Green Marketing Blog - the business of energy efficiency

How To Build A Business Selling Energy Efficient Solutions

Posted on Fri, Jul 29, 2011

Can You Make A Business Out Of Marketing Energy Efficient Solutions?

Yes, Now Is the Time To Build An Energy Efficiency Business

For the past year, I have been researching the energy savings field.  The reason I How-To-Build-A-Business-With-Energy-Efficiencywas doing this is the fact that my family owns an electrical contracting company and we were looking for ways to expand the customer base so that the company would be less likely to experience the cyclical demands of our top two customers. 

Although I never really have found electrical work exciting, the journey has led down a path of both excitement and disappointment.

Show Business Owners How to Save Money With Energy Efficiency Improvements

The exciting part, is the shear ability for building owners to make improvements in their facilities and have a real impact on more than just the energy savings of their facility. 

Teach Business Owners Where The Cost Of Energy Comes From

What many don’t think about is where the energy is coming from.  No one thinks about what fuel is driving that energy.  Most don’t think about how flipping that switch and leaving it on when not needed, may actually be related to the ice melting in Antartica. 

Most people think that they can’t change that from happening and it must be someone else’s fault, not mine.  I used to be the same way, until I learned about how much energy we can actually save, which not only saves us money, but also reduces the impact on the growning demand of our electrical grid and the significant impact of our environment to provide the ability to simply flip a switch. 

Show Them The Money When They Say..."But I Don't Have Any Money...."

Then the thought turns to money.  “I don’ t have any and I don’t want to spend any”.  Those are business owners who still think that business is going to return to normal. 

Energy management is an opportunity.  It is an opportunity to have an impact on the quality of our lives, the amount of money we have to make in our businesses and what we are leaving behind to our grandchildren. 

You can make a difference.  My goal is to help you understand the possibilities.  If you don’t consider them, then that is up to you.  But  you are missing the boat if you don’t look into ways that you can save energy. 

The fact is that if you don’t make any changes, you will forego the money to the utility.  Nothing will change there unless you make the change. 

They want the change.  They understand how fragile the electrical grid is and they see the increase in demand in the coming years. 

Show Them How Small Changes = BIG Savings

The savings can come from small changes, but the most significant impact comes from re-trofitting existing systems.   There are a number of ways to have the improvements pay for themselves and you can find a lot more information about it on my site, but I am going to share a few ways that you can pay for your own energy upgrade. 

A Sample Energy Efficiency Project

You own a building that is 20,000 Square Feet and it is more than 10 years old.  You have a quote of $25,000 to upgrade the lighting in the building. 

Let’s assume we are upgrading 120 400Watt Metal Halide fixtures. 

Your cost of energy is .08 per kilowatt hour.

The Energy Policy Act of 2005 – This allows a building owner to take a straight tax deduction of $1.80 per square foot on your facility. 

The deduction is divided into three areas; Electrical, HVAC and the Building envelope.  Each of the areas qualifies for a $.60 per square foot deduction. 

In the case of lighting, consider the following example;

To Calculate your potential tax savings from The Energy Policy Act of 2005:

You would simply take 20,000 x $.60 per square foot to get a $12,000 tax deduction.  That means any improvement up to $12,000 would be a straight write off in the year you make the improvement. 

But your cost for the improvement is $25,000, you need an additional $13,000. 

Show The Energy Savings....

Upgrading the 400 Watt Metal Halide with a High Bay Fluorescent will net a 50% savings in energy consumption.  This will save your company $11,400 per year.  So of the $13,000 left, after considering energy savings for the first year, you would still have a payout of $1,600.

Show The Cash Incentives From Utilities....

Assuming this project is within one of my own local utilities, the installation qualifies for a rebate of $80 per fixture.  So, 120 x 80 = $9,600. 

At this point you only needed $1600, so now you actually have a surplus of $8,000 from doing your energy upgrade. 

Show The Maintainance Savings....

New lighting products and systems have much longer lives than old technologies.  So it would be reasonable to assume you won’t have to relamp these new fixtures for up to 10 years. 

  • What would that save you in labor? 
  • What would that save you in not having to purchase 120 bulbs every 3 years? 
  • What would that save you in the equipment needed to relamp the fixtures? 

For this example, let’s assume you would save $1000 per year, would that be fair? 

So, let’s recap the project;

Your upgrade is going to cost $25,000.

Your building qualifies for a $12,000 tax deduction.

Your energy savings from year 1 is $11,400.

You qualify for $9600 in local utility incentives.

You save $1,000 in maintenance in year 1.  

$25,000 – 9600 = $15,400 actual payout in year 1. 

$15,400-$11,400=$4000 Balance after energy savings.

$4000 - $4800 (Cash Value of Tax deduction assuming 40% Bracket) = $800 Positive Cash Flow.

$1000 Savings in Maintenance + $800 Positive Cash Flow = $1800 positive cash flow Year 1. 

YOUR UPGRADE PAID FOR ITSELF IN LESS THEN A YEAR. 

Show The Benefits Of The Life of the System...Less Maintainence

New Lighting system last for 42,000 hours of service.  You use the lights 4200 hours per year = 10 year life.

9 years(We used Year 1 above) * $11,400 = $107,100 that you would put in your pocket OR if you do nothing, that is how much you would pay to your utility. 

So if you invested $25,000 and only considered the savings, you would net $114,000 over 10 years ($114,000/$25,000)= 456% ROI. 

But since you only had to pay out $15,400 your ROI would be ($114,000/$15,400) = 740% ROI. 

Compare Energy Efficiency Project With Returns From The Stock Market

How about compared to real estate investments. 

An investment in energy is a great investment.  The disappointing part of this process is that people are skeptical, think it is a scam or don’t think it is possible to save that kind of money. 

Energy Efficiency Is Not A Scam

That is too bad because not only are they still going to pay the utility all of that money, the utility is going to continue to raise rates and that cost will get higher. 

So, those who believe the possibilities of energy savings are those who will be rewarded with a solid investment.  Those who don’t…….well I guess we will have to see!

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Topics: green marketing, Energy Efficiency

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