The Benefits of Enterprise-Wide Energy Management
A combination of new state regulations, fluctuating electricity prices, urgent environmental issues, and public pressure have companies all across the U.S. reexamining their energy management and sustainability practices. And for good reason. Nearly 82% of commercial buildings in the U.S. were built before 2000. As such they simply aren’t as energy efficient as they could be. On average, commercial buildings waste 30% of the energy they consume, and they consume 42% of the nation’s energy – more than any other sector.
Taking a “Big Picture” approach
The choices a company makes regarding energy sourcing and consumption can profoundly influence its reputation and bottom line. In response, forward-thinking companies are investigating energy efficiency, generation and sustainability opportunities that will increase profitability and brand reputation, while balancing any operational and financial constraints.
Managing energy can be particularly challenging for companies with multiple buildings or sites. Some buildings may be old, some new, some are large and complex, some are small and relatively easy to upgrade, some have on-site generation and others have not. How can companies accommodate the special needs of individual buildings while attempting to apply solutions across an entire portfolio of buildings?
Implementing energy management strategies for buildings separately from one another is a time-consuming process that frequently results in missed opportunities and unnecessary additional costs.
Taking a holistic, enterprise-wide approach has proven to yield better results. An enterprise-wide approach to energy management bundles efficiency, generation, and sustainability solutions together, aligning corporate business objectives with facility-level operations to maximize results. For example, multi-site organizations can leverage the benefits of bulk purchasing to improve project performance and reduce implementation costs. Grouping projects that require fewer upgrades and deliver immediate savings with more extensive projects that tend to have a longer ROIs allows companies to achieve more, while still providing a favorable ROI for stakeholders. The same principle applies to bundling new equipment purchases with software implementations and coordinating energy efficiency projects with other infrastructure upgrades.
Considerable research has been done on best practices for the effective implementation of enterprise-wide energy management strategies. The steps outlined below describe the tactics various multi-site organizations have used to maximize results and minimize risk.
1. Secure Company-wide Buy-in:
The first step on the road to effective energy management is to identify and engage key executives and stakeholders from all levels of the business. When executives and stakeholders have clear information about energy inefficiencies within their portfolio of buildings, and are offered solutions to track and improve performance, they are more likely to support and champion an enterprise-wide efficiency plan.
Once stakeholder approval is secured, organizations should assemble a cross-functional team of employees. This team will be responsible for developing the company’s energy management strategy and guiding implementation.
2. Reward Success:
To be successful, enterprise-wide energy management needs to be an operational priority. Effectively communicating how energy management will benefit the company, employees and the community, and providing training on new practices and procedures outlined in the plan, helps boost support for initiatives and ensure greater success. Organizations should keep employees informed on progress against established goals. – and milestones achieved should be celebrated.
Incentives, based on pre-determined key performance indicators, should be developed to motivate all employees to embrace the team’s energy management strategies. For example, GE conducts “treasure hunts” where employees participate in organized facility ‘hunts’ to uncover energy and other resource waste and recommend possible improvements. To date, the Treasure Hunts have resulted in $150 million in savings.
3. Benchmark Energy Use for Every Building:
Many companies across the U.S. lack a clear understanding of exactly how much energy they consume and waste – and the vast majority lack the systems needed for accessing energy data in real-time, and in a form that provides actionable information. Monitoring and analyzing energy use at different sites will reveal operating issues that affect costs, performance, and quality. Establishing a baseline against which future reductions will be measured is an important first step in tracking progress. This benchmarking should include an analysis of the following:
- How much energy does each building/site currently consume?
- What are the energy costs for each building and the total energy cost for the organization?
- What effect does the total cost of energy have on other financial indicators such as the company’s cost of goods and services?
- Is the organization taking advantage of renewables and federal/state-issued incentives?
- What is the organization’s current carbon footprint? And, how does that footprint align with customer and investor expectations?
4. Link Energy Management Goals to High-level Business Goals.
Strategic energy management is rarely an end in and of itself. Rather, organizations invest in energy management to further other business goals. Accordingly, it’s important to align energy management efforts with high-level business objectives.
The goals established by the energy management team will, naturally, vary by organization. But, generally, specific goals are set for each building (or building type group) and tend to include all or any of the following:
- Decrease energy use by X% over the next X years
- Reduce energy costs by X% over the next X months
- Increase renewable energy production by X%
- Reduce maintenance costs by X%
- Reduce downtime by X%
- Reduce greenhouse gas emissions by X% over the next X years
Goals should be realistic, assignable, time-bound and measurable. Many organizations find it useful to establish two-goal parameters: threshold goals define the minimum acceptable level of performance, and stretch goals define levels that exceed the minimum. Stretch goals are normally used as an added incentive for greater achievement.
