Energy Budgets at Risk (EBaR)

Energy Budgets at Risk (EBar)^® provides everyone from facility energy managers and financial managers to government policy-makers and electric utilities program planners with the background information required to understand energy cost, price, efficiency, and related issues important in developing a balanced approach to facility energy risk management. Throughout the book, respected energy economist Dr. Jerry Jackson clearly shows how to reduce energy costs and increase cash flows by using risk management concepts developed in the financial industry. Preface.

Chapter 1. Energy Markets and Budgets at Risk.

Recent Price Increases.

Applying Risk Management to Energy Budgets.

Energy Budgets At Risk Workshops.

An Overview of Energy Budgets at risk (EBaR).

A Look Back At Energy Prices.

A Look Forward: Energy Demand And Supply Factors.

Energy Price Forecasts.

Going Green – The Critical Role Of Efficiency Investments.

EBaR as A Policy Option.

Summary.

Chapter 2. Facilities Efficiency Options.

Facility Energy Management.

Efficiency Options.

Calculating Cost And Savings.

Summary.

Chapter 3. The Nature Of Energy Costs And Prices.

Energy Price Overview.

Electric Costs And Rates.

Deregulated Electric Markets.

End-Use Costs.

Incentives To Reduce Energy Use.

Financing Energy Efficiency Investments.

Summary.

Chapter 4. Capital Budgeting: Theory and Practice.

NPV and IRR Analysis.

Real Options - When Procrastination Pays.

Capital Budgeting in Practice.

Summary.

Chapter 5. Energy Facility Risk Management Foundations.

Capital Budgeting and Risk Management.

A Brief History Of Financial Risk Analysis (Var).

Applying a Var Approach to Energy Facility Risk Management.

Prognosis.

Summary.

Chapter 6. EBaR Concepts and Results.

Energy Budgets At Risk (Ebar) Overview.

Ebar Management Presentations.

Summary.

Chapter 7. Beginning Empirical EBaR Analysis: Risk and Probability Distributions.

Energy Risk.

Probability Distribution Fundamentals.

Extracting Information From Probability Distributions.

Applying Distributions With Monte Carlo Analysis.

Energybudgetsatrisk.com.

Summary.

Chapter 8. EBaR Implementation - Developing Quantitative Relationships.

EBaR Analysis Steps.

Analysis Complexity.

Budget Variable Identification.

Budget Variable Analysis.

Distribution Development

Summary.

Chapter 9. EBaR Budget Analysis (EBaR_Budget).

Monte Carlo analysis Framework.

Evaluations and Assessment.

Summary.

Chapter 10. EBaR Energy Efficiency Investment (EBaR_IRR).

Solving the Efficiency Investment Problem.

Case Study Efficiency Investment Options.

Representing Investment Analysis Uncertainty.

Case Study Efficiency Investment Analysis Results.

Risk Tolerance And Decision Rules.

Summary.

Chapter 11. Energy Budgets at Risk in Competitive Markets.

Competitive Energy Suppliers.

Pricing/Efficiency Misconceptions in Competitive Markets.

EBaR Simultaneous Pricing and Efficiency Investment Choice.

Summary.

Chapter 12. EBaR Reports.

EBaR Budget and Investment Analysis: Austin Office Building, January 20, 2008.

Executive Summary: Office Building, January 20, 2008.

Additional Report Information.

Appendix A.

Notes.

Index.

Jerry Jackson is an energy economist and Texas A&M professor with thirty years' experience in developing and applying practical solutions to difficult energy industry problems. As owner and President of the consulting firm, Jackson Associates, he has worked with more than one hundred clients, including more than twenty Fortune 500 companies, start-up companies, electric and gas utilities, state agencies, research labs, and the U.S. Department of Energy. Jackson has served as an expert witness at government hearings. He recently presented a keynote address at an international sustainability conference in New Zealand, and he has also served as a U.S. representative to a United Nations conference on energy modeling. Jackson has a PhD in economics from the University of Florida with a specialty in econometrics.

Uncertainty over energy prices, equipment performance, weather, and other factors make it exceedingly difficult for many commercial, institutional, industrial, and government organizations to assess the costs and benefits of energy-efficiency investments—creating severe energy budgeting and planning problems, which become even more difficult in areas with competitive energy markets. In Energy Budgets at Risk (EBaR)®, respected energy economist Dr. Jerry Jackson explains why high energy prices and market volatility can be expected to continue, and shows how to reduce energy costs and increase cash flows using risk management concepts developed in the financial industry.

The Energy Budgets at Risk (EBaR)® system developed by the author and described in this book is a new quantitative approach to evaluating energy-efficiency investments using modern risk management tools. Commercial, institutional, industrial, and government organizations can now apply investment analysis to energy-related decisions in a manner that is consistent with their financial investment analysis. EBaR can also incorporate energy purchase decisions for organizations in competitive energy markets, providing an integrated investment-purchase analysis. In short, EBaR applies quantitative risk management analysis vetted in the financial community in a process customized to meet the risk tolerance of individual organizations. It offers a road map that energy managers, corporate executives, and government officials can use to understand and implement "best practice" facility energy risk management strategies.

Because EBaR is a scalable application, it can be used in both large and small organizations of any type—whether commercial, institutional, industrial, or government—and its strategies can save thirty percent or more of current energy bills, even after paying for energy-efficiency investments.

Written for a nontechnical audience, this book requires no special background in mathematics or statistics. All concepts and applications are illustrated with a case study application to an Austin, Texas office building, and readers can apply similar risk management analysis by substituting data for their facilities. Appendix tables provide readers with an easy way to assess potential energy and financial benefits of an EBaR analysis.

The primary opportunity to meet environmental goals is through energy-efficiency investments that reduce energy use, making EBaR analysis essential to every organization's carbon-reducing efforts. Energy Budgets at Risk (EBar)® provides everyone from facility energy managers and financial managers to government policy-makers and electric utilities program planners with the background information required to understand energy cost, price, efficiency, and related issues important in developing a balanced approach to facility energy risk management.

Energy Budgets At Risk (EBaR)®

An innovative approach to energy-efficiency investment and energy purchase decisions

Energy Budgets at Risk (EBaR)® introduces a new energy management framework that reduces energy costs and energy-efficiency investment risk by applying risk management tools developed in the financial industry.

EBaR quantitatively determines energy-efficiency investment risk and provides energy risk management investment strategies that reduce costs while meeting budget flexibility and risk tolerance requirements of individual organizations. By providing energy budget savings greater than investment costs, EBaR investments result in increased cash flows—creating the same financial bottom line impact as an increase in revenues. In fact, EBaR strategies can save 30% or more of current energy bills even after paying for energy-efficiency investments.

Written for a nontechnical audience, Energy Budgets at Risk (EBar)® shows all those on the frontline who are responsible for electric, natural gas, and fuel oil budgets in commercial, industrial, government, and institutional buildings and other facilities how to develop and apply a comprehensive, consistent financial risk management framework to evaluate energy budget risk; how to make the most of alternative energy-efficiency investments; and how to integrate efficiency investment decisions with purchase decisions. An opportunity to meet environmental goals through energy-efficiency investments that reduce energy use, EBaR analysis should be a cornerstone of every organization's carbon-reducing efforts.