Energy Upgrades—Is Total Cost of Ownership the Best Way?

total-cost-of-ownershipWhen evaluating energy upgrades, the #1 question a business will ask is always, what is the return on our investment (ROI)? How much am I (really) going to save from doing this project? Traditionally in energy efficiency projects, Total Cost of Ownership analysis is the universally accepted way of determining ROI. While total cost of ownership is a good benchmark for evaluating the value of energy upgrades, it isn’t the ‘be all end all’ way of determining the projects benefits. In this blog, I’ll discuss total cost of ownership analysis, as well as additional methods for getting the most accurate ROI projection for your energy efficiency project.

Total Cost of Ownership (TCO) is defined as, “an estimation of the expenses associated with purchasing, deploying, using, and retiring a product or piece of equipment. “ Let’s look at a school system deciding whether or not to upgrade to LED lighting. While the florescent lights the district is currently using has a lower starting price, LED lights may have a better value over an extended period of time. If the total cost of ownership shows an advantage of LED lights over florescent lights in the next 2-5 years, than the LED lights are most certainly the better choice. However, there are complicating factors, such as access to capital, alternative capital expenses, and the current economic situation of that particular school district that should also be considered.

A total cost of ownership analysis takes into consideration multiple factors including initial cost, product lifespan, energy cost to operate, frequency of maintenance, expense of product replacement, hours of operation, utility incentives, and how the product will be used. While this is the go-to method of gauging the value of energy efficiency projects, EPCO likes to take this analysis a step further. It is common practice to determine TCO by using industry standard figures for maintenance, repair and operation (MRO) expenses. EPCO has found this isn’t always the most accurate method for determining ROI in energy upgrades.

At EPCO, we believe interviewing the client and understanding their unique energy fingerprint, is the best method for understanding the true inputs and cost of operational expenses. Some businesses have energy expenses that are higher than the industry standards. For example, manufacturers that operate and run equipment more heavily during second shift will likely have a more unfavorable load profile than their counterparts producing mostly during first shift. This effects avoided cost values. EPCO will always review historical billing and consumption patterns to determine the true value of an energy efficiency project.

Although SB 310 led to the discontinuation of small commercial energy rebates throughout northern Ohio, larger businesses and school systems have the potential to capitalize on remaining incentives and tax credits for energy efficiency projects. One such example is receiving an exemption to costly utility fees and riders that appear on all electric consumer bills. EPCO has the expertise to identify, prepare, and submit exemption applications on behalf of clients. Most energy firms overlook this option, but it has added benefits for many large businesses and school districts.

Total cost of ownership is the standard way of determining the added value of energy efficiency projects. Though this analysis can give an accurate judgement of savings with projects, industry standards are not always the best indicator of true ROI. It is important to take an individualized, case-by-case approach, when evaluating energy efficiency projects. To learn more about how this could help your organization, email EPCO at info@energyplanners.com, or visit us at www.energyplanners.com

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Ohio’s Ranking Drops on ACEEE Scorecard for Energy Efficiency

Every year, ACEEE (American Council for Energy-Efficient Economy) ranks states on their energy efficiency policy and program efforts and also provides recommendations for ways that states can improve their energy performance. The State Scorecard is a benchmark, which serves to encourage states to continue “strengthening their efficiency commitments as a pragmatic and effective strategy for promoting economic growth, securing environmental benefits, and increasing their communities’ resilience in the face of the uncertain costs and supplies of the energy resources on which they depend.” Last week, the 2015 State Scorecards were released and Ohio was ranked 27th. This is a drop from Ohio’s 2014 placement at 25th.

This drop in ranking is no surprise after Ohio became the first state to reverse energy efficiency and renewable fuel mandates in 2014. Ohio Governor John Kasich signed Senate Bill 310 in 2014, which froze annually-increasing energy mandates until the year 2017. At which point, the “the automatic levels are to be restored”, a provision that Kasich requested to be part of the legislation, according to The Plain Dealer (Cleveland). The bill also included language that establishes a legislative study committee tasked with evaluating the effectiveness and future of the original portfolio standards.

