Host Dean Stanberry sits down with Gabe Phillips to discuss how facility managers can navigate today's increasingly complex energy landscape. They explore energy procurement, market volatility, resilience planning, efficiency strategies and emerging technologies that can help organizations reduce costs and make more informed energy decisions.
In this episode of Connected FM, host Dean Stanberry, former Chair on IFMA's Global Board of Directors, welcomes Gabe Phillips, CEO of Catalyst Power, for a practical conversation about energy management in an increasingly disrupted market.
Gabe explains how facility managers can move beyond treating energy as a fixed operating expense and instead take a more strategic approach to procurement, efficiency and resilience planning. The discussion covers energy contracts, market volatility, demand management, on-site generation and how organizations can evaluate opportunities such as solar, combined heat and power and battery storage.
The conversation also highlights the importance of understanding energy baselines, gathering operational data and conducting energy audits before making major investments. Gabe shares why facility managers should focus on building a strong data foundation, leveraging expert advice and carefully evaluating the financial realities behind emerging energy technologies.
This episode is sponsored by SiteMap®, powered by GPRS. Learn more at sitemap.com/ifma
Timestamps:
Gabe Phillips: [00:00:00] E-examining your baseline will tell you of some interesting things.
Like looking at your own data about what you consume and when you consume it, assuming you have interval data available, is gonna be very telling as a starting point. So also will be getting an energy efficiency audit. Like I said before, get all the free advice possible.
Host: Welcome to Connected FM, a podcast connecting you to the latest insights, tools, and resources to help you succeed in facility management. This podcast is brought to you by IFMA, the leading professional association for facility managers. If you are ready to grow your network and advance in your career, go to ifma.org to get started.
In today's episode, host Dean Stanberry, a former chair of IFMA's Global Board of Directors, sits down with Gabe Phillips, the CEO of Catalyst Power Holdings, to explore the evolving energy landscape, focusing on how facility managers can adapt [00:01:00] to market disruptions, optimize energy procurement, and leverage new technologies like on-site generation and storage to reduce costs and increase resilience.
Now, let's get into it
Dean Stanberry: Hi, this is Dean Stanberry. I'm a past chair of IFMA's global board of directors, and I want to welcome you today so just to give a little background here, not that long ago, most organizations purchased energy from public utility, a regulated monopoly authorized to build infrastructure and deliver energy services in exchange for a fixed rate of return.
For facility managers, energy was often treated as a necessary operating expense. You used power, you received the bill, you paid it, and then you moved on to your next operating problem. Fast-forward to today, and the generation, transmission, and distribution model has been completely disrupted.
What used to be a one-way pipe for delivering [00:02:00] energy is becoming a two-way operating network. Customers can now generate power on-site, use what they need, and in some cases sell the excess capacity back to the grid So for facility managers, this creates both an opportunity and a risk.
Wholesale market volatility, aging grid infrastructure and demand growth, and rapid advances in on-site generation technology mean energy can no longer be treated as something to set and forget. Our goal today is to make that practical. We'll focus on two levels of action. What facility teams can examine immediately, and how they can build long-term strategy that actually fits the building portfolio.
What should facility managers look at first? What questions should they ask? And how should they separate a promising energy concept from something that is actually feasible? So joining me today, we have [00:03:00] Gabe Phillips, the founder and chief executive officer of Catalyst Power. Gabe brings a deep commercial energy background to this discussion.
So Gabe, why don't you give a little bit of background on yourself and Catalyst?
Gabe Phillips: Thanks, Dean. Really appreciate you taking the time with me today. So, myself I studied mechanical engineering as an undergrad and a little bit of electrical, so I'm, I know enough there to be dangerous. I never did it as a professional in my life.
But mostly I'm a, I'm a recovering electricity trader. Traded the commodity, the futures contracts, just like oil or like any other commodity that trades out there. And so the dynamics of the power markets were, from a wholesale perspective, were always very interesting to me.
