Energy Alert for June 17, 2015

In a recent issue, we noted that the battery industry is poised for growth as both utilities and their customers look for ways to store energy for use when demand is high or the electric grid fails. Battery tech is advancing and costs are falling, but batteries are far from the only viable way to store energy or provide backup power in emergencies. Two other approaches — one novel and one traditional — are also making strides.

Hydrogen Power

Fuel cells have long held the tantalizing prospect of providing abundant and clean energy. By combining hydrogen and oxygen to produce electricity (and water as a by-product), fuel cells emit no greenhouse gases or pollutants; they run silently; and, unlike batteries, they can be “recharged” quickly by adding more hydrogen.

But logistics have long hampered fuel cells. Though hydrogen is the most abundant element, very little of it exists in pure, elemental form. So providing the fuel for fuel cells means extracting hydrogen from other molecules, such as the methane in natural gas, and then transporting pure hydrogen to where it’s needed. And with very little infrastructure in place to move the hydrogen, fuel cells can’t be used in many places.

However, fuel cell makers such as Plug Power of Latham, N.Y., are gradually starting to overcome that obstacle by improving the shipping of hydrogen to customers who like the idea of using efficient, emissions-free fuel cells but traditionally haven’t been able to procure the hydrogen to power them. Plug Power installs its fueling dispensers and other gear on-site and trucks in hydrogen as needed.

So far, that strategy is catching on with big retailers such as Walmart and Kroger, which are switching over to fuel cells from Plug Power to operate forklifts at their distribution centers. Forklifts so equipped can run almost constantly, says Plug Power president Andy Marsh, allowing for more-efficient operation than battery-powered forklifts, which have to either recharge for hours or swap out batteries to keep going. Turning to hydrogen isn’t cheap, but for large industrial sites that can fuel hundreds of forklifts from a central location, the economies of scale can pay off.

Clearly, warehouse forklifts represent a fairly small and specialized market for fuel cell adoption. But Marsh sees expansion possibilities elsewhere. One juicy market he’s targeting: Next-generation cell phone towers, coming on line in a few years, that will need a portable energy source because they won’t be connected to the electric grid.

Meanwhile, cars powered by fuel cells are quietly making some inroads in the electric car market, even as batteries get most of the attention. The basic knock on battery-powered cars — that they can’t drive very far before needing a lengthy recharge — doesn’t apply to fuel-cell-powered vehicles, or FCVs. A quick hydrogen fill-up allows for hundreds of miles of emissions-free driving.

If you can find a hydrogen fueling station, that is. Such stations are starting to pop up in California, which has led Toyota to prepare the first FCV you’ll be able to buy in America. Called the Mirai, it’s a compact sedan with a driving range of up to 300 miles, running on hydrogen in a carbon fiber tank that Toyota calls “durable” and “incredibly solid” (probably to assure potential buyers that the car won’t go the way of the hydrogen-filled Hindenburg zeppelin).

With enough hydrogen fueling stations (California is shooting to have 100 by 2020), the Mirai or a car like it could be the anti-Tesla electric car: One you can refuel in five minutes from a pump and then drive across a medium-size state without being afraid of getting stranded with a dead battery. As an added bonus, Toyota says the onboard fuel cell could even act as an emergency power source for a home during blackouts. (It’s not yet clear if that feature will be available on U.S. models.)

Backup Power, the Old-Fashioned Way

Of course, there’s a far simpler way to power your home or business during a blackout: An emergency generator. Small, portable units running on gasoline can keep the lights on in a pinch, and larger, stationary generators burning propane or natural gas can power your whole building automatically when grid power goes down.

Sales of emergency generators have been a bit soft lately, says Clement Feng of Generac, a major generator supplier. But that’s largely due to the absence of major hurricanes and associated blackouts in recent years, he adds; folks who haven’t dealt with that headache in a while tend to be less eager to invest in a generator. It takes only “one big storm” to ramp up demand, says Feng.

