Green Energy Sources: Combat Rising Energy Prices

The Ontario Power Authorities Long-term energy plan predicts steadily increasing demands for power inOntariocommencing in 2014.  Although the trend is not steep, the fact remains that an increase in power demand is expected, which will begin to move power pricing in an upward direction.

The OPA’s energy plan draws on several sources of supply to meet this predicted increase in demand, namely Wind Power, Solar Power, Hydro-electric, and Nuclear. In addition, energy conservation efforts have been given credit for significant reductions in power demand, and are expected to continue to play a significant role in reducing energy demand.

Realistically, conservation efforts have likely provided all of the benefit we will receive; in fact the perceived benefits are likely less than predicted as a result of the recession of 2009 and 2010, which reduced demand as a result of several economic factors.  In addition, at least three of the four sources of power outlined receive continued negative press for the perceived impact they are, or may have on the environment, leaving solar as the only remaining source of power. If this is the case and the demand predictions hold true, electricity prices are sure to climb, as solar producers rank among the highest paid power producers in Ontario as set out the “Green Energy Act.”

It is important therefore for all organizations to include energy reduction as a key strategy to prepare for the impending price increases.  Fortunately, energy reduction is also a key component of any viable environmental sustainability program, providing a means to employ sustainability methods to provide significant benefit to the environment and to reduce costs.

Here are five strategies to reduce energy consumption:

1. Upgrade the aged.

Energy Star provides information on products, tools, and equipment which it certifies as energy efficient.  The website http://www.energystar.nrcan.gc.ca also provides easy methods to calculating the savings achieved through acquisition of these products, providing for an easy ROI calculation.

2. Check the temperature.

Have you ever been to a gym that had the air conditioning blasting, despite the cool weather outside?  Settings in commercial and industrial environments should be monitored and adjusted in conjunction with external climate changes to maximize system efficiency.

3. Less compressed air is better.

The creation of compressed air requires significant energy. Reducing leaks, shorter pipe runs, and avoiding the use of compressed air to clean off tools or equipment is a simple solution to reducing energy consumption.

4. Same hours, different times.

Alter working hours to take advantage of “off-peak” prices. Start shift’s earlier or later, or move a day shift into the afternoon.  Employees are more often than not happy to enjoy free time in the warm sunshine and work when temperatures are cooler.

5. Better buildings.

Organizations such as Natural Resources Canada, Energy Star, and LEED™ all provide programs to assist with improving the energy efficiency of both industrial and commercial buildings.  These organizations can also assist in identifying opportunities to fund such upgrades where government assistance exists.

Incorporate Environmental Sustainability to hedge increasing electricity prices through reduced energy consumption.  The results will be far more predictable and sustainable than commodity prices, and the increased sustainability will benefit all who follow.

© Shawn Casemore 2011.  All rights reserved.

Incongruence Can Benefit Everyone

Why defining ROI can increase commitment to environmental sustainability initiatives.

My neighbor recently cut down some mature trees in order to increase the amount of sunlight available to power his newly installed solar panels.  There seems to be some incongruence between these two actions, however perceivably increasing the sunlight exposure to the panels will maximize electricity output and increase revenue.  Of course, the greater the revenue, the faster his return on investment will be achieved.

I must admit I find it questionable that anyone would consider eliminating Mother Nature’s solution for shade and oxygen, all for the purpose of increasing their return on an investment.  In reality however, demonstrating a clear and rapid return on investment is the means by which most organizations will be convinced of investing capital funds into “green” initiatives.

Determining a clear return on investment for “green” initiatives can be a challenge, particularly in light of the products and services saturating the market claiming significant environmental benefits.   A study published by Terra Choice in 2009 (a company that runs the Canadian Governments eco labeling program), found that false claims about the environmental benefits of products are increasing.  The study, completed on consumer products in Canada and the US between 2007 and 2009, found that nearly 98% of the products studied used some degree of false or misleading information.

