Proactive ways to reduce energy costs, right at the source
Hospital facilities managers and directors of operations are acutely aware that conserving energy is essential to reducing energy spend. While it’s true that managing energy usage is at the center of controlling costs, going straight to the source can amount to significant savings.
Getting the Best Price for Energy
Discovering new ways to source energy should be part of your overall energy savings strategy, according to Bill Miller, Director of Strategic Account Integration for inSight Advisory – Energy at HealthTrust. The inSight Advisory program can help members with the analysis needed to make smarter energy choices. Miller offers the following considerations.
- Keep in mind that volatility in energy markets could work to a facility’s advantage, as energy providers vie to attract dependable institutional customers. Investigate whether an energy procurement company might be able to find new energy partners (including renewable energy sources) that can deliver energy at a lower rate.
- Negotiate rates with one or more new providers based on actual forward pricing instead of flat, across-the-board rates from a regulated utility. This could yield significant savings. inSight Advisory – Energy can act as a major partner when negotiating with energy providers.
- Engage a partner that can help you forecast energy prices—it’s essential to ensuring hospitals get the best deals possible. HealthTrust can advise members about price predictions, including when to enter into new agreements and whether to extend them.
- Consider entering into a power purchasing agreement (PPA). A PPA is an arrangement where a facility agrees to purchase energy from a third-party developer that owns and operates a generation system. PPAs can give facilities options for purchasing renewable energy.
The Power of PPAs
Facilities can enter into a PPA for power generated onsite, or from a remote generation source. “Typically, an energy supplier approaches a hospital with an offer of energy at a predetermined rate for a set period of years,” Miller explains. “The supplier benefits by receiving predictable cash flow over the term of the contract, which can be 5, 10, 15 or 20 years in duration, and apply that income to defray the cost of building the energy generation infrastructure.”
Miller adds that the cost goes down as the length of the contract goes up. The hospital is assured of paying the guaranteed price with no performance problems—any lapses in service from the contracted supplier are supplemented by the existing utility grid or other systems.
“Whether it’s solar, wind, microgrids or fuel cells—you can purchase the output through a PPA,” says Miller. Healthcare groups interested in pursuing green technologies may find this to be an easier way to make that transition, because the energy supplier owns the infrastructure. For example, the supplier could install solar onsite or bring in electricity generated at a wind farm. Depending on state or federal policies, tax incentives might further drive costs down.
Miller explains that most PPAs share common features, such as no upfront costs to get in—and a hefty termination fee if the facility wants to end the relationship before the term is over. The inSight Advisory – Energy program can help HealthTrust members evaluate such proposals by looking over the contract and giving an unbiased recommendation. “There is no ‘one-size-fits-all’ agreement,” Miller says.
For more information on how inSight Advisory – Energy can help you explore power sourcing options, contact Bill Miller at firstname.lastname@example.orgShare Email