1. Hedge Against Energy Cost Increases With
Ozone Laundry
Posted on June 9, 2012 by ama | Leave a comment
Vitality costs go up. That is unhealthy information for power customers like on-premise laundries (OPL) because
vitality is an intrinsic a part of the operation. Finding ways to reduce vitality inputs – and to manage costs relatively
than be controlled by them – is important to the continued efficiency of laundry operations.
One confirmed manner for OPL operators to take charge of their prices is to put in ozone laundry systems. These
systems can generate verifiable vitality cost reductions without any compromise to laundry outcomes. And since the
vitality savings are permanent, ozone laundering is a hedge towards uncontrollable future vitality value hikes.
To rephrase this, the energy financial savings of an ozone laundry system confer two major advantages to on-premise
laundry operators:
1. Short-time period financial savings by reductions in power consumption pay for the installation costs of the ozone
system in a surprisingly short time, usually underneath 2 years (see the case examine of the Minneapolis Hilton, below),
and linen outcomes stay of the highest quality.
2. Long-term use of ozone in the laundry effectively restores some control over vitality price increases to the OPL
operator. Ozone is the gift that keeps on giving.
Since these points depend upon energy costs, it’s important to get some factual background. The subsequent couple
sections outline the developments of natural fuel costs in the United States.
On-Premise Laundries Expertise Rising Gas Costs
The very latest pattern has been for rising natural fuel spot costs in almost all markets in the decrease 48. As always,
there is regional variation and temporal variation across the tendencies, however most laundry operators who are on
variable price power contracts have skilled uncontrolled cost will increase in the course of the early summer season of
2010. In mid-June 2010, gas prices have been about $.60 higher per MMBtu than the previous June 2009, with a price
of $4.861 on June 25, 2010 (in line with NYMEX information).
Would a set-worth contract or direct futures hedge repair the problem? In all probability not. Investing in futures
contracts includes advanced risks that should not be a part of the monetary picture of most OPLs. The more frequent
tactic, negotiating a hard and fast-value contract, may assist in the medium time period, however the real difficulty is
that power costs have been in a usually increasing pattern for the reason that 1970′s, so fixing a price solely postpones
the increases by a brief time.
Natural Gasoline Prices Have Risen Long-Time period
It is a commonplace to hear that power costs are high and climbing, however anyone paying consideration knows that
these prices are market-pushed and that they go down in addition to up. Nonetheless, it is the balance of supply and
demand over the lengthy haul that’s the level for on-premise laundry. What is the historical development of pure
gasoline costs?
The overall development for U.S. pure gas prices since 1922 has been up, as decided by the U.S. Energy Data
Administration. The overall development has turned up sharply since the first oil value shock in the early 1970′s, with a
long secure (but larger priced) plateau in the late 1980′s and 1990′s.
But since about 2000, prices have been each quickly increasing and volatile. The brief-time period energy shopper has
been whipsawed by massive movements both up and down, the most recent being the large run up in costs within the
early elements of the recent recession adopted by a collapse in costs in 2009. As proven within the subsequent section,
the value developments have reverted to a gentle upward climb, nevertheless it’s good to maintain this volatility in
mind.
Where to next: Pure Fuel Future Price Projections
As authorities studies are likely to do, the projected prices of natural gas are smoothed out by assumptions. The
volatility observed prior to now decade offers method to a quieter although typically rising value trend, as proven in the
following data. This data exhibits projected pure gas costs in constant 2008 dollars in keeping with the U.S. Energy
Information Administration’s Annual Energy Outlook.
These entries show the year, Henry Hub Spot Price and closing delivered price in 2008 dollars:
2008 $8.86 $12.29
2009 $3.forty nine $9.forty five
2010 $4.50 $9.19
2011 $5.68 $10.forty four
2012 $6.17 $10.ninety six

2. 2013 $6.thirteen $10.99
2014 $6.09 $11.11
2015 $6.27 $11.forty six
2020 $6.64 $13.02
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The Henry Hub Spot Value is per million Btu U.S. The delivered business price is per a thousand cubic feet. Source is
the US Power Data Administration.