When discussing environmental sustainability with many of my clients, engagement occurs up until the point at which the investment outweighs perceived benefits.  Unfortunately, quantifying the potential benefits can be a challenge as a result of misleading or exaggerated marketing claims, in addition to the premium prices charged, perceivably to accommodate the transformation from environmental foe to friend.

The solution to achieving engagement, commitment, and investment for environmental initiatives is to introduce solutions that possess a clearly understood and highly attractive return on investment.  Determining the return on investment is “old hat” for many Supply Chain professionals, but a skill that is rarely practiced in light of suppliers providing such compelling, but often misleading marketing campaigns.  By investing time into research, clearly quantifying benefits and challenging supplier claims, a solid return on investment can be found.

Considering the increasing cost of living that we are all faced with, the return on the investment for my neighbor must have been significant to redirect his personal funds into such a project.  I am without a doubt however, that having a clear understanding of the return on investment was the deciding factor for him, the benefits of which will be reaped by he and his family for years to come.

 

© Shawn Casemore 2011.  All rights reserved.

Cutting to the chase on an environmental investment.

I was recently shopping when I noticed a “reduce the pollution” promotion to sell rechargeable lawnmowers. The cost of the mower was around $300 more than a comparable gas powered mower, but the advertising clearly identified the rechargeable mower as the only “environmentally friendly” solution for cutting grass.

To decide to purchase the lawnmower simply based on the marketing campaign would be irresponsible. You must give consideration to the costs versus benefits of the investment. Relative to the mower, many would simply consider the reduction of green house gases to be the benefit, and then proceed to pay a premium for the mower. At least, this is what the sales and marketing team would are enticing intending you to will do.

Many businesses are being drawn to invest in “green” products, without much consideration to the costs versus benefits of doing so. In many instances, benefits will be achieved. However, it is important to clearly understand the extent to which these green investments improve environmental sustainability. Once the benefits can be quantified, a determination can be made as to whether the investment is sound and supports the environmental procurement initiatives, while continuing to consider the total cost of ownership.

There are five main areas to consider as part of the cost benefit analysis:

1. Manufacturing: Determine the environmental impact of the manufacturing process. Investment of funds in the purchase of a product demonstrates support of the manufacturing processes that created the product. Relative to our mower example, the majority of rechargeable mowers are made of plastic. The extrusion of virgin plastic has less of an environmental impact than steel manufacturing.

2. Operations: Will the operation of the product further improve operational efficiency, create additional burden on the process, or have a negligible impact? How can these changes be quantified, and what will the impact be to the cost versus benefit analysis? The weight of most rechargeable mowers is greater than their gasoline counterpart, due mainly to the weight of the battery. As a result, additional effort will be required to operate the mower.

3. Maintenance: Consider the cost of maintenance over the life of the asset. What are the costs associated with the maintenance schedule, and what will be the impact during the life cycle? Maintenance of a gasoline-powered mower can cost from $50 to $100 per year. A rechargeable mower has no fuel or oil, but often requires a second battery to assist in charging, which can cost between $125 and $175. The cost of electricity, although minimal, is also worth considering.

4. Life expectancy: Understand the life expectancy of the product, and determine the depreciation of the asset. Do not solely rely on the manufacturer to provide this information, but look to historical data and references from those who have used the product or material. Relative to a gasoline powered mower, life expectancy can range from 5 to 10 years. The life expectancy of a rechargeable mower is unknown due to its prematurity in the market place, but a new battery would likely be required every three to five years.

5. End of life: Determine how the product will be dealt with at the end of its life cycle and the costs associated with its retirement. Options include refurbishment, recycling, or sale. Mowers made of steel can be recycled at scrap yards, but there are not yet convenient means of recycling plastic lawn mowers.

There is much to consider when investing in “green” products or environmentally friendly services. Give thought to the above five areas and their impact on the cost benefit analysis to shed light on the total cost of ownership and the true benefits that will be achieved from the investment.

© Shawn Casemore 2011. All rights reserved.