Customers & Industries: Fitness First

Fitness First uses @RISK to Manage Energy Costs

  • Industry: Retail
  • Product(s): @RISK, RISKOptimizer
  • Application: Energy Budget Resilience Optimization

Summary

With 75 gyms across Australia, Fitness First identified business electricity cost as a fiscal risk. Knowledge Global constructed an @RISK model for energy cost management.

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Fitness First and our other clients are provided with more confidence in the expected returns of energy efficiency strategies which makes capital sign off easier. @RISK’s strong statistical capability has made NRG Insight much smarter.
Ross Sharman, Knowledge Global

Fitness First has over 1.2 million members, making it is the largest gym, health and fitness club group in the world. With 75 gyms in Australia and a high usage of active patrons wanting to keep cool as well as look better, they have a hefty electricity bill to manage.

Average business electricity costs in Australia rose (in real terms) by 60% in the 10 years between 2003 and 2013. This major cost item was recognised as a fiscal risk that needed to be addressed and managed.

Fitness First engaged Knowledge Global, an Australian company that has won The Oracle Eco Enterprise award on two separate occasions for their innovative approach to sustainability. Ross Sharman of Knowledge Global summarised, “The real trick to energy cost management is knowing your current costs and then managing well-orchestrated strategies to mitigate the cost risk for the greatest return. These strategies typically take the form of energy efficiency programs.”

Knowledge Global has been delivering verifiable and accurate financial return on investment on energy efficiency programs via their data analytics tool called NRG Insight. The purpose of this tool is to give an organisation’s executive management the ability to manage their energy costs in a coordinated and streamlined fashion. The product is fundamentally an independent billing engine that uses daily smart meter updates to provide automated bill validation, accruals, budgeting, forecasting, market analysis and procurement aids.

Budget model with example distribution

@RISK has allowed Knowledge Global to further enhance their offering by optimising expenditure of new capital in energy efficiency programs. Inputs into the model (such as energy cost, usage, and weather) can be modelled with appropriate distributions. The internal rate of return (i.e. NPV) on a portfolio of efficiency projects across a number of gyms is then modelled using RISKOptimizer, providing more confidence in future projects which are then validated by NRG Insight.

Energy Efficiency Program NPV Optimisation Simulation

“Fitness First and our other clients are provided with more confidence in the expected returns of energy efficiency strategies which makes capital sign off easier.” says Ross Sharman. He adds, “@RISK’s strong statistical capability has made NRG Insight much smarter.”

He goes on to explain how the in-depth analysis changed how Fitness First approached their energy needs.

“As a result of the success of the programs last year and with the continual analytics we provided, they have now allocated a larger energy efficiency budget for this financial year for a new program,” says Sharman. “We will continue to measure and analyse the delivery of these projects with ROI and also with effect to their overall energy budgets.”

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