Utility and Energy Costs to Rise

Getting the Most Out of Utilities

To combat forecast growth in the price of utilities, operators with high energy needs should consider investing in power-saving products and services now

By: IBISWorld Procurement Research Analyst, Ian Buchanan

While residential utility prices have been on the rise in recent years, the commercial sector has enjoyed declining utility costs due in part to a drop in the price of natural gas. The increased use of extraction techniques such as hydraulic fracturing has caused the supply of natural gas to exceed demand, and competition from alternative energy production methods like solar and hydroelectric production has been on the rise. As a result, natural gas and electricity prices have dropped. Despite this brief period of declining utility costs, rising demand is forecast to pressure the price of natural gas upward once again during the three years to 2019. To guard against forecast growth in the price of utilities, business operators should seek methods of reducing their utility bills, including energy management control systems and energy and utility consulting services, as soon as possible.

Cutting Down Energy & Utility Bills

One effective and increasingly popular method of trimming utility costs is purchasing and installing an energy management control systemto monitor the consumption of energy at a facility and collect data reflecting the energy usage of various systems, such as lighting, heating and ventilation systems. Armed with this data, building operators can better manage their energy usage and, thus, cut costs. More advanced systems can even make the necessary adjustments to optimize energy usage and cost automatically. Alternatively, many users in the market are moving towards cloud-based energy management software, known as energy intelligence software, which monitors energy usage and helps operators optimize how and when they use energy. Due to rising demand from businesses and expanding nonresidential construction activity, the price of energy management control systems has been rising at an estimated annualized rate of 2.1% during the three years to 2016. Fortunately for buyers, IBISWorld forecasts prices to increase at a slower average annual rate of 0.9% during the three years to 2019. 

Businesses can also use energy and utility consultants to help manage their utility expenditure. These consultants provide many of the same benefits that an energy management control system does. They can assess a client’s facility and monitor its energy usage to determine where cost savings can be achieved. While the end result of procuring these services is generally the same as using energy management control systems, consultants can tailor their services to each particular business’s needs, allowing some operators to achieve a greater return on investment when hiring an experienced service provider. Additionally, a consultant will help with decision making, whereas an energy management control system leaves buyers to determine the most appropriate course of action. As with energy management control systems, rising demand and an increase in nonresidential construction have driven prices for energy and utility consulting up. IBISWorld estimates that service prices have been rising at an average annual rate of 1.4% during the three years to 2016. Because many government-based energy reduction incentive programs have ended recently, however, demand for energy and utility consulting services is expected to taper off slightly throughout the next three years, resulting in suppressed price growth. As such, IBISWorld forecasts the price of these services to rise at a slower annualized rate of 0.8% in the three years to 2019.

Because the expected rise in the price of utilities could drive up businesses’ operating costs, operators may stand to gain from investing in methods of reducing energy and utility consumption sooner rather than later. The prices of both energy management control systems and energy and utility consulting services are projected to rise slowly in the next three years, so buyers can assess both options to choose which best suits their needs and can provide the greatest return on investment.

Source: IBISWorld Inc
www.ibisworld.com/procurement