Rely on data to make energy decisions

Energy Expert Peter Garforth says make your energy-efficiency strategies based on relevant information.

By Peter Garforth

The effects of energy use and how they affect the economy, national security and the environment are a heated topic in the United States. The most obvious is the increasingly partisan debate over both the reality and causes of global warming. This is followed closely by the degree to which moving to higher levels of energy efficiency and alternative energy supplies would foster or destroy jobs and competitiveness. Last, but certainly not least, is the degree to which the use of vast amounts of foreign oil and other crucial fuels affects national security and international relations. What’s increasingly obvious is that scientific assessment and data around these important topics often take second place to strongly held opinions.

It’s inevitable that these debates at a national level find their way into the day-to-day decisions in business. Individual managers often will have strong personal opinions on these energy-related topics, in turn affecting their priorities when it comes to supporting efficiency or climate risk mitigation investments. Like the national debate, these individual decisions might not always be based on relevant data and technical or scientific assessment. At the extreme this can produce some anomalous challenges on employees.

Not that long ago, I knew of a team that was challenged to develop for senior management an assessment of the risks of climate change legislation on the company’s worldwide business. At the same time, they were advised not to use the phrases “global warming” or “greenhouse gas emission” because the boss was skeptical about climate change science — hardly an easy task. It’s also not uncommon for senior management to be convinced that any efforts to increase efficiency aren’t worth the bother, because they don’t believe energy is such an unimportant expense and prices won’t increase significantly.

Managers who fail to ask for basic energy-related assessment before diving into decisions are exposing their company to missed opportunities and unnecessary risks.

At the other extreme, I’ve seen teams challenged to implement programs that increase the use of renewable energy sources or cogeneration based on little more than the belief that they’re effective or that they’ll convince activists that the company is “green.” Many efficiency programs fall into the same category. A manager I knew was so frustrated with the inability of his teenage children to turn off lights at home that he initiated a company-wide program to reduce lighting use, deflecting resources from substantially more productive efficiency opportunities.

Irrespective of their opinions, these managers rarely understand how much the company spends on energy, the scale of its greenhouse gas emissions and rarely have a structured understanding of future pricing and legislative and other risks. They also rarely have explored the background scientific, technical, economic and political analyses that underlie these debates. How important is this mismatch between opinion and knowledge? To what extent can it cause companies to miss opportunities and be blindsided by risks?

My belief is that this is significant and it’s increasingly risking the competitiveness, or even the survival, of many businesses. One is reminded of the 1615 trial of Galileo, who felt it expedient to bow to the commonly held opinion of the authorities of the day that the sun revolved around the world, despite his astronomical analysis to the contrary.

Closing this gap between information and opinion often is surprisingly easily resolved, and it all comes down to developing easily understood baselines and relating them directly to the business. Do we know the total energy costs and what they represent as a percentage of profits? Are the scale, sources and locations of the company’s greenhouse gas emissions available? Have we done a basic assessment of the energy supply reliability for each site? Do we know the range of future energy pricing possibilities? Have we objectively assessed the range of possibilities of legislative and other efforts to reduce greenhouse gas emissions for our sites? More importantly are these available in an easily understood overview showing the best-case/worst-case combinations?

The irony is that most of this information is available in many companies. It simply is scattered across the organization and not available in a form that can guide informed decisions. Energy teams that fail to do this basic decision support homework will inevitably find it tough to get an appropriate level of management attention. If these teams feel under pressure to dodge discussion of certain topics as a result of the boss’s bias, their analysis will be incomplete or unclear.

Managers who fail to ask for basic energy-related assessment before diving into decisions are exposing their company to missed opportunities and unnecessary risks. Even worse, if they use their position in the hierarchy to bias analysis as a result of their personal views on the value of energy efficiency, energy security or climate-change mitigation, it’s a serious failure that could jeopardize the professional quality of their teams’ work and the integrity of subsequent decisions. As at the national level, the company risking to manage energy by opinions rather than information is unacceptable.

Peter Garforth is principal of Garforth International, Toledo, Ohio. He can be reached at peter@garforthint.com.

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