracing for sharply increasing energy costs when hurricanes hit the Gulf Coast late last summer. The practical effect of those soaring prices for Brian Fairbank, the resort's president and CEO, has been to make energy-saving and energy-generating projects that had been deferred more urgent.

"Even before Katrina hit, we knew energy was going to go through the roof," reports Fairbank. He had been considering a wind turbine near the top of his ski hill for more than a year. But, after the spike in energy prices, the turbine vaulted from No. 4 among his priorities to No. 1. Scrambling to conduct environmental studies and consult his banker, Fairbank got nothing but green lights. By late November, he had requested bids, hoping to install a turbine near the top of his mountain this coming summer.

He got. . .nothing. Turbine manufacturers were too busy. "It caught us off-guard, and for two or three weeks, I was really bummed out," he says. Finally, in January, General Electric, which manufactures wind turbines, provided hope of summer delivery of a turbine capable of generating 4.5 megawatts of electricity. Total cost is projected at $3.3 million.

All this gladdens Fairbanks, but also leaves him nervous. "It's a lot of money, probably the most significant investment we have ever made," he says. "It's more money than a detachable lift." Yet there's another bottom-line that comforts him. He doesn't need snowstorms to get his money back. The wind always blows in winter, and he'll have electricity to sell.

Rising Costs Change the Equation
The equations are sliding. Energy costs as an industry average were formerly two percent of overall operating costs. That figure is rapidly edging upward. Energy-saving strategies are making more sense. The payback time on investments both big and small is shortening. If there was ever any debate, the little things like weather-proofing buildings and changing out light fixtures have become no-brainers. But even the more exotic projects-things like improved snowmaking technology, computerized building systems, and alternative energy sources-are moving to within the three-year payback period that executives-and bankers-clearly understand.

"Power in Colorado has gone up 8 percent a year in the last three years, which adds up real quick if you have $100,000 to a $1 million power bill," says Luke Cartin, environmental coordinator at Vail Mountain. "Our power bill is at the higher end of that."

Vail is also hoping to invest in a wind turbine, and publicly has revised the estimated payback from 10 years to only five years. But small stuff has a guaranteed quick payback, Cartin observes. Consider compact fluorescent light bulbs. Although costing more, they consume less energy and last 25 to 30 times as long. That means lower energy costs and less labor costs for changing bulbs.

At Mammoth Mountain, Bob Bradbury advises both short-term and long-term strategies. "A lot of the things I do are not real glamorous," says Bradbury, the resort's facilities and energy manager, "They're down in the trenches: insulation, attics, basements, sticking your hand in a wall to seal a hole. But the return on your investment is huge."

Over the years, Bradbury has found small buildings like lift shacks an easy place to pile up big savings. Instead of adding a heater to a patrollers' building, he simply plugged the leaks. But even newer buildings often lose tremendous quantities of heat when remodelers or installers leaves holes behind. He also urges attention to big things, like controls on heating and ventilating equipment. His efforts at one all-electric building have reduced costs by 75 percent from last year. (For more on building controls, see "The Ultimate Control," SAM July 2005)

"If you do lots of little things, and with a certain amount of logic, all of a sudden you have $1,000 here and $10,000 there," says Bradbury. "A lot of the projects I do provide two, three, four and even eight times on the return of investment."

In some cases, the strategies involve turning down the thermostat. In others, it's using computerized controls to allow energy use only when needed, instead of through the night. "We have one building of 150,000 square feet where we reduced the propane consumption by 40 percent," he reports. "Nobody died, nobody was inconvenienced. If anything, people had improved comfort."

Energy-Efficient Snowmaking
Tim Boyd, president of Peak Resorts, which has nine ski areas in Pennsylvania, New Hampshire, Ohio, Indiana, and Missouri, has most intently studied savings provided in newer snowmaking technology. (See related story, page 56.) "Everything else, in terms of lifts and lodges, really pales in comparison to our snowmaking costs," he says. His resorts have 100 percent snowmaking coverage. Snowmaking energy is 10 percent of his overall operating costs.

As such, Boyd is a big fan of fan snowmaking technology. Although more expensive than compressed air and gas snowmakers, they also use far less energy. As such, the payback on investment has now shortened. Depending upon the area of the country and the amount of snow produced, says Joe VanderKelen, president of Snow Machines Inc., the payback on electrically-driven systems has shortened from 4.5 years to 3.5 years, even less if diesel fuel is used. Boyd is buying a fan snowmaking system at one of his resorts this year at a cost of $5 million. He figures the investment can do nothing but look better over time.

"Our attitude is that the energy costs will only go up; they'll never go down," explains Boyd. "So the more you can do to combat that long-term cost, the better off you'll be."

