Mr. Kiesner

Eco-Friendly Practices

The 2005 Energy Policy Act: Increased Profitability Through Energy Efficiency

By Steve Kiesner, Director of National Accounts, Edison Electric Institute

For most hotels-large or small, urban or rural-total energy costs can account for 3 to 5 percent of monthly operating costs. Hotels spend almost $4 billion on energy every year, according to the U.S. Environmental Protection Agency's (EPA) Energy Star program. Reducing energy costs by just 10 percent, according to the EPA, can add the equivalent of a $0.62 average daily rate (ADR) increase for limited service hotels, and a $1.35 ADR increase for full service hotels. If hotels improved their energy performance by an average of 30 percent, the annual electricity bill savings would be nearly $1.5 billion. This represents a savings of approximately $365 per available room night per year for every hotel room in the country. The Energy Policy Act of 2005 will enable hotels to reap more savings from every energy dollar.

One way the new law will help is by creating higher energy-efficiency standards for a variety of commercial equipment. These products include:

The energy law will also offer a tax deduction of $1.80 per square foot for commercial buildings that meet a 50 percent energy reduction standard. Qualifying buildings must save 50 percent or more in energy costs compared to a reference building defined by ASHRAE 90.1-2001 standards. This tax deduction applies only to interior lighting, heating and cooling equipment, water heating and the building envelope on a per building basis. If the building does not qualify for envelope savings that are 50 percent over the ASHRAE standard, it might still qualify for interior lighting savings, but at a reduced maximum tax deduction-$0.60 cents per square foot.

Hotels, as well as other commercial buildings, will also be eligible for tax credits if they install photovoltaic or solar thermal panels, microturbines, or fuel cells. These credits apply to units installed in 2006 and 2007. The solar power credit is 30 percent of the cost in the installation year with no cap. For microturbines with a maximum capacity of 2000 kilowatts (kW), the credit is a maximum of $200.00 per 1 kW produced, up to 10 percent of the cost. And fuel cells that generate at least 0.5 kW using an electrochemical process are eligible for a maximum of $500.00 per 0.5 kW produced up to 30 percent of the cost.

While the Energy Policy Act of 2005 contains a number of incentives to encourage hotels and other energy customers to become more energy efficient, it is worth noting that greater energy efficiency alone cannot satisfy the energy needs of the country. New power plants will still be needed to keep pace with economic and population growth, and to replace old plants as they are retired. New transmission wires will also be needed, as the grid is asked to move more and more power both within and throughout regions of the country. The Energy Policy Act of 2005 recognizes this and contains provisions to reinforce the nation's transmission grid, maintain electric reliability, modernize electricity regulations, and broaden the diverse mix of both conventional and renewable fuels to power the nation's economy.

The new energy law will begin to take effect in the upcoming months, but hotels can and should get started using their energy more efficiently today. Getting the housekeeping staff on board is a great way to begin. Little things they can do to in each room-resetting thermostats, closing drapes, reporting water leaks, and turning off lights-will add up to make a big difference in energy costs.

To maximize energy savings, hotels are encouraged to contact the electric company or utilities that service their company. The electric company can often be a great resource. The power company will have energy saving advice. Many also have a range of no- or low-cost electric utility energy management programs. When a utility's programs are coupled with the incentives in the new energy law, the savings can really add up.

For hotels that have properties throughout a region or the country, EEI's National Accounts Network can help, and again at no cost. The Network focuses exclusively on the needs of companies with multiple sites or outlets. The National Accounts Network will help to arrange contact between a hotel's facilities and their local electric companies. The hotel can then deal with one contact per power company.

Having a sole point of contact at each power company cuts down on the number of phone calls needed to make and the number of utility reps to contact. The Network can also help hotels to take advantage of any incentive programs or other services that may be available. Again, this is all free. The National Energy Customer Assistance Network (NECAN) directory is available online. This is a convenient guide to the power companies that serve each state and their National Accounts representatives:
http://www.eei.org/industry_issues/retail_services_and_delivery/National_Accounts/products_and_services/nonav_necan/index.htm

The Energy Policy Act of 2005 promises the country a future with a more reliable, affordable and environmentally sustainable supply of energy. And with its incentives for energy efficiency, it is a future that looks even brighter for hotels.

Steve Kiesner is Director of the Edison Electric Institute’s National Accounts Program. Based in Washington, D.C., Edison Electric Institute (EEI) is the association of United States shareholder-owned electric companies, international affiliates and industry associates worldwide. Our U.S. members serve approximately 90 percent of the ultimate customers in the shareholder-owned segment of the industry, and nearly 70 percent of all electric utility ultimate customers in the nation. They generated almost 70 percent of the electricity generated by U.S. electric utilities. Mr. Kiesner can be contacted at 202-508-5000 or skiesner@eei.org Extended Bio...

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