The Romney Camp's Take on Energy Efficiency

Consider this Romneyism: "Energy efficiency is a solution looking for a problem... if it saved money, people would do it on their own." (Source)

The assumption that consumers make "rational decisions" relies on an unstated assumption, to wit: the consumer has complete custody of every step in the decision-making process. This means that the consumer (1) detects some lapse of utility, (2) recognizes the cause[s] of that lapse, (3) seeks and evaluates a remedy, (4) procures the remedy, (5) implements the remedy, and (6) at the end of the day is able to reap the benefits of it.

Especially with regard to energy, rarely are all these stages embodied in one decision-maker. A single-person residential setting comes closest, but even then there may be disconnects-- look no further than centrally-metered apartment units. The rational decision-making assumption is shot down in flames when pondering the commercial/industrial sector. In this case, the six stages listed above usually manifest randomly across departmental lines. The decision stages belong to a management diaspora in which each individual makes energy-related choices that optimize their individual, departmental interests as opposed to being harmonized for the organization as a whole. For example, this paraphrase comes from a chemical plant energy manager who we interviewed last summer: "Our first priority is to ensure that we distribute in a timely and accurate manner all our energy acquisitions across our facility to all the points of production that need them... this is a goal that can sometimes be at the expense of 'efficiency'."

My point: the Romney statement is a non-starter only because the "rational decision maker" is not properly established. Without clear and conscious custody of the decision process, one cannot expect rational decisions to be made. The take-away is that energy efficiency opportunities are directly linked to market failures that can and should be addressed by public policies and programs.

Toward an Advanced Manufacturing Policy

NASEO Annual Meeting Keynote Address Focuses on Key Role for States in Advanced Manufacturing

[from NASEO.org, Sep. 11, 2012] Ro Khanna, author of "Entrepreneurial Nation: Why Manufacturing is Still Key to America's Future" and former Deputy Assistant Secretary of the U.S. Department of Commerce, highlighted the State government and State Energy Office role in advanced manufacturing during his keynote address at the NASEO Annual Meeting on Monday, September 10. "State government is where innovation happens," explained Mr. Khanna to the audience of over 200 State and Territory Energy Officials and private sector energy representatives, "and what you're doing on energy efficiency and clean technology is vital for our economy." He stated that the federal government should partner with States to tap into the innovative public-private partnerships often initiated by State Energy Offices.

Mr. Khanna's address focused on why manufacturing is important to the U.S. economy as a bipartisan priority and how energy technologies fit into that vision. He emphasized the critical link between manufacturing design and production and the manufacturing sector's role in balancing the trade deficit. He indicated the manufacturing sector provides stable jobs with well-paying salaries and encouraged expansion of these opportunities.

On global competitiveness, Mr. Khanna referenced the array of government incentives offered to manufacturing companies in developing economies like China and Brazil. In the United States, he said, "it is only in the last 30 years that we decided that we either don't need manufacturing or that government shouldn't have a role in it." However, he noted a historic foundation for a government role based on a10-page manufacturing brief by Alexander Hamilton in 1791 that recommended the government invest with industry, develop an educated workforce, and provide tax incentives. Mr. Khanna suggested that the U.S. government improve manufacturing economic opportunities through streamlined regulations and enhanced approaches to insourcing jobs and decreasing the skills gaps.

Mr. Khanna reported that energy efficiency is still a sector in which the United States remains in the lead globally, creating 2.7 million jobs over the past two years in energy efficiency and clean technology. He said the nation should focus on promoting manufacturing that customizes products and innovates in order to retain and grow our competitive advantage.

Mr. Khanna concluded his remarks on a hopeful note about the American economy. He said while the U.S. manufacturing sector may have a history of being written off, it always succeeds based on the nation's free market economic principles, policy response, and encouragement of workforce creativity and innovation. According to Mr. Khanna, the United States possesses strategic advantages over its global competitors: a sense of "healthy skepticism" that inspires innovation and action in the manufacturing sector, private sector responsiveness to democratic institutions and process, and an encouragement of creativity and innovation in the workforce. He highlighted the importance of the State and Territory Energy Offices' efforts stating, "If we don't figure out how to increase supply of energy long-term and be more efficient in the use of energy, we will put our manufacturers at an economic disadvantage."

White House Announces Executive Order on Industrial Energy Efficiency, including Combined Heat and Power

Today, President Obama signed an Executive Order to accelerate investments in industrial energy efficiency, including combined heat and power (CHP). Accelerating investment in industrial energy efficiency in a way that benefits manufacturers, utilities, and consumers can improve American manufacturing competitiveness and create jobs while improving our nation's energy system and reducing harmful emissions. The Executive Order:

• Sets a national goal of 40 gigawatts (GW) of new CHP installation over the next decade;
• Directs agencies to foster a national dialogue through ongoing regional workshops to encourage the adoption of best practice policies and investment models that overcome the numerous barriers to investment, provide public information on the benefits of unlocking investment in industrial energy efficiency, and use existing Federal authorities that can support these investments;
• Directs the Departments of Energy, Commerce, and Agriculture, and the Environmental Protection Agency, to coordinate actions at the Federal level while providing policy and technical assistance to states to promote investments in industrial energy efficiency.

Investments in industrial energy efficiency and CHP offer significant benefits to manufacturers, utilities and communities across the country, including:

• Improving U.S. manufacturing competitiveness: By accelerating these investments, manufacturers could save at least $100 billion in energy costs over the next decade.
• Creating jobs now through investments upgrading our manufacturing facilities: Meeting the President's goal of 40 GW of new CHP over the next decade would mean $40 billion to $80 billion of new capital investment in American manufacturing facilities. Most of these efficient technologies are made right here in the United States.
• Offering a low-cost approach to new electricity generation capacity to meet current and future demand: Investments in industrial energy efficiency, including CHP, cost as much as 50% less than traditional forms of delivered new baseload power.
• Significantly lowering emissions: Improved efficiency can meaningfully reduce nationwide GHG emissions and other criteria pollutants.
• Enhancing grid security: Investments in industrial energy efficiency reduce the need for new electricity infrastructure (transmission and distribution) and improve overall electric reliability.

