A New Hue of Green: For the Management Accountant
Barton, Thomas L., MacArthur, John B., Strategic Finance
With energy prices at historically high levels, there's ample incentive for companies to consider investing in energy-saving technology that's both cost efficient and environmentally friendly.Management accountants can help the cause by preparing cost-benefit analyses of alternative investment possibilities that contribute to the further "greening" of the United States. This creates a win-win situation for all.
One real-life example of this has taken hold at Jiminy Peak Mountain Resort, a medium-sized ski and snowboard area in the Berkshire Mountains of western Massachusetts. Jiminy Peak recently completed a very successful wind turbine project that adds a high degree of stability to its energy costs, helps fulfill a corporate mission to protect the environment, and allows the use of "green" marketing to attract even more visitors to its popular ski slopes.
A History of Innovation
Jiminy Peak, which dates back to the late 1940s, is located about 30 miles east of Albany, N.Y. Through good management and sound development, the resort has evolved over the years into a popular winter ski destination with 45 runs and nine lifts. Savvy marketing and attractive mountain facilities have enabled Jiminy Peak to operate profitably, even in the summer.Winter sports draw about 250,000 visitors annually, while summer pulls in roughly another 100,000 for mountain biking and other activities.
Jiminy Peak's business is energy-intensive because machines make most of the snow, especially early in the season. Even with strong conservation efforts over many years that reduced annual energy usage by 25%, the resort consumes about 7.5 million kilowatt hours of electricity per year--or about what a small town might consume. Of this, roughly 60% is used during the winter months.
Rising winter energy costs spurred the resort to start thinking of new ways to lower its bills. Costs had jumped about 90% from the 2003-2004 season to the 2005-2006 season, largely because of a surge in oil prices. Jiminy Peak had already slashed its electricity costs as much as it could before the increase: More than 1,800 new compact fluorescent bulbs in the lodge replaced incandescent bulbs; outdoor lights on the ski runs were programmed to dim during night maintenance work; and half the snowmaking system was converted to gravity-feed. Jiminy Peak was even a test site for the development of highefficiency "guns" for the snowmaking machines. The new technology uses about 40% less electricity than the old version.
But there was only so much Jiminy Peak could do to conserve energy with its existing facilities and still offer high-quality recreational services. The eventual solution arrived in a glow of green.
Harnessing the Wind
Brian Fairbank had been in the ski resort business long enough to know that tops of the Berkshire Mountains can get very windy in the winter. As president of Jiminy Peak, Fairbank decided to put his mountaintop to good use in helping to stabilize the resort's cost of electricity.
Fairbank knew that harnessing the wind would be a complicated, specialized process, so he hired Sustainable Energy Developments of Ontario, N.Y., to examine the feasibility of such an enterprise.With Sustainable's help, Jiminy Peak received a small grant from the Massachusetts Technology Collaborative to conduct a formal feasibility study. As might be expected, in addition to technical and financial issues, a great deal of effort went into ensuring no negative impact on endangered species, birds, and wetlands.
The original plan called for Jiminy Peak to install a 1-megawatt wind turbine with financing provided by a $582,000 grant from the Renewable Energy Trust Fund, administered by the Massachusetts Technology Collaborative, and a $1.8 million loan from a local bank. (Funding for the Renewable Energy Trust Fund comes from a charge on Massachusetts electric bills. …