ROI of Energy Efficiency for Small Businesses

There’s no question that making your small business more energy efficient can save you money. Research shows that energy upgrades can cut business energy bills by 25 to 50 percent, which equals a significant return on investment (ROI).

In one example, a hotel spent about $184,000 for energy efficiency improvements to its building, and now saves about $58,000 a year in utility costs—resulting in a 3.2-year ROI.

But can small businesses expect the same type of ROI? To answer that question, you need to ask yourself a few other questions first.

  • How long is your business open? The more hours you operate, the quicker your energy efficiency upgrades will pay for themselves.
  • How long has it been since you did an energy upgrade? If it’s been more than three years since you improved your lighting (indoor or outdoor) or refrigeration, you’re probably due for an upgrade. HVAC systems can go longer, but it’s worth checking if your furnace or air-conditioning unit could benefit from a retrofit or replacement. Consumers Energy’s Small Business Marketplace provides instant rebates on many common energy efficiency items such as Nest and Ecobee smart thermostatsLEDs, pipe insulation, hot water saving devices and LED exit signs.
  • What kind of rebates, grants or low-interest loans are available? Local, state and federal governments all offer help with paying for energy efficiency solutions. So can we. Consumers Energy’s Small Business Energy Efficiency Program helps you assess your current energy use, identify savings opportunities and provides rebates for upgrades.

Overall, because of improving energy technology, you’ll want an energy efficiency program that pays for itself in less than five years, meaning it has an ROI of at least 20 percent. If you have a smaller ROI, it may not be cost-effective to update your energy efficiency solutions.

Intangible ROIs

The U.S. Green Building Council (USGBC) notes that there are more than energy bills to evaluate when it comes to determining an energy efficiency project’s ROI.

Employee satisfaction is a top consideration. People who work in environments with superior, efficient temperature control and soothing lighting tend to be happier and more productive. The USGBC cites research on 562 financial institutions that found that not only was annual energy cost per employee $675 less in “green” LEED buildings versus non-green buildings, but employees who worked in LEED-certified branches of a bank were "more productive and engaged in their work" than employees who worked in non-LEED branches.

And it’s not just financial institutions that benefit. Another study found that employees of any type of “green” company are, on average, 16 percent more productive than their non-green counterparts. Why? It may simply be that people who work in energy-efficient buildings are more healthy than other workers.

For example, the USGBC reports that more-efficient HVAC and ventilation systems result in better air quality. One study found that building retrofits that improve the indoor environment reduce communicable respiratory diseases between 9 and 20 percent, and allergies and asthma by 18 to 25 percent. Other research shows that better lighting design results in 27 percent fewer headaches for workers.

So, when calculating the ROI of an energy efficiency upgrade for your business, make sure you’re thinking beyond the balance sheet.