SECRET BENEFITS FROM ENERGY CONSERVATION
SECRET BENEFITS FROM ENERGY CONSERVATION
For this example, consider a large school with 10,000 light fixtures. Through a variety of energy conservation measures, it is common to reduce consumption by 25%. First, we will calculate the dollar savings from electricity conservation. Then, we will show the “secret benefits”, which have impacts beyond the utility budget.
Assume the fluorescent lights are relatively new and consume 60 watts per 2-lamp fixture and operate 5,000 hours per year . Our baseline energy consumption is:
= (5,000 hrs/year)(.060 kW/fix)(10,000 fix.)
= 3,000,000 kWh/year
If the school pays approximately $.08/kwh, then the dollars spent on electricity for this lighting system:
= $240,000/year.
Thus, a 25% reduction from the baseline usage would equal: 750,000 kWh/year, or $ 60,000/year in savings.
Benefit A: The Value of Extended Equipment Lives (reducing capital budgets)
If lights are used 25% less, the lighting system (ballasts) should last about 25% longer. A lighting ballast is rated for 60,000 hours of operation. If the school operates the lights 5,000 hours per year, they would need to replace the ballasts at the 12th year and dispose of the old ballasts. If there are 5,000 ballasts, each costing $25 to $55 (material, installation and disposal costs vary by geographic location), the replacement cost (minimum) at the 12th year would be:
= ($25/ballast)(5,000 ballasts)
= $125,000
Annualized replacement cost would be:
= $125,000)(1/12 years)
= $10,417/year
With a use rate of only 3,750 hours/year (a 25% reduction), the ballasts should last 16 years. This would reduce the annualized replacement cost to:
= ($125,000)(1/16 years)
= $7,813/year
Thus, the Annualized Savings, (calculated as the difference between the original replacement cost minus the reduced replacement cost) are:
= $10,417/year - $7,813/year
= $2,604/year (at $25 per ballast)
Using the same equations, at $55/ballast, the annualized savings, (from replacing at 16 years instead of 12 years) would be:
= $5,729 per year.
Thus, due to extended equipment life, we have reduced the annualized replacement cost by a minimum of $2,604/year to a maximum of $5,729/year.
Benefit B: The Value of Reduced Maintenance Costs (operating expenses)
If the lights are used 25% less, the lamps should last about 25% longer . A typical fluorescent lamp life is 20,000 hours. With a use rate of 5,000 hours per year, the school would need to replace lamps at the 4th year. If there are 10,000 lamps, each costing $3 to $5 (material, installation and disposal costs vary by location), the replacement cost (minimum) at the 4th year would be:
= ($3/lamp)(10,000 lamps)
= $30,000
Annualized replacement cost would be $30,000/4 = $7,500.
With a use rate of only 3,750 hours, the lamps should last 5.3 years, thereby reducing the annualized replacement cost to:
= $30,000/5.3 years
= $5,660/year
Thus, Annualized Savings are:
= $7,500 - $5,660/year
= $1,840 per year (at $3/lamp)
Using the same equations, at $5/lamp, the re-lamping cost would be $50,000 and the annualized savings from replacing at 5.3 years instead of at 4 years would be = $3,066 per year.
Thus, due to extended lamp life, we have reduced the annualized maintenance cost by a minimum of $1,840/year to a maximum of $3,066/year.
Benefit C: The Value of Reduced Risk to Energy Supply Price Spikes
For example- if less energy is consumed; the operational budget is less vulnerable when electric/gas/heating oil prices hit their seasonal spikes. The avoided costs can be worth millions to a large organization.
Assume that on average, for 1 quarter of the year, energy prices are 25% to 50% higher ($.02 to $.04 more per kWh) due to seasonal/supply spikes.
