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The Truth About Energy Efficiency vs. Cost Efficiency

You might be reading the title of this blog and wondering “What do you mean energy efficiency vs. cost efficiency? I thought they were the same thing!” You’re in good company. Many, if not most, people assume that the more energy efficient a building is, the more cost efficient it will be. That’s not necessarily the case.

Energy efficiency is measured by a building’s Energy Usage Index (EUI), which is the energy used per square foot. Gas and electricity are converted into a common unit called a British Thermal Unit (BTU). The building type must be determined – is it a hospital, school, factory, etc.? Then, the EUI for that building can be compared to its peers in the region to determine how efficient that building is with consideration for its use and the climate. Cost efficiency is simply the cost of energy per square foot compared to other facilities of the same type in the region.

In Kentucky and Southern Indiana, natural gas is cheaper than electricity. In some areas it’s relatively close in price, but in others electricity might cost twice as much as natural gas. However, electricity is the more efficient of the two for the end user. Equipment powered by electricity is 100% efficient – if you turn on an electric furnace, all of the energy put in comes out as space heat. Gas is between 80% and 99% efficient because of the energy that escapes as combustion exhaust. Any time you burn fuel, energy ends up wasted.

Typically, the most cost-effective system will not be the most energy efficient system. Companies usually consider the building environment, construction costs, and energy usage when designing or remodeling a facility. Few consider energy cost, because they assume that efficiency equals low costs. It’s important to determine the best solution for your business as early as possible because high switching costs can be a substantial barrier to facilities looking at transitioning into a more cost-efficient model.

So how do you determine what the best low cost, low energy solution for your building is? Finding the balance between low energy usage and demand, and low cost can seem impossible. Multiple budgets and models have to be created and evaluated, project payback timelines have to be considered, and all of the other details of decision making have to be addressed. Hiring an energy consultant takes a great deal of the weight off the shoulders of the facility owner. If you want to lower the costs of your facility, call Harshaw Trane at 502.499.7000 to talk to our energy experts today.