During the past 8 years there has been a lot of attention cast on saving energy because the cost of energy has become extensively higher, sometimes by the month. We have seen gas go from approximately $1.35 per gallon in 2003 to a peak of approximately $4.24 per gallon in 2008. Electric costs have gone from 45% to 80% in some parts of the country. Natural gas and liquefied petroleum have risen as well. Nearly every form of energy has increased in price well above the percent of inflation.
The increased costs have taken their toll on American businesses as well. Airlines, trucking firms, and other transportation firms have directly felt the effect of increased fuel costs. Automotive manufactures and retailers have also felt the indirect effect of energy cost due to an economy that has been greatly affected by energy costs. Saving money and giving your company energy resilience doesn’t have to be an expensive proposition. Reaching for the low fruit on the energy tree is simple and inexpensive.
There are some good places to start when your business’s energy needs more efficient. First, regular light bulbs can be replaced as they wear out with compact fluorescent light bulbs (CFLs). These light bulbs use 75% less electricity and produce 75% less heat; further decreasing your business’s cooling costs. Further, CFLs last substantially longer than regular light bulbs. Start the New Year by changing all light bulbs in your home as well as your businesses.
Fuel Efficient Vehicles
Many businesses use vehicles that are much bigger and use much more gas than necessary to do daily tasks. An example of this includes using full size trucks when small trucks or even a car will suffice. The immediate solution to this energy dilemma is to trade the vehicle in when fuel costs go up. However, utilizing the vehicle as much as possible is the best way to avoid unnecessary expenses when fuel costs go up. This is because when fuel costs rise; the trade-in allowance of large vehicles goes down radically, increasing the loss on the trade-in. When fuel costs are up, it is best to hold on to the vehicle, replacing the vehicle with a fuel efficient vehicle when a decent trade-in can be made for the larger truck.
Two words on hybrids; if you intend to purchase a hybrid, many domestic models still qualify for the federal tax credit. Further, the increased cost of the gasoline-electric hybrid may not result in any cost benefit to your business. Many hybrids are far more expensive than gasoline models and the initial costs of the vehicle may never be recovered, despite the cost of gasoline.
Heating and Cooling
A lot can be said for heating and cooling needs. Replacing a heating and cooling system can be expensive. The increased cost of energy does not justify an immediate replacement of a heating or cooling system. With that said, some employers have opted for four-day work weeks. The four day work week allows the company to heat the office to working temperature one less day of the week. Other heating tips include 1) lower the thermostat at night to substantially less than regular operating temperature and 2) set the thermostat at one temperature and do not adjust the temperature throughout the day.
Purchasing an energy efficient heating and cooling system is always a wise choice from a money saving and tax saving perspective.
The cost of the new unit is depreciable and the energy savings can be substantial if you are already on a four day work week and/or have made temperature adjustments.
Much office equipment, including computers, printers, copiers, and other equipment are left on 24 hours per day. Purchasing Energy Star qualified equipment is always a wise choice when replacing business equipment. Energy Star equipment has features which make the equipment enter low power mode when the device is not in use; substantially reducing electricity costs for the device.
Other easy energy saving strategies for office equipment include setting computers and screen to enter energy saving mode and shut off mode quickly as opposed to their default settlings which may be 30 minutes or longer.
For decades, the world has neglected many energy saving opportunities. Energy was cheap and many people disregarded energy and utility costs as an afterthought, as opposed to an opportunity to save money. Now, saving energy and being green is cost effective, not only financially, but also from a tax perspective as many tax deductions are available at both the federal and state level.
By: Dr. Bart Basi at the Center for Financial, Legal and Tax Planning for Transworld M&A Advisors