Energy Management as a Service
Retailers continue to face tight operating margins, which is driving a renewed emphasis on controlling unnecessary costs. Despite recent advances in energy efficiency, the energy consumed by retail locations is often the second-highest store expense, exceeded only by labor.
Further, carbon emissions associated with the electricity purchased to run those stores can represent 80 percent or more of chain stores’ carbon footprint. So the case for a comprehensive energy management strategy is more compelling than ever.
Historically, deploying an energy management system involved upfront capital expenditure, a process whereby retailers invest now for a series of future reductions in ongoing expenses. During the annual approval process, projects from different organizational groups with diverse objectives and success standards compete for their share of a fixed pie — the capital budget. Consequently, many energy management projects with superior numbers in terms of payback, ROI, net present value and internal rate of return are passed over in favor of more “visible” customer-facing initiatives like a new point-of-sale system or merchandising investments.
Using the cloud
Over the past decade companies have increasingly moved from owning licenses and running software in-house to using software-as-a-service. This paradigm shift has yielded tremendous benefits, including reduced infrastructure and administrative costs, continued access to functionality improvements and the ability to adjust computing resources dynamically according to business requirements.
This shift is beginning to impact energy management as well. Many retailers are turning to cloud-based energy management software, delivering the same compelling IT cost savings and continuous access to innovation seen in the broader computing industry.
For the retail industry, however, the concept of “energy management as a service” encompasses far more than on-demand software. Retailers can now procure a comprehensive suite of services paid for on a monthly basis without tapping into the capital budget. Since a service offering is cash-flow positive from day one, companies no longer need financial numbers to compare upfront cash outlays with a series of future cash savings. Instead, the primary financial measurement is simply the magnitude of the net cash-flow improvements.
This integrated solution combines off-balance-sheet financing for store automation equipment and other efficiency upgrades with field services, project management, call support and professional services. The decision to deploy energy management technology can now stand on its own merits, since the services effectively pay for themselves through immediate cost reductions — not only in utilities, but in the maintenance budget as well. We have seen energy reductions of more than 30 percent and HVAC/lighting maintenance savings exceeding 15 percent across thousands of stores — savings which are sustained and actually increase over time through proactive management.
Beyond demand management
The benefits of energy management go beyond the usage side of the equation. Forward-thinking companies are combining the visibility and control provided by enterprise energy management with their energy procurement strategies. This takes the form of automated participation in smart grid programs like demand response and strategies to reduce formerly “fixed” elements of the electricity bill through advanced forecasting and proactive short-term load shedding. Linking energy procurement with load-shaping methodologies enables companies to achieve greater efficiencies than approaching energy supply and demand separately.
An energy management system, deployed correctly, provides a platform for enterprise-wide visibility and control, delivering significant financial benefits for years to come.