Renewables... for some it’s all about saving money
PUBLISHED: 15:21 15 July 2013 | UPDATED: 15:21 15 July 2013
What is one of your biggest overhead costs and likely to rise considerably above inflation every year for the foreseeable future?
Property costs in rent or maintenance and wage costs are going to rank highly but if you are a manufacturer or industrial occupier, the chances are the next in line is your energy costs. For many in the sector, energy and fuel spend can account for up to 10 per cent or more of overheads and yet is often ignored in terms of management time and attention.
Renewable energy sources, alternative generation, energy management, building and machinery performance as well as staff behaviour all need to work closely together in order to reduce costs. A concerted and co-ordinated effort on all these fronts can bring real benefit to the bottom line.
I have been working with a major manufacturer in Gloucestershire, a significant consumer of gas, which was using traditional gas fired boilers as the main heat source. A recent renewable energy audit showed that the capital investment in air source heat plant to replace the boilers had the potential to pay off the capital in less than 5 years and then, even better, go on to provide the heat they require at just over 25% of the current annual fuel bill. The combination of grants, incentives and selling energy back into the grid can combine to deliver real savings for many businesses.
A good example of saving money, by utilising the latest renewable technology, is the experience of a local manufacturer with a £1 million a year utility bill. Using a combination of management and procurement decisions, they were able to see a 10% reduction in the first year even before medium and longer term investment in renewables can be taken into account. That was a whopping £100,000 straight onto the bottom line.
Alternative generation by solar PV or wind turbine for electricity or solar hot water for heat or hot water supply are all now becoming established technologies with track records for delivering tangible benefits. More intrusive Ground Source heat pumps are a very efficient technology for those with the appropriate sites where the disruption and up front capital costs can be managed. Air Source is a good, cheaper alternative, much easier to install for most commercial organisations and those in leased property, although less efficient than Ground Source. Other appropriate technologies include wood chip as a fuel source where a timber merchant client now has abundant heat off grid from waste materials and is exporting heat to their neighbours.
There was a rush of salesmen into a number of these areas and you will recall the domestic Solar PV market and the bubble caused by changes in incentives. However the benefit for commercial users is that the demand has helped drive developments in the quality of technology and improved performance, as well as tackling the capital costs.
Apply the same sound financial rigour to reducing energy spend as with any other piece of major procurement. Get an independent view of the whole range of all available technologies, combined with a proper understanding of how your business works and what may or may not best suit your needs. Remember, there is a lot you can do in looking at how your building and plant work, how your staff manage and control its operation and how you buy the energy you already require, before you start to look at alternatives. You can then identify which technologies in what possible combinations will work for you.
Shop around. Most of the sales pitch in the sector has not just been around a particular technology, but also a particular manufacturer. Not surprisingly there are tales of clients buying inappropriate technology or inefficient manufacture/model and discovering that they are not getting the pay back promised by the sales team or the energy generation they require.
Just taking one technology, such as Solar PV for electricity, there are many factors which can affect whether you achieve the full benefit and multiple manufacturers with different equipment that vary enormously in their efficiency and performance. Pay backs can vary by more than 10 years, and the efficiency of some units is only half that of others.
Accurate, timely and independent financial modelling and feasibility studies of a wide range of alternatives are the key to make sure you maximise the cost reduction benefits you can achieve from alternative generation. Combined with a whole business approach you will feel the full benefit of renewables on the bottom line.