Do you know how much energy your restaurant is using? If not, here’s what you need to know to begin cutting your energy consumption.• See more finance articles
January 29, 2013
Jay Fiske
It’s said that every journey begins with one step, but that’s not actually true because it assumes you know where you are when you begin. This article will help you figure out where the starting line is so you can measure your energy-saving progress. Whether you have one restaurant or a dozen, the method is essentially the same, although multi-unit operators can take the process one step further by comparing similar units to each other.
Begin by gathering your electricity bills for the last year so you’ll have a benchmark for every month of the year. Like year-over-year revenue, this will allow you to compare like months, adjusting for normal seasonality and other factors. It tells you how much you spend on energy each month, but so much more. It also tells you when and how you spend those energy dollars.
Before you begin your analysis, it’s important to understand the difference between energy (kWh) and power (kW). Energy is equal to the amount of power a device uses over a given period of time. For example, a 100 Watt (W) light bulb (remember those?) burning for 1 hour uses 100W x 1hr, or 100 Watt-hours (Wh). 1,000Wh equals 1 kilowatt-hour (kWh). A kWh is a basic unit of measurement for how much electricity you use. The light bulb’s power rating (100W) describes how much power it consumes when running; it’s a measurement of the rate at which energy is being used.
When your electricity bill refers to demand, it is referring to the peak power (kW) your facility required from the utility at any given time over the previous billing period. Usage on your bill refers to the total amount of energy (kWh) your facility used over the billing period.
With that difference in mind, following are some additional terms to help you understand your bill:
• Energy Charges (kWh) – Your utility meter tracks the total energy (kWh) you use in a monthly billing cycle. Utilities charges for energy usage are based on kWh consumed. For example, if a business uses 20,000 kWh in one billing cycling, and energy costs $0.10 per kWh, the Energy Charge for the billing period would be 20,000 kWh x $0.10 / kWh, or $2,000. In many cases, the price per kWh changes depending on the total amount of energy a business consumes.
• Demand Charge (kW) – Demand represents the greatest amount of energy used in 15-minute or 30-minute intervals during a utility’s billing cycle. Different utilities have different intervals for measuring peak demand. To measure demand, electric meters record the average demand usage over each 15- or 30-minute period and record the peak period for the month. Utilities charge a fee based on the peak demand over the month to cover the costs of investing in infrastructure (generation, transmission, and distribution) required to meet the business’ peak power demand.
• Monthly service charge – The fixed monthly fee that covers the utility’s administrative charges such as billing, processing payments, metering and meter reading.
One you understand these terms, you can compare your costs in a number of ways and, again, you must compare like with like. If you look at a January 2013 bill, it best to compare it to the same bill in January 2012, 2011, etc. Most likely you can also compare previous years easily since most utility bills include the amount used for the same billing period the previous year, giving you a two-year history.
If you’re operating multiple properties, it may be helpful to benchmark one site against another on a “normalized” basis.
• If you have similar businesses but of different physical footprints, compare the energy consumption between the facilities on a per square foot basis to normalize for differences in building size.
• If you have similar businesses but with different operating hours, compare total energy consumed on a per-operating hour basis.
• You can also compare energy consumed per dollar of revenue to normalize energy consumption based on business volumes.
By comparing energy consumption across several different variables, it should become evident which of your properties are the most energy-intensive and therefore deserve more of your attention for finding ways to cut consumption and costs.
If you still feel a bit hazy, reach out to your utility company for help. Remember that you are their customer and they can be a valuable partner, whether it’s providing help to decipher your bill, conducting energy audits, or making rebates available to help allay the cost of any investments in new equipment, building renovations, etc.
As you examine your bills, keep in mind that there are some elements over which you have little control such as service charges and the cost of the energy itself. However, as this series of articles will demonstrate, you can control when, how much and where the energy is used.
This series of articles will address both capital improvements (new equipment, building renovations, etc.) and energy-saving measures (behavioral and operational measures such as temperature control). While capital improvements can be expensive and take time to pay for themselves, energy-saving measures can be taken quickly, are relatively painless and yield almost immediate results. These are the baby steps that added together can make a big difference. For additional information on benchmarking go to Powerhouse Dynamics.
Jay Fiske is a clean tech executive and investor with 17 years’ experience building businesses and bringing innovative and emerging technology products to market. He holds an MBA and MS in mechanical engineering from the Massachusetts Institute of Technology where he was a Fellow in the Leaders for Global Operations (LGO) program. He earned his BS in mechanical engineering from Yale University.
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