Lessons in Energy Strategy With Jennifer Kearney

The following conversation has been edited for clarity and length.

You work with hospitals on energy procurement. For those who are unfamiliar with it, what is that about?

When we're talking about energy procurement, we're talking about the ability to purchase the energy supply or the commodity portion of a rate. 

The utilities truly are a monopoly around the transmission and delivery of both natural gas and power, but about half of the states in the country have deregulated gas and power. 

More states than not have deregulated gas, at least, and so [energy procurement] is basically going out to a competitive marketplace and securing quotes for different products, different terms on behalf of a customer to meet their risk tolerance and their expectations of budget certainty. 

It's always a balance between being able to forecast, you know, the market is at X point today. Is it going down in the future or is it going up? How much risk does a hospital want to wear as a for-profit? And even among not-for-profits, hospitals tend to be a lot more budget-conscious, which means that they want to have a little bit more surety around that cost, and in exchange they're willing to not get the absolute lowest price. So it's a balance among all of those things.

Do hospitals have longer contracts for energy than other industries? 

They traditionally have been more comfortable with longer positions, so anywhere from like three to five years, where a commercial building might be in it for one to two years. 

How is healthcare different from the other industries you work with? 

Healthcare facilities have a load pattern that looks a lot like a data center. They use a tremendous amount of power consistently every single day. Hospital operations being 24/7 means that they have a high energy intensity or high load factor, and those are actually load patterns that are very attractive to a seller of energy because it's very easy to predict. 

You work with every type of complex building New York has to offer. What are some of the differences in how hospitals approach operations compared with CRE or high-rise residential, and what might other types of facilities want to emulate from healthcare? 

Healthcare organizations tend to have teams of people on the engineering side focused on infrastructure renewal, energy efficiency projects, and an overall optimization of operations. 

You know, in a commercial building, they tend to have smaller teams around operations and efficiency, but for hospitals, the stakes are really high. It's life or death. Hospitals need to maintain certain climate controls for patients. Operating rooms have very strict parameters around humidity and temperature, and medical equipment can be more sensitive to fluctuations in voltage. 

So there are a lot of things going on with the complexity of a hospital building that you don't see in a multi-family residential building or standard commercial building. But I think that the greater sophistication in the personnel that you would tend to find in a hospital really pays dividends because they're very focused on the bottom line. A day-to-day focus on optimizing operations and identifying opportunities for efficiency pays dividends back that you can see in lower operating costs. 

How do you think operations is changing in response to the Trump administration?  

Well, we're seeing a lot of changes, but the biggest sort of trend that we're seeing associated with the new administration is just this massive uncertainty. That uncertainty drives a lot of volatility, and volatility will sometimes cause a customer to make a knee-jerk decision that might not make sense otherwise.  

People are getting very nervous, especially with respect to Canadian tariffs on energy. New York gets a lot of power from Canadian hydro and we also get a lot of natural gas from Canada. 

Do you see the interest in demand response from the healthcare community changing right now, with the uncertainty around everything that’s going on in the federal government? 

We think that demand response and capacity is an area that people are focusing on more because capacity prices are really dependent on how much generation you have, and [we’re looking at] the grinding halt to the development of renewable generation, so no more offshore wind. 

That's pretty significant for New York and it’s driving capacity prices higher. Whether that's higher in the near term or in the long term, we have yet to really see.  

So that means that you pay more for the energy with the higher capacity cost, but it also means higher earnings for demand response. 

How does submetering and plant monitoring services like utiliVisor fit into your efforts in supporting energy procurement for hospitals? 

utilivisor is a significant tool in the toolbox when it comes to driving energy efficiency. And the more efficient a building is, the better the pricing from the marketplace. 

That goes back to what I was talking about at the top about load factor – how consistent your load is. Being able to avoid short-term spikes in energy usage, having a very consistent load profile, is considered to be more efficient, and with greater efficiency you get better pricing from the market. 

What are properties interested in right now? 

I would say a year ago we were having a lot of conversations about decarbonization and electrification of buildings, so pulling out boilers driven by fossil fuel, bringing in big air source heat pumps, maybe geothermal. A lot of that conversation has subsided. 

What has remained consistent is that decarbonization may be something that maybe works for one building but doesn't work for all buildings. But one sort of very consistent strategy is investing in good energy efficiency projects that have solid ROI. In any political climate that is going to be a solid strategy. 

We're seeing a return to the basics. Let's look at the lighting, let's look at the controls, let's take a look at how old the air handlers are and focus on investing in better and more efficient equipment for the building and not be so worried about carbon footprint. 

What do you think of Energy as a Service (EaaS) contracts? Our understanding is that these are attractive to people because it’s money up-front and allows them to have the funds necessary to do things today, rather than wait five or seven years. What’s your take? 

I see what's attractive about that kind of a contract to a hospital. Many of them are still trying to recover from the losses incurred during the pandemic. And now we go from the pandemic into this new administration and all of this uncertainty. A sizable check upfront for a capital lease on your infrastructure can seem very attractive. The devil really is in the details, and bringing in an expert to help you to negotiate that contractual agreement, especially because it is such a long term, you know, 20 to 30 years in a partnership; there are a lot of nuances to it that will affect a hospital's ability to operate well into the future. 

This is the first year of reporting for LL97. What are you hearing from building owners? 

We're talking about almost nothing else. We're really mobilizing. We’re submitting local law 97 reports for over 1000 buildings in New York City. 

We have definitely seen folks who were looking at hundreds of millions of dollars in work to decarbonize campuses, move off of fossil fuels – where those plans have now stopped. And they basically said, we're going to take a wait-and-see approach with what's happening, because when you decarbonize and you move from a fossil sourced heating system to electric, not only are you investing a tremendous amount of money in capital, but you're looking at longer-term higher operating costs. And if this decarbonization trend is not here for the long term, then building owners are taking a step back. 

I think they'd rather pay some local law 97 fines for the first couple of years rather than go and change out their entire building’s infrastructure, only to find out that this is not really something that makes a lot of sense over the long term. 

The other point is that the utilities are really not ready for buildings in a large volume to electrify, and so the utilities have filed with the Public Service Commission looking for big rate increases. 

Also, the governor has come out publicly and said those big rate increases are just not going to fly, so the utility can't manage the higher electrical load on the system. And it looks like the state is not going to be supportive of the big rate increases, so the cost of the additional infrastructure on the grid will come down to the building owner. 

What do you think might happen as we get closer to 2030, when the emissions limits are set to go down? Will building owners invest in decarbonization, or will the limits change to reflect changing priorities? 

That was written into the law, so they would have to revisit the law in order to change them. But the fact is that the grid won't be as green as they forecasted it, because they're not going to be getting all of the green megawatts they thought they would as a result of the tariffs and the leases for offshore wind. 

I'm not sure they're ever going to do anything about that at all, because I don't think anybody really wants to open up that law and re-litigate it because I don't know that it would pass again. 

*About Jennifer Kearney

Jennifer Kearney is president of sustainability at Environ Energy. She is a +20-year veteran of the energy industry with a background in healthcare, distributed energy resources, and sustainability. In 2007 she leveraged her position as the Director of Energy Programs for New York-Presbyterian Hospital into a trailblazing full-service energy management consultancy, Gotham 360. In 2021 Gotham 360 merged with Hospital Energy to create Environ Energy. In her role at Environ Energy, Jennifer focuses on strategy, growth, partnerships, and most importantly, on delivering exceptional value to clients. She brings a wealth of experience to a diverse set of building owners including Fortune 500 companies, healthcare networks, large universities, life sciences and multifamily residential.