Energy is an essential business input and often constitutes a significant and growing line item of company operating expenses. The cost of energy has been rising steadily due to many factors, a number of which are beyond the control of most businesses. For energy-intensive businesses, higher energy prices can threaten profits and competitiveness.
For businesses where energy comprises a smaller percentage of operational costs, energy often remains the primary source of greenhouse gas emissions. A reduction in energy use is often the primary means by which an organisation can reduce its greenhouse gas emissions.
Introducing strong and robust energy management systems can drive significant cost savings, competitive advantages and mitigate against energy price volatility. Companies that have an in-depth knowledge and understanding of their energy use and systems to manage it have demonstrated increased productivity, better staff engagement, and reputational benefits. This is reflected in their share value and attractiveness to institutional investors.
Benefits of energy management
Businesses can realise many benefits through effective ongoing energy management. Implementation of the systems and processes to achieve best practice in energy management can build business value by:
Unlock significant savings
Organisations that have taken a strategic approach to energy efficiency often find project opportunities with attractive payback periods and ongoing reductions in energy expenditure.
Reduce exposure to future energy price increases
Many Australian businesses have already felt the impact of rising energy costs. Energy efficiency improvements offset these costs, making energy efficient organisations less vulnerable to future price increases. The return on investment for these projects improve as energy prices increase.
Improved risk management
Business risks associated with rising energy prices and inefficient energy use include reputational risks, price volatility and operating cost risks, supply chain risks, energy security and climate change risk. Effective energy management is a core component of an effective risk management strategy.
Businesses are increasingly recognising the link between energy performance and business productivity. Understanding energy use as a function of output and other performance metrics can identify productivity improvements through reduced resource consumption. Improvements in energy productivity are often accompanied by improvements in material use, water use, and use of other resources.
Reduce greenhouse gas emissions
For most businesses managing energy use is the primary means by which organisations can manage their greenhouse gas emissions. Improving energy productivity and exploring different sources of energy can dramatically reduce an organisation’s carbon footprint and associated carbon costs.
Reduce maintenance costs and improving reliability
Energy efficiency actions can identify problems before they occur and reduce the load and operating hours of machinery and equipment. This often improves production uptime, reduces labour and component costs, and extends the useful life of the asset.
Public perception is an important consideration for many companies. A strategic approach to energy management can demonstrate good corporate citizenship, improve the attractiveness of the business for institutional investors, and support the company’s social license to operate.
Empower and educate senior management
Similar to other business management systems, an energy management system provides the board and top management with insights into the way that energy is used in the organisation, opportunities for improvement and how resources could be used to strategically manage one of the company’s key business inputs.
Motivated workforce and other positives
Businesses that actively monitor and manage their energy use often enjoy other indirect benefits, such as a more motivated workforce, demonstrable improvements in environmental performance and new means of staff engagement.
Without an effective management system, inefficiencies in the business can go unnoticed and opportunities to improve energy use (and reduce emissions) may not be acted upon.
Best practice in energy management
Companies that are successfully managing their energy have several elements in common. Best practice approaches allow an organisation to develop a thorough understanding of energy sources, energy use and opportunities for improvement. This includes ways to use energy more efficiently in systems, processes and technologies; how energy is sourced and procured; and investigating alternative sources of energy, e.g. clean energy, cogeneration or waste heat recovery.
Best practices in energy management include:
- strong top-level commitment from senior executives and clear strategic leadership on energy management
- integration of energy management into the company’s existing systems
- appropriate resourcing of the energy management strategy and energy efficiency initiatives with skilled and knowledgeable personnel, and sufficient funds for implementation
- energy efficiency goals that can be translated into business performance goals, are time-bound, measurable, linked to action plans and included in management performance metrics
- implementation of tracking, measurement and reporting systems to monitor performance in relation to goals and objectives
- effective communication, internally and externally of the priority placed on energy management and the performance and successes of the company’s energy management strategy
Many corporations have historically placed energy management within the environmental function, as energy usage is often used to report environmental compliance. However, corporations that have achieved significant cost savings and reduced greenhouse gas emissions have cross-functional responsibility for energy management including the financial, operational, and environmental roles within the business. Companies have often found that rigorous management of energy and implementation of energy projects requires recognition of energy at the top levels of the business. Placing energy management responsibilities within the business improvement part of the business has also led to more effective outcomes.
Energy sources, procurement and demand side management
An understanding of energy use throughout the organisation can reduce the cost of energy supply. Generation technologies, fuels and contractual opportunities can be assessed and implemented as part of a comprehensive energy management approach. When combined with energy efficiency measures, the optimisation of energy supply contracts, fuel supplies and on-site generation technologies could yield dramatic improvements in business performance.
In an effort to reduce energy costs and greenhouse gas emissions, many businesses have considered or implemented alternative energy sources or generation technologies such as co-generation plants, roof-mounted solar systems, heat pumps and many other technologies. Fuel switching may also result in cost savings for both stationary and transport applications. For businesses facing network constraints, alternative energy technologies can also enable an expansion of capacity.
Managing the use of peak and off-peak power, maximum demand, power factor, and other aspects of electricity contracts can yield substantial savings. Depending on the size and nature of the loads at a site, demand side management opportunities may also exist which could provide an additional income stream for curtailable loads.
You can find further information on energy procurement and demand side actions under the Energy Procurement section of the site.
From Shop Floor to Top Floor: Best Business Practices in Energy Efficiency U.S Department of Energy
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