Energy efficiency: The business case
Companies have begun adopting energy saving technologies as a matter of good business practice in a world with high and volatile energy prices. Tsebo Energy Solution’s CEO William Gould gives us the business case.
More and more businesses are talking about cutting costs by using energy more efficiently.
Why? Energy is the fastest growing non-labour component of MRO expenditure globally, while in South Africa, energy costs have increased by 200 per cent in the last three years – a trend we can expect to continue for at least another five.
But don’t despair, undertaking the simplest of efficiency measures, in combination with making energy management a priority, can yield savings of 20 per cent, or higher.
For high energy use businesses, in which energy expenditure can account for one fifth of overheads, this amounts to a transformative business saving.
Yet surprisingly, many senior executives “significantly underestimate” the returns from energy efficiency investments, says William Gould, CEO of Tsebo Energy Solutions, a Division of the Tsebo Outsourcing Group.
The company’s goal is to ensure clients realise the opportunities to make significant savings to their overheads through tighter management and control of their energy use. As Gould notes, “Businesses are wasting billions of rands every year on energy bills that could be avoided. The bottom line is that, as far as energy is concerned, if you put a viable business case in front of a board, they can see the rates of return; it is clear that any money spent on energy improvements generally yield a better return than what they’re getting in their own core businesses. For arguments sake, with a typical voltage optimisation, you’ll get a return of anywhere upwards of 75 per cent over four years. Those kinds of ROI are unbelievable. Having said that we do have to convince people.”
The business case is everything. If the true returns from energy efficiency are not being fully recognised, then important projects with the potential to slash both costs and carbon emissions could be being sidelined, he says.
“While a greater drive in implementing sustainable business practices is gaining momentum, the primary drive is simply because of the expense. Sources of renewable energy – wind and solar – need to be more seriously considered. But at this stage, they are still very expensive to implement with attractive ROIs in most commercial sectors. Companies like ourselves are watching this space very closely. Advances in technology are driving down photovoltaic panel prices, while similar trends in battery and invertor technologies, coupled with growth in demand, will see the viability of solar power installations rocket in the years to come.”
Understanding energy consumption with a high level of granularity is absolutely vital, Gould says. It is the foundation of identifying savings. “We’re leaders in this consumption intelligence.”
What makes Tsebo Energy Solutions different are three things. Firstly, the ability to rapidly analyse masses of energy data across multiple points of consumption, and quickly identify unacceptable variances. Secondly, the use of the analysis to trigger interventions – these could be billing errors, voltage imbalances, abnormal non-trading energy consumption through to more long term projects such as voltage optimisation, lighting retrofits and off-grid interventions, says Gould.
Tracking Energy Interventions is the third and a key differentiator of the company.
“Our ability to understand how an energy investment is performing is so critical; it empowers every level of stakeholder with accurate information – because the direct effect of savings can measured in real time on our systems. Energy savings business cases that can be kept alive with current information is the stuff commercial dreams are made of, and this is what we do.”
On the subject of voltage optimisation, Tsebo Energy Solutions holds a sole distribution license with EMS Energy Management Systems UK to install and maintain Powerstar® Voltage Optimisation Technology – a market leading voltage optimisation system that guarantees savings. While not widely understood in South Africa, voltage optimisation targets a reduction in three areas: over voltage, harmonic contamination and reactive power, all of which lead to either direct or indirect savings, says Gould. “The direct savings are guaranteed, that means we put our money where our mouth is, and that’s what made Powertsar so successful in the UK market – they’ve sold 4,500 Units, typically with a payback between two and three years. We are pleased that the SA market is taking off very well. In the space of six months, six units have been sold, and the demand is strong, so we are working really hard and look forward to the exciting ride rolling this out.”
Energy efficiency is a must for South African companies based on the high increases in electricity prices, Gould stresses.
“All things aside, sustainable business practices pay, and we are very active in engaging the additional commercial leverage Eskom provides on accredited savings initiatives through its Demand Side Programme.”
From a macro perspective, SA is under immense pressure to reduce its carbon footprint, with more than 90 percent of power coming from coal-fired plants. It has to find more sustainable sources of energy and grow the necessary infrastructure to match the economic growth the country needs in order to create employment and alleviate poverty. South Africa’s Minister of Finance announced in his 2012 Budget address the immanent imposition of carbon taxation and a white paper is before the legislators. While it will take some time to finalise, businesses that are smart are already beginning to factor this into their strategy to reduce emissions. “We can play an obvious role here too,” Gould concludes.