The Problem:
Investing organizational resources (e.g. funds or staff time) in energy efficiency projects inevitably means that organizations are foregoing those funds for something else. Energy efficiency projects need to compete not only with other investments, but also different sustainability initiatives within the organization (e.g. an organization could prioritize water savings in plumbing). This problem is largely defined by the funding source- as this will determine what the project is “competing” with. Does investment for a data center energy efficiency project come out of a facilities budget, a dedicated sustainability fund, or a general fund? Additionally, some companies choose to be part of a multi-tenant data center (also known as a co-lo), rather than independently operate their data center, as to not detract from core business competencies, which may expenses related to data center efficiency improvements from capital expenditures (CapEx) to operating expenditures (OpEx). This can impact how organizational leadership may perceive a project – or the hoops a project must jump through, as CapEx spending may undergo a more rigorous assessment- e.g. payback and ROI calculations. Project champions need to effectively convince stakeholders that funds are worthy of being allocated considering the potential project benefits (see drivers for energy efficiency in data centers).
Opportunities to Overcome:
Project champions should determine the anticipated source of funding for the project, and assess whether there are other stakeholders also vying for those funds. For example, if project funds are slated to come from the sustainability office, are there other initiatives that might be foregone? Assess the financial and other reporting requirements of various stakeholders, and frame the project in terms that will resonate with key stakeholders. Project champions also should consider the risk tolerance of the organization. For example, in a more conservative organization, perhaps ECMs with a well-proven track record and shorter payback periods should be prioritized. Organizations report being more likely to adopt energy-saving technologies when the costs savings fully offset the higher initial purchase cost within the first few years of operation; and are less likely to adopt those that are paid off over a longer time frame.viii Project champions can improve odds of overcoming this barrier in the future by implementing consistent yet flexible financial benchmarks. Establish baseline consumption and costs so that improvements can be benchmarked against something. Concrete monetary savings that speak to a stakeholder’s’ bottom line are better equipped to pave the way for improvements in the future. Additionally, partnerships and alternative financing opportunities- e.g. efficiency programs, utility incentives or rebates, ESPCs, UESCs, other potential sponsors can be critical in building a case for an energy efficiency project. ESPCs for example, do not require any upfront capital for a project (with costs paid throughout the life of the project). Lastly, while identifying funds for energy efficiency is key, maintaining and continuing to advocate for those funds (e.g. through a green or revolving fund) is also important for sustaining investments.