Meanwhile, Generac is doing brisk business selling large, trailer-mounted generators fueled by natural gas to oil drillers. Well-site equipment requires a lot of electricity, and gas-fired generators are a good solution in the many parts of the oil patch where natural gas comes up the well as a by-product of oil production. Much of that gas has traditionally been flared off as a waste product, even as drillers hauled in costly diesel to run pump jacks and other gear.

In the aftermath of Hurricane Sandy in 2012, we spoke with Jim Baugher of online power equipment retailer Power Equipment Direct to find out what folks should know if they are in the market for a generator (as many in the Northeast were when Sandy took down much of the grid).

Among his recommendations:

  • Have an electrician assess the power needs of your home or business so you can buy a generator that handles the job without going overboard. An electrician can also install the wiring needed to automatically route the generator’s power to essential equipment — your fridge or furnace, say — without having to run extension cables.
  • If buying a portable unit, you’ll want one with pneumatic wheels for easier movement; a battery for easy start-up; and a voltage regulator. If you’re interested in a large, stationary backup unit, first consult a building inspector to make sure your intended site won’t run afoul of local building codes.

Generator costs can vary substantially, depending on your power needs. Generac’s Feng says buying and installing Generac’s largest standby generator — a 22-kilowatt unit — generally runs $7,000 to $8,000. The company’s smallest standby model puts out 7 kilowatts and costs about $1,900 before installation.

Energy Alerts, June 3, 2015

The boom in shale oil and gas isn’t just unleashing a flood of new energy sources in the U.S. It’s also driving a massive build-out of the nation’s energy-carrying infrastructure, which is needed to bring that big bounty of crude oil and natural gas to market. At the same time, big changes for the electric grid mean utilities are investing heavily in new transmission lines to make sure your lights stay on.

Pipes, Tanks and Trains

The growth in oil output alone is taxing the energy industry’s carrying capacity. Though it briefly leveled off this winter when prices plummeted, crude production is on the rise again. By the end of the year, there’s a very good chance U.S. output will eclipse the record of roughly 10 million barrels per day, set in November 1970. Moreover, drillers are also tapping significant amounts of ethane, propane and other liquid petroleum.

Getting that gusher of oil from wells in N.D. and Texas to refineries on the coasts calls for more pipelines, more rail tanker cars and more storage depots. Last year, market research firm Industrial Info Resources tallied proposed pipeline projects that would be capable of moving a combined 8.2 million barrels per day — almost matching today’s 9.5 million barrels of daily output — and cost tens of billions of dollars to build. Most of that new construction figures to be in the Midwest.

IIR also identified proposed storage depot projects that would provide more than 80 million barrels of capacity, most of them in the West and Southwest. Firms such as Enterprise Products Partners and Kinder Morgan are betting on a mounting need for more storage tanks, especially after the big rise in crude oil stockpiles this winter sparked concerns that storage space would run out and helped push oil prices down.

Much of the surge in oil production isn’t getting to refineries by pipeline; it’s coming by rail. In North Dakota — the second-biggest oil-producing state (Texas is first) — rail is crucial to serving the mushrooming oil wells pumping crude from the Bakken Shale formation. But because this crude can be volatile and prone to exploding during train derailments, federal regulators are requiring the energy industry to upgrade or replace thousands of older rail tanker cars deemed unsafe for shipping crude (or ethanol, another volatile fuel).

How those regulations affect the crude-by-rail business remains to be seen. But the oil industry is clearly not happy with the mandate to overhaul or replace what a study by the Brattle Group estimates could be 30,000 rail tanker cars. American Petroleum Institute spokesman Brian Straessle said in a May 8 interview that the group, which represents oil and gas producers, was still reviewing the Department of Transportation’s new rules, but called them “very difficult” to implement. He questioned whether the rail industry has the ability to deliver so many new or upgraded tanker cars on the tight schedule regulators are requiring. Three days later, API filed a lawsuit against DOT to block the rules.