I started an outsourced energy management company in two thousand and ten called GP Energy Management, and there we used that market dynamic to define our customers' risks and then go to the market and shut them down. I sold that business and ultimately exited in 2019 to focus on a gap in the market that I had seen in that seat where I was providing other principal participants with services. You know, the upstream side of the [00:04:00] market, people who make electricity and other commodities, environmental attributes, and the downstream side of the market, those who consume it or who sell it to consumers, were really gravitating towards the bookends of the markets. So the more, more sophisticated the customer the MUSH sector or the large industrial consumers got a tremendous amount of attention from both of those upstream, downstream, you know, parts of the marketplace. And everybody in the middle, any independent business owner just got totally ignored.
If you were a factory owner in upstate New York, you had more options for hosted equipment that somebody else would own and finance and retail power and gas supply than you did at your business. And I thought that that was backwards, so I wanted to focus on that market gap. And then also had figured that that was a tremendous opportunity to combine these different sources of power supply, whether it's from a piece of equipment that we own and operate on site or from the market, to make the customer's experience more seamless.
And so that's what Catalyst Power does. We are an energy supplier.
Dean Stanberry: Very good. Well, you know, this is an interesting time, [00:05:00] but it's also not unprecedented.
You know, we saw the deregulation of the airline industry. And I lived through the-- I worked for, in the telecom industry and lived through the, deregulation of the telecommunications. And now we're seeing that same scenario play out with energy So, let's start w- maybe with the energy baselines.
You know, many facility teams still treat energy as a fixed cost they cannot meaningfully control. What are the most common sources of avoidable energy costs in commercial buildings, and what should a facility management team look at first?
Gabe Phillips: Assuming the facilities management team is also involved in their market-based energy procurement, then, you know, you would start there.
That tends to be the area where the most lost opportunity exists for those who are both financially responsible for, you know, their energy procurement for what's consumed [00:06:00] within the building, whether it be tenant spaces or their for electricity and for gas. That draws from the, the suite of energy suppliers that exist in each state and of various contract structures that go from month to month to, you know, five years You know, we typically advise customers to do something. Like, g- go contract something. Get, get the volatility of the market off of your plate and onto your supplier's plate. 'Cause when you enter into a fixed rate electricity or gas contract, that's essentially what you're doing.
You're transferring the market-based risk from yourself To that supplier. Which is a hedge. You might overpay, you might underpay, but none of us have a crystal ball, and Lord knows if I did, I wouldn't be talking to you. No offense, Dean, I'd be on an island somewhere using that crystal ball to trade electricity or something else.
So to predict whether or not you're entering into a contract that's over or undervalued is not a good exercise for anybody, let alone a facilities manager, to focus their time and effort on. They should just put a program together and like, you know, a lot of the investing community advises retail investors, [00:07:00] retail electricity and gas consumers should just simply dollar cost average.
They should have a regular program where every two years they do a two-year contract, or every three years they do a three-year contract, or some laddering approach where they do a three-year contract for part of their needs and a two-year contract for another part of it. Just something that's regular and repeatable, so that they're taking all of that volatility that the market produces, that they are exposed to at the end of the day, and transferring that to someone else.
The next thing they really need to do is be vigilant about the terms of those contracts. They, they should understand them. They should try to create an apples to apples comparison across various suppliers, because at the end of the day, what's written on the page is what survives us all, unfortunately in business.
And if their supplier told them one thing but the contract functions differently, they need to be aware of that. So getting good advice is important. Taking all the free advice that's available to you for a variety of perspectives here is also some good, you know, a, a good thing for, for facilities managers to, to try to leverage, although it [00:08:00] can get a little cacophonous, a little noisy.
But making sure you know when your contract actually ends so that you end up on a holdover rate. Now the holdover rates are typically at a higher price. That's ubiquitous throughout the retail s- energy supply industry because the retail supplier has a one-month commitment from you. It's month to month.
That's it. So they need to apply a higher margin to that in order to recoup the cost of servicing that contract if they only know they have it for one month at a time. So it would be wise for the end use customer to ensure that they're keep-- staying on top of the termination dates of their regular retail supply contracts.
