By Phil Scholes, Director of SME Markets, npower Business
The spectacular crash in the price of oil has provided respite for motorists, householders and business owners. It is a great opportunity for businesses to prepare themselves for the future by addressing their energy efficiency while the sun is shining, so to speak.
Amongst small and medium sized businesses (SMEs), energy is often seen as an unavoidable operating cost – as inevitable as death or taxes. As a result, efforts to cut energy wastage are often neglected, in large part because owners believe that the cost of investing in efficiency does little to warrant the savings.
In reality, this thinking threatens to hold businesses back, costing them unnecessary cash and only serving to make them less competitive and less capable of dealing with future fluctuations in the energy market.
Businesses must stop looking at energy as an inescapable operational cost and instead consider it a competitive opportunity. The first step on this journey is to undertake a detailed energy audit.
The audit process
Businesses have a choice – they can commission an energy audit from an independent third party, or from their existing energy provider.
Once appointed, the auditor will conduct a forensic examination of how the SME currently uses energy. Initially, they will look at the business holistically: what it does, how it operates, its plans for the future. The latter is particularly important, because energy use can have significant (and often uncosted) repercussions on an organisation’s plans to move premises or expand. Similarly, a business’s strategy will also likely affect the ROI that they hope to achieve through improving energy efficiency.
The next stage is to examine historical data to determine typical levels of energy consumption over the course of a year. This will identify unexplained patterns that could indicate energy wastage. Following this, the auditor will examine every item in the business that consumes energy – from the smallest light bulb to the largest piece of plant equipment. This inventory is undertaken in exhaustive detail: the age, number, model and wattage of every item is recorded.
Once this is complete the auditor is in a position to identify the areas where the business can make efficiency savings.
Once this examination is complete, the auditors will detail areas where money can be saved. However, they will only recommend investing in specific efficiency measures if they can demonstrate real business benefits.
Whether it is insulating cavity walls or changing to LED lighting, every recommendation will be based on a comparison between the costs of existing consumption and the investment required for each efficiency measure, showing how long it will take to deliver ROI.
This enables businesses to prioritise the measures that will give them the biggest or most immediate benefit. We usually suggest that only those that can achieve a ROI within five years should be implemented by organisations; however, it’s more typical for these to deliver ROI within 24 months.
Size of the savings
As you can see, energy audits are based on thorough empirical methods, and aligned to business goals. But what sort of savings can they deliver?
Of course, every business is different. Some, such as manufacturers, use much more energy than others and will therefore benefit more than other industries in cash terms from the efficiency measures they implement.
While it’s difficult to predict exactly how much each business could save, it is possible to give an idea across all industries. According to Andrew Fletcher, Managing Director of Carbon Control, on average businesses could expect to save 15-20 percent on their energy bills after undertaking an energy audit and implementing efficiency measures. In some cases this figure has risen to as much as 40 percent.
Not only does this deliver savings that can be reinvested back into the business; undertaking energy efficiency measures can be critical to winning new business. Large enterprises are increasingly selecting suppliers that have a structured carbon reduction plan and a clear vision of how to achieve this.
So there you have it – energy efficiency can deliver a double competitive advantage of lower operating costs and more new business opportunities. Naturally, there is also a positive environmental impact from reducing energy consumption. The fact that it’s taken this far to mention that is, I think, a reflection on the most pressing priorities facing businesses: preparing for an uncertain future.