At Kambo, few of the businesses we work with actually set out to be more energy efficient. Executives and business owners are typically busy focusing on day-to-day business, doing what they do best, and business energy efficiency just simply isn’t on their radar. For this reason, energy efficiency projects don’t get the recognition they deserve as a leading way to improve business profitability and that’s a shame.
Energy efficiency improvements are one of the most straight-forward ways to improve cash flow for a business. We can preach about this until the lights go out (pun intended), but to better make our case, here are five economic reasons why energy efficiency is a no-brainer for every business.
Five ways an energy efficiency project will help your business:
1. Lower energy & maintenance costs
A recent report uncovered that typical comprehensive retrofits of commercial buildings can yield savings of 20-50% or more compared with pre-retrofit energy use(1). In some cases, we have even been able to uncover up to 80% savings for our clients.
Energy savings and maintenance savings like a package deal for businesses. For example, energy efficient lights have a longer life-span than most older lighting technology meaning you won’t have to replace your lights as often. This translates to less calls to your electrician and/or less work for your maintenance staff which adds up to significant cost savings over time.
2. Improved cash flow
Cash flow is the heartbeat of any business. Simply put, without cash flow, a business cannot meet its financial obligations and cannot survive. Lower energy and maintenance costs translate to improved business cash flow. Clients who use our Kambo GreenFund project financing can benefit from positive cash flow from day one meaning the savings from the energy efficiency project offset the project payments. It’s a beautiful thing when a business can improve its building efficiency and also enjoy improved cash flow at the same time.
3. Increase market value & net operating income
Studies show that Green buildings attract 2% – 7% higher rental rates and 6% – 35% improved resale value (3). Before we start a project, we can calculate the impact our upgrades will have on the building’s Net Operating Income (NOI) and Market Value (MV). In a market with low Cap Rates such as Vancouver, an improvement in your NOI can have a large impact on your MV.
4. Safeguard against rising energy costs
Average electricity costs across Canada are set to rise by an average of 50% by 2020(2). BC Hydro’s rates rose 3.5 per cent on Apr. 1, 2017. This increase is one in a series of BC Hydro rate increases that will compound to a very significant 55% net rise. Energy efficiency improvements are a guaranteed way to safeguard your business against these rising costs.
5. Energy retrofits often have a better ROI & IRR than other investments
In 2016, the average payback period for a Kambo energy efficiency project was under three years and our average project ten-year IRR was 56%. The graph below shows how Kambo’s project IRR is significantly higher than other common industry IRRs. Additionally, savings from an energy retrofit rely on the laws of physics to deliver savings – not unpredictable and at times volatile global market conditions.
Kilowatt hours, carbon equivalents, and sustainability mandates aside, there is a strong financial case for improving your building’s energy efficiency. Plain and simple, if your building is inefficient, then your business is inefficient. If that wasn’t reason enough, lowering your energy consumption is the right thing to do and your employees, your customers, and future generations will thank you for it.
- http://aceee.org/research-report/u1507 From New Horizons for Energy Efficiency: Major Opportunities to Reach Higher Electricity Savings by 2030 (September, 2015)