Data Center

Making the Business Case for Energy Efficiency Projects

Making your data center more energy efficient is no longer merely a nice goal to have in mind if you can get around to it – in practical and economic terms, it’s becoming imperative.

First the practical side of the argument. World energy consumption is up 45% since 1980. Emerging markets like China and India will soon consume more energy than the U.S. and Western Europe. At a minimum, energy consumption, including electricity and other sources, will double in the next 40 years. Electricity will double by 2030.

This kind of growth in energy demand is untenable, for three reasons.

  1. Not enough readily available energy sources exist to meet the expected growth and new sources and infrastructure won’t be ready in time.
  2. Fossil fuels cause pollution, which is damaging to the health of people, plants and animals. In China, acid rain is estimated to cost the economy $13.3 billion (U.S.) per year, according to joint research by the Chinese Institute of Environmental Science and the prestigious Qinghua University.
  3. Fossil fuels also lead to climate change that has the potential to disrupt weather patterns, bringing droughts and floods to new areas, and hardship for inhabitants. Climate specialists say we should cut emissions in half to avoid serious climatic changes.

One way to cut emissions in half is to simply eliminate half of the activities that cause these emissions. That will be a tough sell, to say the least.

The other option is to be more efficient with the way we use energy – to do more with less.

As it turns out, you can put the practical issues aside if you want and pursue energy efficiency for just one reason: it makes sound economic sense. In tough economic times the knee jerk reaction may be that it’s not a good time to invest in energy efficiency measures. But the reverse is actually the case.

Say your business has an energy bill of $60 million per year. Reducing energy use by 10% would give you a savings of $6 million per year, a pretty good return. But let’s say the company decides that instead of going after that $6 million from energy efficiency, it wants to make the same amount from increasing sales. If your pre-tax earnings margin is 15%, you’d have to increase sales by $40 million to get the same impact. You can try, but there’s never any certainty that whatever measures you take to increase sales – a new marketing campaign for example – will pan out.

Energy efficiency measures are much more predictable, based on proven best practices. Some actions won’t cost you anything and others have short payback periods – a welcome prospect in times like these.

You also have to consider the cost of doing nothing. If your data center is wasting 20% of its energy, you pay for that every single day. The longer you wait, the more you waste, year after year.

Consider a 300,000 square foot office building with an energy bill of $600,000 per year. The company is considering an energy project that will deliver 20% energy savings and a 4-year payback. Let’s assume that energy prices rise at a conservative 5% per year and capital costs rise 10% per year. If the company delays the project for a single year, it will effectively cost it $360,000 between lost energy savings and increased costs of doing the project later. If the company waits 5 years, the tab rises to more than $2 million, again factoring in rising energy prices and inflation.

It’s pretty clear the smart move is to begin energy efficiency projects sooner rather than later. A good place to start is Energy Efficiency Fundamentals, one of the many courses offered by Schneider Electric’s free online education program Energy University. In about an hour, you’ll learn about government and utility energy efficiency incentives, how to prioritize and implement energy efficiency programs and the savings you can expect. It only takes about an hour and, like all Energy University courses, you’ll find the online experience intuitive and most of all, informative. What’s more, you can get education credits from organizations including the IEEE, US Green Building Council (USGBC), Building Performance Institute and more.

Remember, putting off energy efficiency projects costs real money, so don’t delay.

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