Building Management

Money talks. Are you listening?

We listen attentively when it comes to our personal investments – negotiating the purchase price of our homes, choosing retirement accounts, or waiting for a big sale. For most people, saving money isn’t just a benefit, it’s a necessity. And we listen for that “money talk” every day in an effort to secure our personal agendas…aka, our futures. Right?

Well, money is also talking to companies through energy management. But are executives listening? Do they realize its potential impact on their bottom line…and their futures? Many executives still believe energy to be an unmanageable or “fixed” expense. This isn’t true. In fact, in most organizations, energy costs are among the top 2 controllable expenses (alongside payroll and employee benefits).

It’s estimated that 40% of global energy use is from buildings. This represents enormous opportunity. No matter the industry, substantial savings can be realized through energy management solutions.

Consider these statistics:

Life Sciences

Pharmaceutical manufacturing plants spend nearly $1 billion in energy consumption annually (the majority through the HVAC system), while a typical laboratory consumes upwards of 3 to 4 times the energy of an average building. Laboratories for the 21st Century (Labs21) estimates that most labs can reduce energy use by an incredible 30 to 50%.

Education

The average annual energy spend across universities in the US is $14 billion. Education (alongside healthcare & public safety buildings) will be among the largest energy management investors by 2020, according to Pike Research.

Data Center

A single data center can use more power than a medium-sized town – and on average only 6 to 12% of the electricity is used to power servers to perform computations.

Hospitality

In the US, an average of $2,196 per available room each year is spent on energy, equating to approximately 6% of total operating costs.

In a restaurant, energy is the 3rd largest controllable expense, behind labor and food.

Commercial Office

These buildings consume the most energy of all building types, with 66% of that consumption just from lighting. Offices account for  approximately 18% of all commercial energy consumption. A 2010 study from Pike Research predicts that the commercial buildings sector will invest $67 billion into energy management systems between 2010 – 2020.

Retail

A typical 50k sqf retail building spends about $90,000 each year on energy costs. Pike Research forecasts by 2020, $11 billion in energy management software investments will come from the Retail sector.

Government

Energy can account for as much as 10% of a lo­cal government’s annual operating budget.

Healthcare

Energy use has increased 36% since 1995 and is expected to increase another 25% over the next 5 years. In private hospitals, this could result in a decrease in profit up to 0.5%, which is quite substantial given that the average profit is only 3.3%. Data shows that 5.5% of the total delivered energy, used by the commercial sector, was from large hospitals.

Now, consider these trends:

Rising Energy Costs

Experts say this trend will only continue as fossil fuel sources become scarcer. Just last week, in an article from the WorldWatch Institute, it was reported that the International Energy Agency (IEA) predicts the cost of crude oil to average $100/barrel over the next two decades and then more than $200/barrel in 2030 – almost doubling last year’s predictions.

The U.S. Energy Information Administration’s (EIA) Annual Energy Outlook for 2006 shows that energy costs rose 31% from 2003 to 2005.

According to the European Commission, energy costs in the European Union have increased 47% since 2003 … and are expected to grow another 30% over the next 5 years.

Increased Legislation

Governments all over the world are expected to implement more stringent legislation to reduce CO2 emissions. Not complying will pose an imminent financial threat to your business. Use Europe for example, the EU Energy Performance of Buildings Directive (EPBD) requires all new buildings to be nearly zero energy by 2020.

Corporate Social Responsibility

Also impacting your bottom line is the increased pressure organizations face from social and environmental responsibility. For instance, just 10 years ago a dozen Fortune 500 companies issued CSR or sustainability reports. According to Time Business & Money, today the vast majority of Fortune 500 companies do.

So, what about your bottom line?

Implementing energy efficiency measures has a large payback. With tools like this interactive Energy Management Life Cycle Tool, you can quickly calculate your company’s energy savings potential. Solutions such as automation, control, and monitoring can result in savings of up to 30%. Think about that for a moment – that’s a substantial savings and significantly higher than can be achieved by most other investments a company can make. And, the benefits don’t stop at operating costs. According to the Dow Jones Sustainability Index, “the annual share performance of sustainability leaders exceeded that of sustainability laggards by 1.48% between 2001-2008.” Additionally, according to EnergyStar, organizations that improve energy performance outperform their competitors by as much as 10%.

Energy management is not just a matter of survival for our environment; it’s a matter of survival for our livelihood. The benefits are real, tangible, and once understood – difficult to ignore. Investing in energy management isn’t just a smart financial decision, it’s inevitable. When to begin the benefits is up to you.

Money talks. Are you listening?

 


4 Responses
  1. Keith Burnett

    Hi Jaimie,

    Thanks for the good read, adding to your comments I think we need to articulate what these opex savings mean to the business in question. e.g. Increased working capital that could potentially lower the requirement for additional lending…

    Thanks again

    Keith

    Reply
  2. Jaimie Giarrusso Jaimie Giarrusso

    Hi Keith, thanks for the feedback. Agreed, it would be a good idea to dive a bit deeper into the OpEx savings benefits. You’ve given me a good idea for my next blog 😉 thanks for that! Stay tuned…

    Reply
  3. w d

    Jaimie,

    Nice overview of energy saving opportunities in several arenas.

    In my experience, obtaining needed results often depends on LEADERSHIP. If people know what’s needed they will respond. You can’t say energy is important and always talk about other things. Someone has to show the way and lead by example. I’m thinking of a business that reduced its energy bill from about $1.5M/year to about $0.8M/year over a 4+ year period. It took regular tracking and a lot of creativity but surprisingly little capital. Sometimes consultants are needed but in this case it was strictly from focusing a few talented people on what was needed. There were process changes and building HVAC changes. You’ll probably guess correctly that it wasn’t easy. It wasn’t. Plus, some advised: “There’s no opportunity here (in energy). You just take what you plan to produce and multiply by this factor of (Energy $ /Unit) and that’s it.”

    Sometimes the opportunity is bigger than expected, especially if it’s uncharted territory.

    Reply
  4. Jaimie Giarrusso Jaimie Giarrusso

    Thanks for your comment, W D! And, yes, I agree – gaining adoption of the energy efficiency pitch is much more effective when there is a top-down approach. If leadership can not only articulate it, but also demonstrate (in figures, stats, RESULTS – and benefits to employees) why it’s important, than the chances of people hopping on board to welcome the investment is much higher. While it’s true that energy is only one piece of a bigger puzzle, it’s an important piece. And, when properly understood, it proves to be an enticing ROI driver. Thanks again for sharing your thoughts!

    Reply

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