How Energy Efficiency May Impact The Business?
Energy efficiency refers to using less energy to provide the same level of energy service. Implementing energy efficiency measures allows businesses to reduce energy waste and costs while maintaining or improving production output. There are many ways businesses can improve their energy efficiency, including upgrading equipment, optimizing processes, and implementing energy management systems. While the upfront costs of energy efficiency investments can sometimes be daunting, the long-term benefits often outweigh the initial expenses.
Improving energy efficiency can have a significant positive impact on a business’s bottom line by lowering operating costs. It also helps mitigate regulatory and environmental compliance risks. Additional benefits of increased energy efficiency include enhanced productivity and competitiveness. Overall, energy efficiency improvements represent an important strategy for companies looking to reduce costs, strengthen resilience, and meet sustainability goals.
Reduced Operating Costs
Implementing energy efficiency measures can significantly reduce a business’s operating costs. According to Energy5, by optimizing energy consumption, businesses can achieve major cost savings [1]. Upgrading to more energy-efficient lighting, HVAC systems, equipment, and appliances can lower utility bills. Proper insulation, weatherization, and sealing air leaks also decreases energy waste. The Department of Energy estimates 30% savings on utility bills from properly upgrading and maintaining HVAC systems alone [2]. Efficient operations and behavioral changes, like turning off lights and equipment when not in use, also trim energy costs. For utilities, encouraging customer energy efficiency generates significant savings through avoided infrastructure costs [3]. Overall, businesses can leverage energy efficiency upgrades and practices to substantially lower overhead expenses.
Improved Productivity
Improving energy efficiency in offices and buildings often leads to productivity gains for workers. This is because efficiency upgrades like better lighting, temperature control, and air quality create a more comfortable and productive environment.
Studies show that better lighting, such as from LED bulbs, improves visual acuity and reduces eye strain (source). Workers are able to complete tasks faster and with less fatigue. Temperature control ensures the office is not too hot or cold. Extreme temperatures are distracting and decrease mental acuity. Proper ventilation and air filtering provides fresh air and reduces exposure to allergens and pollutants. Employees take less sick time and are able to focus better on work tasks.
There is the “2-20-200” rule that for every $2 spent on energy efficiency $20 are gained in productivity and $200 in asset value (source). Investing in energy efficient upgrades like lighting and HVAC can have major payoffs for productivity and the bottom line.
Competitive Advantage
Implementing energy efficiency measures can give companies a competitive edge in appealing to environmentally-conscious consumers. Research shows that 66% of consumers are willing to pay more for sustainable products (Source). Energy efficient operations demonstrate a commitment to sustainability that consumers find compelling. Companies who make their facilities and processes more energy efficient can tout their green credentials in marketing materials and product labelling. This allows them to charge premium prices and gain market share from sustainability-focused buyers. Energy efficiency also makes companies eligible for eco-labels and environmental certifications that verify their efforts. Displaying such certifications on products is powerful social proof that sways purchase decisions. Ultimately, improving energy efficiency can be a strategic advantage in appealing to today’s environmentally-aware consumers.
Regulatory Compliance
Businesses must comply with various energy efficiency regulations and standards set by government agencies like the Department of Energy (DOE). According to the DOE, they establish energy-efficiency standards for appliances and equipment to reduce energy consumption and promote energy savings.
For example, the DOE sets minimum efficiency standards for common commercial equipment like commercial packaged boilers, commercial air conditioners, motors, transformers, and more. Companies must ensure the energy efficiency of their equipment meets these standards by obtaining DOE compliance certifications.
Additionally, there are state and local regulations like California’s Title 24 Building Energy Efficiency Standards that businesses must follow. By complying with energy efficiency regulations and standards, companies can avoid penalties and project delays.
Enhanced Workplace Safety
Implementing energy efficiency measures can significantly improve workplace safety in a number of ways. Proper lighting, ventilation, temperature control, and equipment maintenance all contribute to a safer work environment.