A slew of orders for new tanker cars figures to benefit manufacturers such as Trinity Industries, Union Tank Car Co. and the Greenbrier Cos. But DOT’s crude-by-rail rules pose challenges for those companies, too. In particular, car makers worry about the government’s mandate that tanker cars eventually adopt electronically controlled pneumatic brakes to prevent future derailments. The Rail Supply Institute, which represents car makers, argues that ECP is an expensive technology that does little to enhance safety.

While oil production draws near its all-time high, natural gas output is already breaking records. Gas production set a new high in December of last year and is likely to eclipse that record before long. Meanwhile, gas demand is also building (as we wrote two weeks ago). New supply and new demand spell many new gas pipelines crisscrossing the country.

The Federal Energy Regulatory Commission, which approves applications to build interstate gas pipelines, is tracking a bevy of proposed gas lines to keep up with supply and demand. All told, FERC data show enough pending pipelines to move about 15 billion cubic feet of gas per day — equal to about 20% of current gas usage. Major builders include Transcontinental Gas Pipe Line Co. and Energy Transfer Partners.

Power Lines

Meanwhile, electric utilities are pursuing more transmission capacity. Unlike for the oil and gas industries, the challenge for utilities isn’t moving more of the commodity they produce or sell; it’s rerouting power on the electric grid from new generating stations — as old coal-fired power plants close and gas-fired plants replace them — and coping with the ebbs and flows of highly variable wind and solar power.

That means more high-voltage power lines throughout the U.S. From now through 2017, electric utilities plan to spend nearly $20 billion per year on new transmission lines, according to the Edison Electric Institute, a utility trade group. Some big spenders include Entergy Corp., Southern Co. and Southern California Edison.

Many utilities will also be shelling out more for large batteries to store excess energy during periods of low demand and quickly deliver it to customers when demand jumps — good news for battery firms such as Panasonic, Toshiba and NEC Energy Solutions.

A Note on Oil Statistics

Readers sometimes ask about the best sources of information on oil production and consumption, and of other statistics. The Department of Energy’s Energy Information Administration publishes a wide variety of reports on these topics; so wide, in fact, that it can be a bit overwhelming.

Perhaps the single most informative snapshot of the U.S. oil industry appears on Wednesdays, when EIA publishes its Weekly Petroleum Status Report. The Status Reports Highlights are a handy summary that runs down total petroleum consumption for the previous week, along with the rise or fall in stockpiles of crude and gasoline; how close to full capacity the nation’s refineries are operating; and how much gasoline and diesel refiners churned out that week. The Data Overview is even more informative, with details on oil production and refinery activity by region.

But note that EIA’s weekly report of crude oil output is based on an estimation and isn’t as accurate as the monthly figures the agency puts out. This winter, the weekly updates were pegging daily U.S. oil production at 9.1 million to 9.3 million barrels. But in hindsight, the monthly report quotes output at 9.4 million barrels in January and February. EIA publishes the monthly figures with a two-month lag, but given their greater accuracy, they’re worth waiting for.

Energy Alerts, May 20, 2015

The hydraulic fracturing boom has unlocked massive new supplies of natural gas, and in the process has driven gas prices to rock-bottom levels. But signs of building gas demand suggest that a long-term price recovery is in the works.

Since 2010, the benchmark price for natural gas futures contracts has mostly held below $5 per million British thermal units (MMBtu). Frequently, the price has dipped as low as $2 per MMBtu, as drillers from Pennsylvania to Texas have raised output from previously uneconomical gas deposits buried in shale and other hard-to-drill rock.

The flood of new supplies has been dramatic. U.S. gas production rose more than 32% from January 2010 to January 2015, vaulting the U.S. into the top spot among gas producers worldwide. That’s good news for gas users, since more supply has helped push prices down, but bad news for gas producers, for the same reason. The number of rigs actively drilling for natural gas has plummeted, from more than 800 in January 2010 to a bit more than 200 today. And yet output continues to soar: The Department of Energy figures supply will rise a healthy 6% this year from 2014’s already-high level.