Dean Stanberry: Any facility managers out there that have leases, they understand holdover rates. You know, I've been involved with that before, so, so that concept is uh, transferable. So once the facility has addressed sort of the, the procurement basics- how should the operators decide what to tackle next?
You know, is it efficiency, demand flexibility, on-site generation storage, cogen or resilience planning?
Gabe Phillips: The [00:09:00] resilience planning is very situational because what's happening bu- you know, inside of the building really matters with respect to whether investing in resilience is gonna be a wise decision or not.
If it's multifamily housing, you have one set of criteria that will drive your decision-making around resilience. You don't necessarily have to ensure continuous power to every apartment, but you certainly have to ensure emergency lighting and elevators are working and maybe a sump pump. It, you know, depends on the, the, the circumstance of that building, where they are, where they're located.
So that could change the investment. It could also change whether you consider taking that investment onto your own CapEx budget or outsourcing that and turning that CapEx into OpEx, and paying a monthly charge for somebody else to own the backup generator and for someone else to be responsible for its operations.
If you have life-saving operations happening within your four walls, like at a hospital or a nursing home or senior living, you [00:10:00] know, what you need to cover with that backup generator, that resilience generator is a completely different set of criteria. You need probably the entirety of your building to be functional.
Certainly, at a minimum, the HVAC systems and much more than just emergency lighting and one elevator bank. And so there you actually have to consider on-site fuel storage and, you know, again, o-owning that risk that you're, that you have backup power really depends on what's happening within the building.
I spent a lot of time after Sandy working with New Jersey and Long Island and sort of Lower Manhattan grocery stores, and the conversation around backup generation came up every time we discussed this, and they would say, "Well, my insurance premium is cheaper than buying the backup generator, so I'll just pay for the business interruption insurance instead."
So all the lost produce, all the business interrup- of operations, all of that was covered by their insurance policies at that time. That dynamic has shifted around as insurance rates have moved, which, Dean, I'm sure you're close to as well. And, and at that time, the decision was it wasn't worth it to buy the generator and pay [00:11:00] for its maintenance and ensure that it's gonna be operational when I need it if my insurance policy just covers my exposure.
I thought that was pretty interesting. So resilience is the one thing that you mentioned, but again, that- So- ... you know, bringing up the continuous operations is a whole other set of calculus
Dean Stanberry: Kind of continuing on that, that theme just a bit the, the customers that you're working with already, you know, what seems to be sort of the primary drivers?
You know, cost reduction, price stability, resilience or emission controls? Where does that fall out?
Gabe Phillips: It always appears to be cost reduction is the key driver. So coin-operated large participant.
Dean Stanberry: What a surprise.
Gabe Phillips: Yeah. And even if they may have publicly stated environmental goals or sustainability requirements they may even be an international business that is, you know, exposed to other regimes for sustainability obligations, they never lead with that.
They don't place monetary value on that unless there's an actual pen-penalty, like in [00:12:00] New York City, Local Law 97, for instance. But then that comes back down to money again. So it's, you know, cost avoidance, whether it's a penalty or it's ongoing operational cost avoidance tends to be a leading factor in making a decision for something that has to change in the built environment.
Dean Stanberry: All right. Well, let's shift gears a little bit. So there's a lot of different technologies in play here. So you got cogeneration, you got solar and battery storage. They all sound like large capital projects What does an implementation actually look like for, like, a mid-sized facility, and what should those facility managers understand before assuming a project is practical for their building?
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Gabe Phillips: Baselining is always the first step. So understanding their baseline of, of their avoidable costs. That, that is still overly simplified by solution providers out there. Certainly a lot of folks who sell equipment, a solar installation or a on-site combined heat and power generator or, you know, VFDs for your HVAC equipment or something like that, they're...
they usually use a very simplistic approach to avoided cost calculations. They take what you pay and divide it by your kilowatt hours of consumption. I hope at this point most facility managers know that that's not sound that's not good analysis. There are [00:14:00] charges that are per kilowatt hour that you can avoid very directly with every kilowatt hour of reduced consumption from your utility, but there are plenty of charges that are per kilowatt base.
