Cutting Operating Expenses with Efficiency

May 21, 2009

Daniel W. Parke
President
Lime Energy

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With corporate revenues falling, corporate energy bills are becoming even more glaring as a cost center and source of waste.

Commercial and industrial (C&I) buildings account for 43 percent of total U.S. electricity expenditures per the US Department of Energy. This represents a significant cost to the country in both corporate profits and avoidable GHG emissions. The stage is set for more energy efficiency projects in this downturn.

A recent report, and our own experience, suggests that the downturn may in fact be generating momentum for energy saving initiatives. The Economist Intelligence Unit recently published the results of a survey of 538 senior business executives and 18 in-depth interviews that “almost three-quarters (73 percent) of firms polled will make energy efficiency a high or moderate priority over the next two years in a bid to cut costs.”

The American Recovery and Reinvestment Act (ARRA) included significant support for such efforts and state-level Renewable Portfolio Standards (RPS) increasingly include energy efficiency goals and incentives for businesses. This government and utility money can be monetized easily by qualified energy efficiency vendors.

With governments and businesses pulling together toward a common goal of smarter energy use, experts in efficiency solutions – from assessment to design to construction – will be critical to ensure we are able to scale to meet our national goals, one project at a time.

Corporate executives in C&I markets are eagerly looking to cut operating expenses. Energy efficiency is one of the lowest-risk and least-painful means to cutting fixed costs. And it comes with the added benefits of improved facilities and work environments, reduced carbon footprints, and improved community and employee goodwill.

Although the mood is certainly cautious, discussions continue to show that energy efficiency is seen as a proven, immediate, verifiable, and economic solution that often has benefits beyond the simple payback. And the low risk factor when compared with some other “clean” technologies is even more important in today’s risk-averse climate.

Energy efficiency solution providers continue to announce strong pipelines, underscoring the continued confidence in this sector in part because of the multiple benefits of these projects compared to others. For example, a warehouse operation decreased its errors in picking items for shipment because the new lighting made shipping labels easier to see; and this added benefit saves significantly more in operating costs than the lower utility bill. In another example, an auto dealer was able to tie the environmental benefits of higher efficiency within the facility to the promotion of the Jetta TDI, a recent Green Car of the Year award winner.

Efficiency is one of the few growth sectors in our economy right now – and for good reason. It’s one of the few low-risk, high-return investments that companies can make in today’s turbulent markets. With energy costs rising faster than inflation, businesses continue to seek to control this runaway drain on profitability and turn to the experts in the field to make it happen quickly and for the least cost.

Given the shot in the arm from the American Recovery and Reinvestment Act of 2009, it is clear that policymakers are looking to push energy efficiency projects. They’ll need partners in the private sector to commit to retrofitting old buildings and service providers that are able to do big, national projects, if we are to meet our nation’s energy and environmental goals.

Daniel W. Parke is President of Lime Energy, a leader in energy efficiency and renewable energy design/build solutions. The company’s stock is traded on NASDAQ under the symbol LIME.

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