It might be tempting to assume that gas prices will remain low for the foreseeable future. However, demand is also on the rise, and it figures to ramp up further in coming years as the U.S. burns more gas for everything from generating electricity to fueling trucks and ships.

Power Shift

Take power plants. In 2010, the share of electricity generated by burning natural gas was a modest 24%, versus nearly 45% for coal. But because of tougher environmental regulations that are forcing many coal plants to close, the DOE expects gas to generate 31% of the nation’s power in 2015, versus 36% for coal. (The total amount of power generated this year will likely come in right around 2010’s level because of stagnant growth in demand for electric power.)

With even more coal plants slated to be retired over the next few years, utilities will increasingly call on gas to help take up the slack. Renewables are still in their infancy, and new nuclear plants are proving extremely expensive to build, meaning that neither of those sources can easily replace the amount of coal-fired capacity being lost. The DOE estimates that the coal plants closing this year alone accounted for 1.6% of all power generated in the U.S. last year. That’s a lot of megawatt-hours to replace.

Gassing Up

Demand for gas is also growing from a surprising source: Fleets of trucks switching from costly diesel fuel to cheaper compressed or liquefied natural gas to save on fuel costs. Though still a tiny slice of total demand, gas consumed by vehicles has risen more than 17% over the past five years. Much of that growth has come from an expanding fleet of gas-powered garbage trucks and other trucks that follow relatively short, predictable routes served by dedicated natural gas fueling stations.

The recent slide in diesel prices has made switching to new gas-powered trucks less compelling. Clean Energy Fuels, an installer of CNG and LNG fueling stations that has benefited from the recent gas-to-diesel shift, expects a bit of a slowdown in 2015, says spokesman Gary Foster. But the company continues to open new fueling stations and believes truck fleets will gravitate to gas in the long run.

Foster says that even with diesel prices down from last year, gas still costs less than the energy-equivalent amount of diesel. As oil prices rebound, that advantage should widen again. Plus, he says, builders of truck engines are starting to introduce more models that run on LNG, which should hasten adoption in a few years.

And note that even ship owners are starting to take a harder look at gas as an alternative to cheap but polluting bunker fuel. One company, TOTE, is commissioning the world’s first oceangoing containerships powered by LNG, the first of which is scheduled to enter service late this year. TOTE CEO Anthony Chiarello says the firm is moving to clean-burning LNG to meet tightening rules on maritime emissions that govern ships traveling within 200 miles of the coast of the U.S. and other participating countries. At $350 million for two new LNG-powered vessels, it’s an expensive solution, but Chiarello predicts that other shipping lines will follow suit in five to 10 years.

Exports Ramping Up

The U.S. has long been a net importer of natural gas. But that’s about to change, once a handful of LNG export terminals begin liquefying some of America’s newfound gas riches and loading it onto tanker ships bound for Europe and Asia. The first export terminal, Cheniere Energy’s Sabine Pass facility in Louisiana, is slated to begin shipments as soon as the end of the year. Four more export terminals — from Cheniere, Dominion, Freeport LNG and Sempra Energy — are also in the works and scheduled to come on line by 2019.

Combined, those terminals will be able to export about 9 billion cubic feet of gas per day when they’re fully operational. That represents a bit less than one-eighth of all the gas consumed in the U.S. in February (the latest month for which output data is available). Gas exports via pipeline to Mexico also figure to climb.

Price Outlook

So where do gas prices go from here? After briefly surpassing $6 per MMBtu during the “polar vortex” cold snaps of last year, gas has gradually trended down, to about $3 per MMBtu today. Amazingly, even the brutal cold that sent gas demand in the Northeast to all-time records this past winter couldn’t nudge prices higher.

Predicting short-term gas price movements is notoriously difficult, says Stephen Schork, who covers energy markets as editor of the Schork Report. “Traders have had their faces ripped off” guessing wrong on which way the market will move next, he says. Anything from an unusually cool spring to a freak summer heat wave can roil prices.

