Case study after case study vindicates the value of investing in energy efficiency and supply reliability. Senior management increasingly recognizes that risks over energy pricing and environmental legislation related to climate change are something to consider, even if only to keep stakeholders at bay. If energy offers such substantial opportunities and carries major risks, why are we so passionate and creative in minimizing the investments in effort and money to make our businesses more energy productive?
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It’s common for companies starting systematic well-structured energy management programs to achieve 25% returns and greater on their investments for years into the future. This column has frequently highlighted the relatively risk-free nature of most energy investments. The technology usually is well-proven, and the benefits are predictable. That’s on the upside. In the same way, the range of future risks in terms of price volatility, supply reliability and cost of carbon are known and can be factored into investment decisions, using some pretty standard contingency planning tools. Again, there are many well documented cases studies of successfully including energy risk in decision making.
All this isn’t going unnoticed. Increasingly I’m seeing that companies are spending substantial amounts of money sending employees to conferences on energy productivity and climate risk. The conferences represent a wider range of topics and specialties than the more technical orientation of the past to appeal to their more diverse attendance lists. All this should bode well for a greater degree of creativity and enthusiasm for challenging the stagnant energy management picture of the past. Sometimes it does, and companies willing to look at the possibility of transforming their relationship to energy as a real option are to be applauded. However, they still seem to be in the minority. Most seem to be living in a “conversation of no possibility” around energy transformation.
This column was triggered by a conversation I had at a recent meeting. A participant well-versed in energy topics raised a question over a seemingly intractable large-scale energy issue, ostensibly looking for new ideas. The specifics are confidential but were economic, environmental and technical, and the players had become locked in entrenched positions that were mutually unacceptable. I suggested a range of options to both relieve the immediate issue and potentially generate vast amounts of future value. These suggestions drew on proven successful energy practices from around the world, using proven technologies. They also required realignment of the operating relationships for the parties and some rethinking of current positions.
What followed was essentially a conversation more akin to a high school debating class than a balanced assessment of breakthrough alternatives. The passion and creativity were definitely there and were well-informed and founded on knowledge. However, the discussion was almost entirely focused on finding reasons why any alternative, other than the previously assumed energy solution, was even an option. At best, this approach might improve the status quo incrementally, hardly the desired step change. If this were a rare occurrence, it would scarcely be worth mentioning. In my experience, it seems to be the norm.
I see similar dynamics in companies where the CEO or other senior leadership has set ambitious energy and climate change goals. In an ideal world, creative organizations and individuals would grab these ambitious targets, treat them as an exciting professional challenge and mobilize the best and brightest to make them real. All too often, the best and brightest are definitely mobilized, but unfortunately to apply their creativity and analysis to proving why the goals are unnecessary, unachievable or flat-out fantasy. Sometimes I feel companies send people to the conferences and the training to make them more creative at explaining “why not” rather than finding new pathways.
A lot has to do with the way leadership sets the challenges. The phrasing, “develop a plan to achieve a 30% energy cost reduction and 40% carbon reduction within five years taking into account different future scenarios,” sets up positive creativity around a goal clearly being seen as non-negotiable. The phrasing, “can we reduce future energy costs by 30%, given the uncertainties around future pricing and greenhouse gas legislation?” sets the stage for the negative answer declaring it to be impossible or unnecessary. Answering both requires analysis, creativity and expertise. In the end, one is essentially a waste of money and effort; the other opens doors to new competitive edges.
The phrasing of energy challenges around benchmarking is another territory for setting up “conversations of possibility.” A team challenged to “develop a plan to make all our plants at least as energy efficient as the best in our industry” clearly says that being No. 2 is unacceptable, and will force an evaluation of global and internal best practices.
All of us trying to achieve vastly improved energy productivity and reduced risks have a responsibility to think carefully how we set tasks. Transformative challenges will be embraced and delivered only if leadership clearly declares them to be possible and non-negotiable.
Peter Garforth is principal at Garforth International, Toledo, Ohio. He can be reached at email@example.com.