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Technology Innovation Brings Electricity to the Hotel Industry

04/25/2014
Hotels’ total energy consumption costs can be 6 percent of the operating cost and utilities cost continue to rise. While energy management focuses on the amount of consumption, cogeneration allows the hotel to have greater control on the cost of consumption. While other energy-reducing technologies have produced limited results, cogeneration appears to be a technology that will meet expectations. It’s a technology that has significant corporate investment behind it so we expect to see continued research and development to improve the technology and lower its pricing. 
 
Cogeneration, known as combined heat and power (CHP), is the production of heat and power from a single-fuel source. A cogeneration plant looks like a shipping container and inside is a power plant that takes natural gas and converts it to electricity. In the process of creating electricity, heat is generated that can be used to supply the heat necessary for the property to operate. 
 
The CHP plant supplies 95 percent of the electricity needs of the property. Hotels typically stay on the grid for the remaining 5 percent in the event of an outage or a need that might outpace the output of the CUP plant. 
 
The primary reason for a change to cogeneration would be financial savings. An additional benefit is creating a more reliable and improved power supply. In large cities such as New York and Los Angeles getting off the grid can often be a greater priority than the financial savings. 
 
The typical profile for a hotel that could install cogeneration would be: 
  • 100 or more rooms
  • High electric rates 
  • Hot water heating system
  • High use needs such as on-site laundry, heated pool or local climate extremes 
 
Cogeneration is not new. The first systems started to go in around 2005. The early adopting hotels were more about green exposure or had extremes under the typical profile that made significant financial sense. The draw back was always the upfront expense of the CHP plant. The payback was there but not quick enough for the property to recoup its investment. However, as the technology has continued to develop, the purchase price continues to drop. The current payback for the investment is right at three years and it is expected that timeline to continue to decrease. 
 
The other significant change is the evolution of the business model. Like any product, it takes time for the companies who sell and install the product to develop and mature. This evolution is now creating opportunities for shared savings, financing, and guaranteed pricing. We have seen a significant increase in companies who will install the CHP plant and charge the hotel a set rate below the cost of their current spend. While hotels enter significantly longer contracts to implement this guaranteed savings solution, their upfront financial exposure is reduced to zero. 
 
I’m just waiting for the residential version or better yet, the Mr. Fusion so I can install it in my Delorean.
About The Author
Trevor Warner

Warner Consulting Group


Trevor Warner is an industry expert and consulting for the hospitality technology field.

 
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