Tuesday, March 20, 2007

Business Risks for Energy Consumers

Any organization that consumes energy should be prepared to manage a wide variety of energy-related business risks. These include energy market volatility as well as rapidly evolving technologies and regulation. Dealing with these risks involves more than pursuing a “project”—such as capital investment in a big chunk of machinery. Another alternative involves durable management strategies that change the way people in an organization use (and think) about energy.

Energy risk management will require input from a variety of departments and people throughout an organization:

Procurement, budgeting, and finance people will be the first-line in dealing with electric utility deregulation. Companies need to develop strategies for making the best use of the many procurement options that are available in deregulated power markets.

Finance people will lead the pursuit of tax deductions and credits that apply to certain energy improvements such as lighting, heating, air conditioning, and building structural systems.

Engineers will monitor emerging technologies and standards. Companies will ask: What are these technologies? Which ones will provide value for me? How shall I evaluate them? Engineers will also design, commission, and monitor new energy-using equipment and systems.

Operations managers will rethink the dozens of staff decisions made each day, across plant floors or office spaces. Machine operators and office workers are largely unaware of how their every-day choices impact the energy bill. Solutions begin with increased awareness.

Human resource professionals need to inventory their staff training needs, then seek appropriate training opportunities. Maintenance workers and machine operators need to learn “best practice” techniques that save money and boost reliability.

Environmental, health and safety professionals need to monitor emerging regulations. For power generators and manufacturers, energy consumption directly impacts the emissions they produce. Compliance with these regulations puts many dollars at stake in the form of potential fines and penalties. Note that an energy management agenda will closely overlap safety and emissions compliance strategies.

Marketing and corporate strategy people need to understand the opportunities posed by “sustainable” business practices. Energy efficiency is a component of sustainable business practices. Sustainability is also the key to developing new products and services and winning new customers. Look at Wal-Mart: they force their suppliers to squeeze as much waste as possible from their production costs. Companies that sell their products to Wal-mart (and many other like-minded firms) need to be aware of this trend and have a strategy ready for it. To ignore this trend is to risk losing business.

Needless to say, someone needs to coordinate these many players so that they are not working at cross-purposes. This is essentially the role of an energy manager.

Forward-thinking companies respond to energy risk by changing they way they use energy. They often begin by rethinking their work habits and procedures. They quickly discover that energy use is as much a human issue as it is mechanical. To ignore the human component of energy cost-control is to invite business risk. A lack of awareness begets a lack of accountability. And without accountability, companies have no effective response to energy risk.



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