Several surveys show that one of the biggest factors holding back companies from investing in energy upgrades is the absence of incentive programs from their utility or government. It is not even the amount of money that is important, but that it is there and, therefore, is a tacit approval of the program. The company gets “credit” for working under the credit program, plus the money helps the bottom line and improves the ROI.

Many states and utilities have incentive programs to improve energy efficiency, upgrade equipment, and/or switch to cleaner or renewable fuels. While it may seem counter-intuitive to offer such incentives (why would a utility discourage energy usage?), there are many good reasons for this, including ensuring that peak summer electric demand is met reliably (without brownouts) and reduced new infrastructure needs. These programs also help states meet Renewable Portfolio Standards. Most states want to lessen big public infrastructure matters, such as power lines and right-of-ways, as well.

Well, if the government or a public utility is giving out money, tax credits, etc., then it has to be careful to ensure that the money is spent appropriately to incentivize real energy reductions. They put the onus on the facility (and its consultant) to demonstrate that the proposed technology or strategy will actually achieve what is being claimed. These entities want to calculate total amount of energy saved from all projects it incentivizes.

This is good. But these requirements can be overwhelming. For some programs, it is not enough to say that a strategy will reduce electricity use by, say, 5%, based on engineering experience. One must do calculations to demonstrate it all. Assumptions are not allowed or highly discouraged. Some programs require using energy models to demonstrate reductions. These are hypothetical, of course (it is software), but somehow thought to add accuracy. The problem is that running models involving complex data entry, researching published reduction factors, and performing complex calculations cost time and money. The applicant must pay the consulting engineer for extra time to do all this. Yet, this diminishes the ultimate ROI of the incentive. I was involved in a project where incentives were based on running energy models to calculate energy usage reductions. While their strategies were excellent and likely to meet the required levels, I could not guarantee the results until I ran the model. I told the owner that he may have to pay me more for my time than he would receive in incentives. I did not know. He chose to move forward anyway, and fortunately qualified fully for incentives and came out ahead. But be careful and research the incentive program for what might you be entitled to and how much extra you must pay your consulting engineers to meet the requirements of the incentives. It may not be worth it. Do your homework.

CCES has the expertise to help you evaluate, qualify for, and apply to a wide variety of energy incentive programs to determine maximum ROI for your energy cost-saving project. Contact us today at 914-584-6720 or at karell@CCESworld.com.