More and more companies are also requiring that their suppliers commit to meeting their efficiency goals as well.
5. Develop a Strategic Energy Management Action Plan:
Once the organization has a clear understanding of current energy use, waste and impacts, it can develop an action plan for achieving the approved goals. The strategic planning process should begin with both opportunity and organizational assessments. While the opportunity assessment quantifies potential energy efficiency and generation opportunities, the organizational assessment appraises the capacity of the company to effectively implement the action plan. This combination of assessments ensures that goals are effectively quantified and assigned. The organization’s energy strengths, weaknesses, opportunities and external challenges should also be included.
Organizations should also determine the degree to which consultants, service providers, vendors, and other product providers will be used. Some organizations may choose to outsource entire aspects of their action plan, while others may only want to contract with specific vendors for limited projects.
The plan should detail an integrated approach to achieving all energy management goals, including short- and long-term reduction and generation strategies. Many organizations find it helpful to divide the action plan into four primary parts:
- Specific, measurable goals and objectives to be achieved within a specific time frame
- A listing of the individual initiatives aimed at achieving those objectives
- Recommended strategies for ensuring specific initiatives are being maintained over time
- Specific metrics for measuring the effectiveness of each initiative.
6. Integrate Energy Procurement and Management:
Most multi-site organizations recognize the inefficiencies and risks associated with relying on a single source of energy to run their operations. Despite this many still use a siloed approach toward energy management. There is no cohesive strategy for buying, managing and monitoring energy. Separate departments exist to manage procurement and sustainability. An integrated energy management strategy that merges procurement with sustainability can help companies make the most of their efforts.
7. Consider a Pilot Project:
Beginning the process with a pilot project helps organizations test and evaluate the results of proposed energy management strategies on a manageable scale, thereby minimizing risk. Testing strategies on one building or site will provide the energy team to examine the benefits and value of every recommended strategy and uncover any unexpected results or complications. Naturally, if the results of the pilot are good, stakeholders are more likely to approve enterprise-wide implementation.
8. Group Similar Buildings:
Empower individual sites to identify building-specific challenges and energy savings opportunities. Look for common denominators, and group buildings together that will benefit from similar efficiency and procurement solutions. Enterprise deployment of successful efficiency upgrades shortens timelines and increases the scale of energy savings, especially in homogenous portfolios.
9. Integrate Renewables:
Today’s energy landscape is characterized by dramatically increased supply and the plummeting costs of alternative energy technologies, such as photovoltaics, biofuels, fuel cells, advanced batteries, LED lighting, wind turbines, and advanced meters. Most renewable-energy projects are currently pricing energy below the cost of any traditional source of power. For example, The total costs of developing solar energy has fallen 74% in just five years. The cost of LED light bulbs has dropped 94% in less than a decade. The cost of storage technologies, like batteries, is falling as well. Organizations that fail to incorporate renewables and other energy-saving technologies are overlooking important benefits and exposing themselves to a variety of risks.
10. Prioritize and Bundle Initiatives:
Evaluate the costs versus benefits of all energy management options (energy efficiency, renewable energy generation, energy storage, etc.) and prioritize strategies based on those that save the most money at the lowest cost. Bundle longer-payback efficiency projects with shorter-payback projects to get deeper energy savings with more favorable returns.
11. Explore New Funding Options:
While the cost of clean energy technology is falling, and benefits of enterprise-wide energy management are obvious, it’s not always easy for organizations to make the commitment — even when capital is available. Committing to enterprise-wide energy management requires a thorough understanding of the financial implications of various purchasing options. Fortunately, there are a wide variety of funding options available now, such as Power Purchase Agreements, Energy Performance Contracts and Energy-as-a-Service options that supplement or eliminate capital investments and mitigate financial risk.
Now’s the Time
Until recently, energy management solutions for commercial buildings have been complex, costly and disruptive to daily business operations. Committing to an enterprise-wide energy management strategy was hindered by complex organizational structures, lack of human resources, technical expertise, and limited access to capital. Even when capital was available, it could be difficult to gain stakeholder buy-in for energy efficiency projects over other competing business priorities. The result was that many large companies have taken a project-by-project approach to energy management which, unfortunately, just isn’t efficient.
Fortunately, new energy management technologies, funding options and expert energy services and solutions companies, can reduce or eliminate those obstacles. In fact, optimizing energy performance can open up new cash flows, as opposed to draining existing ones. For companies committed to gaining a competitive edge, now’s the perfect time to take control of their energy.