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Become Energy Efficient

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How to Become Energy Efficient

Virtually any small business can improve its energy efficiency easily and cost-effectively, using the numerous resources that are available both from ENERGY STAR and a wide variety of other organizations. These resources are available to help you through the process of completing an upgrade. This process can be broken into major activities that are involved in carrying out an energy improvement project.

  • Identifying Energy Efficiency Projects

Getting Started with Few Hassles

As the saying goes, "time is money" and that can be particularly true for small businesses. However, not taking time (to save energy) can mean big money lost.

Reduction in daily energy costs and monthly utility bills for the lifetime of your business can make it well worth the time needed to pursue effective-efficiency upgrades. Here are some strategies to jump-start your energy savings:

  • Ask your utility if they offer free or inexpensive energy audits and/or rebates for energy-efficiency upgrades. A good place to start is the Energy Crossroads - a consolidated listing, by state, of many of the utility energy-efficiency programs available for small businesses.
  • Invite contractors to your facility to suggest upgrades and provide free estimates.
  • Contract with an energy professional to coordinate and manage your project.
  • Leverage your time by drawing on the expertise of ENERGY STAR.

Small manufacturers who are interested in a facility audit may also want to check out the following:

  • Industrial Assessment Centers (IACs)
    Provides eligible small- and medium-sized manufacturers with no-cost energy assessments. Sponsored by the U.S. Department of Energy, Industrial Technologies Program.
  • Manufacturing Extension Partnership (MEP)
    Provides customized technical assistance programs to manufacturers in the areas of process improvement, supply chain management, and business operations. Programs include assistance with implementing energy saving measures in the manufacturing process. Sponsored by the National Institute of Standards and Technology.

  • Financing Energy Efficiency Projects

Access to capital for an energy-efficiency upgrade need not be an issue. Some upgrades require little funding. For those that do require investment, don't worry; there are many traditional and non-traditional financial resources available. A well-designed upgrade can provide your business a positive cash flow from energy savings while paying off the capital investment for new equipment.

For small, inexpensive projects, you may want to use your own internal funds to pay for the upgrade in order to keep your payback period low and return on investment high.

For larger jobs, financing might be the only way to pay for the upgrade. Fortunately, a variety of sources and mechanisms exist for small businesses to finance energy-efficiency improvement projects.

It's your business decision to weigh your competing needs for capital versus continuing increases in operating costs for energy. Remember, even a longer return-on-investment on energy efficiency results in affordable comfort, and new, more reliable equipment that will pay for itself with energy savings. Strategic energy efficiency investments are your hedge against the certainty of higher utility bills that you cannot control.

  • Federal Tax Credits for Energy Efficiency

A tax credit can provide significant savings. It reduces the amount of income tax you have to pay. Unlike a deduction, which reduces the amount of income subject to tax, a tax credit directly reduces the tax itself.

The following resources provide information on federal tax credits available to small businesses for making energy efficiency upgrades.

Tax Credits for Home Builders

Eligible contractors need to fill out IRS Form 8908 PDF to get the tax credit. The IRS has provided the following guidance regarding the tax credits for constructing energy efficient new homes available under the Energy Policy Act of 2005:

  • IRS Notice 2006-27 PDF provides guidance for the credit for building energy efficient homes other than manufactured homes.
  • IRS Notice 2006-28 PDF provides guidance for the credit for building energy efficient manufactured homes.

The tax credit information provided below is based on information contained in the Energy Policy Act of 2005. The IRS guidance provides specific information that home builders and housing manufacturers can rely on to take action to claim the tax credits. ENERGY STAR will study the IRS publications and provide updates as necessary.

Home builders are eligible for a $2,000 tax credit for a new energy efficient home that achieves 50% energy savings for heating and cooling over the 2004 International Energy Conservation Code (IECC) and supplements. At least 1/5 of the energy savings must come from building envelope improvements. This credit also applies to contractors of manufactured homes conforming to Federal Manufactured Home Construction and Safety Standards.

