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Think of Energy as an Investment, not a Cost

February 10, 2015 By Linda Hardesty

A couple of stories last week focused on changing perceptions about business energy use: from thinking of it as an expense item to thinking of it as an investment opportunity.

A blog in the New York Times offered the example of Burton D. Morgan Hall, a 48,000-sq-foot building completed in 2003 on the campus of Denison University in Granville, Ohio. Even though it’s a new building, energy conservation technologies had advanced enough to make some retrofits economically beneficial. In 2012, the college invested about $108,000 to install new sensor-controlled heating and cooling systems and energy efficient lighting throughout the facility, reports the NY Times. The combined savings from gas and electric bills equal about $28,000 per year, resulting in a 26 percent return or a four-year payback. That’s better than most investments, and it’s low risk. The energy savings will continue for many years.

So why aren’t more building owners scurrying to reap energy efficiency dollars?

The NY Times blog says it’s because energy is usually thought of as a cost, not an investment, and the individuals who are best positioned to identify potential savings – operations and facilities managers – have little interaction with the people who control resources – CFOs and investment managers.

For higher education, The Sustainable Endowments Institute (SEI) is working to close the gap between college finance leaders and facility managers. SEI helps colleges establish Green Revolving Funds to treat energy efficiency projects as investments. The energy savings are reinvested into the Green Revolving Fund.

One college that has set up a Green Revolving Fund is Portland State. Through an initial investment of $500,000, the fund is being used to implement efficiency projects and reimburse energy savings in the campus utilities budget.

Also last week, a blog on Schneider Electric’s website said most CFOs see energy as a cost, not an investment, and it’s up to energy or facility managers to convince them differently.

Schneider’s blog gave some tips for how to do that, including specifying the percentage of utility cost savings, correlating kWh prices to cost savings, pointing out the importance to business continuity to have backup power systems, and focusing on the business case while restraining the urge to make presentations overly technical.

Takeaway: Energy managers and CFOs could look like heroes if they show ways to make money for their organizations, rather than cost money.

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