Thursday, July 16, 2009

Energy Managers At Risk in 2009?

Here’s a true corporate energy management story. I share this with you to illustrate the role of strong communications. Energy managers need to be prepared to defend their agenda from short sighted “cost saving” decisions.

A facilities director was informed that the electric utility serving their Arizona location would be raising their utility rates. Armed with his limited understanding of energy value, this facility director did a back-of-the-envelope calculation. He shared the result in a message to his team. To paraphrase, his message was:

“Based on the last 12 months’ consumption, this rate increase will raise our electric bills by $323,000 this year. Looks like we have to put off our ‘green infrastructure’ initiative. We’ll need the money to pay the rate increase!”

I kid you not.

A strong energy manager should be prepared to protect his program from the unwise. Here are some of my potential responses:

• The key phrase here is “based on last 12 month’s usage.” No one said we HAD to consume the same amount of power this year, or in any year, for that matter. This is why we seek efficiencies to reduce our consumption. Every kWh that we avoid is one less kWh subject to the rate increase.
• There are three variables driving our electricity expenditure. They are (1) price, (2) weather, and (3) consumption requirements. Two out of three we cannot control: prices are ultimately market-driven and weather is determined by a higher power. We can control consumption.
• When it comes to energy improvements, there are two price tags. You have your pick of one or the other: (1) the cost of the improvement, or (2) the cost of NOT making the improvement. Efficiency lets you avoid some consumption—at a per-unit cost of YOUR choosing. In other words, you can pay the utility’s price per unit to buy that volume, or you pay a cost per unit to AVOID buying that volume. In either case you will pay for that avoidable volume.

The real problem is a reward system that focuses on this year’s budget at the expense of future years’ earnings. A failure to act now on energy waste reduction will bleed the organization for years to come—at a cost many times that of the improvement.

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