Energy: Standing Up To Scrutiny

30/11/2015

Land Securities has set an energy reduction target of 15% across our ‘top 5’ highest consuming assets by 2020. Whilst this target sounds modest, for a real estate organisation which does not regulate the activities of our tenants, this presents a significant challenge. The challenge isn’t only delivering a return on investment for us and our tenants; but proving and communicating the benefits effectively in order to build on successes. However you look at it, ensuring ROI forecasts stand up to scrutiny takes time and care.

There are a range of factors that need to be considered when calculating and delivering ROI.

As is so often the case in delivering successful outcomes, you have to start with the right data, and establishing accurate baseline data is crucial. Once you’re confident of having data that demonstrates the effects of energy conservation, it’s time to identify the best solution for the job. In choosing your energy conservation measures, it’s important to remain alert to the potential impact of external influences. Checking all submitted planning applications for the area local to a site is key. For example, impending construction projects nearby may cause local voltage to drop. When it comes to photovoltaics, it’s no use mounting rooftop panels on a building if construction of new buildings in the immediate vicinity will prevent sunlight reaching them in the future.

Perhaps less considered are legislative changes and their impact on ROI. Anticipating legislative changes can lead to savings, and it’s equally wise to view with a dose of scepticism those ROI calculations dependent on legislation which may be repealed.

Selecting a supplier is the next hurdle. When it comes to supplier claims concerning the efficacy of their products, it’s important to recognise that their initial financial models will include a number of assumptions, from building occupancy hours, to the utility unit price. I remember, in 2010, being pitched a return on investment for a lighting installation which used an 11.67p/kWh rate, despite our electricity contract comfortably achieving an average rate of 8p/kWh. Simply put, if you have a handle on your prices/building occupancy/footfall metrics, use them. In addition, work with procurement teams to negotiate the best possible terms of purchase.

Once ROI has been delivered, communicating successes effectively is key to marshalling support for further projects. This means relaying results to relevant stakeholders in language they can understand.

Ensuring ROI calculations stand up to scrutiny is no mean task – there are so many factors at play. Done well, the right investment means lower costs, carbon and greater efficiency – welcome news for all stakeholders.

 

This blog was originally published here.