[Part 1] Energy Savings: Commodity Procurement

In the current economic climate, hotels and conference centers find themselves searching for new ways to reduce operating expenses more than ever before. The hospitality industry, like any other commercial enterprise, is driven largely by operating margins.

According to a recent EnergyStar report, hotels in the United States spend close to $4 billion on energy each year. Given that energy costs will only continue to increase, reducing energy expenditures has become a viable way to reduce overall expenses.

Hospitality properties can decrease energy expenditures in three different ways:

  1. By engaging in commodity procurement  measures to reduce the cost of electricity
  2. By increasing energy efficiency to reduce energy usage
  3. By encouraging the development of sustainable day-to-day behaviors

We’re going to go tackle these energy saving ideas in this three part series. Here is the first part:

Commodity Procurement: Pay Less

In several parts of the country, consumers have the ability to purchase energy from independent marketers. This process is referred to as commodity procurement.

Off-Peak Energy Usage

Power marketers encourage customers to reduce their usage in response to market prices. If customers consume energy at off-peak times, electric companies may reward them for off-peak usage with lower energy rates.

Because users pay higher rates during the day and lower rates in the evening, hospitality managers can arrange to do activities that require large amounts of energy in the evening, such as running laundry equipment.  Because of the lower energy rates, hotels will see a direct benefit in the form of lower utility bills without the need to reduce usage. For many large commercial energy users, such as hospitality properties, receiving incentives or rebates is the first step to a balanced energy management plan.

Demand Response: Earn Compensation for “Negative Energy”

The management of electricity consumption in response to supply conditions is referred to as demand response. In most cases, demand response is targeted at reducing peak demand to balance electricity production and consumption. An imbalance means the energy company must run peak power plants, generate extra emissions, and charge higher prices for electricity.

One aspect of demand response is load shedding. Power plants may not always meet the need of “peak demand,” the greatest amount of electricity required by all utility customers within a given region.  In effort to reduce the electric demand on power grids at critical periods, hotels can shed load for power aggregators by drastically reducing energy consumption.

The energy that a property would have consumed but did not becomes “negative energy,” or negawatts, which aggregators like Comverge or EnerNOC can sell back to the power company. The load-shed process involves turning down or off certain appliances. For example, thermostats may be adjusted to lower or higher temperatures to use less energy when heating or cooling.

Load shed can be done in two ways:

  1. Manually, by adjusting thermostats in unsold rooms, or
  2. Remotely, by utilizing an energy management system, which can shed load for all unoccupied rooms to maximize “negative energy” without compromising guest comfort.

Though load shed is available only in certain regions, it may be an attractive savings option for hospitality properties, as buildings that can shed a certain amount of energy for aggregators on command may earn a lower utility rate by doing so.

“Paying less” has positive financial and environmental effects. Commodity procurement through power marketers and engaging in demand response programs allow participants to reap the benefits of decreased energy costs while also eliminating the need for the construction of new power plants.

Gerrit Reinders is executive vice president for Sales & Marketing at Telkonet. For more information, e-mail Gerrit or follow Telkonet on Twitter @Telkonet.

You May Also Like

About the Author: Contributor


  1. Does not seem like Telkonet has a large demand for their product. They sell only a few hundred thousand dollars a year when the demand is in the billions.

  2. Gerrit: I have been led to believe that this application has not taken off as anticipated due to the overall economy. Is this the sole reason? If not, what other reason(s) are there for a company not to take
    advantage of saving themselves money.

    This is perplexing to me. Why wouldn’t this application be accepted by a number of more companies; quickly? What’s holding up the show?

    Thanks for your response.


  3. I wonder if we will ever have the opportunity to see this kind of system available for home use.  Any thoughts?

Comments are closed.