Businesses should not worry about government’s new energy regulations. If they act swiftly and wisely, energy analyses can save them plenty of money, argues Graham James, VP of CACI’s Business Intelligence group.
As the government implements its Energy Savings Opportunity Scheme (ESOS), many companies are anxious about how it will affect them. The instinctive reaction from the business world to new regulations is often one of exasperation. But in this case it should not be.
A major part of the scheme is new energy audit requirements, which in practice means that companies will have to measure and report their energy use in a whole new way. Government demands thorough reports and evaluations of how energy use can be managed more efficiently.
The effort put into this, however, can end up being repaid generously.
CACI’s calculations for its energy management programme indicate that businesses can save between 5 and 15% of their energy bill through energy monitoring and targeting – if they know how to analyse the new information and act on it. Being sustainability leaders is also a good way of attracting investors. What may seem like an added burden can therefore end up becoming a profitable opportunity.
ESOS in practise
One of the direct consequences of the scheme is that businesses will be required to install so-called ‘smart meters’: replacements for existing gas and electricity meters, which will report data directly to energy suppliers. This will give energy companies more information than before and make bills more accurate. It will also form part of a whole new ‘smart grid’, providing energy companies with added data about the whole energy lifecycle.
A great advance for energy companies, then, but so what for those businesses with a high energy spend? Government claims the meters will help trigger energy efficiency improvements in equipment and buildings. And they can – if businesses take the time to act on the new information. It is estimated that UK businesses are collectively missing out on a cost-saving opportunity of up to £1.6 billion through investment in energy efficiency. This is on top of a potential increase in worker productivity of 14% from investment in environmental systems such as better temperature and ventilation control.
Reporting the opportunities for increasing efficiency will be mandatory under the new scheme, while acting on the opportunities will be voluntary. Not acting on the opportunities will be expensive. For the government, increasing efficiency will mean reducing the nation’s overall carbon emissions, getting them in line with international obligations. For businesses, it will mean money saved – plain and simple.
How to save
So what can companies do to convert the ESOS’s potential threat to profitability into a business opportunity? A few important steps, modelled after CACI’s energy analytics programme, will help achieve this.
First, businesses need to analyse two sets of data for energy monitoring and targeting schemes to be successful – driving factors and consumption. Driving factors data needs to be analysed in conjunction with consumption data to help determine how much energy should have been used. Driving factors are recurrent and measureable, and their variation explains deviations in energy consumption; they include weather, production throughput and hours of darkness.
Second, businesses need analytical capabilities to transform the new inflow of data into meaningful information. This will let them identify the exact areas where efficiency can be improved. Good analytical software will let companies integrate data from a number of sources and formats – such as building management systems, meters and local excel spreadsheets – and model different scenarios for energy use. They can then, for instance, work out if moving an energy-intensive production process to a different time will have a beneficial effect on energy consumption. Such features are invaluable in making strategic decisions.
Third, sharing energy data with all departments of a company and establishing key performance indicators, operational targets and benchmarks will help everyone make better choices. Involving the whole organisation and collaborating across workgroups will allow everybody to work smarter than before. Businesses should have user friendly interactive dashboards that allow employees to visualise energy consumption data in a straightforward manner. This will enable them to analyse, interpret and report their usage efficiently. It will help avoid wasting time and labour resources unnecessarily in meeting the new government demands, and provide businesses with the initial analyses they need to make their savings.
Results are measured on the bottom line – and that is exactly where a thorough energy analysis programme will display its merits.
Standing out from the crowd
In terms of enforcing compliance, the ESOS has been described as ‘firm, but flexible’. There is, for instance, no prescribed methodology for preparing figures on greenhouse gas emissions; and if it is impossible for a company to collect all the information required for a report, they may be given the option to excuse any omissions. Several other details of the scheme are also open for interpretation.
This gives businesses a choice: they can decide to de-prioritise energy reporting and limp by on minimum requirements, or they can take the opportunity to do more than complying and stand out as industry leaders. Corporate investors are increasingly considering environmental data and risks as part of their calculations for companies’ performances – and will only do more of this in the future. Staying one step ahead of investors rather than one step behind is usually a sound business strategy.
Not only can energy analyses save companies money on their energy bills, then; it can also help them improve processes, maintain reliability and increase energy efficiency through maximising the use of existing assets without compromising product quality or output. To achieve this, they will need an energy management solution like CACI’s energy analytics programme to integrate energy management with business operations.
Less energy, more power
Cutting back on energy usage can save companies significant sums of money, giving them higher profits to re-invest in business opportunities. It can also help them differentiate themselves in an increasingly competitive business world, where investors are analysing ever more aspects of a company’s performance.
The ESOS, which initially may seem like a chore, will facilitate energy savings by providing businesses with new information on which to base their strategic decisions. All they need to do is to have a system that lets them utilise the new data. It will be up to the individual companies to decide on whether to seize this opportunity or not.
