Energy Purchasing: Five Mistakes To Avoid

By Nate Kessman

The advent of new technology coupled with an increasing focus on sustainability and tightening regulations has all led to the broadening of the facility management role. Due to these factors, many facility executives are beginning to oversee more departments than they had in the past. Responsibilities may now include directing maintenance and facility staff as well as overseeing security, janitorial, or groundskeeping crews and duties. As facilities improve their engineering, architectural services, and IT and telecom systems, the facility professional’s responsibilities become more abundant and specialized. FE-WebOnlylogo

Energy purchasing has traditionally been, and continues to be, an important aspect of facility management. A focus on key performance indicators (KPIs) and budgeting for expenses both known and unknown are key components to a facility professional’s toolkit. According to National Grid, energy represents about 19% of total expenditures for a typical office building. With lighting, heating, and cooling consuming 54-71% of total energy use depending on climate, this raises the question: What steps are successful facility managers taking to control and reduce these costs?

Here are five common mistakes facility professionals should avoid:

1. Being an “energy manager” instead of a “facility manager:”
Your time should be focused on your facility’s KPIs, so working with an energy partner that you can easily communicate your ideas and goals, along with one who understands your tolerance for risk, is key. Inevitably all energy contracts expire. It’s crucial to know how renewal will be handled as well as what the contract indicates will happen to your rate structure at the end of a given contract. Does the supply service default to a volatile variable rate in the middle of the summer or winter? Or, will you be back in the hands of the local utility service at the end of the term? Although not as prevalent, there is also a possibility that your contract will renew on a fixed rate and term. Using an energy partner allows you the advantage of having a dedicated advisor work on your behalf and will manage renewals to avoid high risk pricing scenarios.

2. Overlooking benchmarking energy and water usage:
The process of documenting and filing energy and water usage through the U.S. ENERGY STAR website should be the first step towards efficiency. Benchmarking provides a base number for energy usage and costs, while also comparing your property to similar properties in the area. Once you have baseline numbers you can begin to compare usage and cost year over year to determine whether or not the facility is following a sustainable plan, or if you should reevaluate your energy usage.

Photo: Great Eastern Energy

3. Settling for the “lowest price:”
We all know that pricing is an important factor when it comes to commodity procurement, but it shouldn’t be the most important factor. Oftentimes contract terms and supplier flexibility over the long-term will outweigh the short-term benefit of a low price. Bandwidth and usage restrictions (penalties for using more or less energy during a certain period of time) can be devastating during periods of severe weather, so make sure that bandwidth restrictions are structured and priced to fit your needs. Paying a bit more today might help avoid unwanted charges in the future.

4. Not addressing efficiency projects in order of importance:
Lighting and HVAC can eat up to 70 cents for every dollar spent on energy. If you are looking at co-generation systems and haven’t upgraded all of the lighting in your facility yet, or invested in the most efficient HVAC equipment, it might be time to pump the brakes. Work with your advisor to develop a plan that acts as a roadmap for projects and sets realistic goals in regards to efficiency and usage reductions. It makes no sense putting a Ferrari engine in a Volkswagen. Look at the largest most expensive projects only after other projects have been completed.

5. Ignoring the sun:
Solar arrays (power systems designed to supply usable solar power) work to offset both electricity consumption and demand costs by producing electricity using solar panels that store captured energy in batteries. This option also reduces your carbon footprint because the electricity being produced doesn’t use fossil fuels. Solar energy can be a key component in a business becoming more sustainable.

Understanding that the long-term savings are significant, it’s important to be aware that solar arrays do carry upfront costs, which will depend on the size of the system and specific application. Solar PV systems (solar power by means of photovoltaics) can cost up to $7 per installed watt. Typically, the larger the system, the lower price per watt. Large commercial systems are typically priced below $4 per watt.

There are various ways to finance a solar system, ranging from no money down to fully absorbing the cost. Tax incentives can be realized through the installation, which will offset a significant amount of the upfront cost.

Check with your local utility to see what solar incentives are offered in your area. Another way to offset a facility’s carbon footprint is by purchasing clean energy through Renewable Energy Credits (RECs). RECs work by guaranteeing that the amount of energy used in a facility is equal to the amount being produced elsewhere in the grid through renewable energy resources such as solar, hydroelectric or biomass. There are many different types of RECs, some of which go through a stricter certification process than others.

Adding a simple strategy based on the points discussed in this article is great way to enhance a facility’s ability to better manage energy costs. A trusted energy partner can be a valuable sounding board as you progress and hopefully reduce the amount of energy consumed by your facilities.

Nate_Kessman-headshotKessman is vice president of business development at Great Eastern Energy, an energy services company based in Brooklyn, NY. Having joined the company in 2010 as director of business development, Kessman has used a team approach to help grow new markets and improve the customer experience. He is a graduate of Johnson and Wales University in Providence, RI, where he studied the Culinary Arts and earned a Bachelor’s Degree in Business Management.