Business owners frequently hear about the potential for cutting costs by being greener, and some of the boilerplate solutions are often presented as if one business were the same as any other. But a grocery store isn’t a men’s clothing store, and an office building isn’t a restaurant.

The challenge for business owners, then, is knowing not just how much they’re paying for energy they consume, but how they consume it. Some are more dependent on electricity; some have higher natural-gas demands. Smaller operations can achieve savings with simple steps, bigger ones are better candidates for the larger capital investments needed for ground-source heat pumps, coated roofs or wind power generation.

With that in mind, we’ve combed a number of resources and sought the opinions of experts in energy reduction to tailor some specific recommendations to various styles of business in the Kansas City region. What they tell us is that business owners and managers must view the potential cost savings of green initiatives from the lens of their own business sector.

Keep in mind that labor-intensive industries, such as health-care or educational services, generally account for more than half of all operating expenses. That means reductions in energy consumption, while aiding with the bottom line, may not produce the kinds of percentage returns that could be realized in manufacturing or many retail operations, where energy use can account for a larger percentage of operating costs.

The savings, though, can be significant, especially in businesses operating on narrow margins.

But as you set your energy-saving goals, says Rik Morris, a Texas-based certified energy manager for engineering consultant Terracon, it’s important that they’re the right ones. Trying to beat national benchmarks on energy costs per square foot is a misguided effort if you haven’t factored in differences between the local climate and national weather norms.

“You can’t compare energy data in Miami with Minneapolis,” Morris said. “When you start talking about cost per square foot, BTUs per square foot, the numbers can get skewed because the weather is so different.”

At 53.3 degrees, Kansas City’s ave- rage annual temperature is at a midpoint between cities with lower figures such as Denver, Omaha and Des Moines (all at or below 50 degrees) and warmer metropolitan areas like St. Louis and Wichita (both 56 degrees) or Tulsa (60). So other factors being equal (are they ever?), we pay a little more for cooling than the northern-western cities, and a little more for warming than the southern-eastern ones.

And before you go ripping out lighting systems or replacing your HVAC, you should have a solid grasp of how utilities bill. Natural gas is easier; utilities in most cases bill you for the volume of gas consumed. But electricity charges are computed on two metrics. One is consumption; the other is a demand charge. Consumption, as with natural gas, is the easy part: It’s based on kilowatt-hours (kWh) burned each month. But electric utilities have to account for wide swings in demand, and electricity can’t be drawn out of storage.

The costs associated with providing that power are covered, in large part, with the demand component, a calculation of kWh consumed at peak times in the billing month or over the previous year. Those charges can add up quickly, so focusing on a reduction in peak demand will have immediate payback.

With that in mind, here are some of the challenges, and benefits, to greening up—and saving—by building type.

Office Buildings

On average, energy accounts for roughly 19 percent of operating costs in a U.S. office building, and within that area, as much as 70 percent of the use is consumed by lighting, heating, and cooling. Consider those areas the ripest for potential savings.

As with many businesses heavily reliant on workstation lighting, computers, copiers, faxes and printers, some important first steps involve simply shutting things off when they’re not in use. A personal computer in sleep mode, for example, uses just 30 percent of the electricity needed at full throttle.

Beyond that, “the issue with office buildings is pretty unique,” said Terracon’s Morris. “Most of the time, the majority of people in office buildings don’t own the building. They have a lease. Depending on how the lease is written determines who gets the savings and who is interested in the savings.” So a tenant paying utilities may be interested in short-term fixes to cut energy use, but without a long-term lease, there’s no incentive for capital improvements that could yield larger savings, he said.

Restaurants

The good news for restaurant ow-ners is that energy costs are usually a small part of overall operating costs. The better news? End-use areas consume most of that energy, which goes in large measure to provide heat for cooking and hot water, refrigeration and lighting. Those systems not only get a real workout, they often are competing against each other. A large kitchen operation generates huge volumes of heat, and even accounting for proper ventilation, residual amounts of that will require an offsetting expense to cool the building.

“What the restaurant owner has to concentrate on getting the most energy-efficient equipment, because there’s a lot of run time involved,” Morris said.

One significant issue: Many restaurant owners and operators try to cut corners on such expenses as exhaust hoods and systems to move heat out of the kitchen. Negative pressure in a kitchen will draw air out of dining room, and that can lead to uncomfortable patrons. So the most important things a restaurant manager can do to control costs come from understanding how the systems work (with and against each other), establishing proper operating procedures (and making sure they’re followed), and having your system checked regularly to ensure optimal performance.