If we are using less energy, we will pay less of a premium for the price spike. The avoided price spike premium is equal to:
=(price premium)(kWh saved)(premium period)
=($.02/kWh)(750,000 kWh/yr)(1/4)
= $ 3,750/year
Using the same equations, a 50% price spike would represent an avoided premium worth:
=(price premium)(kWh saved)(premium period)
=($.04/kWh)(750,000 kWh/yr)(1/4)
= $ 7,500/year
Thus, due to reduced risk from price spikes, the avoided premiums are $3,750 to $7,500 per year.
Benefit D: The Value of Carbon Credits
Organizations can claim emissions reductions from energy conservation. There are environmental markets where “emissions credits” (from energy conservation) can be sold, generating revenue for an organization. These markets are already liquid in Europe (and are motivated by carbon-related legislation). California and other states already require emissions reporting and reductions, and federal regulations are in process that will open the door to a similar trading environment in the United States.
According to the EPA, 1.37 lbs of CO2 are created for every kWh burned. So if we are saving 750,000 kWh/year, the avoided power plant emissions would be equivalent to :
=(750,000 kWh saved)(1.37 lbs of CO2/kWh)
= 1,027,500 lbs of CO2 saved per year
Translating lbs to Metric Tons:
=(1,027,500 lbs CO2)(.000454 Metric Tons/lb)
= 466.5 Metric Tons of CO2 saved per year
These avoided power plant emissions could be claimed as “carbon credits” and sold to another party who wants to buy “carbon credits”.
Assuming a market price of $6 per metric ton , the additional revenue generated by selling the carbon credits would be:
=(466 Metric Tons of CO2/year)($6/M-Ton)
= $ 2,799 per year
Using the same equations, at $30 per metric ton, the additional revenue generated by selling the carbon credits would be:
=(466 Metric Tons of CO2/year)($30/M-Ton)
= $ 13,980 per year
Thus, due to the new carbon market, there is a possible additional revenue stream worth a minimum of $2,799 to a maximum of $ 13,980 per year from selling carbon credits. In addition as carbon prices go higher…so does the value of this new revenue stream.
Benefit E: The Value of Enhanced Public Image
Organizations that conserve/manage energy (thereby reducing emissions) can differentiate themselves as “environmentally-friendly” and “good” members of a community. This can have tremendous political, strategic, competitive and morale-building value for organizational leaders. Many benefits (such as attracting and retaining better employees, faculty, students, clients, suppliers, etc.) result from being the “leader” in your field.
Although calculation of this value is difficult and is not generalized here, it can be far greater than any of the benefits mentioned previously. In today’s “green-minded” economy, many organizations have used “green” programs as a very effective marketing tool to differentiate themselves from the competition, achieve business objectives, secure and retain talent, improve productivity and capture a greater market share.
Energy saved can be translated into “equivalent environmental benefits” from avoided power plant emissions. These reductions/benefits can be published in various places to improve the organization’s green image with employees, clients, students, suppliers, distributors, shareholders and other groups relevant to the success of an organization.
Thus, due to energy conservation program, the school can claim environmental benefits equivalent to removing 1,008 cars off the road, thereby improving the school’s public image. Although not calculated here, the benefits of attracting better faculty, students, employees, etc., could far out-weigh all the benefit estimates in this article. A free calculator that estimates the equivalent environmental benefits can be downloaded from the author's website.
Benefit F: The Value of Reduced Risk of Environmental/Legal Costs
If assets are replaced less frequently, an organization will generate less waste and be less vulnerable to environmental regulations governing disposal. Greater environmental regulations are inevitable and unforeseen legal costs can pose a significant expense and political risk.
Although calculation of this value is also difficult and is not generalized here, it can be very significant. The risk is real, but unknown. This is demonstrated by environmental disasters at Union Carbide, Exxon etc.. It is also interesting to note that Exxon’s penalties and fees were 4 times the actual clean-up costs for the Valdez oil spill.
CONCLUSION
This article has presented additional benefits from energy conservation. The example described an energy conservation project that was achieving a 25% reduction in electrical consumption from the lighting system. Beyond obvious energy savings, the “secret benefits” A through F yield additional value worth $10,993 to $30,275 per year. This is equivalent to a minimum 18% improvement from the original estimated savings of $60,000 per year. In other words, if we value the secret benefits as worth only an additional $10,993 this represents a minimum improvement of 18% to our energy savings of $60,000.
