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Monday, March 5, 2007

How you and I can make a difference at work

I couldn't sleep last night because my brain was busy trying to think of ways I can have an impact on my company's energy usage. We recycle paper, as does most large corporations nowadays, and we also encourage carpooling. I wanted to propose an energy initiatives that would have the biggest impact while being somewhat easy to implement, and most important, have measurable benefits. From these criteria I believe that a solar power installation would be the way to go. We have a large distribution center that runs 24/7, ditto for our data center. Both are energy hogs and while I haven't done any investigation in our annual electricity costs an increase is almost certain due to both our growth as well as an increase in electricity prices. Okay, great, now how do I sell this to VITO (Very Important Top Officer) ?

1. First things first, figure out the financial ramifications, especially if yours is a public corporation. The goal should be to figure out the Net Present Value (NPV) of the purchase of a commercial photo voltaic (PV) installation. The keys here are to figure out the total system cost after any state and/or federal tax credits or rebates, followed by the total cost savings due to the difference in energy used and the electricity you were able to sell back to the utility company.

There is a Federal Business Energy tax credit that covers up to 30% of solar installation. The Energy Policy Act of 2005 anncounced that businesses may be eligible for credits such as:

  • 30 percent tax credit for the installation of qualifying solar equipment on buildings;
  • Business tax credits for companies that build highly energy efficient homes;
  • Credits for companies that manufacture energy-efficient appliances such as dishwashers, clothes washers and refrigerators.
So, there is a tax credit of 30% for a commercial solar installation. Sweet. The next step would be figuring out how big of a system you will need. You'll have to do some digging for electricity bills in order to get an idea of the monthly kilowatt hour usage. After you figure how much power your system would need to produce you can then get an idea of the total cost.

Using some excel skills you can do some modeling to figure out the optimal number of solar panels to maximize the NPV. There are several other inputs you need to consider, such as the average number of hours of daily sunlight in your area and also the rate at which you can sell power back to your utility company. All of this information is out on the www.

2. The second component of your pitch is to make sure to trumpet the marketability and goodwill associated with this initiative. "Going Green" could really change how your company is perceived in the marketplace. Entire marketing campaigns revolving around your green campaign can drive incremental sales through increased customer and brand loyalty.

There is much more to this but as I learn more about the benefits and incentives around solar power its hard for me to understand why more companies have not looked into implemented a renewable energy strategy. Part of it comes down to a lack of knowledge regarding renewable energies, while another component is the lack of understanding that investing some of that spare cash into solar or wind power can both help the environment while increasing shareholder value over the long run.

Traditionally, companies with strong positive free cash flow do one of the following:

Let the cash accumulate in the bank or in short term investments sit in the bank or in short term investments, use the cash to make a diversifying acquisition, which usually turns out bad, or they pay out some of the cash in dividends or return some of the cash back to the shareholders through stock repurchases.

I propose that more companies start to look into using some of that cash to improve their sustainability through investments in renewable energies, which, unlike most of the acquisitions we have seen over the past two decades, do not destroy shareholder value. I'll post my cash flow analysis as soon as I do some more research on implementing a commercial solar installation at my company. Anyone else have any ideas for green energy initiatives at work?

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