In support of the Executive Order, DOE and EPA released a new report Combined Heat and Power: A Clean Energy Solution that provides a foundation for national discussions on effective ways to achieve 40 GW of new, cost-effective CHP by 2020, and includes an overview of the key issues currently impacting CHP deployment and the factors that need to be considered by stakeholders involved in the dialogue. The Department of Energy is also announcing new private sector commitments by five companies—Kingspan Insulated Panels, Cree, General Aluminum Manufacturing Company, PaperWorks, and HARBEC Inc.—to the Better Buildings, Better Plants program where firms commit to improving energy intensity by 25% over ten years. Partners in the Better Buildings, Better Plants Program have already experienced at least $80 million in cost savings—these actions alone are expected to save roughly $1 billion cumulatively by 2020.

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.

Point, Counterpoint: Industrial Energy Consumption

A very succinct evaluation of today's energy policy comes from the Council of Industrial Boiler Owners. While some good points are made here, there's also a gap in the logic. My comments are below this quote:

"One of the goals/objectives of the Obama Administration has been to delink fossil energy from Gross Domestic Product (GDP). So far it looks like they have been pretty good at it. The only thing we hear in the news is usually about good renewable energy, energy efficiency, and how these will create new jobs requiring new and different education/knowledge. We never hear about the increasing cost of energy associated with the new technologies, but hear the negatives associated with and fossil energy product, dirty coal, high priced oil, the potential damages from drilling for Marcellus Shale Gas, and the food and timber for fuel with pre-fossil biofuels. All the current activity regarding energy legislation, funding and DOE tends to revolve around buildings and commercial activities, lighting technology, smart grid, and doubling the Auto Mileage Standards to name a few. When they talk about energy efficiency, they do their absolute best to stay way away from any consideration of Combined Heat and Power, probably the single best technology for maximizing efficiency, albeit, through the use of fossil fuel combustion. What we will probably see is legislation on efficiency for everything but industrial energy. However, nothing may happen. There is current controversy over a natural gas subsidy bill that will provide subsidies to Natural Gas companies for developing the infrastructure to use natural gas as a transport fuel to increase demand and increase the cost to industry who use it for both fuel and feedstock. One thing for sure, as the cost of energy increases, the prospect for energy efficiency applications improves. The old adage comes to mind, 'Follow the Money.' It is interesting to watch the dynamic of how the players and rent seekers are moving to raise the cost of fossil energy to levels where renewables are now justifiable and fossil energy is eventually delinked from the GDP."

This commentary suggests that we should resist alternative energy development because it's making traditional fossil fuels more expensive. If you believe that fossil fuel supplies are limitless, you can ignore this entire discussion. If not, we need to think about where energy will come from after the fossil fuel tap runs dry. A policy of continued reliance on fossil fuels is like the drunkard's cure for a hangover: just keep on drinking. Increased dependence on fossil fuels is a formula for energy starvation. People in some countries understand this; as fossil fuel supplies are depleted, successful economies will be those that prepare themselves by make increasing use of renewable alternatives. But it won't happen over night. To ease the transition, we will make increasingly-efficient use of traditional fuels. Efficient (less wasteful) capacity also reduces the magnitude of capital investment needed for energy systems. That frees up capital for investment in other areas of the economy.

DOE Announces Over $30 Million to Help Universities Train the Next Generation of Industrial Energy Efficiency Experts

[Ed. note: The implementation of industrial energy efficiency depends as much on organizational dynamics as it does on technical acumen. The "next generation of industrial energy efficiency experts" must become adept at creating consensus across departmental lines. They must also demonstrate a compelling linkage between energy and business performance. These are skill sets that can and should be better addressed by Industrial Assessment Center curricula.]

June 16, 2011: Energy Secretary Steven Chu today announced the availability of more than $30 million to train undergraduate- and graduate-level engineering students in manufacturing efficiency to help them become the nation's next generation of industrial energy efficiency experts. Through the Industrial Assessment Center program, university teams across the country will gain practical training and skills that will enable them to conduct energy assessments in a broad range of manufacturing facilities and help them compete in today's economy. These groups of student engineers will help local companies and factories to reduce energy waste, save money, and become more economically competitive.

"Through this industrial efficiency training program, students will gain hands-on experience and training for jobs in a growing global sector, while at the same time, reducing energy waste for American businesses and helping to make our manufacturing facilities more competitive," said Secretary Chu. "This program will make sure that the next-generation of American workers has the education and skills they need to further our transition to a clean energy economy."

Through these university-based Industrial Assessment Centers, engineering students will receive extensive training in industrial processes, energy assessment procedures, and energy management principles, which will be put to use working directly with small and medium-sized industrial and manufacturing facilities around their communities. Under this funding opportunity, each Industrial Assessment Center will be expected to train at least 10 to 15 students per year, conduct approximately 20 energy assessments annually, and perform extensive follow-on reporting, tracking, implementation, and management-improvement activities.

Under this competitive funding opportunity, 20 to 30 universities will be selected as Industrial Assessment Centers (IACs) and will be eligible to receive $200,000 to $300,000 per year for up to 5 years for the training and energy audits. Applicants are encouraged to propose innovative methods to better ground students in core engineering, energy, and business principles and increase their understanding of management systems, industrial technologies, supply chains, energy efficiency, and sustainability. In addition to conducting assessments at industrial plants, IACs will be expected to promote interaction with private sector partners that could provide valuable workforce development support, such as scholarships and internship opportunities. Applications are due by Tuesday, August 2, 2011. More information and application requirements can be found on the FedConnect website.

The Industrial Assessment Program has had a rich history of training students and performing energy assessments for small-to-medium manufacturing plants for more than 30 years. Nearly 3,000 students have graduated from the Industrial Assessment Center program and more than 60% have gone on to careers in the energy industry. From the program's inception in 1976 through 2009, the university teams have conducted nearly 16,000 energy assessments at U.S. manufacturing plants nationwide. These assessments have helped save over 500 trillion BTUs of energy – equivalent to the energy consumed by 6.8 million vehicles in a year – and have helped participating manufacturers save more than $3.8 billion in energy costs.

DOE's Industrial Technologies Program (ITP) works to contribute practical solutions for some of the nation's top energy challenges through a combination of transformative research and development and targeted education and assistance in the industrial and manufacturing sectors. For more information, please visit the ITP website.

Funding Cuts for the Energy Information Administration?