There is also a $1,000 tax credit to the producer of a new manufactured home achieving 30% energy savings for heating and cooling over the 2004 IECC and supplements (at least 1/3 of the savings must come from building envelope improvements), or a manufactured home meeting the requirements established by EPA under the ENERGY STAR program.

Please note that, with the exception of the tax credit for an ENERGY STAR qualified manufactured home, these tax credits are not directly linked to ENERGY STAR. Therefore, a builder of an ENERGY STAR qualified home may be eligible for a tax credit but it is not guaranteed.

These tax credits apply to new homes located in the United States whose construction is substantially completed after August 8, 2005 and that are acquired from the eligible contractor for use as a residence from January 1, 2006 through December 31, 2008.

Tax Credits for Manufacturers

While not directly affecting consumers, manufacturers of energy efficient clothes washers, dishwashers and refrigerators are eligible for tax breaks themselves, which may lead to increased availability and a reduction in prices for these energy-saving appliances:

Tax Deductions for Commercial Buildings

A tax deduction of up to $1.80 per square foot is available to owners or designers of new or existing commercial buildings that save at least 50% of the heating and cooling energy of a building that meets ASHRAE Standard 90.1-2001. Partial deductions of up to $.60 per square foot can be taken for measures affecting any one of three building systems: the building envelope, lighting, or heating and cooling systems. The credits are available for systems "placed in service" from January 1, 2006 through December 31, 2008.

  • Choosing a Contractor

The selection of experienced, competent contractors and other energy professionals is critical to the success of your energy-efficiency project(s). Here are some guidelines to aid you in choosing a contractor:

  • Ask for multiple current references that you can contact about work the contractor performed.
  • Ask the contractor to provide a cost-estimate in writing for any work they will do.
  • Make sure they are licensed and insured contractor.
  • The contractor should certify that their work conforms to state and local regulations and codes.
  • Verify that the contractor carries workers' compensation insurance.
  • Make sure the contractor has experience and will use energy-efficient equipment.

Visit the ENERGY STAR Service and Product Provider Directory and search for contractors and energy professionals in your area to help you with your upgrade(s).

How to Select a Contractor

The following resources provide additional tips on selecting a contractor for you energy efficiency upgrade project:

  • 10 Tips for Hiring a Heating and Cooling Contractor

1. Study up Find out about license and insurance requirements for contractors in your state. And before you call a contractor, know the model of your current system and its maintenance history. Also make note of any uncomfortable rooms. This will help potential contractors better understand your heating needs.

2. Ask for referrals Ask friends, neighbors, and co-workers for contractor referrals. You can also contact local trade organizations for names of members in your area.

3. Call references Ask contractors for customer references and call them. Ask about the contractor's installation or service performance, and if the job was completed on time and within budget.

4. Find special offers A heating and cooling system is one of the largest purchases you'll make as a homeowner. Keep your costs down by checking around for available rebates on energy-efficient ENERGY STAR qualified heating and cooling equipment. Begin your search at

5. Look for ENERGY STAR ENERGY STAR qualified products meet strict energy efficiency guidelines set by the U.S. Environmental Protection Agency and offer significant long-term energy savings. Contractors should be able to show you calculations of savings for ENERGY STAR heating and cooling equipment.

6. Expect a home evaluation The contractor should spend significant time inspecting your current system and home to assess your needs. A bigger system isn't always better; a contractor should size the heating and cooling system based on the size of your house, level of insulation, and windows. A good contractor will inspect your duct system (if applicable) for air leaks and insulation and measure airflow to make sure it meets manufacturers specifications.

7. Get written, itemized estimates When comparing contractors' proposals (bids), be sure to compare cost, energy efficiency and warranties. A lowest price may not be the best deal if it's not the most efficient because your energy costs will be higher.

8. Get it in ink Sign a written proposal with a contractor before work gets started. It'll protect you by specifying project costs, model numbers, job schedule and warranty information.

