Energy Efficiency | July 24, 2018
Efficiency is the Incentive in the Midwest Market
Energy efficiency has become increasingly important for business owners to consider from the perspectives of both sustainability and cost of operations. Although rates vary across the 12 Midwestern states, the region as a whole boasts some of the lowest prices for electricity in the United States, in some cases two to three times cheaper than what companies on the coasts pay.
Businesses in a variety of sectors benefit from these low costs and the value they receive from their local utility providers. Because the costs are so low, however, many businesses don’t look for opportunities to save on energy, either because they’re unaware of the options, or because they don’t believe that other savings will add up to much and be worth the effort. Yet, even with the low base costs in the Midwest market, there are opportunities for cost-effective energy conservation, specifically by taking advantage of utility and tax incentives.
Energy Efficiency and Conservation Opportunities
Many companies have inefficient equipment or equipment that runs long hours, making sense to target these areas for improvement. Mechanical systems, building automation, and lighting are all key areas where optimization can improve energy consumption. Retrofitting and updating equipment can increase energy efficiency, and many times results in projects that create significant savings while at the same time providing a reasonable return on investment. Examples of where companies can improve efficiencies:
- Lighting: Fixture replacements and retrofits, advanced lighting, networked sensors and controls.
- Building Automation Systems and Controls: Scheduling HVAC, equipment, and lighting usage, occupancy sensors, shutting down idle equipment, and ensuring proper maintenance.
- Heating, Ventilation, and Air Conditioning (HVAC) Equipment Upgrades: Water and air-cooled chillers, variable speed drives, energy management systems, demand-controlled ventilation, and air-side economizers.
- Refrigeration: LED refrigerated display case lighting, anti-sweat heater controls, display case night covers and evaporator fan controls on electronically commutated (EC) motors.
- Data Center: In addition to the technology and solutions mentioned above, data centers can use airflow management techniques to dramatically reduce the amount of HVAC energy used at their sites facility, while at the same time reclaiming capacity and redundancy.
How to Pay for an Energy Efficiency Project
Understandably, the process of initiating a new energy efficiency project or retrofit might seem daunting from a cost perspective. For eligible companies, the ability to obtain a utility incentive and/or tax benefit to help subsidize project costs is a key factor in making a return on investment compelling enough to move forward on a project. Although utility providers have offered incentives for years, these energy efficiency programs are often unknown or underutilized by the businesses that can use them the most.
Additionally, many businesses are helping pay for energy efficiency programs, as they’re often subsidized by a surcharge added to the bills. These funds are pooled to pay for business efficiency initiatives. There’s a certain logic to exploring how to take advantage of a local efficiency program, since your company is probably already paying for one. More importantly, there’s also a good chance that your competitors are lowering their operating expenses by reducing their energy usage, so it makes good business sense to do the same.
Midwest Utility Companies and Available Financing Programs
Utility companies in Minnesota and Illinois have some of the most efficient programs in the country, as measured by the American Council for an Energy-Efficient Economy’s (ACEEE), Chicago-based Commonwealth Edison ranked eighth and Minnesota-based Xcel Energy came in 10th among their peers nationally. The scorecard takes into account three categories when determining the rankings: energy efficiency program performance, program diversity and energy efficiency-related policy.
Incentives and tax breaks are the key money-saving opportunities in most utility markets, but they are not available to all companies. Public-sector and non-profit companies are ineligible for most tax breaks. And, while many utilities offer programs designed to provide an incentive to commercial customers to install more efficient equipment and/or controls, the scope and quality of these programs vary depending on the companies administering them and the territories they cover.
How to see ROI on Energy Projects
Instead of navigating the incentive process alone, it’s best to partner with an experienced energy services provider (ESP) to manage the process. An ESP will develop, design and build the project, then apply for the utility incentives on the company’s behalf, leveraging their knowledge and experience to maximize the return on investment. The ESP streamlines the process of working with the utility, ensuring that the project qualifies for the highest level of incentives. The result is low capital outlay and a shorter project payback period for the customer, while reaping the benefits of an optimized facility and long-term energy savings.
Beyond the environmental benefits, performing a retrofit or a new energy efficiency project makes financial sense for companies seeking to reduce their operating costs and create a healthier bottom line. With the inclusion of incentive programs from energy utility providers when possible, businesses are achieving faster return on investment than ever before, making these initiatives even more popular. And now is the time to make this investment, because every moment that your business is not operating at peak energy efficiency is more money that goes from your bank account into that of your utility provider.
Discover more content and insights from Mantis Innovation
Assessing risk in your energy spend can be complicated but by understanding what makes up your energy pricing—whether electricity or natural gas —and the factors that influence it, is the first step