Friday, October 28, 2011

Better Buildings, Better Plants

The U.S. Department of Energy will soon evolve its program structure, merging the current Industrial Technologies Program with the Buildings program. Deputy Assistance Secretary Kathleen Hogan gives a concise overview of “Better Plants, Better Buildings.”

If energy efficiency is to be achieved in the buildings and industry sectors, these will be the critical success factors:

1. Direct cost accounting of energy and other expenses. Stop treating energy as overhead when it can be measured, costed and assigned directly. As overhead, energy is artificially parsed by square foot or head count. Submetering technologies can change this dilemma, allowing direct measurement and assignment of accountability for cost performance. With accountability, there is motivation to make improvements.

2. Stakeholders need to think investment, not project. The common practice is to describe energy improvements as projects. A "project" connotes an episode or effort requiring the set-aside of money and attention. A project, in other words, is perceived as a cost and a distraction from normal responsibilities. When time and money are both in short supply, the concept of a “project” is particularly onerous. The alternative is to think of an energy improvement as an investment. For many, this is a radical paradigm shift. A good business investment will (1) improve the overall rate of capital recovery on total invested assets, (2) demonstrate a rate of return to be compared to other investment alternatives, (3) produce new incremental cash flow, and (4) in the case of investments that reduce operating costs, prevent the destruction of capital attributable to waste. Note: “simple payback” metrics do nothing to support this analysis.

3. Self-empowered facility managers. The current program dogma implores industry to provide "top management support." This principle is laudable, but in practice, very hard to achieve. Energy improvements are more likely to happen if they are advocated upward within organizations, usually as a complement to other business agendas. Facility managers can achieve this by monetizing the value of energy and other current resources under their control; this demonstrates the value they can provide. “Monetization” is simply an inventory of current dollar obligations compared to what can be achieved in an efficient, alternative scenario. Using this information, the empowered facility manager will promote energy improvements as the means for accelerated capital recovery, reduced operating risk, and direct cash flow subsidies to working capital or asset growth. This is a massive philosophical change that may not resonate with grey-beard managers who count the days to retirement. It is, however, a promising blueprint for the generation that will replace them.


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