Strategies for Reining In Energy Costs

Strategies for Reining In Energy Costs


With gasoline surging toward $5 a gallon -- and oil flirting with $150 a barrel -- small businesses are scrambling to figure out how to keep their costs in check this summer.

Experts say small companies should start actively pursuing ways to lower their energy bills now, since rising energy prices aren't likely to abate anytime soon.

But with so many energy-saving strategies out there -- and not all equally cost-effective -- how do owners find the most appropriate strategies for their companies? Here are some tips:

Target the big culprits. It's tempting to take a patchwork approach to saving on energy. But for many time- and cash-strapped entrepreneurs, it's more practical to concentrate on the biggest energy sappers first. That's where they'll see the most bang for the buck.

Restaurants, for instance, might focus on installing highly efficient refrigeration systems and lighting, since those tend to be their biggest energy costs, says Virginia Lacy, a consultant for the Rocky Mountain Institute, a Snowmass, Colo., nonprofit that promotes energy conservation. Laundromats should consider buying an energy-efficient water heater. Consultants frequently on the road might switch to a vehicle with better gas mileage -- or cut the number of in-person meetings altogether.

For Susan Velie, owner of Cherry Hill Florists in Port Angeles, Wash., the big issue was driving. Her shop used to make deliveries twice a day, but she recently cut back to just one and raised her delivery rates to remote areas. She uses online mapping sites, like MapQuest.com, to plan efficient delivery routes and is considering buying Global Positioning System equipment for her fleet.

"We don't want our drivers circling the block 10 times to find a particular address," Ms. Velie says.

Her challenge is to adopt cost-saving strategies without alienating customers, who also are struggling with rising expenses. Ms. Velie has refrained from raising prices too much since flowers are a discretionary expense.

Sherwood Design Engineers altered its travel practices. The San Francisco civil-engineering firm began using Web conferencing last year, instead of having employees travel between its San Francisco and New York offices. The firm spends about $5,000 annually on equipment and service charges. But it saves about $48,000 annually in travel costs, says Bry Sarte, the firm's founder and chief executive.

Take small steps. Once the large energy zappers are taken care of, focus on small adjustments that could yield big savings as well.

Turn off equipment and lights when not in use and make sure there is adequate building insulation. Energy-efficient light bulbs often cost several dollars more than standard light bulbs, yet they can pay for themselves in three years or less.

Other relatively affordable steps include installing programmable thermostats and motion sensors, which help control room temperature and lighting over the course of a day. These often cost less than a few hundred dollars each.

A so-called building recommissioning, or a professional building tuneup, can help a business save up to 10% on energy costs, says Ms. Lacy of the Rocky Mountain Institute. This might mean cleaning out and checking for leaks in a heating and air-conditioning system to ensure maximum efficiency. "It helps restore the optimal performance of your equipment," she adds, so you don't have to necessarily buy new equipment.

Get an energy audit. For many businesses the problem is figuring out what energy-saving strategies will reap the fastest returns.

Installing solar panels on the roof, for instance, can make dramatic reductions in a business's energy purchases but they take more than a decade to pay for themselves in many parts of the U.S. Many businesses want to see returns on investment in less than seven years.

So-called energy auditors can help a business determine which projects may garner the fastest returns. An auditor will thoroughly analyze a business's energy usage by poring over energy bills and inspecting its equipment and building environment. The auditor will then recommend steps that a business can take, and sometimes even suggest specific replacement equipment.

Auditors also can help companies qualify for state and federal tax rebates and other available incentives. In addition, they can help businesses find the best utility rate plans based on their usage patterns.

Many local utility companies offer free energy audits to their small-business customers. If not, the power company can refer you to a reliable auditor. Find out about energy audit programs in a given state and other incentives at dsireusa.org.

Consult the power company. Many utilities can help businesses find utility rate plans that best fit their usage patterns. For instance, a business that uses the bulk of its energy at night might qualify for an off-peak rate plan, with lower rates on energy during its busy hours.

Some utilities offer fixed-rate plans or prepayment plans that can help control rising energy costs by letting companies lock in their rates. No-interest loans and other incentives are often offered through utilities for businesses that make upgrades that improve their energy efficiency.