Energy costs for businesses have skyrocketed in the past couple of years and have put a very heavy dent in many profit margins, but tried and trusted ways of minimising the impact exist including solar.

There are three factors you must work on to reduce the amount you spend on your energy:

  1. Ensure you are on the cheapest rates
  2. Ensure you are not wasting energy with non-efficient equipment
  3. Generate your own power through solar, if possible

 

Good return on investment

Many businesses know that they should invest in solar, but either do not get round to it, or are put off by what they perceive to be steep initial investments. The truth is that most solar installations do not require an up front fee, but even those that do have a swift return on investment and leave your business cash positive.    

 

Example from a regional hotel group

We were recently engaged to audit a group of pubs in regional NSW, of which we did, and the results were brilliant. Below is a brief outline of the results across the 10 sites:

 

Capital Investment:
Net Investment $373’810
Financial Savings PA $111’730
Payback Period 3.45 Years
10 Year Cash Flow Benefit $743’500

 

Operating Lease (5-7 Year Lease Terms):
Annual Lease $80’900
Financial Savings PA $111’730
Annual Cash Flow Benefit During Lease Term $30’830
Monthly Cash Flow Benefit During Lease Term $2’570
Monthly Cash Flow Benefit After Lease Term $9’310
10 Year Cash Flow Benefit $680’149

 

Example from a single hotel within the group

Capital Investment:
Net Investment $105’831
Financial Savings PA $30’400
Payback Period 3.48 year pay back
10 Year Cash Flow Benefit $198’179

 

Operating Lease (5-7 Year Lease Terms):
Annual Lease $24’336
Financial Savings PA $30’401
Annual Cash Flow Benefit During Lease Term $6’068
Monthly Cash Flow Benefit During Lease Term $505
Monthly Cash flow Benefit After Lease Term $2’533
10 Year Cash flow Benefit $182’346


Frequently asked questions:

I know I should install Solar, and look at energy efficiency, but I cannot afford it.

Most projects can be financed with no down payment and the savings in most cases, are greater than the finance repayments. So you are cashflow positive, not negative, and you haven’t put a cent down.

 

I am waiting for some incentives from the government. Then I will look at it!

It is likely that incentives will only get worse. Solar is the cheapest that it has ever been and the removal of subsidies in 2021 mean that the best time to install is now, especially whilst the cost of electricity is so high.

 

I have already replaced all of my lighting with LED’s.

That’s a good start, but there are many other smart energy technologies which can be applied to a site to make them more efficient. Power factor correction, demand response, variable speed motors, soft starters are just a few of the many options available today.

 

I have asked companies to look into this before and couldn’t help me.

Many companies out there are thriving in the current energy market. However, they may specialise and make their money in one particular field. For example, they may sell power factor correction units, but market themselves as energy efficiency experts.

When they get to your site, they decide that the project is not worth their time, as they do not have the expertise to bring it to fruition. Leading Edge Energy only partners with reputable companies, which take a holistic approach.

 

I am planning to sell my business in 4 or 5 years, so there’s no point in investing in this.

The majority of energy efficiency projects and many solar projects which we manage are delivering paybacks in less than four years. Moreover, any investments that your business makes in saving on energy costs will directly impact your bottom line which will in turn, increase the value of your business.

 

Explain that one to me again?

Let’s say you own a pub that you’re thinking you might sell in the next five years. You’ve been quoted $90K from an energy consultant for a project that is estimated to deliver $30K per annum in electricity cost savings. Assuming a buyer is prepared to acquire your business on a cap rate (yield) of, say, 10%, this $90K investment will increase the value of your business by $300K.

 

Take control of your energy spend

If you want to take control of your energy spend by generating your own power and eliminating waste, get in touch with a Leading Edge Energy consultant today. Call us on 1300 852 770 or drop us an email on info@leadingedgeenergy.com.au today.