But in the longer run, gas prices look poised to trend higher. Demand not only will keep rising, but the rise will accelerate as the U.S. simultaneously generates more power from gas and exports more to overseas markets. Prices will stay volatile, but we see them heading toward an average of closer to $4 per MMBtu than the $2-$3 level that has prevailed in recent years. Bouts of prolonged summer heat or winter cold could cause higher spikes.

Gas consumers should figure on their bills rising over the next couple of years and act accordingly. That might mean locking into a long-term supply contract if the price on offer seems right; investing in insulation to reduce winter heating needs; or replacing old, inefficient gas appliances.

Higher gas prices bode well for gas producers. The biggest suppliers, such as Chesapeake Energy, Anadarko, Devon Energy and Southwestern Energy, figure to reap the biggest profits when prices do turn higher.

Energy Alerts, May 6, 2015

Oil prices have rebounded from their winter lows. But the oil industry isn’t out of the woods yet.

Since St. Patrick’s Day, when West Texas Intermediate — the U.S. crude oil benchmark — bottomed out at $43.46 per barrel, oil has been on a tear. At today’s price of $60 per barrel, WTI has rebounded by more than 30%.

A few key factors have fueled that rise. First, the amount of crude held in storage is no longer soaring the way it was this past winter, when investors fretted that storage depots would run out of physical space to hold all of the oil coming out of shale fields from Texas to North Dakota. In recent weeks, the Department of Energy’s weekly data has shown only small increases in stockpiles.

Oil is no longer piling up in storage so quickly because refineries are buying more and turning it into motor fuel. Demand for gasoline has been strong this spring, thanks to continued modest hiring gains that are putting more folks behind the wheel as they commute to new jobs. Plus, cheaper gasoline is likely spurring more travel. As a result, the Department of Transportation reports that Americans are driving more miles than ever before. (See page 2 of the DOT report for historical data.)

And, finally, U.S. oil output has hit a plateau. After growing sharply last year and during the early months of 2015, daily output is now holding fairly steady at a bit less than 9.4 million barrels. Chalk it up to the huge reduction in drilling activity prompted by the sharp drop in oil prices that started last year. The number of rigs actively drilling for oil is down more than half from last autumn, and will likely keep falling. That, in turn, means U.S. oil output might start falling fairly soon.

All of that is bullish for prices. But nobody in the oil industry is breathing a sigh of relief yet.

First of all, another price drop can’t be ruled out. Stephen Schork, editor of the Schork Report, a daily publication that analyzes the fundamentals of energy markets for professional traders, thinks the recent price rebound in oil is overdone. Refineries are buying lots of crude now to take advantage of large profit margins on refined fuel, a buying spree that he believes won’t continue. That could spell another “leg down” for crude prices sometime before summer arrives.

Companies in the oil patch are all too aware of that possibility, and they are investing accordingly, paring drilling budgets and looking everywhere for cost savings. One Texas-based energy consultant, who requested anonymity so he could speak freely, says that “caution is the MO” right now as drillers focus on their most promising oil fields and cut spending everywhere else.

That means targeting areas with lower drilling costs, such as the Eagle Ford Shale in Texas, and avoiding higher-cost plays such as North Dakota’s Bakken Shale. (Bakken producers are also handicapped by the lack of pipeline capacity there, which causes North Dakota crude to trade at a significant discount to WTI.)

But even Texas is seeing reduced drilling investment. The Railroad Commission of Texas, which regulates state oil and gas production, reports that it granted fewer than half as many oil drilling permits in the first three months of 2015 than it did during the same period last year. The same story is playing out just about everywhere in oil country. In Louisiana, for instance, drilling activity has fallen to 1970s levels, says Ragan Dickens, director of communications for the Louisiana Oil & Gas Association. The downturn has been especially bad for the many oilfield services companies based in Louisiana that do business in other oil states, he says.

The Upshot for Investors

We look for oil prices to gradually grind higher, with WTI ranging from $60 to $65 per barrel by August and a tad higher in September. But even if that pans out, markets figure to stay volatile, and many firms in the oil industry will remain under pressure.