City and state codes set requirements for temperatures in coolers, freezers and the like. But if your settings exceed those standards by much, you could be paying for cooling or heating that’s going to waste.

Retail

The retail sector’s energy consumption alone is a $20 billion annual industry in the U.S., and retail stores rely heavily on electricity for lighting of building, displays and operating equipment. That accounts for as much as one-third of all energy consumed at the average retail operation. So with lighting displays
in particular, the use of high-efficiency systems—fixtures and bulbs—can have an immediate return.

Retail operations also involve irregular traffic patterns within the store, which means managers can take advantage of systems that switch lights off during periods of inactivity. Experts estimate that lighting costs alone can be cut by 15 percent just by making sure that lights are off when rooms aren’t in use.

What kind of payback can these efficiencies have? Operations analysts say that even a 10 percent decrease in energy costs will do as much for your operation as a 1.25 increase in sales.

Grocery Stores

Whether they’re big-box, full-service grocers or hole-in-the-wall neighborhood stores, grocers use considerable amounts of energy, driven largely by the need to keep things cold. Refrigeration and lighting combined can account for more than 75 percent of energy use in the average grocery operation.

As with restaurant owners, it becomes imperative for grocery managers to take a system-wide view of their operating equipment. Refrigeration equipment that has not been properly maintained can burn extra watts through clogged filters or coils, improper spacing that restricts air flow, doors that don’t seal properly, or thermostats set to proper levels.

All of that is especially important at an operation with such narrow margins; the average profit at a grocery store is only 1 percent. And since energy amounts to roughly 1 percent of overall costs, you could increase your profits 10 percent with just a 10 percent savings on energy costs. How? By turning things off that don’t need to be on, turning things down when feasible, establishing and following proper maintenance protocols and measuring performance. If you don’t have the metrics, you don’t have the information you need to manage your consumption.

Health-Care Facilities

For everything from medical centers to immediate-care clinics and large practices, energy use accounts for a significant percentage of operating costs. Depending on climate, as much as 80 percent of that use goes into lighting, heating and hot-water systems, so consider those areas the low-hanging fruit when developing your energy plan.

One factor that continues to drive up operating costs at health-care facilities is the increasingly reliance on higher-tech devices that require electricity. They play a vital function for health-care providers, but relative to office equipment, those devices can be real energy hogs. Because many of these are subject to infrequent or irregular usage, though, they present more opportunities for savings by simply shutting them off or powering down when they’re not needed.

Terracon’s Morris noted that significant savings can come from scheduling use of energy-intensive equipment in the mornings, before air-conditioning systems kick on. When used later in the day, that medical equipment is bumping up the demand charge level and raising the overall utility bill, he said.

Schools

Most schools in the country were built before the computer age, and when they’ve made the leap to digital, common sense has often proved counterproductive, Morris noted. Computers systems requiring server rooms are often add-ons, stuck into low-use rooms or storage areas. It doesn’t take long to realize the heat those servers generate is an issue.

“So what do they do?” says Morris. “The first thing is, they run ductwork and incrase the air conditioning into that room. It’s common sense. But then they find out that overnight, these servers run 24 hours a day, so you’ve got to leave the air conditioning on. I’ve seen elementary schools with 300 tons of cooling run 24 hours because of their servers.”

That’s a lot of wasted energy. By adding on a 2-ton unit, smaller than you’d find in a two-bedroom home, you can cool the server room and turn the big chiller off when school’s out.

“It’s an ever-changing environment,” Morris said. “You look at things and do what you think makes sense, but that sometimes takes you down the wrong road.”

Whether public or private, schools have roughly 70 percent of their costs tied up in employee salaries, while their energy use accounts for about 2.2 percent of expenses. But even at that level, energy use is closer to 15 percent of the non-compensation spending, providing an easy savings opportunity for administrators trying to protect classroom instruction budgets.

Schools generally spend three times as much on electricity as on natural gas, so as with many business, turning things off when not in use is a good practice. The main areas to focus on with your maintenance practices are heating-cooling systems, and hot-water heating. It’s important that staff is measuring equipment performance, its age and its energy ratings.

Return to Ingram's February 2011