Thursday, July 26, 2012

Do You Want Industry to Improve its Energy Efficiency?

Do you want industry to improve its energy efficiency? Two things need to happen:

1. Address energy in terms of outcomes that are important to industrial leaders. That would be MONEY. It's pointless to frame the discussion around electricity or gas. It's also misleading to perceive energy efficiency SOLELY as a one-time capital investment project. Energy viewed through the prism of fuel or project type imposes silos of thinking that are meaningless to corporate leaders who set priorities for their facilities. Regardless of what product they make, these facilities have one thing in common: they are money-making machines that convert valuable inputs into outputs of even greater value. VALUE is the key here, with value defined as the ratio of net wealth created to wealth invested. Value is therefore a percentage-- a rate of return. Look around you: every instance of investment and lending is measured by a rate of return... everything except energy improvement "projects" which are measured instead by simple payback. When you invest in a mutual fund, do you measure its performance with simple payback?

2. Empower facility managers-- the people whose day-to-day decisions impact energy consumption-- to create value through the recapture of energy waste. This means managing energy the same way you manage money, using goals, decision rules, performance metrics, and accountabilities that make smart energy choices part of standard operating procedure.

We ask why industry is cool toward energy improvements. Stop talking about solutions from the vantage point of your silo. Point to the value outcome. Hint: You really should say more than "reduce your utility bill."



At 12:41 PM, Anonymous Ryan said...

Christopher, this is a very insightful post. Your points about energy efficiency being one of the only investments not measured on "rate of return" really puts things into a unique perspective. The mutual fund analogy was spot-on! It definitely seems like with products such as energy efficient replacement windows, most homeowners are only wondering "How much money will I save on utility bills?" As you pointed out, it's more about the rate of improved energy efficiency, which will provide a return on the investment, both immediately and in the long-term. Thank you for posting this very useful article!

At 1:20 PM, Blogger Christopher Russell said...


You raise an interesting point. I attempted to articulate the investment value concept for the benefit of business decision makers. You are suggesting the same would apply for homeowners as well. I have to ponder that one. Right now, I'm thinking that homeowners would simply see expense reduction (and maybe increased comfort) as the ideal outcome for their window replacement, insulation, or other domestic tasks. Thanks for reading.

At 11:43 AM, Anonymous Sid Abma said...

Hi Christopher. It is difficult to sell "Increased natural gas energy efficiency" because the cost of natural gas is so low.
What we are attempting to get industry to realize is that this time should be considered as a bonus time, because the producers have moved back to oil as they can't make any money at these low prices, so we realistically have to look at seeing an increased cost to this energy source.
The other side of energy efficiency is the environmental impacts that can be realized. The EPA states that the commercial, industrial and power plants consumed over 17.5 Trillion cu.ft of natural gas in 2011. What would be your guess as to what percentage of that was blown into the atmosphere as HOT exhaust? How many cu.ft?
By utilizing this natural gas more efficiently, and venting COOL exhaust instead, might it start to make a difference?
If for every million Btu's recovered from these waste exhaust gases, the DOE's number of 118 lbs would not be put into the atmosphere, how many Tonnes might you guess that to add up to?
Could that possibly make a difference to our environment?
America because of fracking is just now coming into an energy transition stage. America now has to realize it's future and continue to consume this energy as it has in the past 50 or more years, or decide it is time to make some sort of a chance.
Dirty coal is on it's way out, to be replaced with natural gas. Natural gas is also going to become more of a transportation fuel to hopefully remove our dependence on Middle East imported oil, with more demand being put on natural gas.
If America wants to continue to hopefully realize low natural gas pricing, I believe it will have to make the decision to start to consume this energy source as efficiently as can possibly be done.
Your thoughts are always greatly appreciated.

At 12:50 AM, Anonymous Market Reports said...

Economists analyze the costs and benefits of energy efficient technologies to determine which are least expensive and most beneficial, and identify opportunities where energy savings over the life of a product more than compensate for an increase in purchase price.It's main aim is to reduce amount of energy required to provide product and services.
very informative and useful article provided here which provides two aspect to improve energy efficiency..


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