Financial Aid
Many ski area managers have discovered outside aid in reducing energy costs. Jiminy Peak's initial analysis of a wind turbine was aided by a $582,000 grant from the Massachusetts state government. Utility companies also will often help pay for upgrades of everything from lights to big-ticket items like more efficient air compressors.

Such was the case at Waschusett Mountain, Massachusetts. The new compressors don't spew oil-a big hit with environmental regulators, and the payback is good, about 3.5 years. "Especially with the utility paying about 40 percent of a project, it was just a real solid project," says Tim McGuire, the area's environmental and project engineer.

There, like in many areas of the county, electrical utilities are looking at financing new generating plants. Getting permits for such projects, mostly coal-burning plants, takes time. Those plants are also enormously expensive. Paying people to reduce their electrical demand, says McGuire, allows those utilities to delay their infrastructure investments for 10 to 20 years.

Waschusett Mountain has a locked-in price for the next year or two, delaying but not preventing the 30 percent higher energy prices predicted by its utility for late this year. "When it spikes that much, it definitely forces you to think about how you can do things differently,' says McGuire. "Some of those projects that five years ago you didn't think were worth it makes a lot more sense since energy costs have gone up significantly."

One such investment is a computerized energy governor of the resort's 40,000 square-foot base lodge. Staff members have a habit of forgetting to turn off those exhaust fans at night, resulting in the heated air being blow outdoors. But even in the daytime, when nobody's cooking, the fans tend to remain on, sending expensively heated building air into the great outdoors. The new system allows no such waste, turning fans off and on automatically. It also monitors temperatures in the room, and at night reduces them while also dimming lighting. Such a system made no financial sense in former years. Now it does.

Bottom-Line Savings
Always, says McGuire, his managers want to know the payback. He never bothers taking them a project costing $1 million and a 10-year payback. Doing good environmental deeds does matter, and it's something that McGuire always works with the marketing department to communicate to the general public. But that's only frosting on the cake.

"The corporate world tends to have very short-term thresholds," says Auden Schendler, the Aspen Skiing Co.'s environmental coordinator. "Typically, anything more than three years is considered unacceptable to many companies." That, he notes, is a 33 percent return on money-an amazing return by most standards. For most, a 10 percent return is good-which means that a 10-year payback does make sense.

Now, what had been a 10-year payback may be a seven-year payback, he says. That doesn't mean that everything makes sense. Aspen has invested in a solar power project, the largest photo-voltaic in the industry. The $20,000 cost was substantially defrayed by a $10,000 rebate from the local utility, Holy Cross Electric. Still, few companies will envy Aspen on this one. "Solar's a tough sell. We make $400 a year on this system, so it's a 20-year payback or more," says Schendler.

While renewables may not always make sense, wind power in particular but even microhydro plants and other such investments are looking more attractive, simply because they cushion the vulnerability of energy prices. Wind energy production has been growing at 30 percent a year for the last seven or eight years, reports Gary Schmitz, spokesman for the national Renewal Energy Laboratory in Golden, Colo. A federal production tax credit, which has been offered sporadically, provides attractive incentives for investors. "If your cost for producing wind is 4 or 5 cents per kilowatt hour, and if you subtract 1.8 cents per kilowatt hour as a result of the production tax credit, that's significant, he says.

Wind turbines have become large and more efficient, even if the costs of steel have also elevated prices somewhat, says Tom Gray, deputy executive director of the American Wind energy Association. The return on investment depends upon the size of the turbine, the number of them, construction, locations, and, not least, the wind velocity. "In general, the higher the average the wind speed, the better," he says.

Incentives for Efficiency
But low-tech answers like insulation and high-tech projects like wind turbines are not the only ways to reduce energy costs. Business organization is another. Ski areas can realign their accounting systems to provide incentives for employees to conserve. For example, tenants whose rents include the cost of heating have no direct incentive to set their thermostats judiciously, points out Aspen's Schendler. Somewhat similarly, if the operators of restaurants on a ski mountain are not forced to include the costs of energy in their business accounting, there is no feedback loop to encourage conservation.

In some cases, positive incentives make sense. Aspen's broad incentive program for operators of snow-grooming machines provides a bonus of up to $1,500 per driver. The program partly is premised upon delivering quality corduroy, but with energy prices spiking, the resort has added fuel consumption to its mix of incentives. Fifty percent of what they save in fuel costs compared to what was budgeted will be paid to them, based on hours of operation.

The cost savings more than offset the minor bookkeeping headache caused by the added incentive. "It's all a little bit of brain damage at the end of the year, but I don't need to call in any accountants,' says Mike Kaplan, chief operating officer of the Aspen Skiing Co.
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