Our industry is engaged in an important dialogue to improve the efficiency and resilience of real assets through transparency and industry collaboration. This article is a contribution to this larger conversation and does not necessarily reflect GRESB’s position.
In the quest for reduced operating costs, compliance with building performance standards such as New York City’s Local Law 97 and broader portfolio decarbonization initiatives, building owners often make energy upgrades but forget to update their energy buying plans, which means they miss a key chance to save money and reduce risks. After investing in improvements like lighting, HVAC systems, or smart controls, it is important to ensure those changes are reflected in your energy procurement strategy. Energy suppliers typically rely on historical usage data to determine pricing, often looking at the past year of consumption. If your building is now using less energy but your contract is based on outdated data, you may be paying more than necessary. In addition to total usage, energy efficiency can impact peak demand, which influences capacity and transmission charges. Without adjusting your contract, these charges may not accurately reflect your building’s performance. Reviewing your energy plan after making upgrades ensures you receive the full financial benefit of your investments and helps avoid unnecessary costs.
Procurement is the missing piece
Many building owners invest in efficiency upgrades but overlook a critical step: updating their energy procurement strategy. If your contract is still based on outdated usage or past peak demand, you may be overpaying despite improved building performance. This misalignment leads to inflated costs, reduced savings, and missed opportunities. Energy procurement should not be treated as a separate process. It must be integrated into the upgrade strategy to ensure that financial and operational benefits are fully realized.
Reevaluate before you renew
Before committing to a new energy contract, review your current load profile and confirm that suppliers are pricing based on updated performance data. Flexible terms like reforecast clauses or shorter contract lengths can help align costs with actual usage. An experienced energy advisor can help you evaluate options and communicate improvements to suppliers. Making procurement part of your efficiency plan improves cost control, supports ESG goals, and reduces long-term financial risk. Start by reassessing your energy contract to make sure it reflects the building you have today, not the one you had years ago.
What this looks like in practice
Dierdre Lord, co-founder of The Megawatt Hour, shared the following examples from her clients’ recent experiences:
Case study 1: How efficiency turned into real savings
A commercial office building upgraded to an absorption chiller powered by gas or steam. This lowered summer peak electricity demand, reduced utility demand charges, and cut capacity costs, which can make up to 35 percent of supply charges. Because the owner shared updated data with suppliers and negotiated a contract based on the building’s new energy profile, they secured a 10-to-20 percent reduction in energy costs. Total energy use also declined. The savings came not just from the equipment but from aligning the procurement strategy with the upgrade.
Smart Coordination Pays Off
Efficiency alone does not guarantee savings. You need the right contract to capture them.
Case study 2: Electrification comes at a price
Another office building transitioned to full electrification, replacing fossil fuel systems with electric ones. While this improved sustainability, it also caused a sharp increase in electricity use and peak demand. As a result, both utility charges and supplier costs rose. Even though the building became more efficient and its capacity factor improved, total electricity costs still increased. A better capacity factor lowered the rate per unit, but higher usage outweighed those gains. The owner had to work closely with suppliers and provide updated forecasts to secure better contract terms. Efficiency alone did not guarantee lower bills.
Efficiency does not always mean cheaper
Electrifying a building can raise costs unless supply contracts reflect how your energy use has changed.
Take the next step
Energy upgrades can bring real value, but only when they are connected to a thoughtful energy strategy.
Here are steps you can take to move forward:
- Benchmark your building’s post-upgrade energy usage
- Update your load profile with your energy supplier
- Rebid your energy contract to reflect your improved performance
- Explore flexible contract structures, including reforecast clauses
- Engage an energy broker or consultant to support these efforts
- Revisit your procurement plan as soon as upgrades are completed
Do not let outdated assumptions eat away at your gains. The smarter your building gets, the smarter your buying strategy should be.
References
The Megawatt Hour. Energy Cost Management – Supplier Differences and Contract Terms. 17 July 2017, https://home.themwh.com/2017/07/17/energy-cost-management-supplierdifferences-contract-terms. Accessed 21 July 2025.
The Megawatt Hour. Energy in 2019 – What Commercial & Industrial Customers Need to Know. 17 Jan. 2019, https://home.themwh.com/2019/01/17/energy-in-2019-whatcommercial-industrial-customers-need-to-know. Accessed 21 July 2025.
The Megawatt Hour. How to Think About Business Energy Strategy – and Why. 14 Oct. 2018, https://home.themwh.com/2018/10/14/how-to-think-about-business-energy-strategyand-why. Accessed 17 July 2025.
The Megawatt Hour. Energy Cost Management – Supplier Differences and Contract Terms. 17 July 2017, https://home.themwh.com/2017/07/17/energy-cost-management-supplierdifferences-contract-terms. Accessed 21 July 2025.
This article was written by Kendall Guthrie, Marketing Intern at CodeGreen. Learn more about CodeGreen here.