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Being Competitive with District Energy and Adding Shareholder Value

Energy Matters Summit | April 27 2010 Mississauga, Ontario

BIO: Ron Harten, General Manager of Hamilton Community Energy

Hamilton Community Energy is ‌ Established as a division of Hamilton Hydro Services Inc., HCE is a single source energy solution provider, efficiently generating and supplying clean thermal energy through a sophisticated arterial network of underground insulated pipes to approximately 2.0 million square feet of commercial, residential and institutional buildings in the Hamilton downtown core.

HCE is aligned with the City of Hamilton’s Vision 2020 initiative of a strong, healthy and vibrant City, by promoting local solutions to environmental and development challenges through responsible stewardship, protection of natural resources, and the integration of its citizens into a sustainable social infrastructure.

Hamilton Community Energy’s History …

HCE was built by HHSI, a subsidiary of Hamilton Utilities Corporation in 2002, and is supported by a strong Board of Directors who provide independent oversight and governance.

“District energy is based on environmental quality, economies of scale and energy efficiency.”

Initial customers were the City of Hamilton with its aged boilers and the Hamilton Wentworth District School Board.

HCE • 12. 5 MW thermal heating capacity using 3 Sterling hot water boilers • 3.5 MW electrical generation capacity via a Cat®3616 reciprocating engine with heat recovery • Imbedded generation servicing City of Hamilton properties’ electrical loads on-peak • Black-start capable • EcoLogo® endorsed • Piping infrastructure and energy transfer stations

HCE Customers HCE services customers that are located in the Hamilton downtown core including: City of Hamilton: Victoria Park Community Homes: Art Gallery* Queen Street (237 units) Copps Coliseum Oxford Street (197 units) Ellen Fairclough Building* Convention Center* Hamilton Wentworth District S.B.: City Hall Board of Education Market / Library Complex Sir John A. MacDonald H.S. Central Utilities Plant *Via City of Hamilton Central Utilities Plant In Process, Lister Block &MacNab Snow-melt Hamilton Renewable Power Inc. – Operations and maintenance services

Considerations for District Energy: • Are you competitive in the open market?

• Is the District Energy Plant sustainable as a business?

• Do you offer more than your competition?

• Do you have enough data and analyze often enough to know when you have an issue with cycle efficiency?

• Have you balanced energy supply cost and risk?

• Has your measurement system been validated?

• Is your process stabile?

• Are you operating the best technology?

• Does the best technology support a ROI? • Does the process use leading indicators?

New customer and/or new facility rate and margin modeling • Difficulties in determining performance of systems or loads that do not exist.

• A good model will be built using engineering data, and financial data as well as a solid baseline.

• This could become “go / no go” for the project.

Life Cycle Analysis Model •

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Compare district energy costs against conventional technology over the term of the contracts.

All costs must be included: it is always easy to get thermal/cooling loads, gas bills and electrical bills.

Repair and emergency costs, labour, insurance, avoided capital and other costs are hard to obtain from potential clients.

Fixed costs and variable costs generally billed as separate elements

Operating Competitively •

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Worst case − Read all metering monthly (historical data) − Crunch the numbers − Wonder what went wrong or right Best case − Data-based decision making − Live cycle efficiency − Live / real time metering − Leading indicators or metrics − Good control plan

No Optimization Model Monthly Monitoring

Process Optimization Model

Define Desirable Outputs or Deliverables What drives your business?

• Process improvement • Predictive performance • Budgeting • Energy unit cost • Margin • Capital justification • Fuel chargeable to power • Cost control • Carbon footprint

Process Modeling •

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Measurement Systems − Do you measure the inputs and outputs? − Have the measurement systems been validated? − How is the data stored and at what resolution?

Build the Model and Analyze − What are the controllables? − What is/are the desired output(s)? − Do not make assumptions − Is there a bench mark or baseline? − Lean tools, Six Sigma tools Types of Models − Real-time which can be “dashboard” style − Off-line or desk-top done at intervals

Process Model Gas Turbine Steam Waste Heat System Marginal Cost For Power $55.00

HOEP ($/MW)

$50.00

$45.00

$40.00

32,000 lbs/hr 6,000 kWh 20 Deg C Amb. 40,000 lbs/hr 6,250 kWh 20 Deg C Amb

$35.00

45,000 lbs/hr 6,500 kWh 18 Deg C Amb 50,000 lbs/hr 6,750 kWh 14 Deg C Amb

$30.00 $5.50

$5.75

$6.00

$6.25

$6.50

$6.75

Burner Tip Price ($/GJ)

$7.00

$7.25

$7.50

Process Optimization •

Control Systems − − − − − − −

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Is the control plan / system sustainable?

Is the process audited?

Process health indicators Practical solutions Exchange the right information Operations tools, “go / no-go” alarms Reporting

Principals of continuous improvement - drive it through your team

You don’t need this!

Six Sigma Methodology

Risk Management • • • • • •

LTSA (long term service agreement) Gas price volatility and gas buying strategies Redundancy Equipment specification and quality Contracts Energy conversion contracts

Load Management • • • • • •

Load profile Peak management Alternative energy sources Shoulder season loads Manage the 10% Process control

Sustainable, Eco-Friendly Solution • •

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HCE’s commitment to both environmental and economic sustainability benefits its customers HCE produces and distributes clean energy, with minimum ecological impact at an efficiency rate of 80%, compared to 40 - 60% for conventional installations HCE is EcoLogo® Certified to CCD-001 Systems for Buildings, a certification that is recognized world-wide Reduced carbon emissions by an average of 34%

Thank You

Questions?