Finally, all estimates in this article only included the quantifiable “secret benefits” (benefits A though D). Actual values could be much higher when accounting for enhanced public image and a reduction in legal and environmental risks (benefits E and F).
For the full publication, please see [Strategic Planning for Energy and the Environment, 2008 (In Press)]
SECRET BENEFITS FROM ENERGY CONSERVATION - To learn more about this author, visit Eric A. Woodroof's Website.
Like this article? Share it with your friends
A SIMPLE EXAMPLE TO DEMONSTRATE THE “SECRET BENEFITS”
For this example, consider a large school with 10,000 light fixtures. Through a variety of energy conservation measures, it is common to reduce consumption by 25%. First, we will calculate the dollar savings from electricity conservation. Then, we will show the “secret benefits”, which have impacts beyond the utility budget.
Assume the fluorescent lights are relatively new and consume 60 watts per 2-lamp fixture and operate 5,000 hours per year . Our baseline energy consumption is:
= (5,000 hrs/year)(.060 kW/fix)(10,000 fix.)
= 3,000,000 kWh/year
If the school pays approximately $.08/kwh, then the dollars spent on electricity for this lighting system:
= $240,000/year.
Thus, a 25% reduction from the baseline usage would equal: 750,000 kWh/year, or $ 60,000/year in savings.
Benefit A: The Value of Extended Equipment Lives (reducing capital budgets)
If lights are used 25% less, the lighting system (ballasts) should last about 25% longer. A lighting ballast is rated for 60,000 hours of operation. If the school operates the lights 5,000 hours per year, they would need to replace the ballasts at the 12th year and dispose of the old ballasts. If there are 5,000 ballasts, each costing $25 to $55 (material, installation and disposal costs vary by geographic location), the replacement cost (minimum) at the 12th year would be:
= ($25/ballast)(5,000 ballasts)
= $125,000
Annualized replacement cost would be:
= $125,000)(1/12 years)
= $10,417/year
With a use rate of only 3,750 hours/year (a 25% reduction), the ballasts should last 16 years. This would reduce the annualized replacement cost to:
= ($125,000)(1/16 years)
= $7,813/year
Thus, the Annualized Savings, (calculated as the difference between the original replacement cost minus the reduced replacement cost) are:
= $10,417/year - $7,813/year
= $2,604/year (at $25 per ballast)
Using the same equations, at $55/ballast, the annualized savings, (from replacing at 16 years instead of 12 years) would be:
= $5,729 per year.
Thus, due to extended equipment life, we have reduced the annualized replacement cost by a minimum of $2,604/year to a maximum of $5,729/year.
Benefit B: The Value of Reduced Maintenance Costs (operating expenses)
If the lights are used 25% less, the lamps should last about 25% longer . A typical fluorescent lamp life is 20,000 hours. With a use rate of 5,000 hours per year, the school would need to replace lamps at the 4th year. If there are 10,000 lamps, each costing $3 to $5 (material, installation and disposal costs vary by location), the replacement cost (minimum) at the 4th year would be:
= ($3/lamp)(10,000 lamps)
= $30,000
Annualized replacement cost would be $30,000/4 = $7,500.
With a use rate of only 3,750 hours, the lamps should last 5.3 years, thereby reducing the annualized replacement cost to:
= $30,000/5.3 years
= $5,660/year
Thus, Annualized Savings are:
= $7,500 - $5,660/year
= $1,840 per year (at $3/lamp)
Using the same equations, at $5/lamp, the re-lamping cost would be $50,000 and the annualized savings from replacing at 5.3 years instead of at 4 years would be = $3,066 per year.
Thus, due to extended lamp life, we have reduced the annualized maintenance cost by a minimum of $1,840/year to a maximum of $3,066/year.