Despite our economy's ever-increasing reliance on information as a means for creating value, federal budgeteering has resulted in a sizeable reduction of funding for the Energy Information Administration. A 14 percent cut to the EIA's budget is to be extracted now, not by spreading the cut over a full year, but instead squeezing it from the remaining FY 2011 budget, which runs through September 30.

Dr. R. Neal Elliott of the American Council for an Energy Efficient Economy provides a compelling synopsis in the ACEEE blog that describes the economic benefits of maintaining solid energy data.

At the very least, state energy offices and utilities may want to note the loss of federal data sources as they plan their own regional data management.

Here's what the EIA plans to curtail in response to budget cuts:


Oil and Natural Gas Information

•Do not prepare or publish 2011 edition of the annual data release on U.S. proved oil and natural gas reserves.

•Curtail efforts to understand linkages between physical energy markets and financial trading.

•Suspend analysis and reporting on the market impacts of planned refinery outages.

•Curtail collection and dissemination of monthly state-level data on wholesale petroleum product prices, including gasoline, diesel, heating oil, propane, residual fuel oil, and kerosene. Also, terminate the preparation and publication of the annual petroleum marketing data report and the fuel oil and kerosene sales report.

•Suspend auditing of data submitted by major oil and natural gas companies and reporting on their 2010 financial performance through EIA's Financial Reporting System.

•Reduce collection of data from natural gas marketing companies.

•Cancel the planned increase in resources to be applied to petroleum data quality issues.

•Reduce data collection from smaller entities across a range of EIA oil and natural gas surveys.


Electricity, Renewables, and Coal Information

•Reduce data on electricity exports and imports.

•Terminate annual data collection and report on geothermal space heating (heat pump) systems.

•Terminate annual data collection and report on solar thermal systems.

•Reduce data collection from smaller entities across a range of EIA electricity and coal surveys.


Consumption, Efficiency, and International Energy Information

•Suspend work on EIA's 2011 Commercial Buildings Energy Consumption Survey (CBECS), the Nation's only source of statistical data for energy consumption and related characteristics of commercial buildings.

•Terminate updates to EIA's International Energy Statistics.
Energy Analysis Capacity

•Halt preparation of the 2012 edition of EIA's International Energy Outlook.

•Suspend further upgrades to the National Energy Modeling System (NEMS). NEMS is the country's preeminent tool for developing projections of U.S. energy production, consumption, prices, and technologies and its results are widely used by policymakers, industry, and others in making energy-related decisions. A multiyear project to replace aging NEMS components will be halted.

•Eliminate annual published inventory of Emissions of Greenhouse Gases in the United States.

•Limit responses to requests from policymakers for special analyses.
In addition to these program changes, EIA will cut live telephone support at its Customer Contact Center.

U.S. Supreme Court Weighs in on Climate Change

On April 19, 2011, the U.S. Supreme Court will hear oral argument in American Electric Power v. Connecticut. This case will likely become the defining decision on climate change litigation, and it will have profound implications for environmental law generally as well as the future of climate change policy in the United States. Last year's 2nd Circuit decision in this case was the first time a court had permitted climate change litigation to survive a motion to dismiss – leading to a potential flood of litigation against not only the energy industry, but any industry emitting greenhouse gases.

McGuireWoods partner Trent Taylor, who has written extensively on climate change litigation, breaks down the oral argument in this important case just a few days after it is completed. Click here for Webinar registration.

Topics

- In-depth analysis of the questions posed by the justices, and the responses provided by counsel.
- Examination of the range of possible outcomes.
- Discussion of the implications for various industries (with an emphasis on the energy industry) as to each outcome.
- Prediction of the outcome and final vote.

Kudos to the Nevada State Office of Energy

With 50 states plus a number of territorial authorities, we're starting to see a fairly impressive cross-section of stimulus-funded energy efficiency programs. Just one example comes from Nevada. Per their website:

"The mission of the Nevada State Energy Office (NSOE) is to ensure the wise development of the state’s energy resources in harmony with local community economic needs and Nevada’s natural resources by leading the nation in renewable energy production, energy efficiency and conservation, and exportation. The NSOE strives for this by facilitating cooperation between key stakeholders, leading initiatives to stimulate economic development and attracting every energy-related business venue including energy education, retrofitting, manufacturing, site development, generation and production, interstate and intrastate transmission."

Trying to move the needle on energy efficiency in an otherwise libertarian business community is a challenge, to say the least. The folks in Nevada are nevertheless making it happen, as duly noted by the U.S. Department of Energy.

The NSOE, like its counterparts in other states, has an opportunity to boost its effectiveness through more compelling outreach to the business community. Communication has always been the key here, specifically with respect to demonstrating fiscal impacts of energy choices. Virtually all commercial/industrial programs suffer from the same handicap: promoting 21st century energy solutions with 1920s investment metrics (i.e., simple payback). Here's hoping for a modern approach to energy improvements that demonstrates not only costs and savings, but also:

- the cost of "doing nothing" by refusing energy efficiency
- the ratio of the cost to buy vs. the cost to save each unit of energy
- a simplified business proposition that shows investors "what they get" and "what they give up" when they choose to accept or reject energy improvements.

Industry leaders need to understand that their refusal of energy improvements is not without cost. The negative cash flow of energy waste is capital recovery in reverse, which can be quantified like any other investment. By refusing energy improvements, businesses actually destroy capital (as evidenced on their balance sheets by a reduction of retained earnings).

This concept will be the subject of a white paper I'm presenting at the Industrial Energy Technology Conference in May 2011.

Sustainability: Future-Proofing for Business

When the term “sustainability” appears in news headlines, it is usually the subject of policy debate. These debates seem to focus on the rights and privileges of investors and property owners. Debate is generally a good thing, but it’s pointless if the subject of debate is not clearly defined to all participants. This is often the case with concept of “sustainability.”

To many observers, “sustainability” is a trendy buzzword, evoking a lifestyle image of tree-hugging people wearing beads and sandals. Detractors perceive sustainability and environmental initiatives as an infringement upon property rights and economic liberty in general. However, forward-thinking business and policy leaders perceive a different meaning. In a hard-nosed business context, sustainability has practical implications for the basic pillars of business performance: revenue growth, expense reduction, and risk abatement. This alternative perception sees sustainability not as an economic restriction, but as a guiding principle for business growth and profit in spite of resource scarcity. In this context, sustainability is wholly compatible with economic growth in the face of finite resources. This post explains why.

