Tuesday, April 26, 2011

General Eisenhower's Thoughts on Master Planning (and Sustainability)

Driven by the best of intentions, a growing number of public and private organizations aspire to “sustainability.” These are operating principles that minimize environmental impacts and waste while reducing operating costs. This pursuit, however, is not without impacts on other elements of facility asset management. Like sustainability, these other elements also require resources and are subject to performance measurement and accountabilities. They include:

Statutory prescriptions that ensure the health and safety of building occupants
CAPACITY & GROWTH: Ensuring that the volume of space utilized is in concert with demand
ADEQUACY: Ensuring that physical space and technologies are functionally relevant to needs
COST EFFECTIVENESS: Monitor and remediate operations in reaction to cost performance

Without a modern facilities “master plan,” these criteria are potentially conflicting. A master plan provides a durable vision for physical building space that coordinates criteria for cost control, risk management, and program effectiveness. For many organizations, master planning is traditionally driven by five- or ten-year facility audits. These audits simply create a “punch list” of asset replacement and compliance needs. Sustainability, cost performance, and program adequacy needs are mostly absent from this approach.

Because of sustainability’s close connection to energy-consuming buildings and mechanical systems, responsibility for its implementation will typically accrue to an engineering or facilities department. These are the very same departments that have been weakened by years of cutbacks and the perceived threat of outsourced jobs. Most organizations have a handful of visionaries who understand and support sustainability. The remaining staff are indifferent, at best. Regardless of staff support, the typical facilities manager struggles to implement sustainability with limited resources.

To quote General Dwight D. Eisenhower, “In preparing for battle, I have always found that plans are useless, but planning is indispensable.”

A “perfect storm” of forces demands a new approach to facility master planning. Trade-offs among the priorities listed above are inevitable. Facility master planning is a process that (1) develops a vision for physical space management, (2) leads to buy-in from all stakeholders, and (3) provides a durable roadmap for implementation.

A call to action may include the following:
• Research and identify best practices in facility master planning in your industry
• Organize and educate a team of stakeholder representatives
• With expert guidance, develop a limited number of master planning scenarios
• Collectively advocate a specific scenario for implementation

On May 13, 2011, I’ll be conducting a two-hour online seminar entitled “Converting Energy Audits to Business Plans.” This seminar is produced by the Association of Energy Engineers and directly pursues the organizational issues that make sustainability and efficiency pursuits so challenging ...and rewarding. Please join this discussion.


Tuesday, April 19, 2011

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.


- 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.


Tuesday, April 12, 2011

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.


Friday, April 08, 2011

Scenarios for Energy Management

Energy managers (should) spend a fair amount of time simply managing the expectations of their top leadership. The challenge is that everyone comes to the table with a pre-conceived notion of what energy management is and what it entails. Education is the first order of the day. Toward that end, the exhibit shown here is a one-page summary of energy management scenarios. Jump-start your process with a review of these strategy options. Click on the image to enlarge.

Sunday, April 03, 2011

Who Will Blink First: Energy Solution Consumers or Providers?

I just finished reading yet another online forum that questions why businesses fail to adopt the obvious benefits of energy efficiency. Energy efficiency proponents across the globe are discovering the same hurdle. The real culprit here is the threat of change. Organizations cannot address their energy performance without making changes to their status quo. I refer here to changes to capital investment priorities, maintenance procedures, and operational behavior. An energy efficiency upgrade implies change on any or all of these dimensions. Remember also that a team of decision makers has a say in the process. Each decision maker has a unique perception of the risks that change will bring to their domain. Therefore, these managers have varying levels of (dis)interest in the solution and its outcome. What’s good for the organization as a whole—energy savings—cannot be accomplished if the pursuit has differential impacts on departmental agendas. Simply put, if Department A pays for it and Department B books the savings, the energy solution is a non-starter.

The very nature of energy use makes efficiency solutions difficult for an organization to adopt. Energy consumption has impacts that span departmental boundaries. No one person truly “owns” responsibility for energy consumption. It reflects daily operating decisions as well as multi-year capital planning cycles. Staff of all description, at all levels, bear no personal accountability for the energy they consume on the job. All of this begs an explanation, which I’ll offer here in two parts:

1. Silos are a problem in the very organizations that would receive energy solutions. “Silos” manifest around departments in an organization. Managers of these departments develop mental and emotional barriers that define their needs, priorities, and willingness to act. Silos are the consequence of the organization’s long-standing goals, responsibilities, and cultural norms. Silos are the reason why departmental managers battle each other for budget dollars and functional authority. In this internally competitive environment, managers focus on their budget position, not the company’s total bottom line. The value of energy efficiency—a true enhancement of the bottom line—is squandered by the inter-departmental dynamic of silo vs. silo.

2. Silos are a problem among energy solution providers. Energy solutions are so often presented as ENERGY solutions—not as BUSINESS solutions. So by definition, an energy solution is its own silo relative to the larger population of business concerns. What exactly is the benefit of energy efficiency? The traditional answer: “utility cost reduction” and “additional cash flow to the bottom line.” These results mean almost nothing to managers who measure their success relative to the internal competition for authority, budget resources, and departmental domain. Energy solution advocates need to overhaul their message accordingly.

Industrial energy efficiency already has a large and growing inventory of proven technical solutions. The “gears” are already there. What’s needed is the grease that allows those gears to turn. That “grease” would be the motivation for managers to embrace initiatives that transcend departmental silos for the entire organization’s bottom line benefit.

As for removing the silos, who will blink first, the providers or the adopters of energy solutions? The culture of departmental silos and budget hoarding need to give way to a new paradigm. Facility management should perceived not as a cost to minimize, but as a source of value. After all, energy is an inescapable ingredient of business. As long as an organization operates, energy will shape cash flow in one of two ways: savings that accrue to retained earnings or expenses paid for energy waste. Recaptured energy waste is a cash flow subsidy to the core business agenda. In this paradigm, the facility manager is an ally and not a combatant relative to other departments in the same organization. Show me a facility management agenda that pursues the recapture of energy value, and I’ll show you a facility department that holds the key to its durable survival.


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