- Posted by Pam Hoddinott
- On January 29, 2020
By Todd Jarvis, Chief Operating Officer, Chateau Energy Solutions
The best businesses and organizations unlock hidden value in unusual places. This helps them create a competitive advantage and provides new areas for undertaking continuous improvement. However, many of these companies have not yet identified or tackled a potentially major source of hidden value – ENERGY. Almost any enterprise can unlock savings hiding in the way they buy and use energy. Doing so unleashes a new funding source within your business to drive improvements and to pursue new initiatives. The time has come to change the way your organization views energy. Most consider energy as a cost. You may not realize it, but you and your business can turn Energy into an Asset™.
MAKING ENERGY AN ASSET™
How can you make energy an asset? Energy is perfect because it’s hidden in plain sight. You pay for it every day, and it is an ongoing unavoidable part of your business. But do you know if you are getting your money’s worth? Identifying energy savings opportunities and then optimizing energy use empowers you to take those savings and reinvest it back into your business. Most businesses and large organizations spend anywhere from 2% to 5% of their revenues on energy and utilities, but its true cost is much greater. How so? Let us explain.
Understanding the true cost and impact of what you spend on energy is complex. It helps to think about it in several buckets as part of Making Energy an Asset™:
- The raw energy itself – electricity, natural gas, oil, etc.
- The assets that you feed that energy into, that in turn convert it into inputs necessary to support your business. This includes light fixtures, air compressors, chillers, boilers, pumps, HVAC equipment, and on and on.
- The money that you spend to build, maintain, improve, and service those assets. This comes in the form of capital expense and ongoing operating expenses, so it impacts both your income statement and your balance sheet.
- The risk your business faces if you have an interruption in the quality or reliability of these energy-based inputs. What happens to your hotel if guests stop coming because of power interruptions, or what happens to your manufacturing plant if temperatures and humidity aren’t within specifications?
PARTNER WITH AN EXPERT
There is, unfortunately, a limited amount of expertise available in the market to guide you on this journey of Making Energy an Asset™. As a first step, it’s critical to find a partner that you can trust that will provide the benefit of their experience and wisdom. One that can help you develop a strategic plan for what can be accomplished and put into place a way to measure improvement and the value you are creating. Would you like to know why most energy programs fail? It might surprise you. Most energy programs fail because people don’t aim high enough, and don’t get broad organizational buy-in for results and outcomes.
The journey to turning energy into an asset begins with gathering information about your facilities and how you use and pay for energy. You need to include your entire enterprise because you can’t be sure where you will find hidden areas of inefficiency. You need the right data to benchmark your facilities and operations, to compare them with each other and to similar sites, and to match up energy consumption and cost with important metrics. These metrics might be “per bed” in a healthcare facility, or “per product” in a manufacturing plant or “per occupied night” in a hotel.
Once you have gathered the necessary data and turned it into useful information and actionable insights, you can set meaningful and measurable forward goals for your organization. Consideration and application of best practice “handicaps”, similar to golf, will give you an idea of how good you can become as you truly make energy an asset.
CARBON FOOTPRINT CARROT
One of the great things about energy is that it correlates quite nicely with your carbon footprint, so this will become a central part of your sustainability improvement story as well. Customer expectations are rising as their purchasing power calls for more sustainable practices from businesses. Managing your energy use more efficiently allows you to raise your sustainability standing.
MAKE THE CHANGE
How then do you successfully turn Energy into an Asset™ at this point? Set measurable and meaningful goals that can only be achieved by cooperation, measurement, and intelligently applied capital and operating expenses. You should be prepared to “put a stake in the ground” in terms of overall improvement and its contribution to your bottom line such as “$X million in annual savings” or “Y% reduction in energy consumption per widget”. Let your organization know that achieving these results is possible if they will commit the necessary resources, including people.
Then go about achieving these goals by starting an investigation to find opportunities within your facilities. These opportunities are likely to include improvements such as lighting upgrades, the installation of variable frequency drives, intelligent building controls, retro-commissioning, and chiller and boiler plant optimization. Some will be ideas you can implement with little or no money, and of course, you should adopt those immediately. Others will require capital.
Options for financing these capital improvements include self-funded and third-party mechanisms. If you can demonstrate that your ideas will exceed your hurdle rates, you may get them funded internally within your business. If not, don’t get discouraged as there are third parties available in the financial markets who specialize in investing in energy cost saving projects. Finally, one idea that has gained attraction and is being used at some of the world’s most forward-looking organizations is Energy-as-a-Service; look for more about that in a future blog post.
SEE ENERGY DIFFERENTLY
Chateau Energy Solutions sees energy differently. We offer our clients a unique combination of energy Consulting, Implementation, and Managed Services to help you view energy not as a commodity, but as a strategic asset. We encourage you to look at Energy as an Asset™ in your organization going forward. How is this asset class comparing to others your organization invests in? Is your energy efficiency improving over time? How much money have you saved, how much can you save, and to what end can you put those savings back into your business? How many jobs can that save or create, how many more locations might you open, how many more customers might you serve? Turn Energy into an Asset™, and you and your team will have fun answering those kinds of questions.
About the Author
Mr. Jarvis has more than 20 years of experience in the Energy Efficiency, Demand Side Management, and Sustainability areas. He currently serves as Chief Operating Officer at Chateau Energy Solutions. Mr. Jarvis is recognized as a subject matter expert with expertise in operations management and sales with a proven track record in leading successful companies. Through his 20 years in the industry, he has built and led teams that provide energy management consulting services, turnkey implementation of energy efficiency projects, and ongoing analytical managed services. Mr. Jarvis is a Certified Sustainability Practitioner and a Certified Energy Manager.