5 Things To Consider When Costing Your Business’s Energy Efficiency Project

Posted on 17. Dec, 2010 by Ross in Corporate Policy

Energy efficiency isn’t just about energy saving.

Although that statement on face value comes across as a bit daft, installing energy efficient technology in your business can bring a raft of other benefits and/or costs which add more to the financial case than just the raw energy savings. Here’s a quick five-point checklist to look out for when costing and comparing energy efficiency projects.

1) Maintenance Savings

Does the new technology last longer than your current solution? Does it reduce the amount of maintenance required (costed in terms of parts and labour)? Will the warranty also save on maintenance costs?

When you dig into the detail, maintaining business infrastructure is a real expense and a new technology should help towards the goal of minimising those costs too. Try to quantify current maintenance costs and find projected maintenance costs from your energy efficiency suppliers, and work those into your calculations accordingly.

2) Downtime Costs

Reducing maintenance also reduces potential operation downtime and productivity lapses, which even just over a few hours a year can provide a boost to profits which makes a difference to your decision-making.

However, you also need to factor in any potential disruption to your operation during the energy efficient technology installation. Get a firm idea about installation times and disruptions from your contractors, and factor these costs into your equations too.

3) Tax Benefits and Funding

This is one factor that the energy efficiency vendors will probably shout from the high heavens about: there are various tax benefits which companies in various countries can tap into for energy efficiency projects (the Extended Capital Allowance in the UK, for example). Whilst not minimising the initial cash flow burden, recouping additional finance further down the line impacts on your investment calculations.

There also might be ways of avoiding any upfront costs at all! Schemes such as the Carbon Trust Big Business Refit in the UK offer interest-free loans for energy efficiency projects, whilst some projects offer pay-as-you-save pricing. Again, this is an area where your technology supplier is likely to be most aware of your eligibility for relevant loans, so find out what you might be able to take advantage of before doing your final number-crunching and decision-making.

4) Carbon Taxes and Trading Schemes

They’re sprouting up everywhere. Europe’s ETS, the UK’s CRC Energy Efficiency Scheme, California’s new cap-and-trade scheme and a bundle of emerging carbon taxes all over the world. These will all directly affect your business’s finances, so a reduction in energy usage will equate to a reduction in your carbon tax or carbon credit liabilities. Find out the likely price for carbon across the project evaluation period: most schemes seem to be opting for a floor price so opt for this at the very minimum.

5) Cost of Delay

Still not approved the project 6 months down the line? Every day’s delay is a day in which you’re not saving more money. Sometimes proposed projects spend so long on a manager’s desk that they could have paid for themselves by the time they go ahead. Factor the cost of delay into your planning and decision-making: can you afford to do it, or can you afford not to?