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Navigating operating expenses and energy reduction mandates

By Thomas Loredo, Sunrock Distributed Generation




One of the biggest challenges that any business faces is to control its yearly operating expenses.

Whether it is the on-going maintenance of infrastructure or equipment, or the ever-rising costs by the public utility companies that service a facility, increasing yearly operating expenses are a real impact on your Net Operating Income (NOI).

Energy Consumption is now in focus for State and Locally imposed mandatory benchmarking.

Based upon the amount of utility electricity (electricity from the grid) that a facility is currently consuming on a yearly basis, state and local governments across the country are beginning to and have already mandated that commercial buildings and facilities ‘benchmark’ their yearly electric use. This means that building owners and their tenants must track and report their yearly consumption of electricity. The required reporting of this information will be tracked and recorded by submitting information on the US Environmental Protection Agency’s Energy Star Portfolio manager tool. This first year’s report is what will establish the baseline of your future energy consumption levels.

As an example, in 2023, the State of New Jersey mandated that owners and tenants of buildings larger than 25,000sf must track and report (benchmark) their yearly electric consumption (gas and water will also be benchmarked). This is a State requirement that cannot be avoided, and many facilities and their owners are currently working to meet this first year’s reporting requirement.

However, this is only the beginning. Most insiders agree that the next step, after the benchmark year is filed, will be a mandatory reduction in a facility’s purchase of utility (grid) supplied electricity. The estimates are that these mandatory reductions will be in the order of 10-20% per year.

What does this mean?

As an example, if your facility consumes 1,000,000kWh (kilowatt-hours) of utility electricity in your benchmark year, and a 15% reduction is then mandated, you will need to reduce your next years’ electric consumption to 850,000kWh of grid supplied electricity. Non-compliance with both the benchmarking reporting and meeting the reduction requirements are anticipated to be met with significant financial penalties.

The question now is how do I meet these new requirements, what is involved, when must I start and what will this cost me?

How can I comply?

These questions, and the related costs can be readily addressed as there is a silver lining here… It’s your roof!

By utilizing your roof to install solar, you can adopt a no money out-of-pocket solution available to address the benchmarking and energy reduction mandates, and solar will reduce operating expenses, saving you significant money on a yearly basis.

How do I accomplish this?

The answer again is by adopting solar energy on your roofs.

Solar energy is one way to meet these benchmarking requirements. Clean, renewable electricity which is generated from the sun! Solar has been around for a few decades now and has a proven track record of success in its technology, performance, and its ability to provide low-cost energy.

And some of the best solar solutions that are available provide you with a no-upfront capital investment requirement and a guaranteed lower cost of electricity, saving you money on your yearly operating expenses (remember the bottom line?).

What does it cost?

With solar, the most common approach used in commercial buildings is the Power Purchase Agreement (PPA). A PPA is a financing model whereby the owner of a solar energy project enters into a contract with a customer to supply electricity for a predetermined rate over a specified period of time. Simply put, the solar project owner invests the capital expenses necessary to develop, install, and maintain the solar energy system over the course of the agreement. In return, the customer agrees to purchase the electricity at the agreed upon kilowatt-hour rate that is lower than the current utility rate.

What is the next step?

Facilities that have adequate roofs (or even parking space) can develop solar to reduce the amount of utility supplied electricity purchased. In the same example cited above, if a solar system can be developed to provide 500,000kWh of electricity, the yearly consumption of the utility supplied electricity will have been reduced by 50% (you are generating the other 50% of your necessary electricity from your roof).

When a facility is making its own clean electricity by using its roof and the sun, it does not have to purchase that amount of electricity from the utility company. By adopting solar energy through a PPA, facilities will significantly reduce their operating expenses and increase their bottom-line revenues.

Solar can be implemented as part of an overall energy efficiency strategy to reduce energy consumption and meet benchmarking requirements. Owners can also update their HVAC equipment and install energy-efficient lighting systems (LEDs) to augment the overall reduction in the purchase of grid supplied electricity.

In conjunction with a rooftop Solar project, also considering LED lighting provides for a quick, easy way to dramatically reduce a building’s electric consumption of utility supplied electricity. And best of all, the solar can be developed with no capital outlay on your behalf.

In conclusion

The good news is that buildings and facilities now have an easy, proven path forward to reduce and control their operating expenses through solar. And with the available solar PPA option, there is no need for a capital investment to bring clean, renewable energy to your facility, meet the new benchmarking mandates and increase your NOI.

References:

Thomas Loredo is director of sales at Sunrock Distributed Generation.

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