Problem 2: Energy Costs just aren’t that big, right?

This is the third in a series of five posts.

In this series of posts, we’re discussing four people problems with energy:   (1) energy is mysterious; (2) dollar costs are not big enough for many CFO’s to focus on and costs are invisible to almost everybody else; (3) energy management requires basic management skill; and (4) it takes effort to harvest good stories that we need to build will and enthusiasm to get more people on board.

In this post, we’ll focus on problem 2–energy costs don’t make a big enough impression on people.

Let’s tackle the CFO perspective first.

In organizations other than energy-intensive manufacturing, energy costs are not in the top two or three budget categories.   For organizations in health care and education, energy costs will typically be 3% or less of an operating budget.

In tough economic times, organizations may not have the capacity to focus on relatively small portions of their expenses.    It’s remarkable that so many organizations do try to manage energy use more intelligently.

There are least two dollar reasons to go work to reduce energy expenses.  First, even if energy is a relatively small amount of a budget, reducing energy costs yields dollars that can be applied to the real mission of the organization.   Second, you should also consider “equivalent revenue” arithmetic to help make the case for energy management.   If you know your organization’s operating margin (the difference between revenue and expenses, as a percent of revenue), you can make the translation.   For example, a healthcare organization with an operating margin of 5% requires $20 dollars of revenue to get one dollar of income after expenses.   So if the organization saves $200,000 in energy costs, this is equivalent to increasing revenue by 20 x $200,000 = $4,000,000.

What about the people who can most affect energy use in their organizations?  Here we’re talking about facilities staff and end users.  As a rule,  the accounting department sees the bills and few others get the cost information presented regularly.  A first step in managing costs is knowing costs, so there’s a big opportunity in reaching larger numbers of staff.

But wait–energy has more costs than just dollars.

What about climate impacts?  Hardly any utility bills include the carbon emissions associated with the energy used.   Carbon dioxide is not only a colorless gas, it’s still treated as invisibly zero in most billing systems.  When carbon emissions are calculated, they often show up in special reports, not right at hand.

Here’s what Energy Stewards does to solve problem 2 by making costs visible and easier to understand.

1. Costs are visible for an entire organization and for individual buildings.  You can see total dollars as well as dollars per square foot, which is particularly meaningful in buildings with 12 inch square floor tiles–just look at a tile and imagine the money from the cost per square foot figure on every tile in the building.



2. All energy graphs can be plotted in terms of dollars or dollars per square foot and there are multiple ways to compare costs by energy type.

3.  Energy use per square foot can be translated into CO2 units.  For each building, Energy Stewards uses ENERGY STAR®’s emissions calculator to estimate total emissions (in tons of carbon dioxide equivalents; click here for a quick explanation of how ENERGY STAR does the arithmetic.)







Summary and Next Post  If you can make energy less mysterious and educate key leaders and staff about the dollar and environmental costs, you’ve got the foundation for better use of energy.    You still have to act differently to use energy more intelligently–a management challenge.   We’ll address the third problem, management basics, in the next post.

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