In other phrases, the Spot Worth is projected to extend about 39% between 2010 and 2015, and the industrial value per
a thousand cubic toes about 25%. These numbers replicate current assumptions (summer season 2010) that predict
solely slowly growing economic demand, which implies power supply can more simply sustain, thereby moderating
prices. Nonetheless, though these are U.S. value projections, you will need to remember that these costs are straight
affected by worldwide demand, not simply U.S. demand. In keeping with the gradual progress expectation, the
commercial delivered value is projected to extend considerably extra slowly than the overall market price.
The Impact of Volatility on Pure Fuel Costs
The problem with this rosy state of affairs is the volatility natural gasoline markets have skilled the final 10 years.
Regardless that general economic conditions recommend a average increase in prices (if a 25% improve in 5 years is
“moderate”), apparent circumstances on the world stage clearly present a chance of much sharper discontinuities.
History, as anybody who buys shares or funds is aware of, is often used as a predictor of the longer term, however it’s
typically wrong due to surprising events, also known as “shocks.” When these “shock” occasions happen, the pricing
system undergoes a reset because something concerning the underlying expectations has changed. When underlying
expectations are dislodged, individuals perceive increased risk (they’re most likely proper) and prices go up.
Think back to the natural gasoline worth volatility shown within the years from 2000 forward. Giant will increase
adopted by large decreases, however with a strongly upward trend. The shocks that trigger the volatility create
uncertainty, particularly after they touch so instantly on power production because the Iraq War, Katrina and now the
Deepwater Horizon blowout have done.
Will the vitality market expertise another shock? No one can know for sure. However the risks of power worth increases
are very real, from the moderate increases projected by the USEA to the probably a lot larger increases due to the next
shock.
It would pay the sensible ozone laundry operator to hedge in opposition to them.
Reduced Energy Use Pays for Ozone Laundry Startup Costs
Here is the easy syllogism of ozone laundry:
Power conservation is the most affordable strategy to scale back energy bills.
Ozone Laundry conserves energy.
Subsequently, Ozone Laundry is an affordable option to scale back vitality bills.
Yes, energy conservation comes with an investment worth tag. Ozone laundry installations cost money. But a correctly
designed ozone laundry system using top quality elements and correct wash formulation can ship vitality savings large
sufficient to pay for the system in a very quick time, with the long-time period power financial savings accruing to the
underside line.
Check out the verified expertise of the Hilton Resort in Minneapolis, Minnesota. The National Power Providers Firm
(NESC) installed an ozone laundry system in the Hilton’s on-premise laundry that demonstrated the vitality saving
potential of the method in a managed, verified implementation reported by the non-revenue Vitality Solutions Heart of
Washington DC. Obtain the examine abstract for details (the highest article within the listing at this vacation spot).
In the Minneapolis mission, NESC measured the key variables, including hot water use, vitality consumption, and a few
chemical consumption, as well as the quality of the laundered products. Here is some key factors about that four-month
experiment:
* Sizzling water use per load of laundry dropped from 198 gallons to 89 gallons, a fifty five% savings.
* Re-wash necessities were halved, with overall good quality linen outcomes.
* The hotel’s annual carbon footprint was decreased by 209,437 pounds.
* The laundry system penciled out to paying for itself in 13.5 months.
* The ROI was 89%.
These verifiable energy financial savings helped the Minneapolis Hilton qualify for the Xcel Vitality rebate program.
Lock in Decrease Rates by Utilizing Much less Gasoline
The bottom line is that on-premise laundry operators can management energy prices, now and in the future, by installing
ozone laundry systems. These techniques help OPL operators lock in lower energy costs simply by dramatically
reducing the amount of power needed to provide fine quality linen outcomes within the wash.
This post is written by Samuel Jones 45.