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MANAGING COSTS

Save Money With Alternative Energy

Alternative energy can provide financial rewards and make a statement about your green stance, but it’s important to evaluate all your options.
save money with alternative energy

For the past 25 years, Terry Metcalf has run a commercial construction business in Kona, HI. But it wasn't until recently that he noticed his electricity bills skyrocketing to as much as $1,600 to $1,800 per month during the sunniest months of the year, when utility costs soar. His company, Metcalf West, builds apartment buildings and other commercial properties on the island. Metcalf says rates ran as high as 42 cents per kilowatt hour–highway robbery compared to national averages.

He resolved to address the problem by looking into alternative energy sources. His goal was to find a way to generate power locally and with minimal maintenance. Eventually, he chose to install a Skyline Solar array that feeds power to his warehouse. The solar panels do not provide all the power he needs, but they’ve cut his utility bill in half, down to $700 to $800 per month.

For any small business, there are many ways to lower operational costs using alternative energy. The hard part is figuring out which alternative energy source is the best fit for your business. Another challenge: calculating ROI, which involves adding up the total savings from using the alternative energy per month and comparing against the total cost of the install.

One good source for helping you research alternative energy and potential savings is the U.S. Energy Information Administration (EIA), which includes reports on alternative energy. 

For example, Metcalf says the solar panels were expensive (he would not state an exact figure), but they fit his locale perfectly, where it is almost always sunny. To calculate ROI, he added up the savings per month, then determined how long it would take his company to realize the savings from the total cost of the install. If an alternative energy source costs $4,000 to install, but the savings are $800 per month on your electric bill, the ROI will take just 5 years.

For other businesses, the local utility costs and even weather might be a driving factor. For example, Hawaii sun means solar panels make more sense, but in less sunny states like Washington, hydra-electric is gaining momentum because there are so many rivers. For some states where the options are even more slim for natural energy sources, other alternatives do exist.

That’s what made Fireman’s Fund Insurance Company choose hydrogen fuel cells over solar panels or other energy alternatives. The firm, which has 2,900 employees, looked closely at solar power, but even if they had covered their entire parking lot in panels they would have only generated enough power for about 10 percent of their needs at their headquarters in Novato, Calif.

Using Bloom Energy fuel cells, they knew the storage footprint would be much smaller for the amount of energy produced.

“We sized the units to supply 60 percent of the campus’ off peak maximum energy needs, which is about 5.1 million kilowatt hours a year,” says John Vallor, director of corporate real estate and facilities. The payback on investment is about three to five years compared to twice that for a solar investment. More importantly, with the fuel cells, Fireman’s Fund is not releasing carbon emission for 60 percent of their energy draw, so the fuel cells help them achieve their goal to be completely carbon neutral. Another benefit is that they currently pay about 10 cents per kilowatt hour of usage as opposed to more like 13 cents per kilowatt hour from the electric power grid.

In some cases, however, the primary goal with alternative energy is not about a financial payback. For Ed Neumueller, who is the president of Standard Imaging, a company that makes radiation equipment and software for cancer treatments, the main goal was to play a part in helping break a dependence on fossil fuels. The United States consumes over a quarter of all oil production.

Neumueller constructed a new building for his 60 employees, and had a choice about which alternative energy to use. Geothermal is one of the more expensive routes–it involved drilling over 50 holes in the ground and installing tubes about 150 feet below the surface. Temperatures at that depth are constant, so the geothermal energy is used to either heat or cool liquid gradually.

The company uses this energy source for all heating and cooling, but relies on solar panels installed around the building and conventional electric power for office equipment. Neumueller says the geothermal system cost about $200,000 more than a conventional heating and cooling system. Yet, the chemical process used for heating and cooling releases no harmful emissions. For a company with about $10 to $30 million in annual sales, they have made a bold statement about helping the planet.

At the same time, even when the main motivation has more to do with environmental concerns, alternative energy does eventually pay dividends: Neumueller says the geothermal system will pay for itself in the overall heating and cooling savings in just a few years.

Byron King, an energy consultant with Agora Financial, says small companies need to think wisely about an investment in alternative energy. Often, a good first step is to make sure your building is well insulated and that any existing energy system is as efficient as possible.

Besides solar, fuel cells, and geothermal, King says another idea is to consider adding a natural gas microturbine, made by several companies including Capstone Turbine. The turbines can be used for co-generation with your utility to lower your carbon footprint.

King advises companies to be careful, especially when it comes to incentives. Solar power may not work for every company, especially if there is not enough sunshine. More importantly, he says the government incentives for solar power are what make it attractive, but they might not always exist.

The main point: alternative energy can provide financial rewards and make a statement about your green stance, but it’s important to evaluate all options and all the financial variables.

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Last updated: Nov 8, 2011

JOHN BRANDON | Columnist

John Brandon is a contributing editor at Inc. magazine covering technology. He writes the Tech Report column for Inc.com.

The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.



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