How important is energy management?

Published 17th August 2020 by Lindsay Ventress

This post is also available in: Fr (Fr)

How important is energy management

The key stages to managing your energy and why it should be a priority

Let’s be honest, energy management is not sexy. It isn’t a big, glamorous, headline-grabbing project which will get you all the plaudits, so what is the point? What benefit will it bring? Well, if your organisation has money to spare, no concerns about managing or reducing your bottom line, then perhaps you don’t need to concern yourself with efficiency. But, in all likelihood, unless you live and work in an off-grid, self-sufficient location, the chances are you use energy on a daily basis and most of us can find ways to use (and pay for) less.

Is it enough to shop around?

It is common to assume that the obvious step to reduce your energy bill would be to look at the energy contract and seek a supplier who will offer a lower price. This is indeed something to be mindful of, but it is important to understand that the “price” which can be negotiated with the supplier is less than 40% of the overall price which you will pay. The bulk of the price is made up of transportation and distribution fees and government levies and taxes. Commonly referred to as “Non-Commodity” costs, these fees or charges are applied to all energy users and cannot be negotiated away. Thus, while the wholesale price of energy fluctuates, overall retail prices have consistently risen over the last two decades.

How important is energy management? Electricity wholesale v retail prices from business electricity prices referenced by EcoAct
Figure 2: https://www.businesselectricityprices.org.uk/retail-versus-wholesale-prices/

Non-Commodity prices are fixed and non-negotiable, but most of them are still applied as a “per kWh” price. Thus, it is perhaps more important than ever, to ensure that the consumption volume which you are reliant upon is minimised.

Energy Management and Legislative Compliance

In recent years, as public awareness of the potentially devastating effects of Climate Change has grown, so governments have introduced more and more legislation to drive energy efficiency forwards. Keeping up with the various Articles and Directives which must be complied with is a job in itself; responding to and reporting compliance with these schemes can be complex and time-consuming, especially if you do not already have a good foundation for managing energy across your organisation.

Below is a brief summary of some of the current energy-related mandatory schemes, all of which will require comprehensive data and documentation management in order to avoid penalties.

Mandatory Schemes Key Points
Streamlined Energy & Carbon Reporting – SECR• Annual Reporting
• Requires Evidence of Energy Efficiency Activities to be reported
Energy Saving Opportunities Scheme – ESOS• 4-Yearly Reporting phase
• Requires evidence of Energy Audits or comprehensive ISO50001 Certification
Minimum Energy Efficiency Standards – MEES• Continual application of standard
• Requires evidence of suitable EPC ratings for leased properties
Heat Network Regulations – HNR• Notification of existence and management of Heat Networks
• 4-yearly update of notification
• Requires hardware installation for metering delivered heat and ensuring clarity of billing
Medium Combustion Plant Directive – MCPD• Permitting regulation for active and back-up generators
• Understanding of size, operation hours and planned developments required
• Introduces Emission Limit Values on all permitted generators

When Energy Management is not a recognised requirement within an organisation, maintaining compliance with schemes such as those listed above becomes a reactive and burdensome task, prone to errors. However, when Energy Management is clearly recognised and pursued, then the reporting requirements to maintain compliance are considerably easier to deliver, allowing greater focus on “added benefits”.

What does Energy Management look like?

Step 1 – Invoice Management

Energy Management takes many forms, generally starting with clear tracking of associated invoices. Unlike almost every other invoice which an organisation will process, energy is not a pre-ordered product, delivered according to a pre-agreed quantity. Instead, energy is delivered as needed and then invoiced retrospectively, frequently based on an estimated consumption value. Utility suppliers’ invoicing systems are heavily automated and prone to error. Thus, the first element of energy management is to ensure that the invoices are being collected, collated and reviewed for accuracy to avoid overpayment.

