One future trend
that concerns all
How will your business mitigate the increasing costs of energy?
"Overhead". "The cost of doing business." "Static costs." Whenever a set or necessary item in business increases in cost, businesses panic a little. How will the business either eat the cost or pass it along to the consumer? Will increases in overhead make a business less competitive? How high could energy prices conceivably go? What can we do to mitigate energy costs? Each of these questions are complex, but it is vital that businesses have a strategy that effectively deals with items that impact static costs.
Increases in the price of energy is mainly a supply and demand issue. Right now, we are dependent mainly on fossil fuels, and because people don't make more coal, oil or natural gas (they mine whatwas already there) we have a decreasing supply. At the same time, we have more people in the world and more technology that utilizes energy, so we have an increase in demand. Basic economics tells us that whenever we have a decrease in supply and an increase in demand, we will see an increase in prices. Although our government has significantly subsidized energy through the development of technology, direct subsidies and attempts at stabilizing
the geopolitical climate in energy rich areas, the subsidies in the price of energy won't prevent long term cost increases. But, there are some things businesses CAN do to mitigate energy impacts and there are some helpful programs that currently exist for businesses making changes.
At Emporia Main Street, we are interested in making businesses more competitive. We understand that if we can help businesses increase sales or decrease costs (or both), businesses become more competitive, they can hire more people and they can make additional investments. In recent months, entrepreneurial organizations have focused on energy efficiency as a way to improve the bottom line of small businesses, but the same basic rules apply for bigger businesses. For example, the average grocery store needs to sell $11 in product to equal a $1 savings on energy bills. The grocery store example is
pertinent because many businesses have low product margins, and they have to replace products, pay taxes and hire additional staff if they expect to increase volume of sales. Energy savings, on the other hand, is simply savings. We can achieve net energy savings in three basic ways: Design, Energy Efficiency and Energy Production.
Before we talk about the basics of the three net energy savings methods, and possible funding sources, the following is from a local institution that recently upgraded their energy efficiency/production in a building project:
The table above clearly demonstrates the need to focus on energy usage when mitigating business costs. Now, lets focus on mitigation strategies:
Design- Before we talk about design in too much detail, we should recognize that many buildings have made horrible design choices in the name of energy efficiency over the years. Covering storefronts, metal coverings on buildings, covered windows, adding layers of "junk" materials on the exterior of buildings, sealing off upper stories, heavily covering (or tinting) store front windows and other design decisions made for "energy efficiency" reasons can have long lasting and damaging effects on a business. Appropriate design takes advantage of natural light, heightens exposure to pedestrian traffic (businesses won't be the only ones under an energy crunch) and shares walls with other businesses or residents (thus reducing net costs). Solar mass of older buildings represents a huge energy savings. Designing buildings for use by actual people AND energy consumption can make a big difference in your long term energy bills and basic competitiveness.
Energy Efficiency- Insulating duct work, converting to LED lighting, electronic climate controls,automatic lights, updated HVAC systems, efficient water heaters, energy star appliances and many
other efficiency methods can help businesses save money. Think of it this way: if your total energy bills are $4,500 per year, and you can save 20%, you just saved $900. Some of the biggest impacts for energy savings are some of the cheapest: caulking windows, an awning that decreases solar gain, shutting equipment down/turning off lights and insulating are all relatively inexpensive practices that can save you a lot of money in the long run. Programs like theAmerica Saves initiative are designed to help small businesses determine the best ways they can save energy.
Energy Production- Solar panels, geothermal, windmills and other energy production methods do more than save you energy, they provide energy that you don't have to buy from the grid. Technology for many of these systems is rapidly improving in efficiency while simultaneously decreasing in price. You may not be able to create a "net zero" building with energy production, but what if you could decrease your grid energy dependency by 60%? Using the table we referenced earlier, how much would that save your business in 5, 10 or 20 years? Local entities like Flint Hills Technical College through their Office of Sustainability are taking the lead on testing energy production devices and making contacts that can benefit the local business community.
Programs that can help- I can envision a lot of you saying "I want to become more efficient, but how would I pay for it?" That's an important business question. We want to ensure that you have an appropriate payback for your investment, and their are some programs that can help. Websites like www.dsire.org act as a clearing house for tax credits, grants and other incentives. Because we are a rural community, the USDA REAP program is an option for both energy efficiency and energy production programs. Main Street members can also take advantage of zero interest loan programs through Emporia Main Street for building improvements (including energy efficiency upgrades).
When we talk about things that bring businesses to an area, we know that population, median household incomes, land availability and workforce top the list. With shifts in climate, additional resources like water have become much more important. In the near future, the availability of abundant energy sources may be just as important to existing, growing or potential businesses. By having solid program knowledge in place, we can facilitate energy efficiency/production among existing businesses and thereby make businesses more competitive. We can also reduce energy consumption overall, and increase the amount of energy available for other applications.