I remember the last recession all too well, particularly the sudden abrupt financial impact that it left jointly on our clients business and our’s. The global financial meltdown of 2008 created the most toxic business conditions since the great depression. The December 5th economic advisory from UCLA in the referenced LA Times article is a reminder for business leaders that eliminating waste should be a constant priority. Instead of waiting for that economic challenge to motivate your actions, as the great Nike slogan says, “Just Do It” now. According to the Department of Energy, American corporations spend $400 billion in energy annually and waste approximately 30% of that total spend. I believe energy costs are one of the low hanging fruits out there that offers business leaders a painless way of tightening their financial expense belts.
In a recent Forbes article, Hugh Moreno reported that many organizations do not realize they have a problem with energy waste nor are able to quantify it. What I have seen is many of our prospective clients are in denial about truly understanding their utility bills. Forbes reports that this can be a huge issue: an enterprise with $10 billion in revenue may well spend $500 million a year in energy. Managing the cost of energy is more complex than managing the cost of most commodities, thanks to the time dimension—when you use it.
In many markets, such as California and New York, large commercial and industrial users face demand charges—based on the 15- or 30-minute period during the month when a facility uses the most energy. These demand charges add significantly to the bill. Agave® Systems tracks demand charges for clients which often makes up between 40% to 60% of a client’s corporate bill. The process to track your energy costs is certainly complicated when you consider ever-changing energy prices and the attempt to manage demand costs.
While the macro headwinds are unknown, we see energy cost increases as a constant. We have seen annual increases as high as 7% for some of our corporate clients. PG&E and SCE clients will have new tariff schedules this upcoming year and Southern California Gas company is expecting to increase their transportation charge.
These changes leave many businesses out in the cold if they do not have an internal process or system to track and manage these costs to determine their bottom line impact. Peter Drucker’s adage “What gets measured, gets managed” applies here. But it’s a real challenge, according to Forbes, the U.S. boasts some 5 million commercial, industrial and institutional buildings, but only 14,000 energy managers, or one for every 360 buildings. Building energy waste is estimated to cost commercial and industrial enterprises $60 billion a year. And newer, more energy-efficient construction won’t make a dent in this waste anytime soon. Some 85% of existing commercial buildings in the U.S. will still be standing in 2030.
So the question is who manages this when you do not have an energy manager or building operator? Try our Agave® Evolution™ Virtual Energy Manager Service which provides key performance indicators, real-time tracking, analysis, forecasting, utility bill validation, process optimization, and demand charge mitigation to drive reduction in energy costs. Bottom line Agave® Systems helps you better understand your energy usage against your energy costs. Start saving today!