Energy Cost Savings vs. Energy Cost Avoidance
In energy discussions, “cost savings” and “cost avoidance” are often used interchangeably. There is a distinct difference between them:
Energy Cost Savings is the actual dollar difference between current year costs and previous year or baseline year costs. It is simple arithmetic. It does not consider different weather conditions, additional square footage, or increases in the cost of utilities— gas, water/sewer, electricity.
Energy Cost Avoidance compares “apples to apples.” It takes into account dissimilar weather conditions, more/less square footage, utility rate changes, adjustments for billing period length (useful for month-to-month comparisons), and changes in operating hours. Only when these are taken into consideration can you accurately compare current year costs and previous year or baseline year costs. Cost avoidance is the amount of money you avoided spending, in this case by taking action to save energy. In some cases, cost savings could exceed cost avoidance, but this is rare since utility rates usually go up, not down; square footage increases; and there is a creep factor as more computers and other equipment, more lighting and irrigation systems, and increased after-hour use of facilities makes costs go up unless action is taken.