What's Your Energy Plan?
Mar 01, 2010
Here are a few ideas that many businesses have leveraged to improve their bottom lines
There’s no question that energy is a hot topic. From managing costs, to efficiency, to renewables, energy topics dominate today’s headlines. Perhaps less well-publicized are the rewards well-thought-out energy investments can yield in the form of federal, state, and local grants, renewable energy certificates (RECs), and utility incentives.
The American Recovery and Reinvestment Act of 2009, the Energy Policy Act of 2005, and state mandates for minimum renewable energy production have combined to encourage unprecedented investment in renewable or energy-efficient energy products and projects. With so many different incentives and programs available, many individuals and businesses are left wondering what’s available and how they can take advantage of these opportunities.
Here’s a working example reflecting how we’ve helped a number of our clients take advantage of the federal, state, and utility incentives and programs currently available. We’re hoping it will serve as inspiration for other businesses to begin to understand and manage their energy costs.
A Working Example
Meet ABC Company (ABC), a fictional, Ohio-based organization operating a 200,000-square-foot manufacturing facility. ABC realizes that in today’s ever-changing business landscape, it must be proactive in planning its energy usage to remain profitable and competitive in the face of consistently rising energy costs. Energy usage is one business-related cost that ABC can control and, with proper planning, even use to its advantage. How? Using ABC as an example, we’ll walk you through a few scenarios that many companies can consider to be sure that they’re maximizing available benefits.
Examine Existing Energy Needs — First, ABC considers how it manages existing energy needs with an eye toward taking advantage of opportunities that the utility company doesn’t necessarily advertise. Part and parcel of any organization’s energy usage profile is an energy audit, as the audit provides a baseline from which improvements and savings may be measured. Thanks to ABC’s energy audit, the company is able to save $1,000 per month by making a few operational changes and taking advantage of the deregulated utility market in which it operates.
Address Energy Conservation — Next, ABC addresses energy conservation. As the energy audit identifies elements that can be changed to allow ABC to further reduce its overall energy usage, this reduction “supercharges” the benefits that are realized in the energy management step. For example, if ABC replaced the 200 metal halide lights that it currently had in its manufacturing facility with high bay fluorescent lighting, the company could reduce its lighting costs by 50 percent. This 50 percent reduction equates to an additional savings of $5,000 per month.
Although the costs of the lights were $80,000, the local utility provided a rebate that offset $30,000 of the costs. Additionally, because of the reduction in energy usage that resulted from the installation of the lighting system, ABC was able to secure tax depreciation benefits the same year the lights were installed. ABC recovered the entire cost of the installation of the new lighting system in fewer than 10 months. And, each month after the installation, ABC realized a monthly savings of $6,000, money that went straight to ABC’s bottom line.
Evaluate Renewable Energy Technologies — Since ABC realized substantial savings from this energy conservation project, its leaders decided to take advantage of some of the short-term opportunities to add renewable energy technologies to its energy management plan. ABC was able to take advantage of its large amount of unused roof space by installing a 43kw solar array. Since ABC applied for and was awarded a $150,000 grant from the state of Ohio, half of the $300,000 cost of the array is covered. And, because of careful planning and the timing of the installation (before the end of 2010), ABC is eligible for a federal grant of $90,000. Within 60 days of the completion of the solar project, ABC can expect to receive $240,000 toward the total cost of $300,000 to install the system.
Due to recently adopted renewable portfolio standards in Ohio, ABC is also able to sell one year of its RECs (renewable energy certificates), the intangible energy attributes it has created by using a renewable source to generate the electricity, to its local utility for $10,000. Just after the installation of the solar array, ABC has recovered 83 percent of its cost in the solar system. The solar array is expected to generate $5,000 worth of electricity each year and also help lower its peak demand cost in the summer, further reducing ABC’s utility cost.
As you can see, there’s a wide array of federal, state, local, and utility programs available to help businesses reduce energy usage and cost. The key is to develop a strategy around your business’s energy needs. Once established, it’s essential to understand what’s available in incentives and programs so that the cost of your energy plan is subsidized. Only then can you start applying the savings to your bottom line.