With the cost of electricity continuing to climb, using part of your 2024 facilities budget to invest in energy saving projects can pay real dividends. Projecting those savings to prioritize projects before investing is a wise move and a task that involves simple math and a basic understanding of your electric bill.

Start by taking a look at your most recent bill and find the charges billed on a kWh basis.

Add those charges together to arrive at a unit cost per kWh. Do the same thing with any charges applied on a kW or kVa basis to get that unit cost. Keep these two figures handy, they represent your current price for electricity. (In the illustration shown here the customer is paying $.035617 per kWh and $ 9.72 per kW of demand)

Next,you'll need to determine just how much less electricity you'll be using once you complete your project. Start by comparing the wattage of your current equipment with its replacement. We'll use a parking lot lighting project as an example. This parking lot uses forty 400 watt high pressure sodium fixtures and they are being replaced with the same number of 150 watt LED lamps. A reduction of 250 watts per fixture, a total of 10,000 watts (250 watts saved for each of forty lights). Now divide that number by 1,000 and you'll have the expected kW reduction for your project. In this example that number is 10 kW.

Next, you'll use your kW reduction figure to calculate how many kWh you'll be saving. The important part here is an accurate estimation of how many hours a month the new equipment will operate. In our parking lot lighting example we'll assume those fixtures operate dusk to dawn, so approximately 4,400 hours per year. Let's reduce that by 10% to be safe and use an annual operating hours number of 3,960. Multiplying that number by our kW reduction number calculated earlier gives us an annual projected kWh savings of 39,600 kWh. Now go back to that unit cost per kWh we calculated initially, multiply that number by your projected kWh saved and you know how many dollars you can expect to save annually in kWh charges.

10 kW X 3,960 operating hours = 39,600 kWh

39,600 kWh X $.035617 per kWh = $1,410.43 Annual kWh Savings

Calculating the kW / kVa savings is a little trickier, because most often they are billed based on your peak demand set during the month. If your project involves indoor lighting or air conditioning equipment you can probably assume you'll see the full impact of your expected kW reduction on your bill. If that's the case, multiply your kW reduction number by your unit cost per kW to calculate projected monthly savings and then by twelve to get an annual figure.

10 kw X $ 9.72 per kW = $97.20 Monthly Savings

$97.20 X 12 = $1,166.40 Annual kW Savings

In our parking lot lighting example we need to assume that kW reduction won't impact our peak demand which is likely set during daylight hours when indoor lighting and HVAC are operating. So even though we will enjoy significant kWh savings our project won't help at all in reducing kW demand charges. That means our annual savings will be limited to the $1,410.43 in kWh savings we identified. Dividing our total project cost by that annual savings figure tells us how many years it will take before those savings pay for the project.

Equipment vendors are an important part of the project equation, but be careful in relying completely on their calculations to justify your investment. It is natural for them to want big savings numbers, as a result it isn't uncommon for their projections to be optimistic. Customer's who spend the extra time to do their own savings estimates reduce the risk tied to that optimism. If you're considering a project and could use complimentary help in estimating your savings; please let me know, you'll find my contact number and email address below.

Kent Hobart is the founder and principal of Utility Refund Specialists; a utility bill auditing firm based in Denton, TX. His client’s take advantage of his uncommon knowledge of utility rates and billing systems to find errors in their bills and get refunds from their electric, gas and water providers. If you need complimentary help with estimating the impact of a project on your utility bills contact Kent at (813) 917-8952 or kent.hobart@urefunds.com.