Energy management is a process encompassing energy supply, demand and billing issues yet many companies treat energy management as a series of distinct components managed within different functional areas. Although Accounting typically deals with the review and payment of utility bills, Procurement may be responsible for buying the lowest cost energy while Engineering or Facilities Management is responsible for the energy that is consumed. The fact that these individual functions might be segregated at the individual facility level, rather than at the corporate level, further inhibits an organizations ability to develop a cohesive approach to energy management.

Because many companies treat energy supply, demand and billing as separate components, those enlisting outside partners for assistance in energy management tend to enlist separate partners to manage each component. While utility bill management may be managed internally, energy supply might be contracted to a third party supplier with the facility managers retaining responsibility for monitoring the energy efficiency of their equipment. Despite a tendency to maintain all or a portion of energy management in-house, energy supply, demand and billing components each present unique opportunities for cost savings that may only be apparent to dedicated energy management professionals.

For instance, switching from primary to transmission voltage can lead to substantial cost reductions for those customers large enough to cost justify the cost of substation construction yet few industrials review this opportunity once the facility has been built. At the other extreme, a utility billing error resulting from a malfunctioning utility meter is not easily detectable by an accounts payable clerk with responsibility for paying bills for everything from raw materials to office supplies to utilities. Although internal staff can identify “low hanging fruit” when it comes to optimizing energy costs, going the next step to identify all the available opportunities and how they can be bundled to deliver the greatest possible energy cost savings may take a seasoned energy professional.

When utilizing outside partners to assist with energy management, many companies also make the mistake of hiring individual firms to manage individual components of the energy process. One partner might be hired to manage the utility billing process while a second is hired to focus on energy procurement with a professional engineering firm being enlisted to pursue energy efficiency opportunities. Because each has a vested interest in promoting their own capabilities, there is little incentive to work as a team to deliver a higher value integrated energy management solution. In addition, because each individual partner may have an affiliation with a utility, energy supplier or energy equipment provider, there may be a bias toward recommendations that help up-sell their own company’s energy related products. Such a scenario actually works to increase the cost of energy to the energy consumer rather than improve the overall energy efficiency of the company.

To truly optimize energy costs, it is essential to implement an integrated approach to managing energy supply, demand and billing issues. Specifically, the following steps must be taken, in order: 1) optimize the energy consumption pattern, 2) optimize energy pricing within the new consumption pattern and 3) provide on-going measurement and verification to assure the projected results of 1) and 2) are actually realized.

Optimizing a company’s energy consumption pattern entails: 1) optimizing load factor and 2) minimizing consumption. Peak shaving and load shaping alternatives should be reviewed to minimize the differential between peak and average energy requirements. In addition, a thorough review of all energy consuming equipment should be conducted to identify both capital and operation and maintenance related opportunities to reduce energy consumption.

After the energy consumption pattern has been flattened and minimized, a thorough review of all available distribution, transmission and production related supply options should be reviewed to determine the best mix of services for the newly defined consumption pattern. Each component should be reviewed independently to determine if a bundled or unbundled approach delivers the greatest value. Companies must look beyond the traditional opportunities of utility vs. third party supply and consider opportunities that include: 1) interruptible vs. firm service, 2) increases in service voltage, 3) meter consolidation, 4) negotiated rates, 5) self-production and 6) other non-standard options that might exist on a site specific basis before proceeding with selection of the best mix of available energy supply services and/or suppliers.

Once the optimal supply service structures are identified, contract negotiation is equally important and should be pursued with equal vigor. Within the selected service, it is essential that terms surrounding bandwidth, penalties, service reliability and ancillary service issues be scrutinized to assure the all-in cost is consistent with the expectations set during the service selection process. As energy markets become more competitive, the probability increases for insertion of adverse contract terms and conditions that offset reductions in the bid price for energy.

Following optimization of energy consumption and price, there is an expectation of energy savings. If an appropriate measurement and verification process is not established, no one will ever know if the projected results are actually realized. From monitoring the accuracy of utility bills to verifying proper implementation of contract terms to sub-metering individual energy efficiency upgrades to validate results, a process should be in place to measure the overall results of the energy management process. The measurement and verification program should be on-going and the associated information should be tracked in a database to allow periodic reviews of current to historic energy costs and consumption. Making this database web-accessible provides ease of use and opportunities for energy partners, as well as in-house staff, to continue to monitor and mine energy-related data to proactively identify new opportunities to reduce energy costs and consumption in the future.

Truly optimizing energy costs involves a process, not a series of components. Those companies that adopt this philosophy and systematically improve their load factor and reduce their consumption before seeking the optimal price will realize greater energy cost savings in the long run. And those companies that implement on-going measurement and verification and utility bill management will be assured the savings identified through the process are actually realized now and into the future. Without an integrated approach, the benefits of an energy management program will be limited to selected “low hanging fruit” with the potential that the costs of enlisting multiple partners to manage individual components will actually outweigh the limited results of the program. An integrated approach to energy supply, demand and billing assures maximum savings at minimum cost to the energy consumer.

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Copyright 2004 CyberTech, Inc.