Avoid energy-plan market madness

Peter Garforth says the ball’s in your court when it comes to getting competitively priced energy solutions.

By Peter Garforth

Here’s the good news: When developed with sound economics, a multiyear, fully integrated energy master plan for a large, complex manufacturing site in North America will typically deliver energy productivity gains in excess of 30%. The challenge, though – and it’s a major one – is in gaining approval for, developing, and finally implementing such a plan.

Core to a breakthrough energy plan is a willingness to assess all elements of the site’s energy value chain against global best practices. The results of these assessments are combined to create a recommended energy solution. These elements will cover efficiency in buildings and processes and energy distribution across the site. Increasingly, they also include on- and off-site clean and renewable supply. All of this needs to be tied together with comprehensive measurement and control technologies.

The manager’s imperative is to source these elements at world-class performance and acceptable cost. This is often no small task, especially when the plan calls for measures that are substantially different from local market norms. When this happens, even credible and trusted local or national suppliers may not be the right answer. When responding to a rare or unfamiliar request, it’s understandable for a local supplier to price in uncertainty, perceived risk, and the higher overheads of lower market volumes. A few early instances like this can rapidly discredit the entire plan and bring implementation to a screeching halt.

In recent projects, we have experienced examples where the North American market norms were more than two to three times higher than systematic global best practices. The differences could not be explained by fundamentally different market cost structures or underlying deep technical differences. The core reasons were simply local market volumes and limited experience. In many cases, these differences were big enough to put the success of the entire energy master plan in jeopardy.

To deliver global best-practice energy performance, the plan also must ensure that implementation costs and quality reflect global best practices. This means the identification of key areas and the selection of appropriate vendors is as much a part of the overall master plan as anything else. Recent experiences indicate that the area of greatest mismatch here is comprehensive thermal efficiency. This includes retrofitting building envelopes; heat recovery and reuse of all types; creation of heating and cooling distribution networks; and on-site combined heat and power (CHP).

Integrated metering and control across multiple utilities also seems to be an area in which there are cost and expertise mismatches among major markets across the world. No integrated energy master plan can succeed without a successful metering and control structure.

Once the critical areas for success are identified, the plan should identify target cost and performance based on a global view, and then set a game plan for getting as close as possible to these levels. This takes us to the concept of designing a strategic implementation network of vendors.

These partner-vendors should be competitively selected based on demonstrated large-scale, world-class expertise, and they should be engaged for the long haul. They should also be willing to commit to price their expertise and materials consistent with global practices.

Successfully building this network will not always be easy. It will demand a higher degree of vendor research and accessing unfamiliar market data from other countries. It may include approaching companies that have a limited market presence in North America. Equally, it may include setting new expectations with local players.

This effort can pay off handsomely, however. We have recent examples where this type of global benchmarking has resulted in major realignments of material and expertise pricing. In one case, thermal networks ended up costing less than half the prevailing local cost levels. In another, aligning CHP installations with global norms resulted in a similar dramatic difference.

To achieve breakthrough energy performance, energy managers not only need world-class plans, but also they must learn to be world-class customers.

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