It has been a year since I wrote my first article on the topic of energy intelligence. Since then, we have seen many of the concepts expressed in that article really resonate with our clients. We have also seen many software vendors – from well-established enterprise application vendors to small startups and in between –start to come out with offerings that address this area. It’s definitely exciting to see that these concepts are being embraced by clients and software companies alike.
Habits of Highly Efficient Companies
Additionally, the concept of energy intelligence is being supported by some thorough studies. In May, the Pew Center on Global Climate Change released a very detailed report on the topic of energy efficiency called “From Shop Floor to Top Floor: Best Business Practices in Energy Efficiency.” The report, based on extensive surveys of roughly 50 major companies as well as in-depth studies of six companies from a diverse set of industries, identified the seven habits of highly efficient companies. These are:
- Efficiency is a core strategy.
- Leadership and organizational support is real and sustained.
- The company has smart energy efficiency goals.
- The strategy relies on a robust tracking and measurement system.
- The organization puts substantial resources into efficiency.
- The energy efficiency strategy shows demonstrated results.
- The company effectively communicates efficiency results.
These habits describe a business’ strategy, sponsorship, organization, processes and communication that are critical to the success of an overall energy efficiency program. The fourth habit – the “robust tracking and measurement system” – is all about the information requirements that are lifeblood of such a program and enable this all to work. In the report, the Pew Center further elaborated the key characteristics of world-class energy tracking and performance measurement systems:
- The system collects data regularly from all business units.
- The data is normalized and baselined.
- Data collection and reporting is as granular as possible.
- The system tracks performance against goals in a regular reporting cycle.
- Performance data is visible to senior management in a form they can understand and act upon.
- Energy performance data is shared internally and externally.
- The system is linked to a commitment to continuous improvement.
Essentially, they are describing the concept of energy intelligence.
What Drives Energy Efficiency Initiatives?
There has been recognition that energy costs are one of the most useless costs companies bear. If you can find a cost-effective way to deliver the same products and services to your customers with the same quality, but spend a lot less on energy in doing so, why wouldn’t you do it? Also, having been in the midst of a multiyear global economic recession, many companies are not investing in growth strategies and are instead looking for ways to take costs out of their operations. Therefore, less spending on energy not only helps companies run in a leaner fashion to survive the slowdown, but also enables them to be better positioned over competitors when the economy eventually picks up. In other words, it’s about cost cutting and market competitiveness.
Additionally, energy efficiency is a form of cost cutting that everyone can get on board with. Employees can actually get excited and creative about it, as opposed to cost cutting that results in layoffs, pay cuts or other unpopular downsizing measures. At the core, energy efficiency initiatives are about cutting fat rather than cutting muscle or bone.
How Can Energy Information be Actionable and Real Time?
One area in which I have seen interest is how to make information about energy usage actionable in a near real-time basis. It is not useful to just show someone at a facility how much electricity is being used at any moment. It doesn’t give them any context as to whether the electricity consumption is good or bad. Expressing the consumption in a simple, straightforward way enables it to be more actionable. The idea is to compare the current performance to some kind of historical baseline and then describe the current performance as how much better or worse it is than the historical baseline.
The baseline that you are comparing to could be defined in a number of ways, depending on the purpose of a facility or building, such as the average or even the best performance of the building in a similar temperature range in the past or at a similar level of business activity (number of employees, amount of products made, services provided, etc.) in the past. You could also compare to the average and best performance of a similar facility in your portfolio so that you can understand how you are doing versus others.
The trick is figuring out which facilities are proper to compare to in order for this to be meaningful. The general idea is for the people at the facility to be able to recognize situations when their building has been running less efficiently on a consistent basis, so that they can determine the root cause for inefficiency and take action before they get the utility bill and it’s too late do anything about it.
What Should be Taken Into Account to Evaluate Efficiency Projects?
Another area of interest to our customers has been evaluating efficiency projects. Once you have found areas that need efficiency improvements (like lighting, air conditioning, building envelope, etc.), you need to start planning projects to make improvements across your facilities. There are many factors to be considered when deciding which projects to invest in and when, such as:
- Upfront costs of the renovation projects.
- Expected reductions in energy consumption and related cost savings over time.
- Current and future incentives at the local, state and federal levels that may offset some costs and the rules/restrictions around those incentives.
- Expected fluctuations in energy prices for each facility and the impact on projected costs.
Being able to model the impact of all of these variables can help you determine the best course of action and make the most worthwhile investments.
Take Action Now
We are seeing, and the Pew report confirms, that leading companies are now taking action on energy efficiency and applying the concepts of energy intelligence. They are not waiting for energy prices to go up again or for greenhouse gases to result in costs through things like cap and trade or carbon tax legislation. They are acting now because they know they can take significant costs out of their operations to enable them to be more competitive and withstand the economic storm.
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