With rising energy prices, and the growing public appetite for energy efficiency, how long can providers afford to waste money on inefficient buildings, asks John Brodie.

Most aged care facilities we visit are wasting up to $50,000 per year simply by running their buildings inefficiently.

When asked, most of our clients say they never, or rarely, review their operations to identify areas of waste or inefficiency.

The average 100 bed facility spends between $800 and $2000 per annum, per bed on electricity. That can average out to a cost of between $80,000 and $200,000 annually. Most of those facilities are generally at least 20 years old. However, in many cases they may be only two or three years old. It is amazing that many of the new facilities waste as much or more than older ones.

The cost of power is predicted to rise by around 20 per cent per annum. In NSW alone electricity has risen around 40 per cent this year. Most facilities pay between 6 cents/kwh and up to 25 cents/kwh in South Australia. The average in NSW is around 12 cents/kwh. In the UK aged care facilities pay around 45 cents/kwh equivalent. IPART NSW has just officially approved an increase in power costs of 60 per cent over the next three years for the NSW electricity suppliers. Surely we are all aware that cheap electricity is created by brown coal-fired power stations. Even if you don’t believe in climate change the days of creating electricity by using dirty and inefficient brown coal are numbered. In addition the electricity grid is old and faulty and there is an urgent requirement to replace it. The nationwide cost is estimated at $30 billion. Who is going to pay for that? All of us.

If we combine the inevitability of carbon trading (remember per capita Australians are the biggest producers of carbon in the world) and the effect it will have on the cost of power, natural inflation and the phasing out of inefficient power stations and rebuilding a new grid, is it too far fetched to see electricity becoming so expensive it becomes part of the profit and loss analysis for any business? No more sending the secretary down the street to pay the bill once every three months at the post office. No more power bills paid with petty cash. Any business must now consider electricity costs as a significant portion of their risk profile. Consider this: if electricity increases in price at a modest 15 per cent per year (remember this year it has already risen over 40 per cent in some states) then a current $100,000 per annum power bill will cost around $1.8 million in 20 years.

If your driver is to reduce running costs, and help the environment, your first step is to measure your usage. If you don’t understand what is happening and where or how the wastage is occurring how can you manage it?

An energy audit is the first and most important step in understanding demand and identifying how to reduce it. The standard audit offers a thorough, benchmarked investigative methodology to measure your actual usage and relate it to what you should be using. It allows you to understand your demand. The audit will provide energy mass balancing where the actual equipment load in the facility is measured against the power bills to identify areas of inefficiency that require further investigation. For example, if all the equipment in your facility has total rated power consumption per hour of 100,000 watts and you are consuming 140,000 watts, then there is 40,000 watts unaccounted for. Is there a fault in a machine, is there a short, is their a leaking pipe, is the kitchen air conditioning being left on all night?

It is vital for facilities to identify their resource wastage areas, the cost to repair them and how much money can be saved. An Australian Standard level 3 audit (most detailed available) for a 100 bed aged care facility will cost between $15,000 and $40,000 and can take between three and four months. This audit will give you an accuracy of plus or minus 5 per cent. A level 2 audit which provides an accuracy of plus or minus 20 per cent will cost a similar sized facility around $10,000 and $25,000. In addition, during a detailed audit a range of other inefficiencies are often identified including maintenance and operational initiatives and poor services.

It may seem expensive, yet the savings can be in the range of $20,000 to $80,000 per annum. We usually discuss the detail of financial return required by the client and try to target those items that will provide that return. In all facilities, for example, lighting is generally around 30 per cent of the running costs and air conditioning can be up to 40 to 50 per cent. In one audit we recently undertook in a facility only four years old, we identified that for a once-only outlay of around $30,000 to 40,000 on non-structural, easily fixed items, savings could be made every year of around $50,000 .That is based on current power costs. That client has 10 other facilities with similar levels of wastage. That is around $500,000 per annum savings.

As a option to sweeten the pill, there is some NSW state funding under the NSW government carbon trading scheme (for existing facilities in NSW) to undertake improved lighting retro fitting or other efficiency improvements aimed to reduce the carbon emissions.

In 2010 the Building Code of Australia (BCA) will make it mandatory for all commercial offices over 2000 square metres to undertake an energy audit and provide a mandatory disclosure of the energy performance of that building. The legislation is designed to eventually include all commercial buildings. How long before that trickles to other types of facilities, including aged care? The way the carbon economy is moving, maybe one to two years. This leaves this very important question for boards and managers of facilities: how long can you afford to keep wasting money on inefficiencies that can be relatively easily overcome?

<<<John Brodie is managing director of VIM Sustainability.

Go to www.vim.net.au&gt;&gt;&gt;