Example: When we reviewed the invoice history for one of our clients, we found a calculation error in the non-commodity charges applied to their invoice for one of their largest sites. Undetected for the previous 2.5 years, this error had resulted in an over-charge of almost £0.5M.

Smaller organisations, with perhaps just one or two locations, often manage their energy spend via a simple spreadsheet. However, where more detailed analysis of consumption profiles over time or a larger portfolio of premises and suppliers exist, then a database solution is preferable.

In both cases, effective energy management is achieved through a thorough review of historical consumption, coupled with a clearly documented process covering the collection, review and ongoing use of the data. It is worth noting though, that any database, or management process, is only as reliable as the individual managing it.

Step 2 – Energy Management

Once the invoices are being managed effectively, and the historical energy profile is understood, then and only then can “Energy management” really begin. Once you understand how much energy is typically used/expected to be used, then you can set targets to reduce that consumption and use the incoming data to report progress against those targets.

However, achieving reductions in consumption doesn’t happen without effort. Thus, understanding where, why and how energy is used within the organisation is key to identifying ways for that consumption to be reduced. This is most frequently achieved through desk-based review of consumption data, followed by a detailed on-site review of energy consuming equipment, its use and control. Once the “load profile” is understood, then opportunities for reducing demand and improving efficiency can be identified.

Step 3. Efficiency Improvement Activities

Efficiency improvement opportunities typically fall into two distinct categories; quick wins and larger “investment” opportunities. Quick wins, also referred to as “low hanging fruit” are the easiest to implement, often requiring simple adjustments to existing controls or modification of usage patterns and habits. Once these initial actions are completed, focus turns towards those measures which require additional investment. Opportunities which are promoted on the grounds of improved energy efficiency must be capable of generating a net return on investment, within the life of the product installed.

It is important to remember that reviewing energy use and opportunities available is something which should be repeated on a regular basis, as both the patterns of use onsite and product availability and price are constantly changing.

Who is responsible for Energy Management?

As with most management systems, energy management is most effective when it is owned at a senior level. If the senior management team are not responsible for reporting on energy efficiency, then there will be little appetite within the business to effect change. This does not mean that a senior manager needs to “do” the energy management, but there should be senior support and oversight of the whole piece.

For most organisations, Energy Management is not their primary focus, therefore having the necessary skilled resource in-house is frequently not an option. This is compounded by the variety of skills which are required to cover all elements of effective energy management, from invoice tracking and validation, to on-site audits and technical market review of emerging technologies.

Organisations with multiple locations, or sizeable energy use and spend at one or two locations, may choose to employ a dedicated Energy Manager, but will frequently find that additional support will be required to cover some activities which are beyond the scope of their internal resource.

Alternatively, it is possible to select an external partner to provide energy management activities, either as a standalone contract or as part of a larger service. There are of course pros and cons to each approach, which will vary dependent on the business’ goals and the outputs required.

So, how important is energy management?

Energy use represents an unavoidable element of a business’ operating cost, but more than that, energy is also a core element within the “Carbon Footprint” and overall sustainable performance of any organisation. More and more, we are seeing larger organisations looking to their supply chain and requiring evidence of the sustainable credentials of their suppliers. In order to remain competitive in these circumstances, organisations cannot afford to be complacent about their energy use.

When you get energy management right, the results can be rewarding: ease of compliance with legislative demands; reduced energy consumption, spend and carbon emissions; stronger sustainability credentials; etc. These goals sit high on many organisations’ priority list.

Today, energy management is about much more than compliance and cost. We all need to have the fundamentals right – data, energy management and reporting – if we are to succeed in our urgent climate goals. And what could be more important than that?

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As the worldwide focus on Net Zero intensifies, it will be increasingly important to have the fundamentals right – data, energy management, reporting – if we are going to cope with the growing demands for accountability and succeed in our urgent climate ambitions.

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      • An energy management checklist
      • A six-step guide to improving your energy management programme
      • How Harvey Nichols saved energy and costs through energy management
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