Building a business case for energy efficiency

Energy efficiency projects are one of the ways you can reduce your energy costs, improve operational efficiency and help your business meet its sustainability goals.

But how do you convince your business that it’s worth the investment? Here are some tips for writing a compelling business case.

Step 1: Identify the opportunity

Any successful business case starts with one key ingredient: taking the time to conduct a thorough review of your business and its current energy usage. An energy review assesses energy consumption, your energy infrastructure and any maintenance issues or equipment that may need replacing. It could also help you identify any energy efficiency opportunities that may exist in your business, as well as the value, complexity and risk associated with each opportunity.

Energy efficiency opportunities come in many forms and could look like:

• Natural gas, steam and electrification of hot water systems
• Heating, ventilation and air conditioning (HVAC)/chiller upgrades
• Compressed air system improvements
• Information technology and data centre management
• Transformer upgrades or replacements
• Refrigeration upgrade projects

Step 2: Estimate the costs involved

An energy efficiency project can require a big upfront investment of capital. That’s why the second essential step in preparing a business case is to determine the costs.

In working out the cost of a potential upgrade, it’s also worth knowing what government grants and non-governmental incentives are available to help you finance your project.

There are various options, including government grants¹ and tradeable energy certificates available to help you fund your energy transition.

State and federal government environmental certificate and carbon credit schemes also provide businesses with financial incentives to invest in eligible cleaner energy initiatives and energy efficiency projects. Environmental certificates are created for eligible activities, such as building renewable energy infrastructure or installing energy efficient technology. They are then surrendered to meet environmental obligations or sold on the certificate market. We can provide you with insights and information on the certificate market, as well as how you may be able to maximise value across different schemes.

Each state and federal scheme has different eligibility and funding criteria which are subject to change, making it hard to keep up. Reach out to an energy expert, who can tell you what your business is eligible to claim and be able to start your project sooner.

Step 3: Calculate the potential savings

The third step in preparing a successful business case for energy efficiency is to calculate the potential cost savings. The approach you take to calculating potential savings is dependent on the type of technology that your energy efficiency project is focused on, as different types of technology have different routes to achieving energy efficiency.

For projects with a tangible short-term benefit, you simply take the data from your energy review and calculate how much your energy consumption will be reduced by implementing the project. Then add other savings, such as maintenance costs or lowered manufacturing waste, to work out your total potential savings.

For longer-term, more complex projects, the cost of abatement is also a consideration. Working out the costs saved by implementing an energy efficiency project against the cost of abatement can help you determine whether a project is financially viable.

A successful business case is backed by accurate data. Utilising permanent or temporary submetering could help you better understand your operations and energy consumption and help build a more accurate scope for your business case.

Step 4: Determine the payback period timeframe

Determining the payback period for your energy efficiency project is also an important factor in evaluating the financial viability of the project.

Energy efficiency improvements can often deliver quick wins, with many projects offering short payback periods and high energy cost and carbon emissions savings. Energy efficiency projects could also be prioritised based on which offers the greatest value and shortest payback period. Tackling projects with shorter payback periods first allows you to reinvest the savings in future, longer-term projects and meet your environmental targets sooner, as well as generating confidence in your energy plans.

Step 5: Consider any non-energy related project benefits

Don’t forget to consider any other benefits from an energy efficiency project. Non-energy factors such as increased equipment lifespan and improved employee productivity can make your business case stronger.

Step 6: Present the completed business case

Finally, it’s time to present your completed business case.

Presenting as much data as possible to demonstrate the energy efficiency opportunities in your business and the potential benefits for your bottom line – including both cost-related and non-energy benefits – and any government grants or schemes that could offset the costs of your project are vital to the success of your case.

Think about the different stakeholders in your business and how your project could make their lives easier – improved productivity or skills development could appeal to human resources or an upgrade that could be marketed to customers. Engaging a wider range of stakeholders will give you a higher chance of success.

Need some extra help?

By following the steps above, you’ll be in a strong position to make a successful business case for energy efficiency and demonstrate the potential financial and non-financial benefits that an energy efficiency project could bring to your business.

But if you’d like a little bit of extra help developing your business case, or even in identifying opportunities for energy efficiency within your business, our energy experts are more than happy to help.

To get started, get in touch here.

Important information

1 Reference: https://www.energy.gov.au/business/grants-and-funding