So where does that leave investors who are trying to size up the oil industry? In the short term, it seems clear that companies that refine or transport crude and petroleum products are in better shape than companies that pump oil out of the ground. Energy expert Schork favors refiners, which are benefiting from relatively affordable oil and the recent run-up in gasoline prices. That makes refiner Phillips 66 a more profitable bet than Conoco, its former parent, he says. If you’re interested in energy master limited partnerships, “you’ve got to stay away” from those that produce oil.

Firms that provide services to oil drillers appear to be especially risky bets in the near term, too. The anonymous Texas energy consultant says he knows of service providers that are slashing their rates below cost, simply to hang on to clients that are demanding big discounts. By contrast, the integrated oil majors that both produce and refine oil are more insulated from such pressures. Firms such as Exxon, Shell and BP are making less on the oil they’re pumping, but their huge refining operations help offset those losses.

Tesla Powers Up the Battery Market

A few weeks ago, we wrote about the growth prospects for the energy storage business. Right on cue, electric car maker Tesla has announced a new line of lithium-ion batteries that it will begin selling to homeowners, commercial customers and utilities this summer.

We’ll reserve judgment on the quality of Tesla’s batteries until customers start testing them, but there’s no question that this is a sign of the energy storage industry’s future. At $3,500 plus installation, Tesla’s battery should be a compelling option for both homeowners and businesses looking to guard against blackouts or store energy generated during the day by rooftop solar panels.

Electricity customers whose utilities charge “time of use” rates that vary during the day could especially benefit from the growing supply of large batteries. Such plans charge higher rates during times of peak demand and lower rates at night or during mild weather. Customers who can charge a large battery when prices are low and then run their homes or businesses with that stored energy during the day when rates are high will be able to shave their electric bills, perhaps substantially.

According to the Department of Energy, in 2013 (the most recent data available) more than 4 million residential customers were covered by time-of-use pricing plans. It’s a near certainty that such pricing will expand in the years ahead as utilities look to manage peak demand for power without building expensive new power plants.

Energy Alerts, April 22, 2015

Whether you’re a homeowner, a renter or a business owner, and regardless of the energy source you rely on for heating, cooling and lighting, there is one simple way to save on your energy bill: Use less energy. To help you do so, this issue of Kiplinger’s Energy Alerts (issues are free through June 9) outlines ways to shave your utility costs, from making quick and easy changes to investing more substantially in energy efficiency.

Small Steps to Save $$

In our digital age, home and office electronics gobble more and more of the electricity we use — even when our devices are off. The American Council for an Energy-Efficient Economy (ACEEE), which encourages energy-saving practices and advocates for tighter efficiency standards, reckons that the electronics in an average American home draw about 50 watts of power when turned off or left in standby. That doesn’t sound like much, but it adds up to 440 kilowatt-hours per year. Since the average electric rate paid by households in America was 12.5¢ per kilowatt-hour last year, that works out to $55 per year in wasted energy.

Luckily, it’s easy to keep some of that money in your pocket. Unplug appliances and devices you rarely use — say the TV in the guest bedroom that’s rarely watched. And plug items you do use frequently into power strips that can be turned off by flipping a single switch. If you have a home office with a laptop, a printer and computer speakers, for instance, keeping them truly “off” when not in use saves about 9 watts of power.

Don’t overlook easy steps to save a bit on heating and air-conditioning, too. Remember to change the filter on your furnace, AC or heat pump. The system has to work harder to circulate air through a dirty filter, thus wasting energy.

Consider dialing down the temperature setting on your water heater. An easy way to check: If your hot water tap runs more than 120 degrees on a kitchen meat thermometer, your heater is probably set too high, says ACEEE research analyst Rachel Cluett. Also, use the “low” or “vacation” setting when you’re away for several days. (No sense heating water you won’t be using, right?) And if you have an older water heater with fiberglass insulation instead of more-modern foam, pick up a water heater insulating blanket from the hardware store.