9. Pass it on Tell friends and family about ENERGY STAR. Almost one-quarter of households knowingly purchased at least one qualified product last year, and 71% of those consumers say they would recommend ENERGY STAR to a friend. Spread the word, and we can all make a big difference.

10. Get the ENERGY STAR Guide For complete information on keeping your home comfortable year-round, get the ENERGY STAR Guide to Energy Efficient Cooling and Heating PDF (2.6 MB)

If you have a home-based business, you may also find the following resources useful:

  • Prioritizing Energy Efficiency Projects

You may wonder, "Where should I start?" Do I replace one piece of equipment or system at a time? Or, should I do a comprehensive upgrade of my entire facility? The answer will vary depending on each individual business' situation. The age of your current equipment and facility systems, your type of business, your local utility rates, your hours of operation, and your access to capital are all key factors in what level of upgrade makes business sense. One place to start is with low-cost and no-cost changes such as those listed in the Energy Saving Tips section of this guide.

If cash flow is an issue, you may want to wait until a piece of equipment or system fails or is a certain number of years old before replacing it with an energy-efficient model. However, if you are building a new facility or doing a major remodel, you should incorporate energy-efficient upgrades into your design due to the lower incremental cost of "doing it right the first time." For an existing facility, it may come down to what is financially feasible for your business at a particular time. Ask your contractor if they can assist you in prioritizing your energy-efficiency projects.

  • Managing Energy Efficiency Projects

The size and complexity of the energy-efficiency project your business undertakes will most likely be the main factor in deciding who will manage the project. For something as simple as replacing HVAC filters or replacing incandescent lamps (light bulbs) with ENERGY STAR compact fluorescent lamps (CFLs), you or your staff could do it yourselves. Depending on the skills on your staff, installing caulking and weather-stripping, ceiling fans, occupancy sensors for lights, LED exit signs, and programmable thermostats may be "do-it-yourself" projects not requiring outside help.

A more complex project, such as designing and replacing your facility's entire lighting system, will require the help of someone who has experience managing that type of project. Here are some resources to assist you in the process of managing your energy-efficiency projects:

Resources for Business Owners

  • Energy Saving Tips for Small Business Owners
    Learn about energy efficient business practices that can be implemented immediately to realize energy cost savings
  • ENERGY STAR Guidelines for Energy Management
    For larger businesses, these guidelines for energy management can assist your organization in improving its energy and financial performance while distinguishing your organization as an environmental leader.
  • ENERGY STAR Portfolio Manager
    An online, interactive energy management tool that allows you to track and assess energy and water consumption across your entire portfolio of buildings in a secure online environment.
  • ENERGY STAR Building Manual
    A strategic guide to help you plan, implement and manage profitable energy saving building upgrades. You can maximize energy savings by sequentially following the building upgrade stages 1-5.
  • ENERGY STAR Tools and Resources Library
    Get a broad range of tools and resources to help you implement a successful energy management strategy.

For Home Based Businesses

Hiring Energy Management Services

  • ENERGY STAR : Find Expert Help
    From professional engineers to non-profits providing technical assistance, this directory of energy efficient experts will help you improve and manage energy performance.
  • How to Hire an Energy Services Company Handbook PDF
    Energy Service Companies provide a full range of services to help you implement energy efficiency projects, from project financing to operation and maintenance of equipment. This handbook provides comprehensive information on how to hire a contractor to assist with creating energy efficient upgrades to your building. Produced by the California Energy Commission.
  • How to Hire a Construction Manager For Your Energy Efficiency Projects Handbook PDF
    Once you have decided which energy improvements to make, the next step is to decide how to install your improvements. This handbook will help you decide if you need to hire a construction manager, how to determine the services you need, and how to choose the right contractor. Produced by the California Energy Commission.

As your business implements energy-efficient projects it is good practice to continuously assess energy performance to ensure that savings are being achieved. ENERGY STAR offers tools to help you understand and assess your facility's energy performance.

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