Published on August 7th, 2012 | by Priti Ambani0
The Road to Energy Savings for Small and Medium Businesses
August 7th, 2012 by Priti Ambani
Small businesses are ignoring energy savings, leaving money on the table. Energy costs are rising every year, at a healthy clip of 6-8% annually. An increasing number of small and medium businesses quote energy costs as their biggest expense behind real estate and labor. But the small business energy landscape is changing.
A small or medium business in this case is defined as one with typically less than 200,000 sq.ft. of building area and no dedicated energy manager. They span all verticals and can incur monthly bills ranging from $500 to $20,000. Until recently, these smaller businesses lacked options to do much about these rising costs.
Larger businesses typically have energy managers and access to sophisticated and expensive software for energy management solutions. Smaller businesses lack access to these solutions. A recent report by the Center for an Urban Future highlighted the impact of small business in reducing energy costs.
“At a time when small businesses need all the help they can get, one big opportunity to reduce costs has gone mostly ignored: becoming more energy-efficient. Significant savings – up to thousands of dollars a year for even the smallest firms have been left on the table.”
The 30 million small businesses in the country spend more than $60 billion a year on energy. Energy Star reports that small businesses that invest strategically can cut utility costs 10 to 30 percent without sacrificing service, quality, style, or comfort. All the contributions to a cleaner environment are a big bonus. Yet, why are these going ignored and what can be done about it?
Roadblocks to Big Energy Savings For Small Business Owners
Lack of financing : Realistically, most businesses do not have ready capital for energy improvements or energy management software. Cash and credit is tight and is much preferred to be invested in other operational aspects of the business.
Lack of customized solutions: Most business solutions available currently are tailored for larger sized businesses and are complex to install and use. Smaller businesses end up with a dearth of good solutions and most of those are sponsored by the utility.
Lack of technical expertise: Most small firms lack the technical expertise and staff to identify and implement energy efficiency projects. They do not have budget to hire a dedicated energy manager and the business owner or CFO lacks time to gain expertise. Bill payment gets treated like an accounting function. Alternatively, they get called upon by many energy consultants but lack the ability to make and execute holistic plans for their business.
Changing Energy Landscape is Presenting Small Business Owners with Effective Energy Solutions
A number of recent advances in financing, energy data availability, utility engagement and web-based tools to manage energy are changing the landscape.
Green Button Standard: The federal government is making huge advances to provide energy usage data to customers. The “Green Button” initiative challenges utility companies to provide customers with electronic access to their energy usage information. This implies that business customers can download their usage data telling them how much energy they used and when they used it.
Web Based Tools and Applications: The Green Button data file is a spreadsheet of numbers with no real meaning by itself. But the easy availability of this data has spurred innovation in software tools and calculators that can turn these numbers into meaningful data for customers. These tools are web-based calculators that do not require any software installation and have an easy to use interface, ideal for business owners with scrappy IT infrastructure. These provide valuable recommendations and predictions and typically cost less than yearly tax filling fees for a small business.
There is a growing list of third-party developers with interesting applications based on this data. Tendril has developed an application marketplace for such tools. These standards and ecosystems are fueling the rise of startups such as Watts At Work, which are targeting self-service solutions for the small commercial customer. Suchi Sharma, Founder of Watts At Work says,“For far too long, consumers have been unable to have transparent energy usage data which could guide their decisions and purchase. The arrival of web-based data tools, emerging regulatory frameworks and data standardization is enabling the growth of customer choices. This is great news for both consumers and application providers to unleash innovation in this space.”
Utility & Consumer Engagement: Utility companies are not far behind in proving valuable energy use insights to their customers. They are now engaging and educating consumers on every level – through their website, bills and more. They are teaming up with innovative companies like OPOWER that have helped reincarnate the energy bill that customers see. OPOWER has improved the way utility companies engage with their consumers – from the quality of the information provided to the way it’s presented and delivered. It helps people use energy more efficiently and ultimately save money on their energy bills.
Driving Consumer Behavior Through Time-Varying Pricing Tariffs: Traditional electricity supply cannot meet peak demand at its highest. This typically occurs during peak summer days. Utility companies are therefore exploring more effective pricing methodologies that help reduce consumer usage and save them money like Time Varying Pricing (TVP).
The basic way that TVP works is that consumers pay not only for the quantity of electricity they use but also based on when they use it. For example, electricity rates are high when used at peak times (summer afternoons) and lower during off-peak times (late nights). TVP is a great way to get consumers to moderate their peak use demand that ultimately saves them money. But statistics show that less the 1% of the energy consumer base in the US is on a TVP plan.
California utility companies like PG&E and SCE are taking the lead to change this by introducing mandatory TVP for their business customers starting Fall 2012. The catch with TVP is that a business now requires some level of sophisticated analytics of their historical usage to pick the right tariff plan and demand response programs to save money and energy. Clearly the ‘one-size-fits-all’ scenario does not work here. This is again an example where web-based applications are transforming much of this decision space to be self-service. Melon Power, a Washington DC based startup provides commercial benchmarking tools based on Green Button data. Watts At Work’s innovative rate engine provides self-service commercial bill analysis for multiple rate plans as well as demand response options. It generates a personalized recommendation based on Green Button data to select the lowest price tariff and demand response option. Currently the product is available in California’s PG&E service area with plans to expand.
The way businesses use energy is changing. The growing innovations in the small business energy space presents a number of opportunities for businesses to take control of energy costs and find effective and personalized solutions.