The Real Cost Of Deferred Energy Efficient Upgrades. Stop applying Band-Aids.

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At home, we sometimes describe how we fix something as "applying a bandaid". We know the bandaid solution does not fix the underlying problem. It just covers it up until a later date. The same is true for energy-efficient upgrades in businesses.

We know we should do them, but because of the associated cost and potential upheaval, we defer them and keep applying band-aid solutions to keep potentially inefficient and ageing infrastructure operating.  

Centropi facilities energy-efficient upgrades at low or zero upfront cost. This removes a giant hurdle in front of any company considering energy-efficient upgrades but is put off by the cost and upheaval. Whatever your needs, we aim to provide easily understood, unbiased information about accelerating your facility to net zero.

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What are deferred upgrades?

If you are operating legacy or ageing equipment, upgrading to energy-efficient equipment will save you energy and money. Ignoring that fact and applying the band-aids we mentioned above is deferring upgrades.

The 3 most common reasons for deferring upgrades

#1 - Lack of Funds

It is no surprise that this is one of the most common reasons for deferring upgrades. When funds must be allocated across a business to improve profit or drive revenue, few companies will look to energy-efficient upgrades. But as we will discuss, it is now easier than ever to fund these projects with little to no upfront costs.

#2 - Manpower

There is no doubt that upgrades will take time to plan and implement in the short term.  Businesses already stretched to their limits will struggle to justify diverting existing staff resources or bringing on new resources to deal with the projects.

#3 - Competing Priorities

Any company worth its salt will start a new financial or calendar year with goals to achieve that year. Company directors will spend time talking with internal and external stakeholders, prioritising these goals. Energy-efficient upgrades are not normally seen as attractive projects, so they will be pushed down the list and typically deferred.  

Are your upgrades urgent and important? Consider The Eisenhower Matrix

When considering all of the above, it is worthwhile to consider the Eisenhower Matrix. The Eisenhower Matrix is a way to organise tasks by urgency and importance to prioritise your most important work effectively.

Dwight D. Eisenhower—the 34th President of the United States and a five-star general during World War II—presented the idea that would later lead to the Eisenhower Matrix. In a 1954 speech, Eisenhower quoted an unnamed university president when he said, “I have two kinds of problems, the urgent and the important. The urgent are not important, and the important are never urgent.”

If staff only work on the urgent stuff, the non-urgent/important does not get attention. Which eventually becomes urgent, creating a growing backlog of urgent stuff.  The remedy is to tackle some non-urgent/important stuff daily via scheduled maintenance and avoid the backlog.

5 compounding effects of falling behind in maintenance - The Backlog

Let's admit it. We all have one, whether it is in work or our home life. But when it comes to deferred maintenance in businesses, what are the effects of a backlog?

#1 - Increased Operating Costs

Aging building systems, such as HVAC (heating, ventilation, and air conditioning), lighting, and insulation, tend to become less efficient over time. Deferred upgrades may lead to higher ongoing operating costs due to increased energy consumption, maintenance expenses, and potential system failures.

#2 - Decreased Energy Efficiency

Older building systems are generally less energy-efficient than newer technologies. By delaying upgrades, building owners miss out on the energy savings and performance improvements of modern, efficient systems. This can result in higher energy bills and a larger environmental impact.

#3 - Technological Advancements

Building technologies are continually advancing, leading to more energy-efficient and cost-effective solutions. Deferred upgrades mean missing out on the benefits of these advancements, which could have long-term financial and sustainability advantages.

#4 - Tenant Satisfaction and Productivity

For commercial or residential buildings, outdated infrastructure may impact tenant satisfaction and productivity. Upgraded and modern facilities can attract and retain tenants, contributing to the overall value of the property.

#5 - Financing Costs

Postponing necessary upgrades may lead to a situation where emergency repairs become necessary, which can be more expensive than planned improvements. Additionally, financing costs for deferred upgrades might increase due to changes in interest rates or financing conditions.

The benefits of regular maintenance and upgrading plant & equipment

Financial

Extended Equipment Lifespan: Regular maintenance can prolong the life of equipment and equipment. This should come as no surprise, and we all know this from things that we own at home. Take your car, for example. Keep it clean, change the oil, and get regular services, and you might get more money back at the end of your 10 years! But for organisations, this means they can maximise the return on their initial investment by delaying the need for costly replacements.

Reduced Downtime: Scheduled maintenance helps identify and address issues before they lead to equipment failures. Using the car analogy again, if you miss your regular maintenance, the chances of bigger issues arising are much higher. Scheduled maintenance also reduces unplanned downtime, minimising production interruptions and potential financial losses associated with halted operations.

Improved Energy Efficiency: Upgrading equipment to more energy-efficient models or ensuring that existing equipment operates optimally can reduce energy consumption. This, in turn, lowers utility costs and contributes to long-term financial savings.

Lower Repair Costs: Regular maintenance helps detect and address issues early on, preventing escalating problems that might require expensive repairs. Timely identification and resolution of minor issues can save money in the long run.

Compliance with Regulations: Some industries are subject to environmental or safety regulations. Regular maintenance and equipment upgrades can help organisations comply with these regulations, avoiding potential fines and legal costs associated with non-compliance.

Non-financial

Enhanced Safety: Well-maintained equipment is less likely to pose safety risks. Regular inspections and upgrades contribute to a safer working environment for employees, reducing the likelihood of accidents and injuries. This goes without saying. The safety of your workforce is your top priority, and if your workplace is not safe, you open yourself up to potentially costly legal issues down the line.

Improved Reliability: Regular maintenance enhances the reliability of plant and equipment. This reliability can increase confidence in production processes, customer satisfaction, and overall business reputation.

Employee Productivity: When equipment is well-maintained and operates reliably, employees can work more efficiently. Reduced downtime and disruptions mean workers can focus on tasks without constant interruptions.

Environmental Impact: Upgrading equipment to more environmentally friendly models or ensuring optimal performance can contribute to a reduced environmental footprint. This may align with corporate sustainability goals and enhance the organisation's reputation.

Operational Flexibility: Regular maintenance allows organisations to adapt to changing market conditions or production demands more effectively. Reliable equipment can be crucial in maintaining operational flexibility and responsiveness.

How can I fund preventative maintenance?

Here are 5 ways to reduce the capex required for the energy-efficient upgrades, but what about maintenance?

5 Ways to fund your energy-efficiency projects

Utilising an aaS (as-a-service) model effectively outsources your equipment maintenance to a third party. It is in their best interest to maintain the equipment as it will reduce the 3rd parties costs. This model requires no upfront capex, so you get the immediate benefits of energy-efficient equipment and the associated savings!

So, while deferred upgrades may provide short-term cost savings, they often result in higher long-term expenses, decreased building performance, and missed opportunities for improved efficiency and tenant satisfaction.

A proactive and strategic approach to building maintenance and upgrades is generally more beneficial for building owners in the long run.

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