Upgrading to energy-efficient LED lighting provides better illumination for workers to see hazards and perform tasks safely. It also reduces glare and flickering that can cause eye strain and headaches. Proper lighting has been linked to increased productivity and lower accident rates (Source).
Good ventilation that brings in fresh air and removes pollutants is critical for employee health and comfort. Proper ventilation can reduce illnesses, allergies, and respiratory problems among workers. It also removes flammable vapors and fumes to lower fire hazards (Source).
Making HVAC and other equipment more energy-efficient keeps systems running properly to maintain indoor air quality, temperature, and humidity at safe levels. Well-maintained equipment is also less likely to fail or pose risks from electrical issues, leaks, or explosions.
By enhancing lighting, ventilation, temperature control, and equipment maintenance through energy efficiency, workplaces can significantly improve occupational health and safety.
Access to Incentives
Improving energy efficiency can open the door to valuable incentives and tax benefits that help offset upgrade costs. Many utilities offer rebates for installing energy-efficient lighting, HVAC systems, appliances, motors, and other equipment in commercial buildings (Source: Energy Efficiency Rebates for Commercial Buildings). The federal government also offers tax deductions up to $1.80 per square foot for buildings that achieve 50% energy savings compared to a code-compliant building (Source: Tax Incentives for Energy-Efficiency Upgrades in Commercial Buildings). Accessing these financial incentives can improve the return on investment for efficiency projects and accelerate upgrade timelines.
Risk Mitigation
Implementing energy efficiency measures can help mitigate risks from energy supply interruptions and price volatility (see Risk Mitigation in Energy Efficiency Retrofit Projects Using Performance-Based Contracting Mechanisms). By reducing overall energy demand through improved efficiency, a company can decrease its vulnerability to energy shortages or supply disruptions. For example, installing onsite renewable energy sources like solar panels, combined with energy storage, decreases reliance on the grid. Upgrading to more efficient HVAC and lighting systems also lowers electricity demand. If an outage or price spike does occur, an energy efficient building is better positioned to maintain critical operations with minimal disruption. Proactive risk management through energy efficiency gives a company more resiliency and ability to operate continuously.
Improved Asset Value
Implementing energy efficiency measures can significantly increase the asset value of homes, commercial buildings, and utility infrastructure. Studies show that energy-efficient buildings typically have higher property valuations and sell for more money compared to similar less efficient buildings. For example, research from the International Energy Agency found that green-certified office buildings had values that were about 16% higher per square foot than non-green buildings (https://www.iea.org/reports/multiple-benefits-of-energy-efficiency/asset-values).
The U.S. Department of Energy has developed an Asset Score program that provides a 1-100 ranking for a building’s energy efficiency. Buildings with higher Asset Scores have greater energy performance and typically higher market values. The score provides a uniform metric for comparing efficiency across different buildings (https://www.energy.gov/eere/buildings/building-energy-asset-score).
One study found that upgrading a commercial building to improve energy efficiency increased the property’s valuation by 7.2%. The increased net operating income after upgrades directly translated to higher asset value (https://wolfcre.com/the-impact-of-energy-efficient-building-upgrades-on-noi-and-asset-value/). Overall, investing in efficiency measures can provide excellent returns through higher building valuation.
Conclusion
In summary, implementing energy efficiency measures can provide numerous important benefits for businesses. Some of the key benefits highlighted in this article include reduced operating costs, improved productivity, competitive advantage, regulatory compliance, enhanced workplace safety, access to incentives, risk mitigation, and improved asset value.
Energy efficiency should be a priority for any business looking to reduce costs, maximize profits, and maintain a sustainable and responsible operation. The investments made today in energy-efficient equipment and practices can pay dividends for years to come through direct energy savings and many indirect benefits. With the right energy efficiency strategy, businesses can operate more profitably while also reducing their environmental footprint.
This article has shown that the advantages of improved energy efficiency extend far beyond simply cutting utility bills. There is a strong business case to be made for investing in energy efficiency, as it enables organizations to strengthen their bottom line, operations, workplace culture and brand reputation simultaneously.
