Energy cost reduction initiatives has many benefits for companies, not for profit and government organisations. Not least of which are financial savings, overall improvement to operational budgets and financial performance of an organisation. Some energy cost reduction strategies can achieve up to 50% reduction in utility costs – that’s nothing to sneeze at!
In addition to financial savings, there are other benefits to energy efficiency including: lower carbon emissions, uplift in corporate social responsibility profile, public relations, increased shareholder value and attract interest from potential investors.
In this post we take a brief look at seven of the many different ways to achieve energy savings. We then discuss two funding strategies to fund some of these initiatives – without paying a single cent or getting into debt.
Seven different ways to achieve Energy Cost Reduction
Energy cost reduction can be achieved through energy efficiency retrofit upgrades and implementing various other energy management and energy procurement strategies.
- Energy Assessments and Strategic Planning – while energy assessments don’t reduce costs directly, it often does form the basis of a business case to justify investment in improvements and upgrades. Assessments by qualified energy auditors coupled with strategic planning with an energy advisor can help build a framework for energy cost reduction initiatives in line with business objectives and sustainability targets.
- Sub-metering and IoT enabled sensors – installing sub-meters and internet-of-things sensors on major energy consuming assets can help provide valuable data on energy consumption
- Portfolio Energy Management & Building Insights – convert data from sub-meters and sensors into actionable intelligence with energy management platforms capable of machine learning and insights displayed in custom built dashboards and portals.
- Holistic energy efficiency retrofit upgrades – implement energy conservation measures through performance-based projects with fixed costs and guaranteed savings to ensure successful project outcomes.
- Building automation – review or upgrade building management and control systems for optimal energy efficiency outcomes.
- Energy procurement – purchase cheaper energy through accessing wholesale market rates power purchase agreements.
- Bill Verification – validate accuracy of fees and charges in all utility bills.
A Tier-1 Energy Service Company (ESCO) – such as 3E Group – can provide assistance with any one or all of the above in an end-to-end solution with integrated services in performance-based contracts – click here to learn more.
Implementing energy efficiency or energy cost reduction initiatives is both a prudent and admirable undertaking. Unfortunately, capital is not always immediately available to invest in energy cost saving initiatives. Like all investments however, energy cost reduction initiatives must be assessed on a business case basis in terms of what the return on investment is.
There are at least 7 different ways to fund energy efficiency projects.
Five of these ways are conventional funding strategies:
- Review and allocate budget
- Raise capital
- Accessing short term equity or using cash reserves
- Project financing or borrowing money
- Enter leasing arrangements for energy efficiency upgrades
However, some organisations are not in a position to allocate capital funds or take on more debt, or simply have other priorities for funding.
Alternative funding options for energy efficiency projects
Fortunately, there are at least two alternative ways to fund energy cost reduction initiatives.
These funding solutions are neither equity nor debt based instruments. And in certain cases, will not require any upfront capital to implement energy cost reduction initiatives.
The first solution is known as Energy Service Agreements.
The second, is taking advantage of various grants and rebates offered by federal and state governments across Australia.
Energy Service Agreements are a robust project funding solution, ideally suited for organisations wanting to implement large energy efficiency projects but don’t have the capital or debt capacity to invest in such.
- No debt is incurred and zero up-front cash is required;
- Capital upgrades are paid for and maintained by an Energy Services Company (ESCO) like 3E Group who charges fees only if savings are achieved.
- An Energy Services Agreement is neither a loan nor capital/ operating lease – the ESCO delivers energy savings in exchange for a service fee.
- Off-Balance sheet treatment – an Energy Services Agreement is technically not a liability and therefore may not appear on an organisation’s balance sheet
- Typically a 7- 15 year contract that is structured to be cash flow positive, where service fees are less than total energy savings.
Government grants and rebates
State and Federal Governments have various grant programs available for energy cost reduction and carbon reduction initiatives. Some grants are co-contribution schemes while other are free support if certain eligibility criteria are met. There’s constant movement and updates to these various grants and rebates schemes, so it’s recommended you contact a grants specialist to discuss opportunities specific to your situation.
As an example, some grant programs offer up to $30,000 in free energy efficiency upgrades while other programs offer much more depending on what state and industry your business is in.
At 3E Group, we want to do as much as we can to provide additional support to businesses in these unprecedented times. For a limited time, 3E Group is offering a FREE Grants Assistance Support Package where our team assists you by preparing and submitting grant applications on your behalf. For information and to register your interest in this unique offer, please visit this link
NSW Business Energy Coaching Grant
Other grant programs such as the NSW business coaching grant is a strictly limited time offer to NSW businesses only – applications close early July 2020 – Be sure to register your interest prior to 30 June to avoid missing out.