Regardless of our political leanings, we all share universal economic constraints: limited time, limited resources, and uncertainty about the future. Nothing is constant-- except change. As the volume of economic activity grows across the globe, so does the demand for limited energy supplies. The most obvious implication: rising energy prices. Other commodities—including minerals, building materials, even food and water—are subject to the same market forces. One of those resources, energy, is an ingredient of all business activity. This is true without exception. No contracts are fulfilled or obligations met without some consumption of fuel or electricity.

Expense reduction may be the most obvious reward of applied sustainability. Energy expenses can be reduced by efficient technologies as well as smart energy behavior. When energy waste is reduced throughout a supply chain, the result is a lower cost of production and higher profit margin on final goods and services. The impact on financial performance is dramatic, especially for businesses with thin operating margins. For example, it’s not unusual for hospitals to achieve a four percent operating margin (revenue net of expenses but before debt and earnings distributions). At a four percent margin, $25 worth of revenue yields only one dollar of operating income; conversely, one dollar in energy savings is one whole dollar of operating income-- the same impact as receiving $25 in revenue!

Increasingly, sustainability provides opportunities to make revenue. In part, this is due to growing consumer demand for goods and services that are produced with a minimum of environmental disruption. Government contracting regulations as well as market alliances increasingly require suppliers to demonstrate waste and emissions reduction in their business processes. In other words, sustainable attributes contribute to product marketability. Sustainability thus becomes a driver of revenue potential.

Why not maintain the business community’s status quo? This is a paradigm in which energy and other resources are simply a cost of doing business and not worthy of conservation and resulting expense reductions. Forward-thinking business leaders understand that nature knows no status quo. Resource supplies are not static. Resources are subject to depletion as well as substitution. In either case, business decision-makers are forced to adapt to changing technologies and market conditions. Sustainability, through its consequences for waste reduction, is a hedge against the business risk of scarce inputs. By reducing the volume of energy and other inputs needed to earn each dollar of revenue, businesses are offsetting the risk of rising input prices and protecting their profit margins. In addition, the adoption of renewable fuel and power sources provides a measure of resource flexibility and independence from energy suppliers. By adopting these technologies now, businesses gain valuable experience to prepare them for tomorrow’s inevitable resource shortages and shifts in technology. Businesses that resist these changes simply fail to future-proof themselves.

For the astute business leader, sustainability is neither fad nor fashion. Sustainability supports economic growth and earning power in the face of unavoidable change. A sustainable business is one with the means to navigate technology evolution and changing resource availability.

North American Energy Audit Program Best Practices

NEW RELEASE, June 15, 2010: "North American Energy Audit Program Best Practices." This report presents the results of a survey conducted in late 2009 of 15 North American energy audit program coordinators and energy audit experts. It also references three recently published program-specific evaluation reports. Survey respondents represent programs that have collectively provided over 18,000 energy audits of all description. This investigation studies programs that offer energy audits as a means for advancing energy efficiency policy goals. An energy audit is a profile of energy consumption, use, and waste in a building or industrial production process. Energy audits are provided by many utilities and government agencies not only as a service to customers, but as a way to facilitate public policies for waste reduction and pollution prevention. Survey respondents provided valuable lessons learned in the design, promotion, conduct, and evaluation of energy audit programs. Findings are summarized with additional comments and analysis by the author.

Click here for Print-on-demand order format.

Thoughts on "Mandatory" Energy Audits

I saw the aftermath of a web discussion of "mandatory" energy audits. It became an ugly shouting match over constitutional rights. Being too late to participate, I thought I'd share the following observations:

1. The average person is only vaguely aware of what an energy audit does is what it provides. We have to gently educate people so that they know, for example, that the energy audit itself does not save energy. The audit is merely a roadmap that shows where the savings are and how to get there.

2. Energy audits are not all created equal. The report of recommendations depends on the skill and knowledge of the auditor. Ten different auditors can study the same facility and end up generating ten different reports. There may be some overlap in findings, but variation may be great. My point: energy audits are not a commodity (consistent in form and value regardless of source). Also, you get what you pay for-- which leads me to my next point...

3. Today's proclivity for "free" energy audits means providers are scrambling for ways to meet this demand while minimizing their expenses. You can imagine what this leads to in terms of shortcuts, which then compromise the veracity of the results. There are plenty of energy widget vendors that offer free energy audits that recommend (surprise!) that you buy their energy widget. Never mind whether or not that widget is the most valuable energy savings opportunity for the property. Lest there be heartburn created in the policy community because of these comments about free energy audits, let it be known: "free" is better than nothing. This refers to the free audits conducted by most utilities, universities, or government agencies for the purpose of educating observers as to the merits of efficient energy use.

4. The concept of mandatory audits creates dilemmas similar to the "free" audit. With mandatory provision comes mandatory pricing. Add to this the point about variability of results. The next step is to mandate not just the provision, but also the format of the energy audit. This begs a form of regulation, the political implications of which need no explanation.

5. If an energy audit is mandatory, it implies that there is (or should be) some liability for the results. Given the inexactness of energy audit practices, the door is open to a variety of class-action lawsuits. That dripping sound you hear is the salivating legal community.

Please understand, I am sympathetic to the spirit of energy efficiency. But as with most things, the devil is in the details. I think we can expect that consumers will, over time and as energy costs escalate, begin learning more about energy audits and demand services to offset their escalating energy expenses.

The True Value Proposition of Energy Audits

Put simply, the energy audit is a tool for identifying potential energy improvements and the value that these improvements should provide. But we find that energy audits may serve distinctly different audiences—the society as a whole, the audit recipient, or the audit provider. A variety of beneficiaries begets a variety of energy audit formats; no one format is optimal for all purposes at once. Failure to apply the appropriate energy audit format can mislead stakeholder attempts to fully identify potential energy savings. Consider the needs of different energy audit beneficiaries:

• Societal benefit. From a broad societal standpoint, energy and environmental policies seek to preserve or enhance public well-being. Policies seek good outcomes in the form of reduced emissions or minimized investment in utility infrastructure. These goals cannot be achieved without the participation of energy consumers, who are in many ways unmotivated to cooperate. Energy audits are expected to engage and motivate consumers to act in concert with policy goals. For regulated utilities and government energy offices, energy programs are a race against the calendar to achieve specific, measureable goals. Program coordinators are implicitly seeking to “hit their numbers.” Accordingly, energy audit programs seek the biggest, fastest, and easiest opportunities for customers to contribute to program goals. Program coordinators need to quickly reach a large number and variety of consumers, and do so with a minimum of resources. By implication, energy audits are to be achieved as quickly and cheaply as possible. A logical consequence of this the program coordinators’ reliance on checklists of prescribed measures and limited scopes of inquiry.

