Operations Management

Tips to Save on Energy Bills

Written by Gautam Patil for Gaebler Ventures

Skyrocketing crude and energy prices are eating into the bottom lines of small and large business alike. Energy efficiency and conservation have a direct impact on profitability and make businesses environmentally benign thereby mitigating risk related to public grievances.

Energy bills typically constitute about 5% to 25% of total costs depending on the type of business.

Tips to Save on Energy Bills

For energy intensive manufacturing setups it may be on the higher side while for service oriented businesses they constitute a minor cost.

Minor or major, a reduction in energy bills has a direct impact on profit margins. Businesses worldwide have been able to achieve significant savings using simple technologies and very low capital outlays. Some such solutions have been presented here to help businesses of all sizes cut down their energy costs.

Measure energy consumption

This is the most important and usually the least remembered step towards energy conservation. Unless each and every unit of energy consumed is accounted for, it is not possible to point out inefficiencies.

It is not uncommon to uncover a rogue air conditioning unit which abnormally inflates energy bills due to a faulty compressor. For a small fee, energy audit personnel can precisely state the dollar amount of electricity consumed by a piece of equipment or the peripherals in an office. This could be analyzed to create benchmarks like the ceiling for energy unit consumption of an office per personnel or the units of products produced per unit of energy consumed.

Use natural light

Sunlight is the most neglected source of light and heat and has great potential to shave a percentage points off the energy costs. Advanced materials now make it possible to control the amount of light and heat entering a building and such investments are known to provide attractive rates of return even after adjusting for risk.

Minor structural modifications may be required and there is also empirical evidence of improvement in productivity of employees working in well day-lit places which is an additional benefit.

Go green

What most industries discard as waste can usually be tapped for producing heat and electricity. Biomass is one such example. Sugar manufactures routinely use bagasse (dry and dusty pulp that remains after extraction of juice from sugar cane) to augment their energy supplies while wood chip waste is a favorite for co-generation (firing along with coal). Solar power is now being increasing used for process heating applications such as drying coffee beans and water heating.

Regulatory changes now make it possible for businesses to install capacities - for instance, wind power, which has a proven track record of good returns - and tap the power elsewhere by paying transmission and distribution costs to the utility company. Also, the reduced carbon emissions provide the business with carbon credits that it can trade with others. This also hedges businesses against increasing power tariffs and may prove to be a source of revenue after a few years.

In the coming years, energy efficiency and conservation will no longer remain a voluntary reaction to climate change but an added source of competitive advantage. Businesses that start early will enjoy a good head start and not risk inviting the heavy handed regulator's attention.

Gautam Patil is a recent MBA graduate from the Indian Institute of Management, Bangalore. In addition to serving as a contributing writer for Gaebler.com, he will join the consulting firm Oliver Wyman at their London office.

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