Energy-efficiency initiatives create benefits for players beyond the primary investor. Often these collateral benefits are even greater than the primary benefits, but they're rarely factored into an efficiency program's assessment. As a result, efficiency initiatives tend to get scaled back or even abandoned. A perceived nonalignment of interests slows down efficiency improvements. Good energy planning supported by reliable information is the key to unlocking these so-called nonaligned interests.
A familiar example is close to home. Many of us have looked at investing in more-energy-efficient windows. At U.S. energy costs, it is rare that savings to the homeowner are that attractive on a purely financial basis. If we do decide to invest, other benefits of convenience, comfort and appearance are used as added justifications. Overall, few of us will decide to spend the extra money on windows that meet the highest efficiency standards.
Viewed as a single action, this homeowner’s decision does not create that many collateral benefits. If thousands of homes in the same city changed their windows in a short period of time, however, the picture would be completely different. From an energy standpoint, gas and electric utilities could avoid investment in new infrastructure, could serve more customers using the existing infrastructure, or could even close the least-efficient parts of their systems.
This picture raises new questions for utilities and homeowners. As a utility, what share of the “windows” am I willing to invest in to avoid capital investments or improve cash flow? As a homeowner, what investment am I willing to make in enhanced efficiency to reap both direct and indirect utility cost savings? The list of collateral benefits for the community is extensive, ranging from manufacturing and installation employment to enhanced property values and tax revenues.
In a complex manufacturing site in the same company, there can be similar apparent mismatches between the interests of different departments. Systematically improving the energy efficiency of production processes all too often stalls with a debate over longer- term efficiency benefits versus short-term production disturbance. As a result, efficiency programs are modest and suboptimal. Shareholders are rarely if ever consulted.
As in the example of the homeowner’s windows, industrial users can create major long-term benefits for their supplying utilities if they deliver predictable large-scale efficiencies. Benefits tend to increase exponentially as more industrial users in a community deliver efficiency. However, this will not happen unless the shared benefits are accompanied by shared effort and investment.
The first step toward generating collateral benefits is to develop an integrated energy planning process that gathers potential beneficiaries together. The result will be a plan that not only captures the scale and type of all investments needed but also captures all the technical, economic, and environmental benefits that could accrue. An integrated plan will allow sensitivities and assumptions to be tested to see how one player’s decisions could affect other players.
With this plan, players understand the possible benefits and costs of their actions, whether within a single organization or across a wider network. The stage is now set for “horse-trading” among the various beneficiaries in terms of the level, timing, and assignment of investments and efforts. The first commitment all players have to make is to invest in a system that can track the same range of efficiency benefits and costs that are called for in the plan.
Putting a credible information system in place allows the rest of the game to proceed, with all the players confident that their efforts will be rewarded on the basis of the total range of benefits. Over time, this will allow for optimization, as experience overtakes planning assumptions. It will also allows more potential players to be added to the game on the basis of an actual track record. The lack of information to track efficiency benefits has probably been the single biggest barrier to successful integrated efficiency programs. This is changing as we move to smart energy networks that can continuously track all energy flows, investments, and costs.
In this transition period, smart energy networks often reflect the structures of the past. In a manufacturing site, it's still rare to see a system that continuously captures, integrates, and reports detailed facility and manufacturing energy data from technical, economic, and environmental standpoints.
All too often, the terms “smart metering” and “smart networks” refer to a single utility – commonly electricity. The day when communities and energy suppliers tie the technical and financial information systems for electricity, gas, heat, and water is getting closer, but it's still in the future. It will also be a while before energy information flows smoothly and transparently between suppliers and users.
At the level of a manufacturing site, a city neighborhood, or even an entire community, integrated planning and implementation by multiple beneficiaries can point the way to aligning the efficiency interests of multiple players. Are we actively planning our energy use with the benefits for others in mind?