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How to Cut Corporate Energy Costs

Solar Panels on a Building

Most companies would like to cut their energy bills, given the fact that energy accounts for roughly 19% of office building expenses. A large portion of that spending comes from lighting, heating and cooling—uses which are highly variable yet also controllable through monitoring, automated controls, replacing old equipment with energy-efficient  equipment and educating employees on how to be frugal by shutting down their computers at the end of each workday.

For large companies with facilities spread across the country and even the world, however, it can be an overwhelming task to understand energy consumption and where savings are most easily derived.  Doing nothing to reduce energy costs is also not viable.

Finance professionals who begin to take a more strategic look at energy consumption, however, can over time gain the domain expertise needed to significantly increase efficiencies and lower corporate spending every year.  Here are some ways to get started:

1. Investigate late fees.  Utility bills with late fees are a fairly common oversight in large companies and can add up fast. In some cases, a company will pay the bill but never pay the late fee, resulting in rolling late fees over years. It’s worth running reports on late fees, clearing them all up and determining what can prevent them from happening again. There are times when the utility provider is not invoicing with enough lead time, making it easy for accounting to pay a bill late.

2. Be careful about tariff switching. There’s a common belief that working with providers to change tariffs can lower bills—but this is rarely true. A large company may only have a couple of plan choices to begin with, and by switching, you may expose your company to unpleasant gotchas, such as tariffs that are lower during some hours but double during peak hours. A business can counteract those gotchas by controlling temperatures and lighting during peak hours and still benefit from the lower tariffs in non-peak times, but it’s pretty hard to do the same with thousands of employees and several if not dozens of buildings. However, it is worth looking at tariffs locally and regionally; if there is too much discrepancy in tariffs between nearby facilities, you’ve either got a building issue or a provider issue to investigate.

3. Get an inventory of facilities. If you are able to run baselines of your buildings regarding energy costs per square footage, and then analyze those metrics against that building’s usage (aka., the number of employees and types of equipment consuming power), you can start making adjustments at the facility level. Without this analysis, buying LED lights or making upgrades to HVAC equipment among other improvements could be a waste of money. Get clear on which facilities need the most help, and then determine how and if they can be addressed cost-effectively. Such analysis can also shed light into regions that are cheapest from an energy standpoint, for when a company is expanding or relocating facilities.

4. Look at weather patterns. Weather plays a significant part in building energy costs, but only if the facility is weather sensitive. The construction of a building according to LEED certification requirements for environmentally-sound design can greatly reduce the impact of external heat or cold on inside temperatures.  Therefore, if you are able to determine through utility bills that a building’s energy consumption does not fluctuate widely with temperature change, you can make smarter decisions. For instance, a building that is not weather sensitive would not be the ideal candidate for an HVAC upgrade.

5. Buy energy ahead of time. In deregulated markets, such as California, Texas, Georgia and New York, you can play the stock market in a way through energy procurement. These market-based contracts allow a company to lock into a rate for a period of time, thereby protecting their business from energy pricing impacts of natural disasters, such as Hurricane Katrina, or global events that may cause prices to go up. Of course, not all markets are deregulated and in some areas, there’s only one supplier, limiting your choice and ability to play the market.

6. Use common sense.  Many offices overcool or overheat. By lowering the temperature by just one degree in the winter and raising it by one degree in the summer, you can make a noticeable impact on your bills. Lighting is another area to consider. First of all, LED lighting is much more energy efficient. Secondly, encourage employees to turn off lights in conference rooms and other common areas when not in use. Upon leaving for the day, ask people to turn out the lights in their own offices. These are just a few ideas, but the more you can educate employees on energy-saving practices, the more you will save. Getting an energy audit completed every year can help ensure you’ve done all that you can: most utility companies will provide one at no charge.

When it comes to energy consumption, the more you know, the more you can save. Even if you’re starting from the smallest base of knowledge, don’t let it dissuade your efforts to think big. Through targeted analysis of top areas of spending, a company can get it on the path quickly to smarter and more strategic decisions on energy management throughout all of its locations.

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