Consider This -- Single Energy Projects Don't Maximize Savings

Nov. 15, 2009
Reducing energy usage and costs gets easier when your energy initiatives work in tandem as part of a comprehensive energy strategy.

If you're feeling torn between sustainability goals, energy requirements and budget realities, you're in good company.

Business leaders surveyed in the 2009 BSR/GlobeScan State of Sustainable Business Poll view climate change as one of the top priorities for the year ahead and identified energy efficiency as the most significant element of their climate strategy. But nearly half also cited competing strategic priorities and short-term financial pressures as barriers to addressing climate change.

The hesitancy to take on energy initiatives that improve sustainability or efficiency is understandable if you approach projects one at a time instead of tackling several at once as part of a comprehensive energy strategy. For example, developing a major on-site solar installation would certainly help you achieve your environmental goals but probably exceeds your budget for new energy infrastructure if you build and finance it yourself. Likewise, individual energy efficiency projects can make incremental improvements but rarely signal to stakeholders your corporate commitment to sustainability.

There is a better approach to sustainability, but it requires you to think bigger.

By implementing multiple energy conservation measures at once, the combined suite of projects is more likely to justify comprehensive self-funding measures, including major renewable energy systems.

This comprehensive commitment to energy efficiency will be more visible, more financially viable and more effective. Savings from projects with rapid payback periods can help offset the costs of projects with longer-term paybacks, such as solar energy systems. You're doing these short-term, lower-cost projects anyway -- upgrades to high efficiency lighting, HVAC controls or insulation. Maximize their value by doing more, combining them with the major projects that you've been putting off or did not think were financially possible.

Multisolution Approach

Smart businesses are taking the multisolution approach to energy and sustainability. Their energy programs encompass traditional efficiency projects to cut costs and demand response to receive compensation from the grid for reducing load. They are also deploying renewable energy to hedge price volatility and improve sustainability.

Majilite Corp., the manufacturer of Nytek microfiber and other high-performance materials, has taken a comprehensive approach to its energy portfolio. The company added a 400-kilowatt solar power system that serves about 16% of the energy requirements of Majilite's Dracut, Mass., headquarters and manufacturing facility. The system took advantage of a $926,000 state solar incentive from Massachusetts and structured the contract as a 20-year power purchase agreement with Constellation Energy to buy down the per kilowatt cost of the solar electricity. The company also purchases the remainder of its electricity through Constellation's competitive retail supply business, and participates in demand response programs to earn money from the grid. These initiatives were combined with heat-recovery projects and an upgrade to high-efficiency lighting at Majilite's facilities.

These visionary companies are taking advantage of contractual and financial structures that reduce upfront capital expenditure, such as performance contracts and power purchase agreements, while leveraging public grants and incentives to pay down project costs. Companies of all sizes are also becoming more knowledgeable about energy markets and shopping among competitive power suppliers for the best value.

Tackling more projects at once will help you deliver more noticeable and meaningful sustainability results -- the type of sustainability results that galvanize your employees, your suppliers and your customers. This approach can create competitive advantages as many early adopters of greener, more efficient energy portfolios have found. These sustainability leaders have realized significant marketing value in highlighting that their energy usage is offset -- partially or fully -- with renewable energy certificates. A business or institution with a green energy reputation often has an advantage over competitors relying on fossil-fueled brown power.

You may even find that you can make sustainability gains without paying more for green energy or incurring any construction and operating costs. By structuring solar power projects as long-term power purchase agreements (PPAs), you shift the system costs to a renewable energy provider that owns the photovoltaic assets and sells the power back to you over 15 to 20 years. Using the PPA structure -- and applying rebates and tax incentives -- can reduce the price of the electricity to a level comparable to what you're paying today. By coupling a solar array with other efficiency improvements, you not only increase the positive environmental impact of the site, you use savings from other projects to build an even larger photovoltaic system. This approach has successfully helped deploy large solar photovoltaic systems at General Motors, Alcoa, Parker Hannifin, McCormick & Co. and other manufacturers.

Managing a comprehensive energy program can be complicated, but it can be made much easier with the help of an experienced energy services partner. Today's energy-services companies will handle traditional energy-efficiency and infrastructure projects, of course, but also the construction, financing, ownership and maintenance of renewable systems. You should also be able to work with the same provider to participate in demand-response programs and to procure electricity, gas and renewable energy certificates.

If your energy partner can't provide an integrated suite of products and services, implementing a comprehensive energy strategy will be more complicated and probably less effective.

Greg Jarosinski is president & CEO of Constellation Energy's Projects & Services Group,

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