Is efficiency important to you? For many, the answer is yes.
Most companies over the past several decades have continuously pushed toward greater efficiency in operations, from automating processes to utilizing customizable software to manage clients, transactions or projects. But, how important to you is energy efficiency?
Concerns regarding commercial and industrial energy usage have only risen in importance in the public eye in the past two decades, and conversations around the topic can distract from the actual meaning of energy efficiency.
When considering their energy use, some think that the focus is strictly on sustainability, with corresponding high costs and disruption to current systems. These associations, however, draw attention away from the operational and financial benefits of efficiency projects.
The grocery-store sector offers Connecticut businesses a model from which to understand the value of efficiency.
Traditionally operating with thin margins, this industry reflects the gains available from efficiency measures: in terms of sustainability, operational improvements and financial benefits.
Increased energy efficiency and its associated operational cost savings can lower most commercial/industrial utility bills by 15% to 30% or more.
A key aspect of viable and significant cost savings is the design of the efficiency project. If a company pursues the cheapest efficiency solutions available, the result does not lead to long-term, highest-possible savings.
In Connecticut specifically, pursuing the cheapest option frankly doesn’t make sense because of how much a project cost can be covered by utility incentives.
Additionally, projects yielding the highest efficiency usually involve multiple savings measures, e.g. lighting and refrigeration. When a project encompasses several energy-efficiency measures, incentives increase significantly, as do energy and cost savings.
The state of Connecticut offers great opportunities for energy-efficiency projects due to the sizable incentives provided by utility companies — some of the best across the country. These programs provide funding for energy-efficiency projects, sometimes covering up to 75% of the project cost.
In Connecticut, the grocery/supermarket industry has a lot of success with efficiency projects and provides a model for other businesses. Combining high annual savings projects with a 25% out-of-pocket cost, energy projects consistently deliver a one-year (or better) payback – greater than 100% ROI – while improving store aesthetics and the overall shopping experience.
The grocery industry provides a strong case study for discussions of energy efficiency due to its historically low margins. This means that any decrease in overhead costs can have large, visible impacts on overall profit-cost analysis. In fact, the online trade publication Supermarket News reports that “every dollar saved in electricity costs yields the same profit impact as boosting sales by $18.”
I recently developed a project with a leading grocery chain, targeting five Connecticut locations and encompassing three separate energy-savings measures: lighting, HVAC and refrigeration.
The combined savings resulted in over 5 million kilowatt-hours and 47,000 therms saved annually. The client will see a $2 million decrease in operational costs. The $2.3 million utility incentive meant this project resulted in a 0.8 year payback, or 125% ROI. If we apply the above referenced profit formula, this means the $2 million decrease in operational costs would equate to $36 million in revenue for these stores.
While this example may seem “easier said than done,” the path to pursuing high efficiency and multi-measure energy projects is doable if you carefully review your energy usage and tailor projects based on facilities’ specific needs.
Christopher Recine is a sales engineer for energy efficiency consultant Fairbanks Energy Services.
