Tuesday, January 12, 2010

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.



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