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Weighing Your Options: Prioritizing Energy Projects

Key Points
  • Prioritizing energy efficiency projects can help make the most of your investment.
  • Start with low-cost measures and then work your way up to more expensive projects.
  • Use simple payback and other financial tools to evaluate the financial impact of upgrade options.

Energy efficiency is a good investment, but where do you start? A variety of energy-efficient technologies and cost-saving opportunities are available. Selecting and prioritizing projects may depend on your facility type, hours of operation, age of equipment and access to funding.

Start with the easy targets

It doesn't take a lot of money to start saving energy. Begin by making a commitment, benchmarking your energy performance and creating a plan. The ENERGY STAR Portfolio Manager is an excellent resource. Next, put your plan into action. Prime examples of low-cost energy-saving measures include:

  • Encourage employees to turn off lights in empty rooms.
  • Install Wi-Fi enabled programmable thermostats to adjust building temperatures based on your schedule.
  • Use power management settings on computers, printers and other office equipment.
  • Seal energy leaks around doors and windows with caulking and weather stripping.

Take it to the next level

Big projects can provide long-term savings, but they are also more expensive and involve greater risk. To evaluate the financial impact of a project, consider the following:

  • Initial cost (purchase, installation and so on)
  • Ongoing costs (maintenance and training)
  • Disruption to business operations
  • Rebates and other incentives
  • Projected annual savings

Simple payback

How do you decide among project options? Simple payback is a financial analysis tool that can help you find the answer by estimating how long the cash flow (cost and savings) from a project will take to reach zero.

To understand how simple payback works, take a look at these examples: a furnace upgrade, which costs $15,000 and a lighting upgrade, which requires a $10,000 investment. The projected annual savings from the furnace upgrade is $5,000 and $2,500 for the lighting project. Which will provide a faster return? A simple payback analysis will tell you:

__Furnace upgrade: Simple payback = $15,000/$5,000 = 3 years

Lighting replacement: Simple payback = $10,000/$2,500 = 4 years

While easy to understand, simple payback fails to take into account the changing value of money and other factors. Use more sophisticated financial tools, such as internal rate of return and life-cycle cost analysis, to get a more accurate picture of the long-term impact of a project. See Financial Analysis from the U.S. Small Business Administration for more information. 

For more energy-saving ideas and resources, go to ENERGY STAR. for Small Business. By using the right tools and planning ahead, you can select upgrades that will optimize savings, while matching your budget and strategic initiatives.

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