They're demand-related charges, and they might be the highest peak demand within a given month, and that's usually what most utilities use to set the demand charges associated with delivery and transmission on their side of the bill. But then there's other demand-based charges, depending on the area, depending on the, the ISO, the that regional grid operator where the, the facility is, that might be set annually.
So what you... You know, so you might hear of, you know, operating schemes where you can reduce your consumption during, you know, hours that are likely to set one of those coincident peaks. And there are some services out there that you could that you could subscribe to if your facility has the ability to change its consumption on an hourly basis or on a couple of hour chunk basis, like maybe day ahead or morning for same day.
You know, maybe you could drop a shift or you can change, you know, a set point [00:15:00] on on thermostats or something to reduce that consumption. You could impact that year's capacity tag, which shows up in next year's planning year, typically June to May But if you don't have a contract with your retail supplier where the reduction in that cost is passed through to you, you won't see that benefit until the, the next time you go out to bid
Dean Stanberry: That demonstrate that there's a lot of levers on that supply side that that come into play depending on where you are. But also for each facility, there's a lot of levers depending on what industry segment you're in and what that building does, you know, what can it do?
So for a facility manager that's listening today and wants to take some meaningful steps, what information should they be gathering and what do they bring into that first conversation in order to start talking about, you know, what levers they can pull on both sides?
Gabe Phillips: Yeah. E-examining your baseline will tell you of some interesting things.
Like looking at, you know, your own data about what you consume [00:16:00] and when you consume it, assuming you have interval data available, is gonna be very telling as a starting point. So also will be getting an energy efficiency audit. Like I said before, get all the free advice possible. That wasn't just on the market-based energy supply side, it's also on what c- can you do to affect your consumption side of the equation for facilities managers. There's a million vendors that will come in and do some form of audit or site walk for the suitability of different measures.
Some measures are really easy to deploy, like LED lighting. Pretty much everyone who could do that at this point has done it because the payback was short, and it didn't matter what the unique aspect of your building's operations were, that was always going to be a quick payback from an efficiency standpoint.
But it doesn't always make sense for you to change aspects of the building envelope. What if you've got an apartment building or it's a co-op, or you've got, you know, 250 people that you have to get on the same page to, you know, change their single pane windows to triple pane windows? Like, that's not gonna necessarily [00:17:00] be the easy And there are cert- there are other things that you can do that work in almost all scenarios. So certainly examining that with an audit partner or a vendor partner to come in and gathering up all that information is the, is step zero. Next what you do is then, you know, look at paybacks And if you know what your avoided costs are, and now you know what different measures you could take on site are to avoid those costs, you can figure out your payback.
It's always good to do that on your own, but you should have whoever else is pitching you do it for you, too. And you should question each component of it. Fortunately or unfortunately, there's incentives available for a lot of these measures, and those incentives are a little bit complicated and kind of confusing.
So pushing all of the risk associated with incentives, compliance with those incentives, and simply just doing the paperwork to go get them onto your vendor I think is a wise decision for any facilities manager to make.
Dean Stanberry: You know, on a technology perspective, we've, we've had demand [00:18:00] response for a while and we have, you know, some systems, building systems that can participate in that.
But l-looking from your perspective, what's like some of the most interesting developments, new technologies, new options coming out that kinda get you excited? Like, what's, what should facility managers be looking at that's new and different than just the typical stuff they've seen for the last 10 years?
Gabe Phillips: I wanna address the new thing, but you said demand response. It's just triggering for me. I have to bring this up. That, that-- If you have to invest in a piece of equipment or a BMS in order to be able to participate, and there's a cost associated with you participating in demand response, it, it's a merchant revenue stream.
You're beholden to rates that are set, you know, annually or maybe monthly, depending on the market regime that you're participating in, and you don't know what those are upfront. And so if you made a CapEx investment and you're trying to calculate what your payback would be, like [00:19:00] we talked about before, you're gonna really struggle in a merchant environment, which again, capacity markets are what demand response is paid based upon, unless it's a utility tariff-based demand response program, in which case it may be more stable but shorter term in nature and you give a lot of that control up to the utility, you lose it.
