Energy Management

Taxes, the Economy and Your Energy Strategy

There’s currently a lot of buzz about the importance of an “integrated strategy” when it comes to energy-related planning—but what does that mean for you? And how do the economy and current events affect your energy strategy?

Currently the economy is strong with many of the leading indicators showing strong growth momentum. For example, according to Dow Jones, U.S. industrial output—reflecting everything produced by factories, mines and utilities—rose 0.7% in April 2018. Across all sectors, production has increased broadly and risen 3.5% over the past year.

According to Credit Suisse, spending on factories, equipment and other capital goods by companies in the S&P 500 is expected to have risen to $166 billion in the first quarter, up 24% from the year prior—a rise that was likely accelerated by the U.S. business tax code changes, resulting in more cash in corporate coffers.

With this increased demand, factories are stepping up output: It’s up 1.8% over the past year. Labor shortages, aging equipment and recent tax law changes on depreciation, however, can make adding production difficult, and reinvesting capital less attractive.

This is where an integrated energy strategy can help. Energy is a top five business expense for most companies. Using company goals including risk appetite, timing and how to buy your energy needs can allow for cost and usage reductions. As a strategic alternative, you can leverage your energy contracting to make capital investments in efficiency. Energy efficiency initiatives can provide three key benefits that would be available to you immediately: (1) lower operating costs with new equipment; (2) leveraging of tax depreciation rules; and (3) extended payment options through your supply contract.

These infrastructure upgrades will lower consumption and overall spend through a variety of measures such as reduced load, increasing building efficiency and peak load contribution (PLC1) tag reductions. Efficiency measures can cover a wide spectrum of project improvements including lighting improvements, electric motors and drives, HVAC, water and sewer conservation, and building automation and energy management control systems. The right energy supplier can help prioritize the projects to help provide the most benefits based on your overall company strategy and future growth plans.

If you and your company are interested in implementing and funding energy conservation measures and efficiency upgrades with no upfront capital, a program like Constellation’s Efficiency Made Easy (EME) might be the right one for you.

 

1 Peak load contribution, or PLC, is a reliability measure in each Independent System Operator (ISO) determined through the measurement of the five highest demand hours within the ISO. Your PLC is then used to determine a portion of your electricity distribution charges.

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