The most important thing that businesses in North America need to know when purchasing natural gas or electricity is that both are commodities. The prices for both natural gas and electricity are market-based and dependent on the forces of supply and demand. Like any other security or commodity, when energy supplies exceed demand, prices decrease. Conversely, when there is more demand than supply, prices increase. Often, when businesses are shopping for electricity, the first question is, “how much can I save?” This is a little like asking what you “saved” on gasoline for your vehicle last year. Like gasoline, the market prices of electricity and natural gas change every day. And the truth is that the only time savings are realized are either when a purchase is made when market prices are lower than the prior purchase or when less electricity or natural gas is used due to the implementation of energy efficiency measures.
Good energy solutions for businesses begin with understanding the options that are available. The best place to start is by knowing if the business is in a location that is deregulated for natural gas or electricity. Some states are deregulated for both commodities. Other states are regulated, meaning the only option is taking supply from the local utility. Additionally, there are locations within deregulated states like Texas or New York, that remain regulated or a part of co-op that are not open to energy competition. Reach out to us if you are not sure if your business can switch to a supplier other than the utility.
Another best practice for effective energy solutions is to never wait until your current electricity or natural gas contract expires before shopping for new rates. The good news is that unlike gasoline for your vehicle, electricity and natural gas can be purchased in the future. This means that businesses should always be shopping for energy, regardless of when their contract expires. Since the prices for these commodities are market-based, it means that businesses can capitalize on futures purchases when the prices of those commodities go down. This is how real savings are obtained. Regularly checking prices on our shopping site, subscribing to our newsletter and tuning into our webinars are a great way to stay informed about market-based prices and knowing when market conditions are optimal for making a purchase.
PS – There is an urban legend that believes the spring and fall months are the best times to buy energy. Check out this article to find out why this is not true.
Another important energy solution is to reduce consumption and decommissioning older equipment that is beyond its operational lifecycle. A good strategy for businesses looking to save money on energy is to be proactive about identifying opportunities to adopt energy efficiency measures. An important first-step is to understand how energy is currently being used, adopting appropriate metrics to benchmark current operations and sharing that data with stakeholders. Industry leaders and mission-driven companies are often aggressive about tracking energy consumption and understanding how it is used throughout its operations and supply chain. Once baseline metrics are obtained, then steps can be taken to identify opportunities to use less energy through an audit. Older facilities that have not had an energy audit are perfect candidates for an evaluation. In some locations, such as New York City, local laws require an energy audit for buildings that are over 50,000 square feet. Other cities are considering similar requirements. Often, there are utility or state-wide incentives available for audits, projects and professional services aimed at reducing energy consumption through the decommissioning of older equipment and the installation of newer and more energy efficient systems. A database of policies and incentives across the country can be found here.
What happens to your business when the power goes out? If a power outage will cause a significant and material disruption to a business’ operations, its important for that business to consider resiliency measures such as energy storage systems and back up power systems. Sometimes, these systems are referred to as Distributed Energy Resources, which are small-scale energy generation and storage systems that can be used when there are large-scale power outages. Examples include rooftop solar panels, battery systems and standby generators that are located at or near a given facility. These distributed energy resources can be an important energy solution for businesses than cannot afford to lose power. And in some states, these distributed energy resources can be used to participate in demand response programs.
Demand response programs are a lucrative energy solution for businesses that have the ability to curtail electricity usage during periods of peak demand. Demand Response (DR) programs compensate participating businesses that can either run on-site generation or take steps to reduce their electric load from the grid on-demand. Although participation in various demand response programs is voluntary, some require firm load-shed commitments during events, with potential penalties for non-compliance. Demand response events are typically triggered on the hottest summer and coldest winter days, depending on regional grid infrastructure and weather conditions. Growth in renewable energy and clean energy resources coupled with the electrification of the grid means that managing electricity demand is more important than ever, making demand response program an important energy solution for businesses that can participate in these programs.
Many businesses want to know about purchasing renewable energy and the steps they can take towards decarbonization, reducing their emissions and addressing climate change. Rooftop solar and energy storage systems are a effective ways to make an environmental impact. However, there are easier and less capital intensive ways to begin the sustainability journey.
The easiest way for a business of any size to take steps towards reducing it’s emissions and helping with sustainability is through purchasing Renewable Energy Credits (RECs). Renewable Energy Credits are a small premium that is added to the cost of an electricity contract that supports the development and operation of clean energy resources such as solar arrays and wind farms. More information on Renewable Energy Credits can be found here. Purchasing Renewable Energy Credits is a simple clean energy solution that can have a significant environmental impact and satisfy business stakeholders who are interested in addressing climate change. Renewable Energy Credits can be purchased for fractions of a cent per kilo-watt hour (kWh), which also makes them a cost effective clean energy solution.
It is difficult for businesses to be aware of all of the market based forces affecting energy supply and demand, the various demand response programs in each utility, energy efficiency measures and incentives throughout the country and what’s happening across North America in terms of sustainability, renewable energy and decarbonization strategies. At 5 Digital Energy, we are committed to helping businesses make better energy decisions. This why we and our sister company 5, host webinars, generate newsletters and share the latest energy-related news with our clients. Be sure to sign up for our newsletters so you can stay on top of important news you can share with other stakeholders who are interested in energy-related best practices and energy solutions that are right for your business.