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How Much Does Energy Management Cost?

July 7, 2016 / by Max Dworkin

New business initiatives can have many different sources, but before anything is decided upon and put into action, the budget is always considered. Energy management is no different. No matter how much your company wants to take strategic advantage of energy management, at some point during the process you are going to have to address costs.

Unfortunately, uncovering the costs of energy management is not as easy as you might hope.

If you have been trying to figure out how much energy management costs, it won’t surprise you to learn that there is not a lot of good, reliable information out there.

And that has been by design.

Expensive Consultants

The historically complex nature of energy assessment has made it possible for energy management consulting firms and other professionals to obfuscate their costs.  Their consulting model relies on leveraging complexity in their favor.  

These consultancies are top heavy and rely on expensive human capital to solve problems.   Their work is often good, but it comes with a hefty price tag and once your initial agreement is complete, your support and execution leave with the consultants.  For larger enterprise customers, it is not uncommon to see energy consulting projects fetch hundreds of thousands of dollars.  Even more crazy is that these fees are often billed to customers before projects are implemented and savings are verified.

Hidden Costs Start with Energy Audits

Does your financial advisor charge you to come up with your initial assessment and plan before they are hired to manage your money?  

Most energy management consulting firms are still charging for this work and start their process with an energy audit, which can cost a significant amount. Some standards for ASHRAE audits have been introduced and they range from $.02-.$12/ sq. ft. depending on the facility size and complexity of the audit, but even those market supported estimates represent a huge range in terms of cost.

Even if you are able to nail down the exact pricing on an energy audit, it is likely you’ll be left to yourself to figure out how that audit cost will translate to actual savings -- because an energy audit itself doesn’t actually save you anything. In fact, in many cases an energy audit can raise a lot more questions than it can actually solve itself.   

Post-Audit Action Can Compound Costs

Few energy audits for businesses come with a plan you can follow to make the changes you need to make in order to save energy and position your business to strategically manage your energy decisions. Of course, most audit companies bank on the fact that their results will be so complex that you will hire them on after the audit to manage energy retrofits and ECM deployments.

Some companies choose to take their audit data and hire a full time energy management specialist to implement changes, but the fact is that

  1. Those specialists are difficult to find, with only 14,000 energy managers for 6 million buildings in the U.S., and
  2. They don’t come cheap.   

Most strategic energy programs can be executed in less than 3 years.  What will that employee do after that time and can they continue to be fully utilized?  

To avoid the employment and technical expertise risk, some companies look towards alternative models from Energy Service Companies and ESCOs. These companies typically only deal with the largest companies and organizations, and when they do, they often take 50% of the savings for 20 or more years. This is perhaps the most expensive way to implement energy projects and their models don't take into account the new lower cost financing options that are available to companies.

Down any of these paths, the odds are not in your favor of finding a cost effective solution to your energy management needs.

Budgeting for Energy Management

Despite the challenge of determining costs for energy management there are ways to make intelligent decisions about energy.  It is always smart to first determine a budget.  A simple approach is to have your budget be less than your 3 -5 year combined savings.  Most energy conservation and generation measures will provide savings for 10-20 years, so there is plenty of time to see excellent returns on your time and investment.

An easy way to set your budget is to pick a simple return horizon (typically 3-5 years) and a reasonable savings goal (10-30% reduction in energy costs).  From here, you can work backwards and determine your budget based on what your return requirements are.  Achieving your financial return requirement with regards to energy efficiency and generation used to be difficult, but with new financing options,  low cost strategic energy management programs,  cash flow positive solutions can be created from day one.

Complexity Should Not Equal Cost

Energy Management as a Service (EMAAS) is the most cost effective way to implement strategic energy management changes that can have a real impact on your bottom line, without being fraught with the any of negatives that come along with your company’s other options.

Just because something is complex on its surface does not mean it should inherently cost more. At Correlate, our aim is to eliminate the complexity of the energy management pricing model and provide a predictable, clear and simple path to energy savings and action. The Correlate pricing model is transparent from day one, starting with a complete and free energy assessment.

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Topics: energy costs, energy management, energy consumers

Max Dworkin

Written by Max Dworkin


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