Senate Bill 310 counteracted Ohio Senate Bill 221, which was passed in 2008 and established the efficiency standard. Under Senate Bill 221, Ohio ranked #1 in the nation for advance energy and renewables, “bringing in more renewable energy facilities than any other state,” according to JobsOhio. Under the legislation, utilities can count improvements made by their own customers and also roll over any savings above a given target into the next year. Language in SB 310 created a provision that permits large industrial users to opt-out of utility offered programs; allowing these users to develop and institute internal programs. Concern has arisen that this may adversely impact the effectiveness of the utility offered programs; potentially increasing the cost and burden of compliance on smaller commercial entities.

Overall, the passage of SB 310 has negatively impacted the implementation of commercial energy efficiency retrofits throughout the First Energy territory. Unlike other state utilities, First Energy has opted to discontinue any rebates for energy efficiency work performed by its customers. As a result, there has been a decline in the number of small and mid-size commercial entities instituting energy efficiency related projects. This concern may persist beyond the current two-year freeze in place under SB 310.

Recently, the legislative study committee released a report recommending an indefinite freeze on the mandates. This has largely been met with criticism from environmental groups, politicians and industrial entities alike. In response, Governor Kasich stated that “a continued freeze of Ohio’s energy standards is unacceptable”. There is much debate still to take place before a final determination is made on the future of Ohio’s renewable and energy efficiency portfolio standards. EPCO will continue to provide additional review and analysis as more information becomes available.

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EPCO Energy Infographic

Recently EPCO decided to evaluate the influence our team has had within the energy marketplace. We were curious to know what the economic and environmental impact has been from the projects we have facilitated over the past couple of years. To that end, we identified several key metrics from each projects portfolio, and put it into an infographic to share with prospective clients.

We were really pleased the results, and have opted to share it with the larger community. The numbers speak for themselves, but there are three metrics I would like to highlight.

  • $1.87 million in annual energy savings
  • Average project payback period is 0.96 years
  • Energy savings are the equivalent of more than 11.1 million pounds of coal burned

All Projects Infographic

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What EPCO Can Do For You

As we approach summer, more and more businesses will begin to think about their energy consumption. In a just a couple of months, higher temperatures will bring increased electric consumption. Consumers will be cranking up their cooling load or increasing production. With increased consumption come increased energy costs. That is the bad news. The good news is that there are steps you can take to mitigate those rising operations expenses.

Energy Planners Company (EPCO) is a full service energy solutions firm committed to providing the best products and services available to our clients and partners. Leveraging our proprietary approach to energy management, EPCO will work alongside our clients to create a long-lasting advanced strategic plan to address all their current and future energy related needs. EPCO’s carefully designed methods and portfolio will help your business realize savings in areas you may not have known existed.

Electric & Natural Gas Utility Bill Review

For each metered account, EPCO will review all supply side charges related to the acquisition of, and costs associated with, electric and gas procurement.

ASHRAE Levels 1, 2, & 3 Assessments & Design

ASHRAE level energy audit & lighting assessments determine where, when, why and how energy is used in a facility. The main outcome of our customized energy audits is a list of recommended energy efficiency measures (EEMs), associated energy savings projections, and a calculation of whether EEM installation costs are a good financial investment for your facility.

Rebates, Incentives & Financing

EPCO specializes in creative and alternative financing mechanisms. Our team of professionals will leverage the energy efficiency projects you perform to exempt your facility from costly utility fees or apply for rebates through either your local or regional utility.

Long-term Energy Planning & Strategy

EPCO takes a holistic look at an entire building or campus to choose the appropriate approach to create cascading savings and improve asset value. EPCO will help design a clear and customized business case for a deep energy retrofit through quantifiable savings and empirical research.

Project Management & Implementation

From project identification, to design, and ultimately installation; EPCO can manage and facilitate the entire retrofit process for your facility. EPCO works with all energy intensive industries and consumers and understands the complexities of retrofitting a facility such as yours. Areas of project management expertise for EPCO include, but are not limited to, the following.

  • Lighting
  • HVAC
  • Motors, Drives, & Controls
  • Roof Top Units (RTUs)
  • Air Handling Units (AHUs)
  • Combined Heat & Power (CHP)

EPCO prides itself in its ability to cultivate unique and customized solutions for each client it works with.

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