Beyond the bill: Non-energy savings multiply ROI of energy efficiency
Think about the last time you evaluated a job offer. Did you look only at the pay cheque? Or did you also consider what you’d be doing, whether you liked your future co-workers, how many weeks of vacation you would get, your commute, your office space, your next career step and more?
Chances are, you took that wide-angle view and considered several benefits of the position. That’s exactly what you should be doing when you look at making energy efficiency investments. Why? Because research indicates that efficiency has many benefits beyond lower utility bills.
Among the studies that prove this assertion, you’ll find one conducted by a U.S. Department of Energy laboratory researcher who examined dozens of case studies to determine just where energy efficiency pays off. He looked at a variety of what researchers call “non-energy benefits” from efficiency initiatives. These include:
- Quality improvements, which may be seen in faster cycle times, reduced defects or improved processes
- Business efficiency, such as better process control technology or improved productivity
- Revenue enhances, which might include things like the higher margins landlords can charge for space in energy-efficient buildings
- Ancillary benefits, such as enhanced corporate image
In all, 77 case studies came under review and 52 of them showed quantified, monetized savings. Among that group of 52, non-energy benefits equaled or surpassed energy-cost savings in 63 per cent of cases. In 25 per cent of the cases, those non-energy savings were some four times higher than the energy savings.
Other research conveys similar findings. A study by Bain & Company, a management consultancy, found that most manufacturing facilities in North America and Europe save between 10 per cent and 30 per cent on their energy costs with efficiency projects.When they calculate the non-energy benefits, the businesses experienced an additional 50 per cent savings.
What might that look like in a specific instance? Here are two examples.
Rx for savings
A sprawling and progressive healthcare system in Illinois started looking at ways to save energy in its 150+ locations. With 12 hospitals, physician offices, specialty facilities and 27 long-term care sites, the organization found several options for efficiency upgrades. These include improvements in boiler efficiency, steam traps, pipe insulation and enhanced ventilation control.
In 25 per cent of the cases, non-energy savings were some four times higher than the energy savings.
At one facility, managers quickly noted they could achieve energy savings by setting temperatures differently through the building automation system and updating the main boiler. It had an improperly sized burner that caused excessive cycling and energy waste. Making a capital investment in the main boiler delivered a 20 per cent increase in boiler efficiency.
System-wide, the healthcare provider has invested some $20 million in energy efficiency investments, but it also has earned more than $1.25 million in rebates from the local utility. So far, these investments realize a reduction of more than 800,000 therms annually which equals approximately $500,000 in operational savings each year.
Other payoffs include:
- Sustainability goal achievement: To date, the system has cut greenhouse gas emissions by 4,670 tons each year.
- Public relations impact: The healthcare system uses its energy efficiency commitments to demonstrate support of a healthy environment for patients, employees and the community.
- Increased revenue: According to the U.S. Environmental Protection Agency, every dollar a non-profit healthcare organization cuts from its energy bill is equal to $20 in new revenue. Using that math, this organization’s energy efficiency upgrades have chalked up the equivalent of $10 million in patient revenue.
Here is another example of non-energy benefits from an efficiency initiative. A non-profit redevelopment company that provides apartments to low-income tenants did three simple retrofits to help those struggling tenants save on their heating and cooling bills. The organization sealed up leaks around windows and doors, added insulation and replaced a furnace.
The tenants and owner of the apartments saw energy-bill savings in the 10 per cent range. On top of that, maintenance dropped by 17 per cent in two years, so the landlord was paying an average of $836 per unit annually versus a national U.S. average of $1,084. Some 70 percent of tenants said they’d sign another lease, and the landlord saw rental vacancy losses as low as 8.2 per cent versus the national average of 11 per cent.
The improvements also resulted in greater tenant comfort. After sealing up what had been a drafty building, two thirds of tenants said their units stayed cool in the heat and 80 percent said it was nice and warm on chilly days.
The apartment owners may have targeted energy-bill savings initially, but those non-energy benefits add impressive ROI.
In fact, non-energy benefits could be likened to getting a job from a company that has an office masseuse, free catered lunches and concierge service for employees. Not all of those perks will show up in your bank account, but they’ll all add substantially to the compensation you receive for your efforts.
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