• Recipients’ benefit. In contrast to policy goals are the proprietary expectations of typical energy consumers: that energy should be supplied reliably and at the lowest possible cost. For the most part, consumers are distracted by the evolving complexity of modern energy markets and emissions concerns; consumers still yearn to carry on business without having to think about energy. If asked for their preferences, consumers merely ask that energy prices be kept low. We can argue that this is a naïve expectation borne by consumers’ lack of awareness of the productivity benefits of improved energy performance. Addressing this awareness suggests a hybrid agenda between energy audit program coordinators and consumers. Specifically, program coordinators need to educate consumers in order to raise the adoption rate for energy-saving measures. At the same time, educated consumers expect more from energy policy than low prices—they seek to improve their relationship with energy and energy technologies in ways that improve their business performance.

• Engineers and other professionals that actually conduct energy audits find opportunity at the crossroads where public policy goals intersect with the business interests of audit recipients. The challenge is in reconciling energy audit formats to serve those very different interests. An energy audit conducted strictly for the recipient’s benefit is almost always more demanding in terms of the level of skill, depth of analysis, and time that it requires. However, the greater time and effort involved are not attractive to the resource-limited program coordinator; both coordinators and recipients will resist greater costs. This explains the abbreviated scope and conduct of policy-driven energy audits. In this case, audit providers logically focus on measures that contribute most effectively to program goals. This focus often excludes the discovery of unique energy-saving measures are derived from patient, methodical study. From the recipient’s perspective, the consequence of a policy-driven audit is not one of pain created, but of opportunity lost. In other words, there is no detriment in conducting cost-effective energy audits in support of energy and environmental policy goals. But opportunity is lost in the sense that unique, business-enhancing energy opportunities are not fully recognized. It should be noted that energy audits that serve a public policy goal remain valuable to the recipient in that it still identifies some value. After all, an energy audit with an abbreviated, prescriptive scope is better than none at all.

These different perspectives shape today’s market for energy audits (and perhaps for energy solutions in general). In 2010, as North Americans struggle with an economic recession and corresponding stimulus policies, there is an expectation that energy audits shall be “free.” The majority of consumers neither recognize nor care about the differences in sponsorship or format of an energy audit. Energy audits are perceived to be a commodity, so cost is the prospective consumer’s overriding consideration. Thanks to stimulus funding, the capacity for utilities, universities, and government agencies to provide free energy audits is increasing. Free service begs cost-effective delivery, so expect more cookie-cutter energy audit formats that emphasize prescriptive measures. Providers of fee-based audits, which include product and service vendors as well as consulting engineers, are compelled by market forces to devise their own version of the “free” energy audit. In the worst instances, the “free” energy audit becomes a façade for a commercial agenda—an exercise that puts the vendor’s interests ahead of the consumer’s.

An interesting market compromise weaves the free energy audit into a larger business relationship. Specifically, a preliminary energy audit is free if the customer agrees to proceed with detailed engineering studies and implementation support; if the customer refuses the additional work, a charge for the energy audit is applied retroactively.

What if There WAS NO Industrial Energy Policy?

Let's say, for whatever reason, that an industrial energy policy is not wanted or needed. Let's ignore for now the predictable rejoinder that "no policy" is itself a policy. From a U.S. perspective, here's the result:

1. Without a public policy emphasis on energy, we'd be competing against "energy smart" economies that have a greater flexibility to handle resource scarcity and evolving regulatory and market needs.

2. Without development of energy-efficient technologies, we would simply conduct business-as usual, a model predicated on a 1960's expectation of cheap, limitless energy. This would be reinforced by our dependence on old paradigms for industrial technology, capital and organization.

3. Without a supporting energy research and development infrastructure, we lose the power, efficiency, and economy of coordinated R&D resources. We condemn ourselves to wasteful "reinvention of the wheel" instead of harnessing collaborative synergies. We can argue that there's a risk management benefit in having redundant research paths, but this works only if political battles among the different path sponsors don't get out of hand.

4. If we fail to encourage the training of an energy-efficient workforce, we forfeit the comparative advantage of labor productivity characterized by energy-smart behavior and procedures. We resign our industry to competing on wage rates alone-- not a good strategy for the U.S. and many other developed nations.

5. If we do not convene industry-wide initiatives to adopt energy efficient technologies, we forfeit a competitive advantage to countries that excel in such coordination-- as many already do.

6. If we chose to forfeit our national security, a good way to do this is to remain dependent on foreign suppliers of resources-- the more the better.

Why Do You Need a Corporate Energy Management Policy?

Well-run companies are implementing formal corporate energy policies for the following reasons (in no particular order; the importance of these varies across companies):

1. Demonstrate administrative and legal compliance with respect to environmental liabilities, both current and future. Carbon is the big item here, but so are other direct emissions (fossil fuels used onsite) and indirect emissions (the emissions generated by the power plants that supply your electricity). Your front office should know that the U.S. EPA issued a mandatory greenhouse gas (GHG) reporting rule on 3/7/2009. This rule requires facilities to keep records, starting Jan. 2010, of the GHG it is responsible for producing. Facilities must begin reporting their GHG emissions starting Mar. 15, 2011. Compliance penalties for not doing so will clock in at $32,500 per day. This applies to any facility that generates in excess of 25,000 tons of GHG emissions annually. The biggest and most controllable element of emissions compliance is energy use. That’s why an energy policy is relevant.

2. Capture investment incentives that can improve energy performance and boost productivity. The federal stimulus package provides the latest in an evolving set of investment incentives. There is not “enough money for everybody.” While the disbursement of these funds is still a work in progress at this date, you can bet that the limited funds will ultimately reach the entities that are best prepared to receive them. That means (1) knowing your current energy profile, (2) knowing what the optimal profile SHOULD be, and (3) having a business plan for achieving that optimum. An energy policy is that roadmap.

