As energy strategy increasingly becomes a C-suite concern, one of the questions most often asked by executives at industrials and utilities is what comprises best-in-class industrial energy management.
The biggest takeaway: it’s not just about the data. Energy management has matured. If it were all about the data, then there’d be no such thing as energy waste in the production process, judging by the myriad of available options that collect and report data.
We all understand that data is critical; however, it’s become the new commodity in the energy intelligence challenge. Data is information, knowledge is information in context, and intelligence is acting on that knowledge to create solutions for now and the future.
Energy intelligence software (EIS) is the platform that unites people, process and technology to incubate the enterprise change management and communication needed to ensure an energy strategy sticks.
Here are five factors that are enabled by EIS, which are essential to the success of any industrial energy strategy.
1: Employ a Structured Energy Business Decision Framework
When energy spend as a percent of the cost of goods sold ranges from 2% on the low end (e.g., food and beverage companies) to 60% on the high end (e.g., mineral production companies), it’s important to have a decision framework that is adaptive to that level of variability.
Yet the effect of planned production volume variances on the energy cost profile, as a function of time and location, is not well understood. General understanding stops at matching past utility expenditures with past production volumes and adding a fixed percentage increase to plan the next budget cycle.
This understanding should be central to everything from energy policy to planning, procurement, use, accounting, documentation, and investment approvals. A defined energy business decision framework helps business unit profitability and return on invested capital—two critical financial metrics for industrial enterprises. The EIS platform establishes the enterprise structure for energy business decisions.
2: Put in Place an Effective Means for Enterprise Communication
This represents one of the industrial enterprise’s greatest opportunities for differentiation. Most global companies enjoy pockets of energy management success that can easily be translated throughout the company. But because these organizations lack a vehicle for effective enterprise communication, it doesn’t happen—meaning your enterprise energy strategy is never fully maximized.
Having an energy strategy alone does not guarantee success. Effective communication mechanisms—to promote successes and share best practices, for example—need to exist, too. The EIS platform establishes the basis for communication continuity, and is the single place the enterprise can look to for energy topics.
3: Have a Detailed Plan to Deliver on Sustainability Goals
Most industrials have sustainability goals around energy, carbon, water, and waste (if they don’t, an intelligent energy approach might be too big a lift for now). While industrials generally do well with water and waste, an energy strategy that details how to reach a multi-year energy and carbon goal with reliable, consistent, and impactful reporting against critical energy metrics is more difficult to develop and maintain.
These issues are further complicated by geography, language, organization, systems, production SKUs, and global business processes.
And yet, there is a strong correlation between production-adjusted energy use improvements and performance to the operating margin plan. In a survey, the Aberdeen Group reported that the top 20% of respondents (what they call “best in class”) delivered a 15% reduction in production-adjusted energy use and performed 14% better than their corporate plan for operating margin, a compelling case for industrials that look for any competitive advantage they can get, and use efficient energy use as one type.
4: Benefit from Comprehensive Expertise
Three types of expertise are crucial to effectively executing an energy strategy:
First is energy expertise (i.e., understanding the global energy marketplace, and the local permutations to it). From understanding demand and consumption to cost, tariffs, regulations, incentives, risk, location, and supply, the list is long.
Energy expertise is ubiquitous in today’s enterprise energy software solutions, to varying degrees of depth. Software that relates energy use to energy cost as a function of incremental time at an individual location is a key requirement, but is rare.
Second is the expertise to understand how to minimize energy utilized to make product without negatively impacting production. This ability is in high demand and difficult to deploy at scale, and is important to industrial operators who are, in most cases, incentivized to meet certain production metrics and not focus on lowering the intensity of energy use.
Optimizing energy per unit with technology can be complicated or beyond the scope of most industrial staff, but the potential impact on energy consumption can be meaningful. Energy intelligence software can help here, too.
The third type of essential expertise—which happens to be almost universally absent from implementations—is energy business process expertise. Business process outsourcing is common in other areas; why not energy? This expertise occurs today in areas such as energy procurement or utility bill management. However, these piecemeal approaches miss the larger value available through a coordinated, enterprise-wide energy decision making process.
In the Deloitte Resources 2015 Study, only 38% of companies surveyed actively tracked available energy incentives. A well-developed energy intelligence business process ensures that this real value is routinely captured for the remaining 62%.
The right energy business process expertise will establish the people, process, and technology necessary to efficiently manage and report in accordance with internationally accepted energy management standards and best practices, such as ISO 50001. The EIS platform coalesces the expertise into one enterprise tool from which everyone can collaborate effectively.
5: Ensure You Collect the Right Data
Let’s come full circle: data actually is important, but only the right data and in support of the four previous energy management key factors for success. Industrials are geared to produce more of their manufactured goods cost-effectively, so the valuable data to collect is that which can be used to calculate and influence total energy use intensity (kWh, BTU, etc./unit) and energy spend intensity ($/unit). The right EIS platform will condense all the available data into the just the data needed to properly serve as a valuable key performance indicator for your business. Some businesses rely on keystone metrics as a predictor of overall business performance and the EIS platform can help determine if this makes sense for your business.
A Clear Roadmap for Success
These are the real drivers for long-term customer satisfaction and value delivery for the industrial customer, but without a systematic approach to address variances, it is difficult to make a persistent impact. It takes time to achieve best-in-class status, but regardless of where an organization’s starting point is, improvement in energy use is achievable, and is a definite competitive advantage. The EIS platform helps to bring all these factors together for enterprise change management, communication, and simplicity.