Are you optimizing your energy spend?
To optimize energy spend and realize the full value of a sustainability strategy, energy purchasing must be aligned with energy efficiency. Office buildings in the U.S. spend an average of $1.51/sq ft per year on energy, accounting for about 20-30% of operating expenses. A 5% reduction in consumption can mean tens or hundreds of thousands in annual energy savings. But if you’re in a deregulated energy market and are not aligning buying decisions with efficiency measures and timing, you could be leaving a significant chunk of that savings on the table.
– A building has completed a retrofit to reduce its peak demand by 200 kW. However, it signs a contract with a fixed capacity rate, which was calculated based upon its former peak demand. The building will be overpaying for capacity once the retrofit is complete.
– A building switches to natural gas boilers, but remains on a utility index rate for natural gas. A polar vortex strikes in the winter and natural gas prices spike. Increased consumption plus price consumes half the year’s budget in 2 months.
In the first example, passing through the capacity charge would’ve resulted in cost savings. In the second, hedging part or all of the gas spend during the winter would’ve provided risk mitigation and budget certainty. Taking an active approach to energy spend and purchasing helps ensure money isn’t left on the table, and unnecessary risks aren’t taken.