Robert Farris writes:
“Is that how much we’re spending right now for electricity?”
A few months ago, I had a real-time electric monitors installed at my house. It’s a simple little device that sits on the counter in my kitchen and is constantly updated with information about how much electricity our family is using within the whole house. It also shows how much that electric use is costing us. For example, it shows what our electric bill would be at the end of the month if we continued at the current consumption level. I must admit, sometimes this number is pretty shocking – especially when many things are running, such the air conditioner, TVs, washer, dryer and dishwasher. My nine-year-old son, who seemed to ignore the device since I got it, noticed it one day and said, “Is that how much we’re spending right now for electricity?” I told him that is how much we will spend if we keep using as much as we are right now. He said, “Wow, I guess I’ll go turn off the video game.”
Imagine if your company had this kind of visibility and was able to make informed decisions about how to reduce your energy consumption. How much do you think your company could save in energy costs?
The Department of Energy estimates that companies can decrease their building energy consumption by up to 27 percent by applying several techniques, including decision support, managing demand and operational efficiency. Given that typical companies spend on average between 7 and 12 percent of their annual budgets on energy, a focus on reducing energy consumption can have significant bottom-line impact. Additionally, because energy costs have generally been rising and there are no serious predictions that this trend will change, these expenses have the potential to threaten many companies’ already slim profit margins or get passed on to customers in the form of higher prices. Either could potentially put a company at a competitive disadvantage.
Energy costs are a classic operating expense. Just keeping the lights on doesn’t necessarily add a lot of value to your company. Most corporate executives would prefer to reduce these costs and instead spend the money on more productive things like expanding and improving products and services, hiring people to help with this, increasing profit margins, or passing the savings on to customers – thus improving competitive position.
The Energy Information Challenge
Currently, many businesses struggle with how to deal with this energy cost situation. They recognize at a high level that there is a problem to be solved, but they aren’t sure what specific actions should be taken to address it. Should they institute new office policies, install new lighting equipment, install new heating, ventilation and air conditioning equipment or install new insulation? The number of actions companies can take is broad, and some actions are much more expensive to implement than others.
As with any worthy business problem that is large and complex, it’s important to gather information before taking costly actions so that you can focus your actions on the most fruitful areas. But where do you get the information?
You could start by looking at your company’s utility bills. These can help you see the general trend in usage and cost, but there are several problems with this approach. For example, utility bills are a lagging indicator, meaning they only tell you what happened after the fact and don’t allow you to take immediate real-time action. Plus, they usually give you information at the building or campus level – so you can’t tell what is really driving the energy usage. Also, if your company is of reasonably large size, you probably have facilities in multiple locations (cities, states, countries) that are each served by different utilities with different rates and price structures.
You could also look at your building systems themselves. Much of the equipment that uses energy, such as lighting, space heating, cooling, ventilation and water heating has management systems that facility managers use to monitor and manipulate what is happening with that equipment. These building management systems are beneficial in that they allow information about what is happening to be monitored in real time, and they can allow you to do this at a granular, subfacility level. However, these systems are islands of information that don’t relate to each other. Also, they typically use proprietary communications protocols and essentially become a third network – in addition to the IP and phone networks – within your company.
The other challenge with just looking at these sources of energy consumption information is that they don’t help you understand what you did with that energy. For example, if energy usage is rising at a particular location, is that a good thing or a bad thing? It really depends on what you did with it.
- Were there more employees working more hours during that period?
- Did you produce more products then?
- Did you service more customers?
- Looking at what you did with the energy gets to the heart of the business problem itself, which is to increase operational efficiencies related to energy; in other words, to do more with less.
This is where “energy intelligence,” literally a business intelligence approach applied to energy use within a company’s facilities, comes into play. An energy intelligence system can integrate data from islands of energy usage information (building management systems, building sensors, utilities, etc.) and combine it with other operational data from your enterprise applications (supply chain, manufacturing, HR, finance, customer relationship management, asset management, etc.) to provide visibility to trends in usage, costs and efficiencies – across all locations, sub-locations, and building systems. By bringing this information together in one place and providing BI capabilities – trending graphs, dashboards, near real-time monitors, exception alerts, location-comparison reports and detailed analysis capabilities – an Energy Intelligence system can help company leaders understand where efficiencies are and help them make informed decisions about what actions will provide the most return.
Bottom Line Benefits and More
An energy intelligence system can provide the visibility your company needs to identify ways you can make significant energy-related cost reductions. By looking at this information over time, an energy intelligence system can also help show which improvements are actually providing the intended benefits, allowing you to repeat the actions that work at more locations and to stop taking the actions that don’t. An Energy Intelligence system can also apply business logic to calculate the greenhouse gas (GHG) emissions that are a result of this energy usage. As regulations regarding GHG emissions begin to take effect in the United States – many of which are already in effect in other counties –this information will be critical for compliance.
In the U.S., roughly 18 percent of total energy usage and 33 percent of electricity is consumed in commercial buildings, according to the DOE. This consumption comes from the buildings where we work or that we use on a regular basis such as retail shops, restaurants and grocery stores, commercial offices, schools and universities, health care facilities, hotels and distribution centers. As companies across industries begin to focus on energy reduction, it will not only make those companies economically stronger versus competitors, but it will also enable greater reduction of greenhouse gas emissions and their long-term destructive effects.
Concern over energy use, related costs and emissions are becoming more top of mind with CEOs, COOs, CFOs, and Sustainability Officers within most companies. CIOs and IT leaders should partner with building facilities leaders to paint the vision for how to begin addressing this concern using solutions like Energy Intelligence. As I saw with my 9 year-old-son, providing actionable information can definitely change behavior – a lesson that can surely be followed by corporate leaders.