3 outdated assumptions about how hotels pay for energy

By | April 21, 2015

3 outdated assumptions about how hotels pay for energy

The way that hotels pay for electricity is changing. The rapidly shifting and increasingly complex connection between electricity usage and costs has left many hotel managers with outdated notions about energy management. Here are some of the most common and costly misconceptions.


Assumption: Energy keeps getting more expensive.

Fact: Energy rates have decreased, while demand charges are on the rise.

Due to factors such as inexpensive natural gas and widespread adoption of renewables, the cost of generating electricity has actually declined or stayed flat in recent years. As a result, the rates charged for each unit of electricity consumed have generally trended downward. But if rates are lower and the hotel isn’t using any more energy, why do utility bills keep going up? The answer lies not in the cost of electricity, but in the cost of the system that delivers it. The electric grid must be built and maintained to deliver the maximum amount of power demanded at any given time, so businesses pay separate charges for energy used during short periods of peak demand. These are called demand charges.

Demand charges are based on the single point during each billing cycle when your energy use is the highest. You might think of energy charges like buying gas for your car, where you pay a certain price for every gallon, while demand charges are more like a fine that you might pay each month based on your top speed.

Since grid infrastructure is aging, its capacity remains constrained during peak times and so utility companies have raised demand charges in order to cover their fixed delivery costs. For many commercial buildings, demand rates have increased by more than 75 percent over the last decade. Thus, while the cost of energy is declining, the cost of demand is rising. This means that simply reducing total energy consumption may not be the best way for hotels to reduce costs. Instead, building managers may need to consider ways to lower peak energy usage, reducing demand charges.


Assumption: It’s impossible to accurately estimate and prove savings from energy initiatives.

Fact: New solutions allow you to accurately project and verify savings from energy projects.

Hotel management and facility teams are often presented with a wide range of potential energy saving solutions. Many of these initiatives are compelling, but fail to move forward because of a major roadblock: difficulty proving the credibility of savings estimates and explaining how savings will be verified after implementation. When an energy manager brings a proposal to his or her boss, the number one question is: How confident can we be in these savings?

Given the variety of factors impacting energy costs, such as time-of-use, weather, occupancy, and rate fluctuations, answering this seemingly simple question can actually be quite difficult – but not impossible.

Low-cost energy management solutions are available today that use real-time energy monitoring to assess how and when buildings use energy, down to the second. This technology analyzes historic and current energy usage patterns and accounts for weather, time-of-use impacts, and rate differences to predict what usage and costs would have been under the status quo. As a result, they can easily model the real-life cost impacts of an energy initiative and verify results down the road – without having to take a solution provider’s word for it.

Assumption: Energy projects are expensive and capital intensive.

Fact: Hotels can access low- and no-cost savings with automated demand management.

Many hotels have attempted to lower their electricity bills with equipment upgrades and retrofits such as LED lighting, HVAC controls, or ENERGY STAR® appliances. While these can make a big impact on overall energy consumption, they often involve high upfront costs or long payback periods.

The truth is that equipment upgrades only address a portion of hotels’ energy savings potential, overlooking operational inefficiencies such as leaving equipment on all night or incurring avoidable demand charges (the part of electric bills that is rising). These types of operational issues are typically hard to find, but inexpensive to fix. Rather than replacing costly building systems and equipment, hotels can access low- and no-cost savings by investing in monitoring and demand management solutions that detect, notify, and respond to savings opportunities.

Fortunately, advanced energy technologies are now available that combine learning software and energy storage to automate and verify savings for hotels, while providing real-time visibility into energy use and costs. These solutions have much lower costs than traditional energy investments and often require no upfront capital.


Companies like InterContinental Hotels Group and Extended Stay America have implemented energy storage services in order to:

  • Save money by automatically trimming energy peaks with no change to operations
  • Receive valuable alerts to shift energy use away from moments when costs are highest
  • Accurately estimate electricity bills before they arrive
  • Visualize how and when they use energy in real-time to identify hidden waste
  • Assess the potential and actual impacts of energy initiatives

As the leading provider of advanced energy storage to hotels, Stem lowers monthly energy bills with no change to business operations or guest experience. Stem does more than just store and deploy – it learns your hotel’s patterns to maximize savings and deliver real-time, actionable insights. Getting started is easy, with simple activation and no upfront costs.

Combat rising demand charges with Stem.
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