Minimizing Budgetary Risk: Effective Energy Management
Minimizing budgetary risk is consistently top of mind for organizations, particularly as commodity prices across the board continue to uptick, from gas to food to electricity and natural gas. While no one can predict where energy prices will go, or when market volatility as it relates to electricity and natural gas prices will subside, what businesses can do is take smart steps to minimize budgetary risk through trusted procurement strategies, as well as implement technologies and solutions to reduce energy usage.
Get a Green-Apples-to-Green Apples Comparison
An integral component of an energy management strategy is to seek consultation regarding market timing, the procurement process, and suppliers and their contracts. Businesses that are proactive have a competitive advantage when addressing their energy supply needs. They are positioned to make more fully informed decisions that decrease costs and provide improved budget planning and forecasting.
A core component of risk management is mitigating exposure to volatile energy prices that can cause budget uncertainty and operating cost increases. Effectively managing energy supply contracts yields substantial cost reductions and improved business performance. For organizations in deregulated energy states, energy choice allows you to shop around for the most favorable rates. Getting a true green-apples-to-green-apples comparison of pricing across a pool of carefully vetted suppliers leaves you well-positioned to secure not only the best pricing, but also the most favorable contract terms.
Pro Tip: Beware of false promises. If it seems too good to be true, it just may be. The unfortunate downside to energy choice is the slew of bad actors that are too eager to take advantage of organizations that don’t have the time or knowledge to fully understand the complexities of energy procurement and supply contracts.
Act Sooner Rather than Later
A common misconception is on the timing of when energy supply agreements can be executed. Many believe they must wait until just before their current contract expires to decide what to do next. They are not aware they can begin the process much earlier, in fact, at any time during their current contract term without negotiating or harming their current contract.
Favorable electricity price trends also greatly determine when executives evaluate prices and suppliers, as well as when to go the route of a consultant. The question is, do you have adequate time and knowledge to track energy price trends and compare suppliers? For a business that consumes one million kilowatt hours of electricity annually, the cost difference between supplier price quotes could be several thousand dollars annually.
Pro Tip: Many utilities and suppliers require as much as 60-days’ notice of your intent to drop or add service, so do not wait until the last minute or you may be subject to additional fees. Further, energy prices become more volatile as the delivery date gets closer due to the impact of weather so starting early is generally the best approach.
Lighten Up, Brighten Up
Lighting is one of the largest electricity expenses in your buildings, which is why upgrading to LED lighting is one of the smartest decisions you can make. With on-bill funding, tax rebates and incentives, significant savings on your energy bill, and little to no operational disruption to install the new lighting, it’s often referred to as the ‘low hanging fruit’ for reducing energy costs and usage, and for good reason.
An LED retrofit is ideal for organizations with lights running 10-12+ hours a day and can drastically reduce current energy costs. What many often don’t realize is the amount of money and time being wasted on the maintenance of old, inefficient lighting. With LEDs guaranteed to last at least 5 years, that’s added savings to your already reduced energy bill. What’s more, LEDs have the ability to improve the visibility and aesthetic with brighter and cleaner looking lights, yielding an improved product, increased worker productivity, and improved safety.
Pro tip: Explore funding opportunities for LED retrofits. In addition to working with a partner that can effectively identify incentives and rebates, the right team can also bring funding opportunities to the table. Qualified clients can get an entire lighting project installed and funded without any upfront capital.
Curtail Your Way to Savings
The least expensive kilowatt hour is the one you don’t use. One way to curb costs is to curb usage. Demand response is a financially rewarding energy solution that reduces your organization’s energy usage during periods of high stress to the electric grid.
For large electricity consumers, particularly where electricity usage is consistent, it could be as simple as not running or curtailing energy usage during certain times of the day during peak events. In addition to realizing the savings associated with your energy curtailment, you’ll also receive payment for doing so, allowing you to maximize earnings while minimizing operational disruption.
Pro tip: As summer heat waves roll through, organizations can expect to receive peak alerts from their local utility or supplier. While no one can know which days or hours will end up being called for the year, reducing your demand can help lower energy costs by lowering your peak load contribution (PLC) tags. Peak demand typically arises in afternoon hours, during summer months. Usage can be reduced by dimming lighting, adjusting thermostat settings, shutting down equipment, or using onsite power generators.
Explore Your Options
Renewables are certainly on the rise. A quick scan of the news cycle reflects the increasing push for renewable energy sources, not to mention pressure many businesses are facing from stakeholders to reduce greenhouse gas emissions. The good news is there are a wide variety of options, from installing solar PV on your rooftops, adjacent land, or parking lots, to procuring green energy by way of renewable energy certificates (RECs). For organizations where solar is a good fit, the benefits include increased energy savings, reduced energy usage, improved resiliency and independence from the grid, and more.
Pro tip: Not all solutions are the right fit for every business, so taking a comprehensive look at your energy goals and balancing those with budgetary constraints and mounting pressure from your stakeholders, supply chain, or pending legislation, is key.
Think Big Picture
Whether you’re securing a new energy supply contract or exploring on-site generation, an effective energy management strategy is all-encompassing. Taking a comprehensive, holistic look at your current energy usage, as well as your operations, budget, and goals – both long and short term – positions your organization for continued success while minimizing budget uncertainty. There are many moving pieces to an effective energy strategy; by considering how all of those pieces fit together, you’ll be saving yourself valuable time and money.
Next Steps
Get the conversation started with an expert from APPI Energy. Our complimentary assessment comes at no upfront cost or obligation to you. Contact our team today at info@appienergy.com or 800.520.6685.