Energy Procurement | December 15, 2022
What Makes Up Your Energy Spend
More than just the price you’re paying for the energy you’re using, what makes up your organization’s energy spend is a confluence of three primary factors that interplay with each other.
In this first-in-a-series blog post, we outline these factors and how they impact your spend. Later, we’ll dig deeper into the details of each to uncover risk, understand the economics, and equip you with strategies to ensure your spend is optimized across your building portfolio.
Energy procurement has to do with how you are sourcing energy outside of your building. What you pay for the energy you use—your power bill—is probably the first thing that comes to mind. Whether your organization is buying directly from a utility, or supplier, or working with a broker who can help you be agile with your contracts to keep costs in check, there is a measurable price that you pay for your energy.
If your buildings are in a state with deregulated pricing, you have some control over what you pay for energy because you can choose who is providing your energy and for how long. An experienced energy broker typically maintains relationships with many suppliers and can help you develop a procurement strategy and navigate contract details to ensure you’re paying a price that you’re comfortable with for the energy you use, be it natural gas or electricity.
If your buildings are in a state with regulated pricing, you have fewer options as you’re typically locked into using a single provider. There are some things you can do like purchase Renewable Energy Certificates or install on-site renewables but otherwise, you’re using whatever sources of energy that are supplied through the utility-owned grid at whatever cost the utility charges you.
Renewable energy is another major, and growing, aspect of energy procurement. We’ll delve deeper into it in our next piece but, for now, some key concepts to understand are:
This refers to buying, installing, and maintaining renewable energy production, usually a solar array, on your property for the purposes of on-site power generation.
You can also engage a third-party solar developer or financial institution to lease the array.
Power Purchase Agreements (PPA)
A PPA is a contract through which you can lease a solar array from a developer for installation on your property from which you can use the power, sell it back to the grid, or some combination of both.
Virtual Power Purchase Agreements (VPPA)
A VPPA is a specific kind of PPA that, rather than installing solar on your own property, you purchase the power from a specific energy source virtually.
On-site generation of renewable energy is gaining momentum and there are currently many incentives for businesses to implement solar projects. We'll dig deeper into these concepts in our next blog.
Your energy use has to do with how you are using energy once it’s in your building. All your building systems that consume energy drive the amount you need to procure to keep your business operating.
This includes but is not limited to:
Computers and other low voltage devices
The efficiency of the building envelope—roofs and walls—and the equipment you are using play a big part in how much energy each building requires.
Well-designed roofs and walls that insulate from external temperatures or ones that reflect or absorb sunlight, depending on the local climate, can help mitigate the need for extraneous heating and cooling. Well-placed skylights and windows can provide daylighting to limit the need for powered lighting.
In recent years, LED lighting has made older forms of illumination obsolete by requiring only a fraction of the energy to operate. Larger systems too, like your HVAC and other mechanical systems, now have high-efficiency options and create opportunities for businesses to significantly reduce energy use.
At the nexus of these systems are building controls that can be automated to further improve efficiency. Examples of this building automation include hallway lights that only turn on when someone enters an area or heating and cooling settings that are adjusted based on building occupancy or kitchen equipment that turns off after the restaurant closes.
Managing Peak Demand
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