Bright Ideas...

Energy costs take a big bite out of your profits. These moves will save you money. And boost your green credibility, too

By Amy Barrett

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Frustrated by rising energy bills, Larry Tinkelman, president of Kevin's Wholesale, replaced 100 light fixtures in the company's Scranton (Pa.) warehouse with energy-efficient fluorescent units. That seemingly ho-hum fix saved $2,600 a year, so Tinkelman moved on to bigger things: installing a new heating system. The cost for the upgrade? About $23,000, after $15,000 in state rebates. But the 57-person, $6 million seller of decorated apparel and promotional items should knock about $5,600 off its gas and electric bill next year, and Tinkelman expects the savings to continue. "When you are running a business, you aren't focused on the little stuff," he says. "But it's not hard to see the investment is a good one."

With oil at about $90 a barrel as of early February and natural gas prices up about 37% since the beginning of 2007, small business owners are seeing their energy bills spike. Energy costs tied with health-care costs as the largest spending increases for small and midsize companies in the past two years, according to a November, 2007, IBM survey. Add to those worries the value of cultivating a green image among customers and there's plenty of incentive for small companies to rein in their energy use. Jerry Lawson, manager of the Environmental Protection Agency's Energy Star Small Business program, says companies can slash costs about 30% a year by improving lighting, heating, cooling, and office equipment.

Making changes costs money, of course, but not as much as you may think. Installing a new heating or cooling system will run thousands of dollars. But energy-efficient appliances and equipment typically are no more expensive than less efficient models. Even better, you can often get help with financing. Many utilities and states offer rebates on energy-saving equipment, with some also providing loans at below-market interest rates for small businesses to finance upgrades. All told, there are about 250 financial incentive programs offered by federal, state, and local governments and utilities, according to the North Carolina Solar Center at North Carolina State University. And a new federal law, the Energy Independence and Security Act of 2007, created a program to direct Small Business Development Centers (SBDCs) to do more to help small companies cut energy consumption. The law gave the Small Business Administration authority to back loans under its 7(a) program to help small companies make energy-efficient upgrades. While both programs still need to be funded, "it's the first time Congress has made a connection between small business and energy policy, and that is really important," says Bryon Kennard, executive director of the Center for Small Business & the Environment in Washington.

The up-front costs of using alternative energy, including solar and wind power and fuel cells, can be steep, but there are cases where they make good financial sense. California and New Jersey, for example, offer healthy incentives for companies to use solar power. And companies surcharged for using a lot of energy during peak hours could reduce costs over time with a solar or wind system.

Check out the Energy Star Web site, energystar.gov/smallbiz. It lists ways small companies can save energy and finance upgrades. See if the SBDC in your area does free energy audits. Private firms typically charge $50 to $500 for an expert to come to your offices or warehouse and make suggestions. Next, contact your local utility, state energy office, and state utility regulator to see about other financing options. And ask your utility if it offers free or low-cost energy audits. Tinkelman, whose business had a free audit from a nearby SBDC, is glad he did.

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