That becomes, again, a, a different payback calculation I think is a lot, a lot more complicated. In terms of like new equipment, honestly, the ability to gather information is really, has been the, the big technological shift here. You know, IoT-enabled sensors and the fact that you could put together your own monitoring platform with a Raspberry Pi and a, you know, and a data logger has, has allowed anybody who, you know, r- or again, you can get it off the shelf too has allowed, you know, anybody who is interested to really see exactly what's happening at multiple points throughout the mechanical system from end to end.
So you can see, you know, you know, heat waste throughout, you know, [00:20:00] the boiler room. You can see, you know, thermal waste. You can see you know, bad power factors. You can see inrush currents. You can see inefficient, you know, lo-loading of equipment. You can see so many things there that you couldn't see 25 years ago, and certainly longer.
And I think always, like, gathering information, getting free advice, like doing your baselining, deploying sensors so that you know what's happening in your building. You know, does that guy keep messing with the thermostat over there in that office, and that's what's screwing up my set point over here?
Like, th- those are all really valuable and important things for you to start with. And that happens to, you know, to also answer your question about new technology. The rest of this stuff I'm talking about's not new. Like, solar's been around forever and ever and ever. That, there's nothing new about that.
Maybe the newest thing are batteries, but frankly I'm still struggling with the economics there. And, you know, combined heat and power that's generally a gas-fired reciprocating engine that operates in or adjacent to your building and supplies power behind the meter and thermal load.
You know, [00:21:00] thermal, you know, energy somehow that you tie into your thermal loads throughout the building, and that stuff's been around for a really long time. But, you know, when you start getting into the, the engine side of it, the, the shift has been minor. What's, what's... What we benefit from is software. You know- The ability to access this information remotely with a little cradle point and a SIM card and, you know, just getting the, those basic ducks in a row is really what's been beneficial I think for us as an asset owner and from, you know, for our customers in, in monitoring their assets if they've got more, more than one on site and seeing how they all work together.
Now, okay, we can't ignore storage. Sorry, I, I, I know I glossed over it. I suppose that being, you know, the newest technology that people ask about frequently I, I can't ignore it. But in a middle market-sized commercial and industrial application depending on the location, I have not found the economics to result in a, an attractive payback.
You are still subjected to federal incentives there. You need an investment tax credit generally [00:22:00] for those to pencil, and even then, it, it still needs some more juice there for that to work from an economics perspective.
So you have to consider, like, how long you charge over and then am I giving the control of this battery up to somebody else, like a local utility, in order to get access to an incentive program? In which case, its use as backup generation or a UPS or any form of resiliency is gone. Yeah, I can never guarantee that it'll be in a state of charge when I need it.
It's only gonna be in a state of charge when they need And so the economics on batteries are really challenging, and the smaller the installation, the more challenging that they get.
Dean Stanberry: Well, I think we're about at time here, so just to kind of, wrap that up based on what you described, you know, the, the markets that we have out there right now is kinda like the Wild Wild West.
It, it varies where you are, and if you're a multi geographic organization where you have properties all over the place, you're not gonna find the same deal in New Jersey as you do Southern [00:23:00] California. But what I did hear, and what does everybody need, and that is you need to bring evidence.
You need to get your data together. You need to have a means of measuring what you have and and storing that data consistently, and then being able to tell if you pull a lever, did it make a difference, you know, positive or negative? So, we see this across the industry. Data is the, the new gold, right?
It's something that we have struggled with in commercial real estate and, and have gotta get better at it. So with that I think that's about all of our time. Gabe, thank you for joining me today and sharing everything that you know about this. This is new for many people who live in areas where that market availability is still relatively new.
And so I would encourage them to seek out someone to learn from and, you know, rather than trying to do it on [00:24:00] your own because it's it is very complicated, and you don't wanna make a mistake on this scale with a long-term contract.
Gabe Phillips: I agree, Dean. Thank you so much for having me today. This was great.
Dean Stanberry: All right. Well, thank you very much.
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