Peer-reviewed research compiled and published in 2012 shows that there are significant and highly probable extra benefits that result from energy conservation. The minimum extra benefit was calculated to be worth 11% of additional value beyond the direct energy budget savings. These benefits are highly probable because it was found that a high percentage of facility managers did experience these benefits. The implications of this research suggest that more of these extra benefits should be included when energy conservation projects are proposed. The full research article: “Energy Conservation Also Yields: Capital, Operations, Recognition and Environmental Benefits” was published in Energy Engineering, Vol. 109 (5), 2012.
The Concept of Energy Conservation:
During a diet, when a person doesn’t over eat, they are likely to receive benefits that extend beyond weight loss. The person may be happier, live longer, have increased stamina and avoid other diseases.
Similarly, the benefits of putting a building on an energy diet extend beyond the reduction of energy expenses. Such benefits can include tangible and measurable values such as reduced material and labor costs, as well as other soft benefits such as increased productivity and morale. Soft benefits were not calculated within this article.
Examples of Additional Benefits from Energy Conservation
These benefits usually apply to a facility’s capital, operations, maintenance, administrative, marketing, environmental, and/or other budgets.
1. Reduced Maintenance Material Costs
Example: If lights are not "on" as many hours, they may not burn out as often. This means you won’t have to buy as many replacement lamps in a year. Another example is reduced Heating, Ventilating and Air Conditioning (HVAC) filter replacement costs as a result of operating such systems fewer hours per year.
2. Reduced Maintenance Labor Costs
Example: If an HVAC system is not "on" as many hours, the filters can be changed less often, resulting in labor savings. Similarly, if lighting is used fewer hours, then lamp lives are longer and annual re-lamping labor costs decline. Finally, if an energy conservation program results in a labor savings worth 10% of a maintenance person’s time, that’s a real savings - That 10% is available for other activities.
3. Avoided Capital Investment
Example: You reduce energy consumption so much that you don't need to purchase equipment you thought you needed such as an additional chiller, boiler, lights, etc. This would be a one-time savings and its impact can be huge, think about the price of a new chiller.
4. Avoided Procurement Costs
Example: You operate the equipment less hours per year and it lasts longer. You don't need to replace it as often, which represents deferred planning, legal, administrative, procurement and other costs. The savings depend on the amount deferred and other factors, such as your interest rate, opportunity cost, staff time, or new positions avoided, etc..
5. Avoided Purchases of Carbon Offsets
Example: If your facility is buying carbon offsets, then you will need to purchase fewer carbon offsets as a result of energy savings. This is only a direct, measurable savings if your organization is purchasing offsets as an objective to be more sustainable.
6. Enhanced Image, Public Relations or Recognition
Example: If your facility pays for public relations, or engages in "green marketing", your success at energy conservation will provide benefits such as free press in newspaper, awards, etc..
7. Reduced Sales Taxes/Environmental Penalties
Example: A company will not pay taxes or environmental surcharges on energy that it does not use. This avoided cost represents an additional 8% to 15% of the energy savings usually estimated by engineers. Note that if a facility calculates savings using an “average cost per kWh” (when the total electric bill is divided by total kWh), these savings are automatically recognized (and the value from Benefit #7 would be zero).
8. Improved Building Value
Example: From a property management standpoint, when comparing two identical buildings, if one has reduced operational costs, then that building is worth more. You can estimate the increased value by applying a Capitalization Rate Factor, which = [Yearly Income/Total Value].
Consider a business that earns $100,000 per year and it is valued at $1,000,000 then the Capitalization Rate is 10%. Thus, if that business reduces its operating cost via energy conservation by $20,000/year thereby improving income by $20,000/year, then the Total Value becomes:
= [Yearly Income/Cap Factor]
=[$120,000/0.1]
=$1,200,000
It has been widely reported that the occupancy rate, rental price, and sale price of a building can increase by 2% to 25% after a commercial building has attained the Energy Star label or LEED Certification.
Summary:
Not all of the extra benefits will apply to any one facility, but a facility manager can choose which ones are relevant. It is also worth mentioning a few other facts about energy conservation projects:
Stock prices of corporations have been proven to improve dramatically when energy management programs are announced, or when an organization publishes its corporate sustainability report.[1]
Avoided energy expenses go directly to the bottom line and result in a very efficient use of money, sometimes even greater than the host company’s profit margin.
In Part 2, I will describe the methods to calculate the savings of some of these benefits. My hope is that you will be able to think about some of the extra benefits that you receive from energy projects (perhaps even increased productivity). If you have interesting stories to share, feel free to write me: [email protected]
[1] Wingender, J. and Woodroof, E., (1997) “When Firms Publicize Energy Management Projects: Their Stock Prices Go Up”- How much- 21.33% on Average! Strategic Planning for Energy and the Environment, Summer Issue 1997.
About the Author
Eric Woodroof
Ph.D., CEM, CRM
Dr. Eric Woodroof shares simplified ways to improve sustainability and profits. His practical ways to save energy and our environment have been successful all over the world. He also shares common "worst practices" to help his clients and audiences avoid penalties.
He is the lead instructor and editor for the Certified Energy Manager Program (CEM), which is the field's most popular training in the world. He has created certifications and training programs which are endorsed by countries on 6 continents.
He has received Department of Energy Awards and is also the youngest member ever inducted into:
- The Energy Manager Hall of Fame (Association of Energy Engineers),
- The College of Engineering's Hall of Fame at Oklahoma State University.
- He also is a recipient of the Lohmann Medal, which is the college's highest merit-based alumni honor for contributions to the field.
Dr. Woodroof has trained thousands of professionals, who are now saving billions in avoided energy expenses and global pollution. He continually learns from working with these professionals, and he brings this collective knowledge back to his clients and students during his seminars and keynotes.
In 2011, Dr. Woodroof served as President of the Association of Energy Engineers, which has over 20,000 members in over 100 countries. He serves on several certification/advisory boards, and is the Chairman of the Energy Management Professional Council.