Congress, Energy Issues & Your Hotel

By Steve Kiesner Director of National Accounts, Edison Electric Institute | May 04, 2010

The passage of the Energy Independence and Security Act of 2007, signed into law by President Bush last December, will help to improve the nation's energy efficiency. Perhaps its most noteworthy feature is that it will boost the average fuel economy standards for automobiles to 35 miles per gallon by 2020 - the first increase in fuel economy standards for automobiles since they were enacted in 1975.

The new energy law will make all energy consumers more energy efficient. The law increases energy efficiency requirements for a wide variety of appliances and equipment. Notably, the new energy law requires that general service incandescent light bulbs use about 20 - 30 percent less electricity by 2014, effectively phasing out the least efficient incandescent light bulbs. By 2020, lighting would have to use at least 35 percent less energy than they do today. The early target could be met with compact fluorescent lamps and advanced incandescent lamps, while the 2020 standards may require the use of LEDs (light-emitting diodes) and other advanced lighting technologies.

In addition, the legislation sets new minimum efficiency standards for a number of appliances, including dehumidifiers, electric motors, and commercial walk-in coolers and freezers. The law also sets a goal for all federal buildings to cut their energy use by 30 percent by 2015 (compared with a 2003 baseline), and requires new and renovated federal buildings to significantly reduce their reliance on energy from fossil fuels (natural gas, propane, oil, and coal). Compared with existing federal buildings, those built or renovated after 2010 must use at least 55 percent less fossil fuel. And by 2030, new or renovated federal buildings may not use any fossil fuel at all. Given the enormous impact of the federal government's purchasing decisions-it is the world's largest volume-buyer of energy-related products-this measure will greatly expand the availability of energy efficient products and building materials for businesses and homes alike.

For hotels, the new energy law ultimately means it will be easier to get more value from every dollar you spend on energy. This is important, because with today's volatility in energy prices, becoming more energy efficient is the best protection against higher bills. America's 47,000 hotels spend $2,196 per available room each year on energy, according to a recent report by the U.S. Environmental Protection Agency's (EPA) Energy Star program. This represents about 6 percent of the typical hotel's operating costs. If you operate a limited service hotel, and you can reduce your energy costs by just 10 percent, you can add the equivalent of a $0.62 average daily rate (ADR) increase. If you operate a full service hotel, becoming 10 percent more energy efficient is like adding a $1.35 ADR increase.

Importantly, the new energy legislation also complements the efforts of the nation's electric utility industry to help hotels become more energy efficient. The electric power industry has promoted energy efficiency since the first oil embargoes of the early 1970s. The industry has done so through demand management programs that pay large commercial and industrial customers to use less power during peak periods, or to shift their demand to off-peak periods. Some utilities also use programs that offer small commercial and residential customers a credit on their electric bill for cycling their big, energy-using appliances and equipment on-and-off during peak demand periods. And electric utilities use incentives such as cash rebates or low-interest loans to persuade customers to purchase energy-efficient appliances and equipment. Going back to 1989, electric utility DSM programs have saved almost 860 billion kWh through 2006. To provide some context, 860 billion kWh represents enough electric energy to power over 76 million homes for one year. Energy efficiency programs, because they result in the need to generate less electricity, have also had a significant and immediate benefit for the environment.

The efforts by electric utilities to promote energy efficiency are especially important to the industry's ability to reduce greenhouse gases in the short term. In 2005, the latest year for which data is available, energy-efficiency programs are estimated to have reduced the industry's carbon-equivalent greenhouse gas emissions by 13 percent, or almost 55 million metric tons. Electric utility energy efficiency programs have also helped the industry to mitigate the effects of volatile fuel costs, as well as defer the need for new infrastructure investment. And the investment in energy efficiency efforts has led to job creation and healthier state economies.

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Eco-Friendly Practices: Corporate Social Responsibility

The hotel industry has undertaken a long-term effort to build more responsible and socially conscious businesses. What began with small efforts to reduce waste - such as paperless checkouts and refillable soap dispensers - has evolved into an international movement toward implementing sustainable development practices. In addition to establishing themselves as good corporate citizens, adopting eco-friendly practices is sound business for hotels. According to a recent report from Deloitte, 95% of business travelers believe the hotel industry should be undertaking “green” initiatives, and Millennials are twice as likely to support brands with strong management of environmental and social issues. Given these conclusions, hotels are continuing to innovate in the areas of environmental sustainability. For example, one leading hotel chain has designed special elevators that collect kinetic energy from the moving lift and in the process, they have reduced their energy consumption by 50%  over conventional elevators. Also, they installed an advanced air conditioning system which employs a magnetic mechanical system that makes them more energy efficient. Other hotels are installing Intelligent Building Systems which monitor and control temperatures in rooms, common areas and swimming pools, as well as ventilation and cold water systems. Some hotels are installing Electric Vehicle charging stations, planting rooftop gardens, implementing stringent recycling programs, and insisting on the use of biodegradable materials. Another trend is the creation of Green Teams within a hotel's operation that are tasked to implement earth-friendly practices and manage budgets for green projects. Some hotels have even gone so far as to curtail or eliminate room service, believing that keeping the kitchen open 24/7 isn't terribly sustainable. The May issue of the Hotel Business Review will document what some hotels are doing to integrate sustainable practices into their operations and how they are benefiting from them.