Today’s low energy prices can lull us into a sense that we’re doing enough. But it is still possible–even likely depending on your location–that your business could pay less for energy. What steps can you take to be sure you’re not paying too much?
First of all, if energy isn’t your core business, it’s a good idea to seek an outside expert to help you evaluate whether you could be paying less for energy.
You should look for experts who have experience and technical knowledge–plus certifications that ensure they’re truly experts in the energy field.
For example, you should search for an expert who is a certified energy manager from the Association of Energy Engineers.
The expert you choose should be willing to prepare a preliminary energy analysis at no cost. Ask for an analysis comparable to an ASHRAE Level 2 audit, which identifies energy conservation measures and associated cost savings and payback.
When you’re evaluating your energy costs, be sure to think of both supply and demand. What can you do to lower your energy supply contract costs and what can you do to decrease your energy use?
For demand-side issues, you should conduct energy audits that give you a feel for the most appropriate and cost-effective measures. Keep in mind that energy efficiency yields permanent savings.
Generally, you’ll find that lighting upgrades are most cost-effective, and that if you combine lighting with mechanical upgrades to your HVAC equipment, you’ll likely be eligible for rebates and incentives that make these energy efficiency measures attractive.
On the supply side, find an expert to evaluate your supply contract. Are you getting the best deal? What is your risk exposure to rising prices?
While you’re evaluating your contract, be sure to compare apples to apples and ensure that all your quotes have the same cost components in the price, advises Chuck Hurchalla, president, Evolution Energy Partners.
“Some people might quote energy only, and leave out major components of the price, including capacity and transmission. In Pennsylvania, for example, they might leave out the gross receipts tax,” he explains.
Be sure to look hard at the risk written into the contract. In a full requirements contract, the supplier takes all the risk. Another option would be an 80-20 contract, in which the supplier takes on 80 percent of the risk.
Keep in mind that prices can spike dramatically. During the winter of 2014-2015, during the so-called Polar Vortex, extremely cold weather from the Arctic caused wholesale prices in the spot market for electricity and natural gas to hit all-time highs.
If you have a long-term contract with a supplier that has strong financial backing or significant generation, you’d not exposed to a Polar Vortex event.
In addition, make sure you understand your supplier’s demand charges. These charges will be high if you use a lot of power over a short period of time, as opposed to using power at a consistent rate.
“Find someone with significant experience and a strong relationship with a large pool of suppliers,” says Hurchalla.
Energy management goes well beyond understanding your bills or signing a low-cost supply contract. It’s important to consider your facility as a whole – its supply and demand. Seek help from a firm that can help you cut costs by both navigating energy markets and engineering your systems for maximum efficiency.