Energy incentives are worth a look, but not universally useful

Nov. 27, 2006
Grants and other incentives utility companies offer to their business customers are worth a look, but they might not be as beneficial to each and every company as they seem on the surface.

Grants and other incentives utility companies offer to their business customers are worth a look, but they might not be as beneficial to each and every company as they seem on the surface, according to our expert. Key considerations are careful examination of the program’s details and how they relate to the your company’s energy philosophy. The Southern California Gas Co.’s newly established Energy-Efficiency Grant program is the most recent example of many similar programs that exist across the nation. It is to provide $2.4 million to business companies between now and 2008 for projects that save at least 250,000 natural gas therms per year.

“Several of our business customers already have enrolled and many others are expressing interest in participating,” says Mark Gaines, director of customer programs for Southern California Gas. “This program provides as much as $300,000 per business customer, which provides the incentive to move ahead with major energy-efficiency projects.”

The program is open to any non-residential customer in Southern California Gas’s service territory. The company recently awarded its first program incentive payment to Vertis Communications, which is saving about 335,000 therms annually-worth more than $170,000 per year at today's natural gas prices-by improving the energy efficiency of two of its printing facilities in Pomona and Riverside.

"The gas company is giving us a total of about $167,000, which will reduce our payback period by six months so we’ll recover our investment in about 2.5 years," says Ken Kowal, engineering projects manager for Vertis Communications.

The program offers payments for a variety of energy-efficiency projects. Participants can qualify through equipment replacements  and process improvements such as installing a new heat-recovery system or redesigning an industrial process line. For more about the program, visit

While $300,000 isn’t small change , it’s not a huge amount of money if it stalls a project because it takes six months of paperwork to get the funds, explains Peter Garforth, principal of Garforth International, Toledo, Ohio, and Plant Services “Energy Expert” columnist. A company already doing the right thing might be slowed down to gain a relatively modest incentive.

“The vast majority of these programs are for equipment procurement, which is the end of the procedure, not the beginning,” says Garforth. “I suspect they would be more valuable if they supported the energy planning stage.”

There are plenty of programs to choose from, but Garforth suggests careful review of the program details before signing on. The Database of State Incentives for Renewables & Efficiency (DSIRE) includes state, local, utility and federal renewable energy and conservation incentives at The listed is indexed  by a map of the U.S. so you can easily click on your state and see what programs are available.

The programs generally focus on getting companies to upgrade equipment because  it’s a measurable quantity, says Garforth. For companies with 20- to 30-year-old assets, it’s a no-brainer. However, “it’s not always the right place to pull the lever to get the maximum impact,” says Garforth.

There are three categories of companies with different considerations when it comes to energy incentives, he says. The first category includes the companies that want to improve energy efficiency by replacing equipment. The second category are companies already committed to breakthrough energy productivity, for which the incentives may or may not provide leverage. The third category of companies have done energy planning and for them, the incentives usually aren’t any help whatsoever.

“The real question  isn’t whether the program is good or bad, but whether  it’ssufficiently targeted to your company’s category ,” says Garforth.

The key point to consider when assessing an energy incentive program is, has it  been designed to meet the strategic goals or consciously accelerate the decisions of your  company, he explains. If the return on a project shows there’s no point in delaying it , don’t get caught up in artificial timing requirements that will not only end up costing more than they save, but can steal the momentum and distort the direction of your well-considered energy strategy.

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