3. Keeping new business opportunities open. You may be familiar with Wal-Mart: as a corporate policy, they demand that their suppliers demonstrate clean, waste-reduced production processes, or else Wal-Mart doesn’t buy from them. Your customers (the defense department and government agencies) are under executive order direction to improve the energy and sustainability performance of their facilities. It’s only a matter of time before such criteria appear in the terms and conditions of work that they bid out to contractors. It’s hard for a contractor to demonstrate compliance with these expectations WITHOUT a formal energy policy in place.

4. A formal policy is the key to buy-in from your staff. Execution of any organizational effort hinges on its people. Energy cost control requires many staff to change the way they work and make decisions. In the absence of policy, there’s very little to compel them to make those changes.

5. A good policy means less work, not more. A good corporate energy policy sets the standard for taking action. It establishes clear roles, accountabilities, and investment criteria. A clear energy policy saves the company from wasting time and effort. Without such a policy, the company must deliberate energy improvements one at a time, mixed in with all the other core business decisions that have to be made. The energy agenda then becomes a stop-and-go process, and expect to “reinvent the wheel” many times over. Think of a corporate energy policy as a way to largely “automate” the decision-making process, removing the debate and speeding up the results.

BOTTOM LINE: a corporate energy policy has two major purposes: (1) to harmonize energy improvements internal to the organization, and (2) to prepare the organization for outside scrutiny and opportunities, such as compliance and market development. In other words, if energy policy is focused only on internal cost reduction, the glass is only “half full.” A valuable energy policy is one that also helps to improve productivity and provides entry to new business opportunities.

American Recovery and Reinvestment Act & the Industrial Assessment Centers

In case you haven’t heard, the American Recovery and Reinvestment Act (ARRA, signed in to law on February 17, 2009) provides enormous sums of money for advancing energy efficiency initiatives that save energy, reduce carbon emissions, and yes—help to stimulate our moribund economy.

Industrial Assessment Centers were a resource highlighted during the debate that led up to the ARRA’s ratification. The IACs are university-based centers dedicated to the development of hands-on energy expertise. This brilliant concept, funded by the U.S. Department of Energy’s Industrial Technologies Program, allows engineering students to gain experience while providing energy-saving recommendations to small manufacturing entities. Industrial entities that obtain IAC services get a student-teacher team to provide a one-day facility assessment. This culminates in an itemized list of recommendations for technology upgrades, procedural amendments, or behavioral changes that reduce energy waste or boost productivity.

The IACs are not new. In fact, these centers, now 26 in number and located across the U.S., have been around since 1974. Since then, they have amassed 14,000 individual facility-level energy assessments, producing over 100,000 improvement recommendations. A recent estimate reports that implemented IAC recommendations equate to a cumulative energy savings of $4.5 billion. About 250 students are involved in IAC activities in 2009.

IACs are well-positioned to become an even greater resource for economic development. We might expect to see more centers, an expansion of existing centers, or both. The vehicle for enabling this growth may be the U.S. Department of Energy’s State Energy Program grant. SEPs have been a historically important vehicle for extending federal grant dollars to state energy offices for driving the implementation of energy efficiency and renewable energy initiatives. Hideously underfunded for the past decade, SEPs are suddenly (because of the newly-ratified ARRA) in a position to deliver over $3 billion to state energy offices. State administrators need to look no further than the IACs to quickly deliver measureable value.

I had the pleasure of giving a presentation to IAC students at their annual meeting in Washington, DC on February 6. I commended the group for choosing a career path in energy—a feature of critical importance to our economic health and national security. And as regular readers of this blog might guess, I spoke about the managerial aspects of energy cost control. I believe it was well received. Take a look at all the speakers’ presentations here.

Obama's Energy Plan: Where Intention Meets Reality

Deploy Energy Efficiency.

There it is, a statement as declarative and straight forward as any of the other items in the Obama Administration’s energy plan. Thanks to Denis Du Bois, managing editor of Energy Priorities magazine for outlining the plan. Now hear this: my complaint is not with Mr. Du Bois, nor is it with the Obama Administration. And I am all for energy efficiency. I wince at the innocence implied by the word “deploy”—especially as it applies to the industrial sector.

Before I expand on that, let’s recap some facts: The industrial sector (meaning the facilities that manufacture the intermediate and final goods we buy or export) represents over 200,000 facilities and a solid one third of all U.S. energy consumption. It’s logical to have an industrial energy policy because any one facility’s energy consumption can equal that of hundreds, if not thousands, of homes. Up to 40 percent of U.S. industrial energy consumption goes to waste, although much of that can be economically recovered by implementing energy-efficient energy technologies, procedures, and behaviors.

Energy solutions exist. They are many in number, well proven, and often quite down-to-earth. Most involve little in the way of “rocket science” to deploy, at least on a technical level. See links to many of these resources on my website.

Here, now, is our impasse: energy solutions do not deploy themselves. How exactly will these efficiency solutions be implemented? Regulation? Imagine the receptiveness to a regulation that tells industry how and when to invest its capital and operate its facilities. Before asking anyone to make these investments, you have to decide exactly what processes, procedures, and applications within industry are to be targeted. The energy efficiency agenda collides with other asset management issues, raising complicated equity issues. A corporation can have a portfolio of facilities of varying ages and design. Do you “deploy” as much energy efficiency in a plant that is months away from closing or divestiture as you do in a new or expanding plant? What if potential efficiency measures occur far more often in one type of industry or process than in another? If the government provides help in the form of tax breaks, incentives, or grants, then certain industries or processes achieve windfalls. Through no one’s fault in particular, certain industries can receive a disproportionate share of energy tax breaks, incentives or grants. If your company collects a bunch of incentives, then so much more of your existing cash flow and investment capital are free to go into other non-energy pursuits.

