Energy Management and Energy Efficiency
If energy efficiency is something a business must do then putting a thorough energy management system in place is just plain common sense.
All businesses rely on sound management to be successful and managing energy usage should be a fundamental part of that approach. Despite that fundamental truth, energy management is often neglected, even though it is a crucial component of reducing costs.
And there’s nothing complicated about it. In simple terms, it’s the systematic use of management techniques, processes and tools to improve the energy performance of an organisation - basic house-keeping, you might say.
Though it is straightforward, for energy management to be effective, it must be rooted deep within an organisation. It also needs to be a continuous discipline, and it should incorporate all elements of energy including procurement, usage and monitoring.
However to get the best our of any initiative it is essential to approach energy management in a pragmatic way that’s right for your business, its size and industry. Energy management for a small legal firm will be a totally different to energy management for a company in manufacturing for example. However, whatever your business, the fundamental principles are much the same.
Why bother with energy management?
Wasting energy is wasting money.
- For every £1 saved on energy costs, most UK businesses would have to make £10 worth of sales to generate the same £1 of profit, according to Carbon Trust calculations.
- If poor energy management is wasting a business £1,000 – whether that’s because of being ignorant about where you use it or even a bad business buying decision – that business would have to make £10,000 worth of sales to make back an equivalent £1,000 in profit.
As well as the direct effect on the bottom line, of course, there’s the cash flow, environment and business reputation to consider. If you’re wasting energy, you’re causing pollution that could be avoided – mostly through increased CO2 emissions – and this drives climate change and contributes to the problems associated with dwindling fossil fuel reserves.
There is also increasing pressure from rising energy prices, climate change legislation and the need to be seen to be environmentally responsible by customers and stakeholders. Saving energy also saves you money; it’s the kind of cost cutting that makes good business sense.
To really make an impact on your energy usage, you need to take a structured approach that reaches every corner of your business. The Carbon Trust provide a very useful document Better business guide to energy saving.
A good starting point for energy management is to adopt the Low Carbon Hierarchy, an approach favoured by the Carbon Trust and adopted by many local government bodies.
The Low Carbon Hierarchy
The Low Carbon Hierarchy is three all enveloping steps for the total overhaul of a business' energy management approach. As a result it is not necessarily a realistic ambition for a small business but the principles can transcend businesses of all shapes and sizes.
Reduce energy consumption by cutting down usage and putting energy efficiency measures in place.
This should include the design of all goods and services and also the entire supply chain.
Replace fossil fuels with renewable energy
Including adoption of cleaner fossil fuel technology such as Combined Heat and Power (CHP).
Having reduced carbon emissions by reducing waste, energy efficiency and by using renewable and cleaner sources of energy, neutralise the remaining unavoidable emissions through carbon offsetting schemes.
Carbon Trust 5-Step Plan
An alternative to the low carbon hierarchy’s grand ambitions is the Carbon Trust's simpler five-step plan, which is easily scalable according to the size of the organisation.
Step 1: Commitment
Making energy efficiency part of company policy (whether that’s as part of procurement or corporate social responsibility or simply raising awareness of best practice) will demonstrate senior management's commitment to energy efficiency.
Following this, having an 'energy champion' is crucial and it’s also crucial that this champion has the support of top management and all necessary resources to be effective.
According to the Carbon Trust approach, the energy champion should:
- be the firm's eyes and ears for energy wastage;
- be responsible for reading meters and checking fuel bills;
- develop a weekly or monthly checklist of duties;
- consider forming an action team to report on progress to stimulate further action.
Step 2: Understand (establish the facts)
As the Carbon Trust says, the adage ‘You can't manage what you don't measure’ is especially true for energy management.
Invoices alone don’t give enough data to take full control over energy costs so the key is taking regular and frequent meter readings in order to:
- spot abnormal consumption and get to the causes quickly;
- check invoices and make sure that you only pay for the fuel actually used;
- compare current data with historic records;
- compare all your sites, processes or buildings;
- benchmark similar businesses;
- look for any seasonal patterns.
Taking these steps will help set improvement targets and pinpoint the areas with the greatest potential for saving energy.
How often you take meter readings depends on how much energy you use, but as a general rule, readings should be monthly if invoicing is quarterly and weekly if invoicing is monthly.
And it’s important to take readings at the same time of day and day of the week, particularly if the reading is weekly. Energy use can then be displayed on a graph, which makes it easier to detect trends and spot abnormal consumption spike. Of course investing in smart meters makes this stage a whole lot easier.
Step 3: Plan and organise
Once objectives and targets are decided upon, a plan of action is needed.
The Carbon Trust say a good action plan should:
- have management approval;
- relate actions to particular objectives;
- assign actions to individuals;
- allocate resources to each improvement.
Making people accountable can be the difference between success and failure.
If different business units are required to account for the energy use in their areas, they will have an incentive to practice good housekeeping and to implement energy-saving measures. You might even want to set up an internal league to incentivise local ownership.
Another important tip is to raise staff awareness. Although the energy champion has overall responsibility for energy efficiency, the involvement and commitment of all staff is crucial to achieve success, so in larger businesses appointing local champions can help.
Whether it’s through the noticeboard or the intranet, by incentive schemes or poster campaigns, if the whole team is behind an energy-efficient culture, the greater the chance to succeed.
Step 4: Act
A good way of identifying waste initially is to stage an energy walkabout.
Usage patterns will inevitably vary throughout the day, so vary walkabout times to match, for example:
- when the cleaners are in;
- at lunch;
- at night or over weekends (if your meter readings indicate that there is unexpectedly high energy use during these periods).
From these walks, identify where energy is being wasted and the possible reason. Is it a lack understanding, are procedures being overlooked, is repair or necessary to reduce energy costs, or is there a need for capital investment, for example?
Step 5: Control, monitor & review
Energy management should be a process of continuous control and improvement, not a one-off blitz.
In order to identify further areas to work on and to check that targets are being met it’s important to set up recording and monitoring systems.
Monitoring and Targeting (M&T) – the process of continuous recording and monitoring of energy use against consumption targets – has been shown to be an effective management tool in many organisations.
Step 6 (unofficial): Keep going
And finally the unofficial step 6 - the Carbon Trust have found that once companies stop monitoring their energy regularly, slippage sets in and waste starts to re-occur.
The key then is to embed behaviours in the fabric of the business to ensure continual improvement.
Energy management tools
Most business energy suppliers offer energy management tools and products, so your first stop should be your own supplier or broker. Your supplier will be able to tell you what they offer, your broker what the market offer.
If your appetite is whetted then there are an increasing number of energy management applications on the market, these however can require significant investment in purchasing, integration and resourcing and so are not suitable for a business' initial steps into energy management.
If you have any queries at all, please don't hesitate to contact our team of experts. We'd be happy to advise on your energy contract, pricing, switching or any other aspect of Business Electricity or Gas.