By Chad Gilless
From the November/December 2015 Issue
The complexity of managing energy expenses is at an all-time high. This increasingly tangled web is influenced by numerous external factors, including thousands of different rate structures, the ongoing rollout of energy data disclosure ordinances, and investor pressure to report on sustainability metrics. Internal organizational issues also present challenges: lack of accountability for energy management, hard-to-access (or inaccessible) data, competing priorities, multiple facilities with bills from different utilities and on different timetables, variance in procurement contracts, and skill set shortcomings.
Facility leaders can take action on these five strategies to better manage energy expenses—and position their teams for success.
1. Understand the primary energy cost drivers as a starting point to better energy management—how you buy energy, how you use energy, and when you use energy. Organizational energy efficiency programs often focus on reducing overall kilowatt hours or BTU hours consumed. While this strategy alone may produce incremental successes, the opportunity to have a significant impact on overall business operations is far greater. Broadening the focus to include the other two cost drivers will address the full picture of energy expenses.
Here’s a quick example: if you reduce energy consumption by starting up your facilities at later time (e.g., 8:00 a.m. versus 7:00 a.m.), you may inadvertently create a start-up spike that will result in a demand charge on your bill—a penalty for ignoring when you use energy—and eliminate your energy reduction savings.
Additionally, your energy procurement strategy, or how you buy energy, can significantly impact how much you pay or how much exposure you have to the volatility of energy markets. This is a complex issue in itself that starts with evaluating your locations to determine which accounts and components within those accounts can be actively managed. Accounts in deregulated territories should evaluate all of their options and leverage a competitive market to create pressure among suppliers to offer you the best possible terms. The portfolio of facilities should also be managed like an investment portfolio within the company’s acceptable risk tolerance. Because energy procurement is so nuanced, this is one area where organizations often look to third-party advisors for support.
I regularly speak with executives about how they have limited control of their market, how many cost components such as labor continue to rise, and how energy is one of the few areas they can actively control and make measureable improvements. The bottom line: maximizing return requires successful management of all three cost drivers.
2. Build the right cross-functional team. As many as 13 different organizational departments can play role in energy—from facilities, operations, real estate, and sustainability to finance, procurement, maintenance, and even human resources. Successful initiatives require communication and engagement with these groups. Dedicating an energy manager or energy champion is a great first step but, alone, that inappropriately focuses energy within one person. To maximize impact and effort, the organization needs a cross-functional team. At minimum, your team should include these roles:
- Executive Sponsor: This person must communicate to other executives how the program links to broader business objectives, and also be responsible for approving needed capital and time investments and removing difficult organizational roadblocks.
- Energy Champion: This person actively manages energy, reports on progress, creates and monitors energy policies, and ensures implementation of measures.
- Energy Management Software Power User: This data guru knows your software tools very well, performs analysis, runs reports, and assists the energy champion in leveraging energy information to make decisions and inform and influence the organization.
- Extended Team: The best teams are typically comprised of procurement, engineering, planning, finance, operations, and HR. In addition, every team should have at least one junior up-and-comer who will handle the many small details necessary for a robust effort.
3. Develop a plan that defines what success will look like. Getting started without a good plan is one way to waste a lot of time and effort. When developing a plan, explicitly state the scope of the energy program and how successes will be tracked. What are the goals? What metrics and KPIs will be used for reporting? How will you acquire the appropriate tools and collect data? What milestones will be set? Maintaining gains will only be possible with a long-term commitment.
4. Understand the tools needed to execute against plan, accurately prioritize which problems to investigate first, and then measure and verify results later. To manage energy proactively before costly waste actually occurs, it is beneficial to have energy data in two forms: monthly bills and streaming real-time data (this is especially true given the “when you use” cost driver). That data will allow the team to recognize potential issues quickly. And it’ll help to measure and verify results of projects after they are complete.
Technology solutions like energy intelligence software can be invaluable in collecting and making sense of all this data—and translating insights into dollars.
5. Promote the energy initiative across the organization. Praise early successes, and make sure your organization knows about the work of the energy management team. There are employee engagement tools, like WeSpire and CloudApps, that help employees and building occupants become part of the solution. When you broadcast goals and successes and let others know how they can help, you will undoubtedly see better results.
Gilless is practice lead, strategic energy management, at energy intelligence software provider EnerNOC, and was a key participant in the creation of the ISO 50001 standard.
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