Benefit C: The Value of Reduced Risk to Energy Supply Price Spikes
For example- if less energy is consumed; the operational budget is less vulnerable when electric/gas/heating oil prices hit their seasonal spikes. The avoided costs can be worth millions to a large organization.
Assume that on average, for 1 quarter of the year, energy prices are 25% to 50% higher ($.02 to $.04 more per kWh) due to seasonal/supply spikes.
If we are using less energy, we will pay less of a premium for the price spike. The avoided price spike premium is equal to:
=(price premium)(kWh saved)(premium period)
=($.02/kWh)(750,000 kWh/yr)(1/4)
= $ 3,750/year
Using the same equations, a 50% price spike would represent an avoided premium worth:
=(price premium)(kWh saved)(premium period)
=($.04/kWh)(750,000 kWh/yr)(1/4)
= $ 7,500/year
Thus, due to reduced risk from price spikes, the avoided premiums are $3,750 to $7,500 per year.
Benefit D: The Value of Carbon Credits
Organizations can claim emissions reductions from energy conservation. There are environmental markets where “emissions credits” (from energy conservation) can be sold, generating revenue for an organization. These markets are already liquid in Europe (and are motivated by carbon-related legislation). California and other states already require emissions reporting and reductions, and federal regulations are in process that will open the door to a similar trading environment in the United States.
According to the EPA, 1.37 lbs of CO2 are created for every kWh burned. So if we are saving 750,000 kWh/year, the avoided power plant emissions would be equivalent to :
=(750,000 kWh saved)(1.37 lbs of CO2/kWh)
= 1,027,500 lbs of CO2 saved per year
Translating lbs to Metric Tons:
=(1,027,500 lbs CO2)(.000454 Metric Tons/lb)
= 466.5 Metric Tons of CO2 saved per year
These avoided power plant emissions could be claimed as “carbon credits” and sold to another party who wants to buy “carbon credits”.
Assuming a market price of $6 per metric ton , the additional revenue generated by selling the carbon credits would be:
=(466 Metric Tons of CO2/year)($6/M-Ton)
= $ 2,799 per year
Using the same equations, at $30 per metric ton, the additional revenue generated by selling the carbon credits would be:
=(466 Metric Tons of CO2/year)($30/M-Ton)
= $ 13,980 per year
Thus, due to the new carbon market, there is a possible additional revenue stream worth a minimum of $2,799 to a maximum of $ 13,980 per year from selling carbon credits. In addition as carbon prices go higher…so does the value of this new revenue stream.
Benefit E: The Value of Enhanced Public Image
Organizations that conserve/manage energy (thereby reducing emissions) can differentiate themselves as “environmentally-friendly” and “good” members of a community. This can have tremendous political, strategic, competitive and morale-building value for organizational leaders. Many benefits (such as attracting and retaining better employees, faculty, students, clients, suppliers, etc.) result from being the “leader” in your field.
Although calculation of this value is difficult and is not generalized here, it can be far greater than any of the benefits mentioned previously. In today’s “green-minded” economy, many organizations have used “green” programs as a very effective marketing tool to differentiate themselves from the competition, achieve business objectives, secure and retain talent, improve productivity and capture a greater market share.
Energy saved can be translated into “equivalent environmental benefits” from avoided power plant emissions. These reductions/benefits can be published in various places to improve the organization’s green image with employees, clients, students, suppliers, distributors, shareholders and other groups relevant to the success of an organization.
Thus, due to energy conservation program, the school can claim environmental benefits equivalent to removing 1,008 cars off the road, thereby improving the school’s public image. Although not calculated here, the benefits of attracting better faculty, students, employees, etc., could far out-weigh all the benefit estimates in this article. A free calculator that estimates the equivalent environmental benefits can be downloaded from the author's website.
Benefit F: The Value of Reduced Risk of Environmental/Legal Costs
If assets are replaced less frequently, an organization will generate less waste and be less vulnerable to environmental regulations governing disposal. Greater environmental regulations are inevitable and unforeseen legal costs can pose a significant expense and political risk.
