The Eagles Energy Financial Analysis Engine for Energy Efficiency Projects
A delicate balance exists between energy and money. The easiest way to understand this relationship would be that energy costs money (The National Academy of Sciences, 2019). Beyond this monetary value, however, stands its cost to the environment, the prospect of sustainability, and national security, which may be difficult to quantify in cash, but I digress.
The same case applies to energy efficiency and renewable energy projects. A majority of the measures that have the potential to increase efficiency are quite costly, with the savings accrued in the long term providing sufficient incentive. It costs money to save money.
This delicate relationship brings in Energy Auditors and their accompanying field. Energy Auditors use skills acquired through training and experience to analyze energy consumption in a facility and recommend potential energy efficiency approaches. Typically, this profession draws from technically inclined skilled individuals with little experience in finance.
However, methods exist to provide a bridge through which Energy Auditors can communicate energy efficiency to potential financiers in a language they can understand. These involve financial analysis of energy efficiency projects. Most commonly, Energy Auditors use bulky excel spreadsheets for this form of analysis.
The Eagles Energy Financial Engine provides a massive advantage to energy professionals in working to translate energy efficiency projects into practical financial information. This tool is just one of several data science-based systems developed for energy auditing through the Eagles Program.
This tool uses inputs from energy efficiency projects and runs them through algorithms built in collaboration with internationally certified Energy Auditors and trainers. The result is a comprehensive analysis with accurate cash-flows. This result draws from the main questions potential financiers look for in determining the viability of projects.
For purposes of clarity, let us sample a project drawn from a recent audit performed through Eenovators Ltd. The project involves switching from fluorescent lighting to LED lighting.
In the mentioned audit, the auditor identified the sizes, ratings, use, and configuration of existing fluorescent lighting and calculated potential savings for making a like-for-like switch to LEDs.
The potential savings stood at approximately 29,323.06 kWh annually. The auditor found that the purchase of equipment for this project stood at KES 1,308,100. This data provides the basis for analysis through the Eagles Energy Financial Engine. Let’s fill the data in the engine.
The Eagles Energy Financial Engine is hosted online and available complimentary at no cost for use through https://portal.eenovators.com/financial_engine. The first tab provides a section for basic data into the Engine. This section involves adding data such as the project’s name, the facility’s average monthly bill, and the currency to use. The energy type allows the system to handle both electrical and thermal projects for financial analysis.
The next tab dives a little deeper. The section allows the auditor to input information regarding the facility’s average tariff, the country’s average inflation rate, and the minimal acceptable Rate of return shown as the interest rate.
Additionally, the auditor can input and the annual energy savings in kWh or L of diesel if the project is thermal and not electric. The system also allows inputs for the project period, which is typically the life of the installation. Finally, this section allows input of the facility’s energy consumption in kWh.
The final section of this tool allows cost estimates. The cost of accessories, installation, and annual maintenance draw from the equipment cost as a percentage, as is the norm among energy auditors. These sections estimate the project’s initial and recurring costs.
The system provides a significantly accurate analysis to provide a conclusion based on the provided data. The first and most crucial section of the result identifies if the project makes financial sense. For this LED retrofit, the project makes sense, as demonstrated through the image below.
Additionally, the system generates a cash flow chart that, in turn, also estimates the break-even point for the project.
The final section provides a detailed view of the result of the financial analysis, including the IRR, ROI, NPV, and Profitability index.
The Eagles Energy Financial Engine is one of a significant number of tools available for energy auditors through the Eagles Energy Management program. This system translates energy efficiency into meaningful financial information crucial for energy auditing and implementation through financing. For more information on how the Eagles Energy Financial Engine and other brilliant Audit tools can work for you and your team, get in touch with us on +254(0) 791838959 or email us on firstname.lastname@example.org.
Feel free to try out the Energy Financial Engine through the link provided below and translate energy efficiency into actionable solutions for a better tomorrow.