Energy Efficiency Is Demand-Side Solution Needed to Protect the Grid and Save Businesses Money

There’s growing global recognition that a net-zero world is inevitable, with ever-increasing investments in clean technologies and strong consumer support for sustainably-minded companies. As the transition to a carbon-free future accelerates, potential costs are being scrutinized, particularly as it relates to transforming the U.S. power grid, which remains a chief source of pollution and is in need of serious improvements.

Estimates peg grid upgrade costs—which are needed to allow for a massive buildout of renewables and storage to support things like charging infrastructure, data centers and manufacturing plants—at up to $1 trillion by 2050. It’s an eye-watering sum that poses the question: Who’s going to pay for all of it?

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The cost will ultimately be borne by some combination of taxpayers through government spending, ratepayers through utility costs, and shareholders through investments in clean energy assets. And while each stakeholder has an incentive to embrace an emissions-free grid, be it health, savings, or returns, it’s unfeasible to think that a single interest can, or should, be solely responsible for fronting the costs. To make grid upgrades more palatable for all, there’s a growing emphasis on the least-cost means of reducing carbon emissions. Solutions that simultaneously lower upfront capital costs while also minimizing operational costs, like energy efficiency, make for an obvious solution.

How Does Energy Efficiency Alleviate Rising Grid Costs?

The link between a more energy-efficient built world and a more cost-effective electrical grid is quite simple. When buildings consume less energy, there’s less strain on electrical infrastructure, allowing it to perform better and for longer. For example, energy efficiency plays a particularly important role when it comes to eliminating peaker plants—those that run only during periods of excess demand — which are massively inefficient and cost Americans billions of dollars per year. In fact, the impacts are so substantial that a recent report found that investing in commercial energy efficiency could cut the cost of transitioning to a net-zero grid by more than $100 billion per year.

Energy efficiency can also be paired with smart technology to improve grid flexibility and resiliency through innovative demand response programs, which incentivize consumers and businesses to adjust their electricity usage in response to grid stress. When aggregated across a range of facilities, smart thermostat-connected equipment—HVACs, electric water heaters and coolers, or grid-responsive refrigerators—can offset excess demand to minimize grid impacts, without an extra cost. Plus, these programs offer businesses entirely new revenue streams, creating additional value for investments in sustainable technologies.

The advantages of energy efficiency are undeniable; however, its adoption in commercial sectors varies. Addressing these disparities is critical to ensuring that the benefits of the emerging net-zero economy are distributed equitably and that costs are minimized.

Energy-Intensive Businesses Fall Behind in Energy Efficiency

Mid-market businesses have traditionally struggled to leverage the benefits of energy efficiency, despite having the most to gain from it. From quick-service restaurants to retail shopping centers, these types of establishments are known for their significant energy consumption, often using tens of thousands of kilowatts per month and wasting 30-40% of the energy they consume.

Frequently having to contend with budget constraints, however, makes it difficult for mid-market business owners to finance new and expensive energy-efficient equipment. Holistic energy management promises long-term savings on energy bills—something businesses desperately need—but without the initial capital to pay for it, taking advantage of these cost-saving opportunities can be difficult. Business owners are often wary of projects that come with extended payback periods, leading many to resort to short-term, “band-aid” solutions, which ultimately lead to higher costs and worse performance in the long run.

On top of budget constraints, many mid-market businesses don’t know what efficiency investments would serve them best. With a lack of accessible information on commercial energy usage and a growing number of technologies on the market, piecing together a cost-effective energy efficiency strategy has never been more complex. Business owners need experienced energy partners, who can deliver energy efficiency, without saddling them with tens of thousands of dollars of debt. With the rise of Energy-as-a-Service (EaaS) providers throughout the U.S., mid-market businesses now have that chance.

The Zero-Upfront-Cost Solution that Promises Business and Grid Savings

EaaS is a transformative opportunity for mid-market businesses, offering a promising path to reduce utility costs as well as improve grid reliability and lessen environmental impacts. One of the most enticing features of EaaS is that it eliminates upfront costs, with providers incurring all of the initial expenses. For businesses with tighter financials, this makes all the difference, allowing for long-term energy-saving solutions to be implemented without the need for substantial capital investment.

Beyond cost reductions, EaaS simplifies the marketplace of energy technologies while offering access to a comprehensive suite of customizable energy solutions. This allows businesses to focus on their core competencies while offloading the intricacies of energy management to their EaaS providers for turnaround speed. Whether it’s lighting, solar panels, or HVAC systems, EaaS providers take on all ownership responsibility from selection, implementation, maintenance, and monitoring, freeing businesses from the burden of doing so themselves.

Today’s mid-market businesses find themselves at a crossroads; they need to reduce utility bills, carbon emissions, and their grid impact, but face a lack of capital that makes doing so difficult.  As an innovative response to these real energy needs, EaaS serves to bridge this gap by removing the financial barrier of efficient upgrades and assuming responsibility for the process from start to finish. By harnessing the power of EaaS, mid-market businesses can not only lower operational expenses but also play a vital role in supporting a more resilient and sustainable energy grid.

—Al Subbloie is CEO of Budderfly, a technology company focused on energy efficiency.