Although calculation of this value is also difficult and is not generalized here, it can be very significant. The risk is real, but unknown. This is demonstrated by environmental disasters at Union Carbide, Exxon etc.. It is also interesting to note that Exxon’s penalties and fees were 4 times the actual clean-up costs for the Valdez oil spill.
CONCLUSION
This article has presented additional benefits from energy conservation. The example described an energy conservation project that was achieving a 25% reduction in electrical consumption from the lighting system. Beyond obvious energy savings, the “secret benefits” A through F yield additional value worth $10,993 to $30,275 per year. This is equivalent to a minimum 18% improvement from the original estimated savings of $60,000 per year. In other words, if we value the secret benefits as worth only an additional $10,993 this represents a minimum improvement of 18% to our energy savings of $60,000.
Finally, all estimates in this article only included the quantifiable “secret benefits” (benefits A though D). Actual values could be much higher when accounting for enhanced public image and a reduction in legal and environmental risks (benefits E and F).
For the full publication, please see [Strategic Planning for Energy and the Environment, 2008 (In Press)]
SECRET BENEFITS FROM ENERGY CONSERVATION - To learn more about this author, visit Eric A. Woodroof's Website.
Like this article? Share it with your friends
 | |
 |
No article feedback found. |
| |
Leave Your Feedback |
 | |
| |||
George LudwigGeorge Ludwig is a recognized authority on sales strategy and peak performance psychology. An international speaker, trainer, and corporate consultant, he helps clients like Johnson & Johnson, Abbott Laboratories, Northwestern Mutual, CIGNA, and numerous others improve sales force effectiveness and performance. Though it's George's strategies and processes that help corporations increase productivity and performance, it's his tremendous energy and dynamism that spark the transformation. Again and again, clients remark on his amazing ability to unleash human capacity and inspire men and women to break out of their comfort zones. The result is a whole new type of salesperson. His customized presentations teach achievers to make stunning advances in their lives. From helping salespeople realize cherished dreams to helping corporations exponentially accelerate revenue streams, George Ludwig leaves audiences and individuals empowered, emboldened, and clamoring for more. George is the best-selling author of Power Selling: Seven Strategies for Cracking the Sales Code and Wise Moves: 60 Quick Tips to Improve Your Position in Life & Business. - Visit George Ludwig's Website |
|||
|
To learn more about the Evan Elite Author Program please contact us. | |||
 | |
|  |
Subscribe to Eric's articles
 | |
|
|  |
 | |
|
| |
 | |||||||
|
 | ||
 |
||
 |
||
 |
||
|
| ||
 |
| Have you written articles that would be of value to entrepreneurs? Become an expert on our site by publishing them! Expose yourself to a wide audience, drive more traffic to your website and get more sales! Click Here for details. |
|
|
 |
| Modeling the Masters: Learn the true secrets behind Walt Disney's business success factors & grow your company! Video produced by Phanta Media |
|
|
 |
"Learn straight from Evan how you can Make a Full Time Income (And More) from a Website"
Click Here To Learn More |
|
|
|
|
Get advice & tips from famous business owners, new articles by entrepreneur experts, my latest website updates, & special sneak peaks at what's to come!
|
|
|
 Adopting Creative Thinking Residual Income Start-Up Capital Estimate Inspiration Business Plan Managing Customer Relationships |
|
 | ||
 |
Top 50 Niche Blogs 2009
Top 50 Niche Blogs 2009 | |
 |
Guide To ERP Software
Business Management Software | |
| ||
 | ||||
| ||||
|
| ||||
| ||||
|
|
|
|
|
||||||||||||
|
Email us your ideas on how to make our website more valuable! Thank you Sharon from Toronto Salsa Lessons / Classes for your suggestions to make the newsletter look like the website and profile younger entrepreneurs like Jennifer Lopez and Sean Combs!
|
|
|
| ||||||||||||
| ||||||||||||
|
|
||||||||||||