If you have even casually looked into energy management services for your portfolio, have you noticed the wide range of opinions and options? The differences are more significant than simply positioning. It is a more difficult (and meaningful) choice than asking “Do I want a Coke? Or Pepsi?”
Have you ever asked yourself why?
Some of it is related to the lack of a common consensus of what certain terms are, what constitutes a “best practice” in energy management, or suppliers who exploit confusion as to what energy management is. But under the hood and behind the jargon, there are several very different approaches to a class of services that are loosely grouped under the energy management and energy efficiency umbrella. I find there are four main drivers that support energy management services – each with its own motivations, risk tolerance and financial needs.
The four areas are:
- Cost Containment,
- Resident Perception,
- True Green Believers, and
- Risk Management.
As we cover each, I encourage you to consider your motivations and interests. The more you can share with your energy partner, like NWP, the better job they can do in helping you achieve your goals.
Cost Containment or Savings
The number one driver for energy management today is to contain or reduce costs in the consumption of commodities, or in the delivery of a service. Consider the following: heating and forming metal in a foundry to produce automobiles, or the cost of running heat generating equipment that must be kept cool in data centers, providing the right kind of lighting, temperature and humidity to keep residents comfortable in an apartment setting: all of these are very different and yet intensive users of energy.
Energy and water costs are rising quickly – more quickly than the general public is likely aware of. However, in our economic climate that is combined with increasing condusion from the government – these costs are not easily passed on to the residents. With economic turmoil having lasted over 6 years now, everything that was easy has been done. You may have noticed fewer pieces per package, or that a half gallon of ice cream is no longer a half gallon. Today I even noticed my hostess cupcake is noticeably smaller than it was a few years ago. These types of cost cutting methods without raising prices are common in the grocery industry. As portfolios look for new ways to cut costs, energy is getting its share of the limelight. in some properties, it has surpassed salaries and taxes as the #1 expense line item.
Resident (Public) perception is a driving motivator for companies that rely on the general public to buy their products, but are generally seen as harmful to the environment. Automotive companies, chemical companies, paper mills and others look for ways to “offset” byproducts of the manufacturing process (or that are produced by their own product) by investing in clean technology and energy conservation. For them, cost containment is a side benefit. As they implement projects, they publicize their “achievements” so that consumers will consider them as caring about the world that we all share.
True Green Believers
The believers are those who are passionate (or want to be seen as passionate) about sustainability and conservation and put their money and resources where their heart is. Their motivation is not about money saved or their residents knowing what they do – but in knowing that they are doing the right thing and possibly setting an example for others to follow. These companies usually form the vanguard of the “bleeding leading edge” of innovative energy-related conservation and sustainability efforts.
Companies whose products are impacted by rapidly swinging commodity prices, or those who have mandates or extremely profitable services require guaranteed up time are concerned with energy management today to help manage their risk exposure. An example of this would be phone companies that are investing in solar energy at remote cell sites (for lower maintenance), or those close to population centers (to replace noisy diesel generators). The Department of Defense is perhaps the best example of looking at their energy portfolio as an extension of managing the risk to service members, allies and American citizens.
Looking at energy from a risk management point of view reduces pricing sensitivity and in many cases, they don’t want the publicity either. They are concerned solely about reliability, experience, case studies and understanding how you can help them reach their goals.
In multifamily, risk management is more concerned with future growth. Example: Will there be enough water in a local jurisdiction for new construction? Will your companies reputation with regards to conservation be good enough to be rewarded with future building permits? Will future residents prefer conservation minded properties over those who ignore this issue?
Regardless of the catalyst for energy management, any portfolio can benefit from looking at ways to manage energy as an asset. When we pay professionals to manage our money, they put it to work for us and increase the value of our portfolio. Saving energy, much like putting money into a savings account, will extract the maximum value from your assets, investments and initiatives.
If you are interested in developing the best energy plan for your portfolio, we would suggest the following:
1.) Create a methodical, enterprise-wide energy policy aligned with company goals and needs.
2.) Inventory existing assets, investments and initiatives. Establish an energy baseline for each property. Use the EPA’s Portfolio Manager.
3.) Be more concerned with best-in-breed solutions than brand names.
4.) Drive your utility data information and allow the results to drive your organization: Plan, Do, Check, Act.
This article is adapted by Jim Charles for the Multifamily Industry from an
article by Mark Brown. Mark works at Telamon Energy Solutions and is a
part of the Noesis Energy Advisor Program.