Don’t think of energy reduction as a burden, but as a great financial investment. A robust program will effectively help your bottom line by reducing operating costs.
What is the other way to increase profits? Increase revenue. Fine, but how easy is that to achieve? Let’s say a building saves $100,000/year in operating costs through energy savings (not hard to imagine: less than $10,000/month). If your average “widget” results in a 10% profit, then you’ll have to increase sales by $1,000,000/year to get the same increase in profits as reducing energy. That means investing in more advertising, sales people, etc., and then there is no guarantee that you’ll reach that $1,000,000 annual increase in sales. It is more likely you will meet an energy savings goal than a sales goal. More important, even if you succeed in increasing sales accordingly, the next year you have to do it all over again. Keep the advertisements, salespeople, etc. going. How easy is that? But the energy conservation measures automatically keep saving you energy costs. In fact, savings will increase in future years as the unit cost of energy will only rise (will your utility keep the cost per kWh, per therm, etc. the same?). So the savings likely will be $103,000 in year 2, $107,000 in year 3, etc. for some time. But each future year, you have to invest and hope to get that million-dollar increase in sales.
Yes, think of energy savings as an investment to get the best return with your business’ hard-earned money. The basics of any financial investment is to get the highest return for the lowest risk. Energy efficiency achieves this as rates of return on many projects are conservatively in the teens percent per year, and often 25%, 30% or more per year. What bank or Wall St. investment pays this, with no risk (a light bulb is lower wattage, you will save; equipment is designed to use a certain amount of energy, etc.)?
Why is energy management such a good investment?
• Rate of return exceeds most financial investments (often >25%/year), with low risk. Technologies are well understood and perform well in “real life” conditions.
• Energy costs are a growing segment. Reducing these directly increases Net Operating Income for any business.
• These technologies last longer, meaning you need to have fewer in reserve, liberating space. Reliability is improved and maintenance costs are lower, freeing up O&M staff for other projects.
• Prices for these technologies are coming down as more get into the business. Plus, utilities and governments give incentives to pay part of the cost. But don’t wait for prices to come down further. Future capital cost savings will likely be lower than the lost opportunity to save energy costs in your buildings.
• The financial community knows energy efficiency projects have a high rate of return and are reliable. So they will compete to loan you upfront money for these projects. Financing can be arranged to produce a positive cash flow at all times.
Again, think of energy savings – if done right – as an opportunity to get a great financial return with little risk. CCES has the experts to help your company maximize the benefits of energy upgrades. We handle it all from assessment to planning to execution to benefit you the most. Contact us today at 914-584-6720 or at karell@CCESworld.com.