How Do I Bring Energy Efficient Projects to My Team? Selling Value over Cost Savings.
Selling the value of investing in energy efficiency across an organization, especially in competition for precious capital, can be a real challenge. Demonstrating the potential return on investment (ROI) through long-term cost reduction, along with all of the other factors of such a project, can seem like an impossible task.
It’s important to balance:
- Quantifying the direct and indirect benefits such as less maintenance, less downtime, access to people who can fix it when it does go offline, etc.
- Reduced maintenance expenditures.
- Financial and operational impact associated with equipment downtime.
- Lifecycle assessment of current infrastructure.
In addition to the potential ROI, companies should also explore available funding options. Even if the limited available capital is allocated elsewhere, energy efficiency projects can still be executed without it. This situation begs the question where is the value in this project is it simply ROI?
Here are a few tips when considering energy efficiency upgrades from a value perspective:
Focus on Long-Term Cost Savings, Not Energy Savings
To clarify benefits of an energy efficiency initiative, focus on the financial metrics. Financial analysts may not consider how many kilowatt-hours a given project may save or the intangible benefits of having a more sustainable business. They will, however, consider how much money they can save per month, long-term expenses they can avoid, and how this investment stacks up to others when evaluating long-term ROI.
There are indirect benefits as well. For instance, replacing the heating system may be expensive but what are the costs of keeping the status quo? Existing equipment requires maintenance and upkeep costs, and in the case of a breakdown or emergency, those situations can be more costly than a planned upgrade. Moreover, finding the people and resources in a pinch can compound the expense.
Communicate the Business Benefits
Effective energy management and related efficiencies offer a variety of other far-reaching benefits that can help control costs. For example, the tools that allow for automation also help organizations collect data on energy consumption and pinpoint areas for savings. Ultimately, better visibility of energy use (and waste) is critical for companies to prioritize efficiency, control their utility expenditures, and enhance energy continuity.
Highlight the Competitive Advantage
On the matter of continuity, energy management is becoming critical for staying on top of competitors. When considering using energy intelligence software, key highlights include productivity increases, waste reduction, and growth in asset values. Learn the metrics most important to the company’s overall goals and tie the specifics with clear financial metrics and visuals.
The Costs of Inaction
Inaction can be just as costly as action – if not more so. The status quo often “feels” less expensive than change, but in an environment of rising energy prices and sustainability-minded competitors, a lack of energy management could be far more costly than an investment in new infrastructure. Without in-depth insights into your company’s energy use, you won’t be able to analyze historical performance, predict demands or accurately estimate future costs. The explosion of Big Data and enterprise-level energy management software, such as Utility Bill Management platforms, is shifting most industries towards three-, five- and even ten-year plans, and those plans are only possible with accurate cost predictions.
Alternatives for Funding Energy Efficiency Projects
Funding is still one of the most critical aspects of energy efficiency projects, and not every company can bring money upfront to finance a project. The energy savings you discuss should eventually balance out your costs, but there are also ways to minimize or even eliminate the need for upfront investment. Alternative Energy Source offers a few solutions to fund sustainability initiatives and energy efficiency upgrades, including:
- Performance Contracting: Performance contracting allows customers to fund building improvements with no upfront capital costs. Instead, the projects are supported by guaranteed energy savings over time. A budget-neutral financial structure provides customers with an avenue for payment and an immediate justification for their investment.
- Capacity Load Response: At times of an electrical grid imbalance, grid operators may need to call for additional capacity to supply the increase in customer demand. By participating in capacity programs, business customers earn financial incentives to reduce their energy usage during high-demand events. Sign up in advance to curtail electricity usage to earn revenue on a monthly or quarterly basis.
- Alternative Financing Options: Many regions offer alternative financing opportunities through local, state, or federal grants and loans to reduce or eliminate upfront costs to the consumer at standard to below-average interest rates. These provide a budget-neutral financing approach to upgrades.
Implementing new energy efficiency initiatives—even on a small scale—can initially sound overwhelming from a cost perspective; however, such an investment can translate into reductions in energy consumption and maintenance expenditures, enhanced system operations and a lower carbon footprint.