Then we have turf issues within industrial organization. The culprit here is organizational complexity—the typical industrial facility is really a loose confederation of departments that compete with each other for scarce budget dollars. Production targets—and not energy efficiency—rule the day. While the organization as a whole will benefit from energy efficiency (i.e., save money, reduce emissions liabilities, and often improve product quality and productivity), there are barriers to action when the costs and benefits of energy improvements are not clearly assigned across departments. Industrial energy performance reflects the collective decisions of many departments; responsibility for energy solutions is similarly dispersed. This is an organizational issue that must be understood and addressed internally. Lawmakers are powerless to overcome proprietary issues like these. Grants, tax incentives, and all other forms of government intervention, no matter how well intended, will not move the needle on industrial energy efficiency—unless organizations untangle their own internal barriers to action.

The organizational change that is required to “deploy energy efficiency” begs an analogy to the life-style changes that individuals make to stay healthy. There is no plug-and-play solution. Quitting cigarettes by itself is not enough. Changes in diet, sleeping patterns, and exercise are more effective when done collectively rather than exclusively. However challenging, these cumulative life-style changes make a big difference to an individual. Imagine trying to make decisions of that nature by committee, and you begin to understand why industrial organizations find it difficult to pursue energy efficiency.

The Obama Administration is not alone in its attempt to deploy energy efficiency. Many states and utilities, individually and sometimes collectively, establish programs to address industrial energy waste. In every case, the leaders of these efforts are scratching their heads over the approach to this task. Rest assured that the solution is not (solely) the stroke of a lawmaker’s pen. Energy efficiency is deployed when companies make the proprietary decision to dismantle the organizational barriers to capturing the value in the energy that they already use.

Update on the Economic Potential of On-Site Power Generation

Oak Ridge National Laboratory (ORNL) has released Combined Heat and Power: Effective Energy Solutions for a Sustainable Future, a new report highlighting Combined Heat and Power (CHP) as a realistic solution to enhance national energy efficiency, ensure environmental quality, promote economic growth, and foster a robust energy infrastructure. The report provides an in-depth discussion of current opportunities and challenges to more widespread national CHP deployment, and sets the stage for future policy dialogue aimed at promoting this clean energy solution.

The report asks "What if 20% of generating capacity came from CHP?" If the United States attained this goal by 2030, benefits would include:

* A 60% reduction of the projected increase in carbon dioxide (CO2) emissions by 2030—the equivalent of removing 154 million cars from the road
* Fuel savings of 5.3 quadrillion British thermal units (Btu) annually—the equivalent of nearly half the total energy currently consumed by US households
* Economically viable application throughout the nation in large and small industrial facilities, commercial buildings, multi-family and single-family housing, institutional facilities, and campuses
* The creation of 1 million new highly-skilled, competitive "green-collar" jobs through 2030 and $234 billion in new investments throughout the United States.

CHP, also known as cogeneration, is the concurrent production and use of electricity or mechanical power and useful thermal energy from a single fuel source. CHP includes a suite of technologies that can use a variety of fuels to generate electricity or power at the point of use, allowing normally lost heat to be recovered to provide needed heating or cooling. Using CHP today, the United States already avoids more than 1.9 quadrillion Btu of fuel consumption and annual CO2 emissions equivalent to removing more than 45 million cars from the road.

The report is a joint effort between the Department of Energy's Industrial Technologies Program (ITP) and Oak Ridge National Laboratory and involved substantial input and review by a range of industry, association, and non-governmental stakeholders.

Download the report (2.5 MB).

Energy Costs: Why is Industry So Slooooooow to React?

It’s no secret that the U.S. industrial sector is struggling with high energy costs. managers react first by chasing lower prices. But what about eliminating waste so they don't have to buy so much in the first place? Corporations seem to pursue these solutions at a snail's pace. Some current data from the U.S. Department of Energy’s Industrial Technologies Program provides some insight on this phenomenon.

The diagram below shows the state-by-state results from the U.S. DOE’s Save Energy Now program. Keep in mind that this activity provides free energy audits (for more information about energy audits, see below). Recipients of an audit get a summary that identifies potential savings. The U.S. DOE does not implement or pay for the actual improvements. Recipients must do that on their own, either by using in-house resources, or by securing the appropriate vendor.

( Click on Image to Enlarge)

Note how, in virtually every state, the volume of implementation is a mere fraction of what’s been identified. Before you conclude that the recommendations were too expensive, please note that the DOE’s program focus is on identifying measures with payback measures under two years. (A completely different discussion is the misguided use of "payback" to measure financial performance). New York State is a notable exception, but this is because the state energy authority (NYSERDA) actually doles out cash incentives to underwrite the cost of improvements.

To me, these results (excepting New York) beg a mighty question: Why so little implementation? Here are my thoughts. Since this is a blog, you can add comments; I wish you would.

1. First, and to be fair, it takes time for organizations to absorb engineering recommendations and to budget the capital to make them happen. The DOE’s program has only been in place since late 2005. Two hundred audits were conducted in 2006, and 250 more in 2007. People have not had time to follow up just yet, especially when you consider the slow economy, lean payrolls, and the chronic lack of time available to facility staff.
   
   
2. Second, free energy audits don’t inspire a high level of commitment from recipients. With no “skin in the game,” the urgency on the part of facility managers is naturally lower.
   
   
3. Many recipients not only have the resources to secure a proper energy audit, they often times already have. By accepting the DOE’s free energy audit, they are inviting a “new set of eyes” to verify or expand earlier findings. The DOE does not require energy audit recipients to “do” anything with the results…. And even if they did, how exactly would enforcement work?
   
   
4. To make energy improvements, a facility must accommodate change. Meaningful energy solutions require some combination of changes to technology, procedures, and practices. Change poses challenges—even threats—to people whose livelihood is connected to long-standing procedures and priorities. Change requires front line energy managers to practice a certain amount of salesmanship. Sadly, this kind of communication is often not the strength of most powerhouse superintendents or maintenance directors. Many good energy-saving proposals never get off the ground for this reason.
   
   
5. Finally, I think a lot of people are betting on future hand-outs from the government and utility companies. This could be (many think) in the form of cash grants to underwrite improvement costs, or perhaps buyers' consortia that hopefully lower the price of fuel and power. Perhaps I'll share some thoughts about that in a future post.
   

If energy improvement is a discussion limited to mechanics in the boiler room, it’s a non-starter. Companies successful at energy management are those that develop a business plan with clear goals, criteria for action, and accountabilities for getting the work done. These are organizations that in fact perceive energy as a form of wealth, worthy of the same careful handling as cash currency, and deposits.

