Renewable energy use in the United States is growing rapidly due to a combination of environmental, economic and political drivers. However, renewable energy sources still represent only a small fraction of the overall energy supply, mainly due to the high cost of renewable energy technologies compared with conventional energy sources. While the potential for Federal and state incentives may ease some of the upfront capital expenses, there is another method by which a company may actively reduce the high cost of on-site renewable energy projects. By reducing operational energy demand upfront by adopting energy efficient technologies and practices, companies can choose more affordable renewable energy systems to cover more of their energy demands and thereby make the proposition of using renewables all the more effective.
Recent Energy Policy Favors the Clean Energy Sector
Federal and state governments are offering various incentives, rebates and tax credits to encourage investment in both energy efficiency and renewable energy projects because they do understand how the two work separately and together for the benefit of the country. Most notably, the American Recovery and Reinvestment Act of 2009 designated $4 billion dollars in Federal renewable energy loan guarantees and $16.8 billion dollars for energy efficiency and renewable energy projects. Most of this funding is realized in the form of Federal tax credits which greatly help to offset the costs of on-site renewable energy projects for private business. Federal funding from the Reinvestment Act pushed the U.S. solar industry to grow its revenue by 36 percent, boost its installations by 5 percent, and increase total electrical capacity by more than 2 gigawatts in 2009. Energy efficiency incentives include the Federal Energy-Efficient Commercial Buildings Tax Deduction, in addition to hundreds of utility-sponsored programs geared toward lighting and HVAC retrofits. Businesses should seriously consider taking advantage of these efficiency cost saving measures while they still exist in order to increase the payback period on their investment.
Federal Funding Stimulates On-Site Renewable Energy in the Private Sector
Private sector companies seeing the advantages of on-site renewable energy have benefited from these incentives. For example, in early April 2010, PepsiCo. decided to put a halt to its purchase of Renewable Energy Credits (RECs) and instead invest in upwards of $30 million towards on-site renewable energy projects at its facilities across the country. PepsiCo. cites innovation in technology and changes in incentives as the reason behind their investment decision. Another example of private business interest in on-site renewable energy is Cox Enterprises, a leading cable TV provider. As part of “Cox Conserves” program that began in 2007, the company has installed nine photovoltaic solar arrays since then, on its way toward reducing the company’s carbon footprint by 20% throughout the next decade. It was only after Cox Enterprises initiated several years of energy efficiency improvements to lower its energy loads did it decide to install these on-site renewable energy projects. Today, both energy efficiency and renewable energy are working in concert at Cox.
Rising Energy Costs Spur Movements toward Operational Efficiency
Historically, US companies have enjoyed relatively low energy costs. During this time, concerns about facility or operational efficiency were rare. Over the last decade, concerns about improving energy efficiency have increased along with the price of oil and natural gas. Regionally-speaking, the U.S. Energy Information Administration (EIA) expects utility rates to increase as the price for oil and natural gas will continue to rise from 2009 to 2035. If greenhouse gas (GHG) legislation should come into play, EIA’s Annual Energy Outlook 2009 estimates that utility rates under a GHG policy would be 22% higher in 2030 than in a “business-as-usual” case.
As utility rates increase, companies have a greater incentive to adopt energy-saving technologies and behaviors in order to save money. Unfortunately, there is a perception that energy conservation projects in commercial and industrial facilities are expensive and present a long-awaited return on investment. On the contrary, many efficiency gains with a short term ROI can be achieved with little or no capital investment. By evaluating the baseline energy consumption patterns of a plant or network, companies can start to identify significant savings opportunities.
Energy Efficiency Consulting Reduces OpEx to Save CapEx on Clean Energy Projects
Energy efficiency and sustainability consultancies can help to facilitate these cost saving opportunities by working closely with clients to identify, develop and implement energy efficiency, carbon abatement and sustainability solutions in order to achieve operational excellence. Teams of efficiency experts conduct survey audits of facilities and network servers to analyze a company’s current energy profile. Throughout the audit process, the consultancy can identify the areas within a client’s operations that are the biggest energy wasters and provide recommendations that work within their business model, corporate planning methodology and capital strategy to help meet their energy efficiency goals. Creating an optimal solution is achieved by combining technical energy efficiency audits and behavioral change programs.
Upon completion of the energy audits, the consulting firm can provide their client with a turnkey service for an on-site renewable energy project by recommending services through their network of connections to renewable energy contractors. The client’s energy efficiency investments will allow for them to choose a more affordable renewable energy system to cover their energy demands.
Energy Efficiency Measures Maximize your Investment in Clean Energy
Despite the Federal incentives and tax credits available, on-site renewable energy systems remain inherently capital intensive – reducing your overall consumption will significantly reduce the upfront capital expenditures in the form of a smaller renewable energy system to cover your energy demands. Consulting services can help to identify the areas within your energy profile that can create visible energy and cost savings. While energy efficiency and renewable energy projects can both reduce operating expenses and minimize risk against volatile utility prices, companies should prioritize energy efficiency measures to produce less costly returns on investment which can subsequently reduce the capital costs of an on-site renewable energy project.
Paul Shmotolokha, President of Coppervale Enterprises Inc. &
Andrea Thomas, Carbon & Energy Analyst, Coppervale Enterprises Inc.
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