Delaying Energy Upgrades Impacts College Budgets

Faced with declining public funds and/or dwindling tuition revenue, many community colleges are having to do more with less. Nothing new there. The challenge, of course, is to reduce spending without shortchanging students, canceling programs and demoralizing staff. As such, college business officers and facility managers play an increasingly important role, as they look for innovative ways to balance the budget by cutting energy spending.

The solution?  While it may seem counter-intuitive, forward-thinking colleges across the U.S. are discovering that one of the most effective ways to reduce spending is to invest in energy efficiency upgrades for campus buildings – sooner rather than later.

Really?

The opportunity to drive savings through increased energy efficiency is especially compelling for colleges and universities.  Many campuses have outdated energy systems and buildings that are well past their prime. Upgrading aging, inefficient equipment can reduce energy costs up to 60%. In addition to the cost savings, upgrading energy systems will enhance the learning environment, boost student and staff productivity and increase sustainability.

While electricity rates across the U.S. vary wildly, American’s 5,300 colleges and universities are spending approximately $7 billion a year on utilities and electricity costs. Whichever way you slice it, energy costs can be a major drain on a college’s budget.  While some assume that tight college budgets simply can’t accommodate energy efficiency projects, the fact is that delaying energy-saving upgrades means continuing to pay utility companies for wasted energy, rather than investing the saved money to improve other college programs.

So, what’s the delay?

Common misconceptions.

Misconception 1: “We’re already energy efficient.”

One of the primary reasons colleges delay energy efficiency upgrades is they’re not able to identify where and how energy is being wasted in campus buildings – and to what degree that wastage is affecting their budget. There’s an easy solution.  An energy audit will help colleges identify exactly how energy is being wasted – whether from equipment that needs to be updated or repaired, or operating errors, such as lights left on or thermostats set incorrectly after hours. When conducted by a reputable energy service provider (ESCO), an energy audit will provide a clear breakdown of how, where, and when electricity is used in campus buildings. The audit will include recommendations for potential modifications, ranked according to financial, operating and environmental benefits.

Misconception 2: Doing nothing won’t cost anything

It can be easy to overlook the high cost of utilities as simply the cost of doing business. As such, university and college managers often reason that postponing the implementation of energy efficiency projects until budget dollars are available is the wisest financial decision.

Not so. Measuring the costs of delaying energy efficiency projects adds a critically important element to the financial decision. The reality is that delaying energy efficiency upgrades – even for just one year – is often a costly course of action.  Here’s why: the U.S. Environmental Protection Agency estimates that as much as 30% of the energy consumed in buildings may be used unnecessarily or inefficiently. The money lost due to those inefficiencies in just one year frequently totals more than all the costs of financing energy-saving upgrades.

Waiting to implement the project also delays the point at which energy savings begin to accrue. When you consider the availability of budget-neutral options like Energy Performance Contracting, colleges and universities really can’t afford to delay increasing energy efficiency in aging, inefficient campus buildings.

Misconception 3: Better to wait until the interest rates drop

A common tendency among college Boards is to either avoid sourcing financing altogether or wait until rates drop to the lowest possible level. Again, while it may seem counter-intuitive that paying interest on a loan is a wiser financial decision than paying no interest, basic logic applies:  if the costs of financing energy-savings upgrades are less than the operating budget dollars saved from reduced utility and maintenance bills, financing is the most cost-effective solution. Quod erat demonstrandum.

Whatever the reason for the postponing energy efficiency upgrades, there are real costs associated with delays. Higher operating costs mean diminished services to the students and staff.  Pursuing energy efficiency retrofits sooner rather than later will immediately reduce operating costs and free up money that can be redirected toward the core activities of your school.

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