Energy Management: 5 KPIs that Increase ROI and NOI
Energy management saves properties huge sums of money that sometimes is wasted in the day-to-day operation and occupation of buildings and living spaces. In multifamily, the bills for water, electricity, gas, fuel oil, refuse, sewer and storm drain costs that properties must manage – whether for a developer, owner, third party manager, or resident – draw much attention.
With them comes the burning question: What are the key performance indicators (KPIs) that properties need to be aware of in order to measure these costs and reduce them for very high-dollar returns?
KPIs should be able to be measured, benchmarked, compared, sliced and diced. And the first most important step to make use of KPIs is to have a solution to get a high-level view and therefore manage your energy data. Many multifamily utility billing and invoicing products offer some level of this service. Some even have experts who tailor a system to a company’s needs. Even our old friend Excel can produce some measurable results. A high-powered energy management system, however, is a proven ally.
With a measurement and verification (M&V) system in place, properties can define factors that are important to managing energy spends that favorably affect the bottom line.
For this to work, comparisons of KPIs are necessary. Each company is different, in that one KPI may be more important than another, but the following should be considered as important in a property’s strategy to get the most revenue out of energy management.
KPI #1: Clean Data
The first step to measuring results, while not exactly a KPI, is inputting clean, accurate data. To accurately input data, every line item on the bill – such as rate, units of measure, charges, start date, end date, taxes, consumption start, consumption – must be included to compare previous years, months and amounts. The whole nine yards. This data has to be correct or the rest of the effort will produce diminished returns, if capable of many returns at all. Be highly conscious of the relevance, completeness, consistency, transparency and accuracy of the information – as well as tight integration – when considering an energy management system. Point B requires point A, and a smooth transition is of maximum value.
KPI #2: Energy Costs
Cost is the one KPI that should be at the top of everyone’s list. Measuring site against site (apples to oranges and sometimes even to pumpkins) can produce some benefit, and it is fun to categorize things and judge them against each other. But, by lining up energy spend by cost, energy management becomes clearer, and saving money comes closer within in reach. The best way to find the most money in energy management is to look first at where it’s being spent, then reducing that spend by percentages.
Keep in mind that there are other areas that deserve attention as well. Issues like finding leaks and billing discrepancies are high priorities, but cost should always be a top consideration as you benchmark and manage your energy.
KPI #3: Measuring Usage
Here is where the battle for savings takes place. By focusing on reducing use, the ultimate result of lowering costs comes into view. Simply, use equals cost. Thus, as use is measured, managed and reduced – whether by kWh, Kgal, CCF or DTherms – cost is reduced. Insuring that the meter at the other end spins more slowly (or backwards, in the case of solar systems) is key to success, and success is measured in dollars, made from reducing use.
KPI #4: Energy Rates
Rate is one item that properties have upfront control over in some situations. By reviewing current rates and investigating potential rates, savings can be realized before making any effort to reduce cost through use.
Knowing rates is important, and comparisons are essential. For example, if five sites in the same city are compared and it’s realized that four are paying one price while the fifth is at another rate, something may be amiss. Upon further investigation, a change may need to be made in order to lower cost for one or four of those sites. Additionally, energy procurement is a great way to control rates. Many states allow for deregulation of one or more commodity, electric or gas. The outcome is sometimes a lower rate structure that can save a little or a whole bunch, for years to come. There are many many service providers in this area, in Multifamily and outside of it, so insure that the provider is very knowledgeable, understands Multifamily and has a strong history of performing these services.
KPI #5: Greenhouse Gas Emissions
While data, cost, use and rates are paramount, a fifth KPI – GHG or greenhouse gas – is a factor. This villain can be easily measured with high accuracy through the KPIs mentioned above. For those companies that wish to take their sustainability or energy management program to the corporate stewardship level, GHG is the KPI for you.
Measured, accurately and transparently, GHGs open the door to big green marketing opportunities and some of the larger investment groups from the stock market. One word of warning: For companies wishing to enter this very public arena, take a professional, or two, with you. Big mistakes or “green-washing” are not tolerated, so accuracy and transparency is critical but easy with the right M&V system behind you.
M&V, benchmarking and KPIs are essential to garnering the huge benefits of energy management and sustainability and highly reliable when working with the right systems and partner.
Image credits: iStock