Last month we explored the challenge of addressing highly interconnected energy challenges. Worldwide, we must supply the growing needs of billions of new consumers for high-quality energy services, increase efficiency of existing systems and ultimately reverse the effects of climate change. The temptation to address these with disconnected energy projects often overwhelms the systemic approach that can deliver breakthrough results and continuous improvement. Let’s explore some ways to avoid this.
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The first way is to establish framing energy goals that go far beyond the tenure of any manager or politician. The CEO and staff, as well as the board, should endorse them. They should be communicated openly to the wider stakeholder community. This agreement and transparency fosters a reasonable possibility that the goals will survive leadership changes.
Framing goals should be challenging enough to force rethinking of existing norms. For example, Virginia’s Arlington County Board approved a strategy to reduce energy-related greenhouse gas emissions from 15 tons CO2 per resident to 3 tons; Owens Illinois aims to reduce its energy intensity by 50% and carbon intensity by 65%; Toyota’s goal is to have plants with net-zero emissions. These goals can be achieved only by changing the status quo.
Targets should cover both energy use and greenhouse gas emissions with a clear understanding that economic performance is to be enhanced. This forces implementation plans to look at the entire energy supply chain all the way back to the primary fuel sources, which forces an evaluation of ways to increase the conversion efficiency of electricity and the energy effectiveness of vendor supply chains.[pullquote]
Every key site should develop an integrated energy master plan covering at least the coming decade and ideally longer. A key site could be a neighborhood, a manufacturing location or something similar. These integrated plans view the entire site and the energy systems that supply it as a single energy object. A good energy master plan always follows the priorities of the loading order. They focus first on efficiency, then heat recovery and waste heat avoidance, followed by the use of clean and renewable energy supplies. They’re always teamed with traditional utilities and seek out ways to generate shared long-term benefits. An integrated plan is a multi-year investment road map that drives the site to breakthrough levels of energy performance consistent with the framing goals.
The master plans should be approved in the same way as any other complex investment — in their entirety. An effective integrated energy solution isn’t a buffet from which individual pieces can be accepted or rejected at whim, but instead is an investment portfolio phased over a number of years. Of course, the year-on-year performance will need to be reviewed and adjusted regularly, but the overall directions will be left intact. This is quite different from the way most energy efficiency projects are approved today. However, this change in process is essential if we are to get beyond the stop-start fragmented nature so familiar to most of us.
Approving and implementing integrated energy plans is more than just a change in conceptual understanding. It requires wholesale changes in many management processes. One of the more obvious is capital approval. A multi-year energy productivity investment plan, which includes significant changes in core manufacturing or utility structures, needs completely different preparation and approval steps than a traditional efficiency project such as changing a lighting system or swapping out some inefficient motors. This challenge has been addressed successfully in many different ways by many organizations. The key to success is ensuring that the change is real and appropriate to its culture, skills and the overall energy goals. Failure to address investment approval almost guarantees a gap between visionary rhetoric and reality.
Responsibility for implementation and performance will be at levels far higher than traditionally associated with energy efficiency programs. Strategic management of energy productivity becomes a key competence for senior managers. This requires structured development of new skills, supported by clear individual and team performance targets and incentives.
Performance targets can be managed seriously only with first-class data, which brings us full circle back to the framing goals. Systems should be in place to capture, consolidate, visualize and report the energy and emissions data ultimately needed to validate overall results relative to the framing goals and the site master plans. This data should address the classic three dimensions of energy productivity — cost, reliability and environment.
Like framing goals, all levels of management should agree to expected results and make them transparent to a wide range of stakeholders. They should be reported consistently and regularly in appropriate detail for each audience. Transparency always causes occasional discomfort when intermediate goals are missed. Companies and communities with exceptional energy performance have learned that this discomfort is more than compensated for by the value of having to live up to their stakeholders expectations.
Peter Garforth is principal of Garforth International LLC, Toledo, Ohio. He can be reached at [email protected].