Bloomberg News

Goldman’s Icy Arbitrage Draws Interest to Meet EPA Rule

August 01, 2014

Condenser Pumps Inside the Goldman Sachs Tower

Carlos Hanco, vice president of corporate services for Goldman Sachs Group Inc., walks past condenser pumps, part of the heating and cooling system, inside the Goldman Sachs Tower, located at 200 West Street, in New York. Photographer: Peter Foley/Bloomberg

Clustered deep beneath the trading floors of Goldman Sachs Group Inc. (GS:US)’s Manhattan headquarters are 92 tanks with enough ice for 3.4 million margaritas.

Goldman runs chilled anti-freeze through pipes connected to the 11-ton vessels during summer nights -- when power costs less -- to freeze the water. That ice is used the next day in its air-conditioning system, when high-demand electricity comes with a surcharge.

Proponents of so-called thermal storage systems such as Goldman’s, which have roots in the New England ice houses of the 18th century, are pushing to expand its use. And they see it as a way to help utilities comply with future carbon rules as well as to store power from rooftop solar panels or wind farms whose output often surges when demand is low.

A Global Push to Save the Planet

“We’re going to start phasing out the old coal plants, and replacing them with solar, wind and some nuclear power,” said Mark MacCracken, chief executive officer of CALMAC Manufacturing Corp., which made Goldman’s tanks. “All of these need to use storage in a big way, and thermal storage is the low-hanging fruit.”

Getting thermal storage to take off has been a slog, though, as building owners don’t want to invest in power savings that will accrue to their tenants, and utilities exempt most customers, especially residential ones, from pricing based on peak demand periods. Without those pricing cues, government tax breaks or subsidies may be needed to boost the use of ice tanks, said Jim Lazar, a utility consultant in Olympia, Washington, who wrote a report on integrating more renewables in the electric grid.

“If people understood the opportunities, this technology should sell itself,” Lazar said. “In reality, it may require some kind of incentives.”

Renewables Growth

Wind and solar power, together the fastest-growing electricity sector this year in the U.S., are on track to provide one-fifth of total capacity by 2030. And the carbon plan of the Environmental Protection Agency, which is being debated in public hearings this week, is predicated on both more renewable power and greater energy efficiency.

Unlike coal plants, generators can’t fire up the sun or wind when customers plug in a hair dryer or turn up the air conditioner. That’s one big reason why the U.S. Department of Energy and investors such as Elon Musk have poured so much research and funding into breakthrough battery technologies. Panasonic Corp. agreed yesterday to help Tesla Motors Inc. build its so-called Gigafactory.

Environmental Benefit

Water is a cheaper and easier way to store a chunk of that energy, Lazar said. In addition to ice tanks, home water heaters can be tweaked to fire up when electricity is in ready supply, he said.

Buildings are a big part of any energy equation: They account for two-thirds of U.S. electricity demand. A quarter of the energy used by commercial buildings -- the largest share -- is for cooling.

In the basement of Goldman’s New York City headquarters, the nation’s largest thermal storage system makes 1.7 million pounds of ice every night. A single storage tank contains about as much cooling capacity as 400 bedroom-sized air-conditioning units. The tightly packed units, which are part of the building’s 25 million to 30 million gallons of annual water consumption, sweat like beer cans on a hot day, as a maze of overhead piping connects them to a system that reaches skyward to six rooftop cooling towers.

Electricity Arbitrage

Together with an air-conditioning system that cools from the floor, not overhead, and efficient chillers, the company says it’s cutting both its electricity bill and carbon footprint. The 43-story building, which opened in 2009 and houses about 8,000 employees, is 30 percent more efficient than a typical office.

“It has a powerful environmental benefit,” said Timur Galen, Goldman’s global co-head of corporate services and real estate. “We are calling upon the energy grid when it has the most available capacity and, as a result, the cleanest energy.”

Goldman estimates that it saves about $50,000 monthly on its summer power bills.

Goldman uses the “ice storage system to arbitrage difference between on- and off-peak electricity prices,” said MacCracken, who has been selling the systems since the 1980s. “In energy conservation, everybody focuses on kilowatts, but they don’t focus on peak demand.”

In New Jersey, Princeton University, which pays more for power during periods of high demand, does focus on its peak. It installed 2.6 million gallons of ice-storage in 2005. As a result, it shaves 3 megawatts off its peak demand, lowering its annual bill by more than $240,000, said Tom Nyquist, the university’s executive director of engineering.

“We are saving money, but also lowering the capacity requirements on the grid,” Nyquist said in an interview.

Curbing Demand

Storage is something utilities such as Consolidated Edison Inc. (ED:US) and Florida Power & Light Co. (NEE:US), a regulated utility owned by NextEra Energy, Inc., are pushing with greater emphasis, as aging power plants and transmission grids force them to plan for billions of dollars in replacement costs. By getting customers to cut their peak draw, they can postpone those investments.

Con Edison, New York City’s utility, spends more than $1 billion a year on new plants, substations and transmission lines, and curbing demand peaks helps reduce the need for those investments, said John Shipman, department manager for energy efficiency at the company.

“There are a lot of different things utilities are doing to reduce peak demand, and that makes the power system more efficient,” said Lisa Wood, executive director of the Institute for Electric Innovation in Washington.

Incremental Benefits

Ensuring that storage also reduces carbon emissions is a trickier issue. Engineers say there may be some energy loss in the freezing and then tapping of the frozen water, compared with directly cooling the air. And in states like Texas, which get much of their power from coal plants that run all the time, cooling tanks at night could be a wash in terms of greenhouse-gas emissions.

“This is much more about cost savings than emission reductions,” said Jim McMahon, director of Better Climate Research & Policy Analysis group in California. “To cut emissions, you need to cut the energy you use.”

Proponents counter that thermal storage provides myriad incremental benefits now, which help make electricity generation more efficient, and therefore lower in emissions.

Nighttime Generation

In New York City, generating electricity at night is about 35 percent less carbon intensive than at peak during the day, said William Nelson, an analyst with Bloomberg New Energy Finance. In that region two carbon-free sources, nuclear and hydro power, account for about half of the electricity and those typically run without interruption, day and night.

“During the day, we’re forced to fire up more expensive -- and less efficient -- gas units,” he said.

And the long-term implications may be much greater.

In Southern and Western states, the need for storage may be the greatest in the coming years because of the surging growth in wind and solar generation.

“In the big picture, we have to reduce our carbon by 90 percent, and the only way to do that is with more renewables,” MacCracken said. “But renewables need storage, and ours is the easiest way to store that energy, because it’s storing it the way it will be used.”

(An earlier version of this story incorrectly stated the amount water used by the system, based on information provided by the company.)

To contact the reporters on this story: Mark Drajem in Washington at mdrajem@bloomberg.net; Justin Doom in New York at jdoom1@bloomberg.net

To contact the editors responsible for this story: Jon Morgan at jmorgan97@bloomberg.net; Will Wade at wwade4@bloomberg.net Will Wade


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Companies Mentioned

  • GS
    (Goldman Sachs Group Inc/The)
    • $193.28 USD
    • 1.67
    • 0.86%
  • ED
    (Consolidated Edison Inc)
    • $65.69 USD
    • 0.13
    • 0.2%
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