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MORE INFO ABOUT ENERGY AUDITS.

• Checklist for Securing a Successful Energy Audit
• Free Energy Audits
• Free Industrial Energy Assistance: What You Should Know
• Survey Says: Half of Facility Managers Don’t Know How Much Energy They Use
• So I Have an Energy Audit. Now What Do I Do?
• Evaluating the Payback of an Energy Audit
• About Energy Audits: An Open Letter to Procurement Directors

Free Industrial Energy Assistance: What You Should Know

Many industrial facility managers are looking outside their organization for some kind of free assistance for controlling their energy costs. Energy assistance programs of various kinds are conducted by certain state, federal and utility outreach offices. It costs money to conduct these programs, and that money almost always comes from tax payers, utility ratepayers, or from industry associations. On one hand, it can be argued that the cost of energy assistance is an investment in economic development. A more cynical take is that these programs allow industry to benefit from other people’s money. Let’s not rush to judgment. For now, let’s simply review the most common forms of program assistance—and the pros and cons of each.

New technology research and technology (R&D). Leading researchers develop new technologies that may allow industry to make more products with less energy. Since the 1980s, the U.S. Department of Energy (U.S. DOE) has led the charge in pooling costs, risks, and know-how needed for energy R&D. R&D work—and hence the funding—is channeled mostly through universities and national labs.

PROS: By pooling resources and risk, R&D funded cooperatively by government and business consortia makes a wider variety of energy-saving technologies available somewhat faster and with less redundant use of resources. R&D funds ultimately trickle through to the local economies that host the national labs and universities. The universities are not just developing technology—they are also the training ground for the next generation of energy experts.

CONS: R&D efforts usually take years to develop. Note, for instance, efforts led during the late 1990s by the U.S. Department of Energy—industrial energy “roadmaps” that culminated in a “Vision 2020,” or in other words, results that were expected some 20 or more years after their inception. For the 15-person metal fabrication shop in Arkansas or the 100,000 square-foot food processor in Pennsylvania struggling to meet this year’s production targets, the benefits of industrial energy R&D may seem way beyond reach—or even relevance.

Energy information “tool kits” for the do-it-yourself (DIY) plant technician. By the year 2000, government and utility program designers rightly noticed that many industrial facilities simply lacked awareness of energy waste and the means for becoming more energy-efficient. This is when U.S. DOE’s BestPractices effort emerged, wisely focused on the handful of technologies that are common to most facilities, such as steam, compressed air, and motor drives. The “tools” are tip sheets, sourcebooks, diagnostic software, and case studies, all mounted on the BestPractices website-- available for free download via the worldwide web.

PROS: Developed by expertise drawn from industry, government, and academia, the BestPractice tool kit provides comprehensive, unbiased guidance to its users.

CONS: The BestPractices program (and its many spin-offs and imitators) is predicated on the assumption that “if you build it, they will come.” In other words, we assumed that practitioners in industry would readily adopt any and all “how-to” direction if it was given away for free. In practice, we find that is not the case, since many facilities remain indifferent to these materials. Facility managers tell us they lack the time and expertise to pursue information resources, regardless of cost. We should also recognize the lack the incentive to focus on “efficiency” when one is held accountable for meeting production targets at any cost.

Corporate energy management strategy guidance. The U.S. Environmental Protection Agency’s (EPA) Energy Star program attempts to communicate directly to corporate leaders, issuing a message that generally links energy management to profitability, competitiveness, and the abatement of combustion and related environmental risks. The EPA’s body of work encourages industry to implement strategic energy goals, plans, and accountabilities.

PROS: EnergyStar for industry is certainly the deepest and richest well of information regarding corporate energy management planning. Based on lessons learned from the best-of-the-best corporate energy programs, EnergyStar provides a roadmap for designing and implementing a rigorous energy management discipline. It’s all on a website, and it’s free.

CONS: “Energy management planning” is a concept yet to be accepted especially among small- and mid-sized industrial facilities. While top managers are generally interested in reducing energy costs, very few leaders establish the appropriate staff accountabilities to make it happen. People in an industrial environment stake their careers on meeting production targets and growing the business, not achieving “efficiency,” per se. Industry’s common practice is to seek relief in the form of a one-time project—“once and done”—so that they can return to what really matters. “Energy management,” and its emphasis on continuous improvement, implies a new layer of responsibilities which don’t appeal to industrial staff who are already overworked and spread too thin.

Energy audits. An energy audit measures the gap between current and optimal energy performance for a given facility. Why not offer individual facilities some quantification of potential their savings? If industry leaders saw how much value was at stake, would they not be more inclined to cut the waste by implementing greater efficiency? The U.S. Department of Energy has been doing this, to date providing several hundred industrial energy audits for free. In return, the DOE asks only for the privilege of publishing the results of each so that the rest of industry can be informed and inspired by the magnitude of potential savings.

PROS: Some, but not all industrials, will accept a free energy audit. Some documentation of potential savings is provided to those that do. As energy prices go up, managers are beginning to enquire more frequently about energy audits.

CONS: The energy audit concept is poorly understood by many. For one thing, the very act of getting an energy audit fixes nothing. It only provides the roadmap for getting to the savings. Almost always, an energy audit is a technical document written by engineers for an engineering audience. It usually says nothing about the “people” issues that will help or hinder the implementation of recommended improvements. While the number of enquires about energy audits ( and “free” audits in particular) is on the rise. As explained at length elsewhere in this blog, energy audits are not a commodity, and you effectively get what you pay for.

Capital grants. A handful of entities have attempted to provide grants—to actually give away money—to industrial facilities that commit to a specific energy improvement project.

PROS: The preparation for such grant programs certainly stimulated a lot of discussion about needed technologies.

CONS: In the end, it was actually hard to give away money. Energy “projects,” pursued without the larger context of an improvement program, are often seen as a distraction from all-important production goals. Also, such projects simply represent change—and where there’s change, there’s risk. In a business environment, the time and effort that are devoted to efficiency are expended at the risk of missing all-important production schedules.

Lessons learned? The promotion of industrial energy efficiency depends on a carrot AND a stick. The give-away of free resources will help only if industrial leaders first ensure that their staffs have the goals and accountabilities for making measurable energy improvements.