Calculating the Value of Hidden Benefits of Energy Conservation

10/15/2012 | By Eric Woodroof, Ph.D., CEM, CRM

Research Shows Predictable, Quantifiable Impact

If you’re only identifying the direct, tangible benefits of energy conservation, you’re missing part of the equation – perhaps as much as 31% of it.

There are many extra hidden benefits that result from energy conservation efforts, and they are significant and quantifiable, according to recent peer-reviewed research. Read on for research results as well as some examples on how to calculate the impact of certain energy conservation strategies.

Part one of this discussion – which identifies the many hidden benefits from energy conservation measures – can be found here.

 

HOW TO CALCULATE BENEFITS

Among the hidden benefits are reduced maintenance costs, reduced labor, avoided capital investment, and reduces sales taxes and environmental penalties.

Provided after the article are three examples containing templates of equations that you can use to calculate those benefits (the full research article has more). The basic goal is to quantify each additional benefit associated with an Energy Conservation Measure (ECM), and then add the benefit values together to determine the total additional value per ECM.

For example, if you optimized a building system and it lasted longer, you could use the sample calculations below to estimate the values of avoided material, labor, etc. Then you would add these values together to determine the ECM’s total additional value. If you had implemented multiple ECMs, you would repeat this approach for each ECM and then use the sum to estimate the total additional value to the facility. Note that all cost estimates can be adjusted to reflect your local conditions.

Let’s apply this approach to a simple example and illustrate specific calculations. Consider a lighting system that has 10,000 fluorescent lighting fixtures, each with two lamps and one ballast. Each fixture consumes 60 watts. The baseline operational hours are 5,000 per year, and energy costs are $0.10 per kWh.

As a result, our baseline energy consumption is 3,000,000 kWh per year and at $0.10/kWh, the annual energy cost is $300,000.

If we implement an ECM that powers the lights off for 25% of the time, then we would reduce 750,000 kWh per year and thus save $75,000 annually in direct energy savings. However, using the calculations provided, you can calculate the additional benefits that extend beyond the energy savings. Although not all additional benefits will apply to this particular ECM, three calculations are shown as examples at the end of the piece.

Eric A. Woodroof, Ph.D., is the Chairman of the Board for the Certified Carbon Reduction Manager (CRM) program and he has been a board member of the Certified Energy Manager (CEM) Program since 1999. His clients include government agencies, airports, utilities, cities, universities and foreign governments. Private clients include IBM, Pepsi, GM, Verizon, Hertz, Visteon, JP Morgan-Chase, and Lockheed Martin.

Summary

It is clear that there is a high probability that facility managers will experience at least some additional benefits from energy conservation. Within an example application, we found that the additional benefits contributed an additional value worth 31% beyond the energy savings per year. Perhaps you will estimate more or less value at your facility, but it is clear that these efforts produce benefits that are significant and highly probable. 

My hope is that you will be able to think about some of the extra benefits that you receive from energy projects – such as increased productivity, enhanced public image, and improving building value – and now calculate the impact of some of them. If you have interesting stories to share, feel free to write me: eric@profitablegreensolutions.com. The full research article “Energy Conservation Also Yields: Capital, Operations, Recognition and Environmental Benefits” was published in Energy Engineering, Vol. 109 (5), 2012.


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