Thinking Bigger

To trim your energy costs further, you’ll likely need to invest more time and money.

Take lighting, for example. The federal Energy Information Administration estimates that lighting accounts for 15% of the electricity consumed by both homes and businesses. More-efficient lighting products hold big potential savings. Both compact fluorescent bulbs and light-emitting diodes use far less energy per unit of light output than do traditional incandescent or halogen bulbs.

But are the up-front costs worth the long-term energy savings? A CFL bulb that mimics the light output and shape of a 60-watt incandescent can cost a few dollars. An equivalent LED can easily run $10 or more.

To earn back that investment quickest, install high-efficiency bulbs in the fixtures you use the most. (And bear in mind that CFL bulbs generally aren’t dimmable, so they won’t be suitable for every fixture.) To gauge the time required to break even on your up-front expense and start saving on your electric bill, use a calculator such as this one. You can input the prices of two different types of lightbulb (say a traditional incandescent versus an LED), how many hours the bulb will work every day, and how much you pay for electricity.

For instance, swapping a 60-watt incandescent bulb for a nine-watt LED that costs $10 and runs four hours a day, at an electric rate of 12¢ per kilowatt-hour, will break even in about 13 months and then save the user $9 per year. (It helps that LEDs generally last much longer than traditional bulbs.) Multiply that by a dozen or more bulbs, and the annual savings start to look sizable.

When It’s Good to Get Audited

For a more general approach to saving on your energy bills, consider calling in a pro to perform a whole-house energy audit. ACEEE’s Cluett, who used to perform these inspections for homeowners in Maryland and Virginia, says the idea is to identify where your home is losing heated or cooled air – letting you target insulation and air sealing to the places that need it most.

To find a qualified auditor, check with your state energy office or your utility. One or the other should be able to recommend experienced auditors in your local area and can also tell you about any incentive programs from your utility that might pay for some or all of the inspection. Cluett says a typical home audit costs roughly $400, but rebates from the utility could trim that significantly.

Insulating and air sealing a home aren’t cheap. But the payback can be substantial, assuming you plan to live in the home long enough to reap the benefits. The U.S. Department of Energy says that proper insulation and air sealing yields a 15% saving on the average home’s heating and cooling bills.

Businesses with large facilities can expect to pay much more for a customized energy audit. But note that many utilities will pay for part or all of the expense if the firm adopts the energy-saving recommendations generated by the audit.

Cooling Your Summer AC Bills

If you live in a region with hot summers – or hot weather year-round – your air conditioner probably adds a hefty amount to your electric bills. ACEEE estimates that cooling accounts for 17% of residential energy bills (second only to heating, at 26%). So helping your current AC run more efficiently, or upgrading to a new unit, has the potential to save you some real money.

Wes Davis, vice president of quality assured programs at the Air Conditioning Contractors of America, says there are a few things consumers can do to make sure their systems are running at peak efficiency. Aside from replacing dirty air filters regularly, he recommends gently washing the aluminum fan blades in the outside compressor unit with a garden hose to remove debris so the fan can move air as efficiently as possible.

Need to replace your air-conditioning unit because it’s on the fritz, or nearing the end of its useful life (roughly 20 years)? Ease the hit to your wallet by springing for a highly efficient new unit that will lower your future electric bills. Davis says that the best ACs available today are about 60% more efficient than the units commonly installed two decades ago. He recommends models with variable speed motors, which let the system throttle back when less than full cooling is needed.

But whatever type of air conditioner you buy, the key to maximizing its efficiency is proper installation. Davis says most brands on the market today are reliable – what matters is selecting a system that is the right size for your home and making sure that the ducting is well insulated and sealed. So seek out a good contractor to do the job (interview a few of them, and use this ACCA checklist to ask them the right questions). “This isn’t like buying a refrigerator at the big-box store,” Davis says. Getting the installation right is essential to keeping you cool, and to saving you money.