Energy Efficiency & Sustainability Consulting

Lower Operating Expenses: How to Improve Your ROI on Energy Efficiency

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Getting the Most Return-On-Investment from Energy EfficiencyAs energy prices continue to rise 3 to 28%, many business owners are looking for ways to cut costs and improve profits permanently. Making your business energy efficient could dramatically cut down on your utilities. Most buildings can benefit from energy efficiency improvements but there are certain things that can improve your return-on-investment. Here are four simple ways to look for and receive the highest return-on-investment from energy efficiency improvements.

1. Hours of Operation: The longer hours your business is open, the more energy you are using. Buildings that operate 24/7 have the best return on energy efficiency upgrades, meaning that the improvements pay for themselves in a shorter period of time.

2. Electricity Rate: The higher your rate, the bigger your potential savings. A typical energy efficiency retrofit saves business owners between 25 and 50 percent on their electric bill, and some clients have saved as much as 60 percent. For example, the average convenience store uses 52.5 kilowatt hours of electricity per square foot each year. At $0.11 per kwh, a 2,800 square foot store would spend a whopping $16,170 on energy annually. Energy efficiency improvements could save anywhere from $4,000 to $6,500 a year – for the lifetime of the building!

3. Building History: When was the last time you upgraded the lighting or refrigeration in your business? If your answer is more than three years ago, you’re due for an upgrade. With today’s improvements, you could modernize your space, save money and improve sales. There are numerous studies that point to increased sales and reduced shrinkage due to lighting.

Technology Solutions in Convenience Stores

4. Parking Lot Lighting: The brighter your parking lot, the more marketable your business. Replacing existing pole and canopy lights with more efficient versions will give you the most bang for your buck when it comes to recouping the benefits of energy efficiency quickly.

 

Who Picks Up the Tab?

Currently, there are grants, rebates, and low interest loans to leverage energy efficiency or renewable energy projects. For example, a rural small business open 24/7 would likely qualify for up to 55% of the project to be in the form of a federal grant, tax credit, and/or utility rebate in the state of Tennessee. Low interest loans are based on projects that have immediate positive cash flows and loans have occasionally been approved for 100% of the gross project costs.

Not taking advantage is like throwing away money.

Grants and utility funds are limited and have historically run out before a year is up, so timing can be critical. The last time the Tennessee Valley Authority (TVA) had rebates was in 2013 and the funding was closed off by April of that year. This is not uncommon, no matter where your location or utility provider. Federal grants and tax credits can be complex especially when going through the process for the first time. Often the energy auditor or assessor provides this service as part of the entire project implementation and can be part of the grant funding, if not itemized separately.

How Do I Get Started?

If you have questions, find a trusted advisor that has a diverse talent support pool of electrical and mechanical engineering, building science, HVAC, refrigeration, lighting, and finance. These projects can be “turn-key” or sub-contracted, depending on the owner’s skills and comfort level.

The payback on quality projects is typically between 1-4 years and return-on-investments (ROI) run between 20-30%. Since technology continues to improve with slight price reductions annually, it is not recommended for commercial businesses to accept projects greater than 5 years or with lower than a 20% ROI. Since you are in the business of making a return, it is suggested that a close evaluation of the financial measures be performed before implementing an energy project.