With more than $10 billion spend each year, healthcare ranks as the country’s 2nd most energy intensive industry. And, hospitals are the sector’s largest energy consumers and producers of greenhouse gases.
Energy costs have been soaring – consuming up to 3% of a hospital’s total operating budget and up to 15% of annual profits.
With healthcare dollars being squeezed, there’s a need to address energy, consumption and sustainability efforts.
What can we do?
An often overlooked opportunity to reduce costs is the efficient management of facility operations costs. To do so, you need a plan.
An effective energy management plan begins and ends with strategy. The strategy should lay out your goals and ways to achieve them. Your energy management plan should also:
- Measure/benchmark current energy use vs. that of organizations like yours
- Set annual energy efficient goals
- Identify project needs to achieve goals
By laying this groundwork, you can set a baseline to see if your energy management efforts are succeeding in the future. Once a baseline is established, you can continue to track consumption on an ongoing basis and quantify the savings from reduction efforts.
4 areas to consider when purchasing energy
1. Facility profile
Your facility profile should show the number of facilities with aggregation potential and the location (regulated or de-regulated, state/regional energy cost).
2. Energy profile
An energy profile will show:
- Total cost of energy consumed
- When is energy used (peak, off-peak, seasonal)
- How is energy used (voltage levels, transmission)
- How is energy received (direct connect, city-gate)
- Demand response participation opportunities
3. Energy purchases
Energy prices fluctuate based on changes in supply and demand. When energy supply increases, prices go down. When there’s a shortage, prices go up. Factors like extreme weather conditions, economic conditions and availability of supply also contribute to price volatility.
The single most important determinant of pricing is the timing of purchase due to volatility. So make sure to time it right!
4. Energy contracts
Most healthcare organizations follow a traditional approach to buying energy. The plant engineer negotiates with utilities to arrive at a fixed price for a period of time. But energy prices can fluctuate minute by minute. This is why you should look at your energy contracts! Here are some tips:
- Review terms and conditions (these are just as important as the price!)
- Look at all elements and components of cost, including commodity, delivery, service charges, $/dth, $/kWh
- Manage and monitor all charges and pricing
Effectively communicating the need for energy management, and providing guidance on how to implement strategies can help you achieve greater reductions and gain support for future initiatives. By looking at these 4 areas, you’ll have the direction needed to manage your energy and make the right decisions.