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When selecting projects under a limited budget, a firm should implement the project that will return the most value. Ultimately, firm value is measured by stock price, which can be impacted when the firm makes a major announcement. This paper shows that announcements of energy management projects correlate with a 21.33% increase in stock price within 150 days of the announcement. This increase is in addition to the risk-adjusted return the firm would normally experience . For example, during a "bull market" a firm's expected return was 10%. After the announcement, the return would increase by 21.33%, for a net return of 31.33%. These results suggest that investors react positively to energy management projects. This outcome demonstrates one more strategic incentive for firms to implement energy management projects.
As a new US government administration comes into control, many people have asked me if I am optimistic about energy efficiency projects... the answer is YES. No matter how you analyze it, energy efficiency is a great investment... dare I say "Huge". Energy efficiency projects have high returns on investment and extremely low risk. The only thing they don't have is a "compelling event" forcing them to get done. In contrast, a repairing a roof leak has a sense of urgency because of potential damage from inaction.
About five years ago, I wrote about project developer who specializes in energy tax deductions and rebates. We call him "Dr. EPAct" because he knows how to navigate and attain substantial tax deductions and rebates, which pay for most (if not all) of a project's cost. His highly tangible skills in accounting are typically "outside" of an energy manager's core strengths, but definitely worth knowing. This month, Dr. EPAct (Bill Bissmeyer) is contributing again in this article! He will help explain the Federal Tax Extenders Act, which was signed on December 18, 2015 into law. More importantly, Bill presents a case study showing the economics and tax advantages that you have available to you. Frankly- you cannot afford to skip this article because it may be the key you need to get your project funded.
You think you're about to be a hero by entering into an Energy Savings Agreement, (which is supposed to fund improvement projects based on savings). Your long-time law firm reviewed the contracts, and your engineers have signed off. Everything seems positive. So what can go wrong? Actually, quite a bit... and your knowledge can be the difference between having a glowing success or abject failure that could cost you a job, reputation or worse.
A joke long popular among disaffected employees and humorists in the power industry asks, "What is the difference between an electric utility and a group of Boy Scouts in the woods?"