Three Cost Drivers of Your Energy Bills

Alison Liaboe

Benchmarking your energy performance is a key component to identifying areas of opportunity to save money. Energy benchmarking can also assist with helping to understand the drivers behind your energy costs. Understanding what’s driving your energy costs year over year will help you prioritize your areas of focus.
energy_billsThere are three cost drivers on your energy bills that you should benchmark to have a true understanding of what is driving costs: consumption, weather and cost. These components will help you identify which techniques are appropriate to analyze for energy saving opportunities.

Consumption is a key ingredient of your energy bill. An effective way to monitor variances in energy consumption is to compare facilities by site or by a group of sites. Once you pull out a set of site data that you want to analyze, you can make an apples-to-apples energy consumption comparison with other sites. The nice thing about analyzing consumption by group is that you can have sites that, year over year, look completely normal, but are skewed when compared against peers. If energy consumption for a site or group of sites is increasing year over year then you know that there could possibly be an issue happening at those locations.

One of the most common ways to compare sites is to look at either a one- or three-month energy benchmark. This frequency will help you accurately determine which sites have the highest potential return on investment for energy efficiency projects.

The ultimate goal of energy benchmarking is to find outlier facilities and then be able to reduce energy consumption not just at the outlier sites but portfolio wide. It all starts with a site by site analysis. Understanding that a site’s geography is a key component to performance is a crucial step to understanding the cost drivers of your energy bills. Each geographic location experiences different weather conditions at different times of the year. Sites located in Florida will operate differently in the summer than sites located in Maine. So, being able to remove weather conditions from the equation is critical to understanding how each site is performing.

Being able to quantify savings in terms of how much consumption would have to be reduced to bring any strong return on investment is another key component to understand your energy bills. Capital expenditure budgets are based on where companies can get the highest ROI for an investment in any given year and the cost driver is a key metric to finding this out. The nice thing about cost is that the variances are typically easy to track. Unlike weather or consumption, you can usually put together a compelling scenario that shows how your entire portfolio could benefit from certain opportunities without too much trouble.

Understanding how consumption, weather and cost impact your energy bill is a key step to becoming more responsible about your energy use. Knowing what impacts your energy bills will help identify where you have the biggest impact for reducing energy costs and consumption.

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