Back-office Carbon Accounting–Outsourcing for the Utilities Sector

by Tom Hamilton, FirstCarbon Solutions

The utility sector is in the midst of revolutionary business change. The flattening effects of electrical deregulation and increased competition coupled with the demand for providing low-carbon electricity are requiring utilities to alter their business models to stay competitive.

Any good business will say that during tumultuous times, it’s critical to focus on what matters. Many business process outsourcing (BPO) sectors were founded on this premise alone. Information technology (IT), human resources (HR) and financial accounting outsourcing formed to relieve businesses of the essential yet resource-draining demands of back-office work. The call from the general public, NGOs, shareholders and federal, state and local government for utilities and big businesses to move toward a low-carbon future has added one more “O” to the BPO mix: environmental management outsourcing (EMO).

The Devil is in the Data

The utility sector is no stranger to environmental health and safety reporting, but reporting and reducing carbon presents a challenge unlike anything else: It’s everywhere, and its footprint is being demanded by many different stakeholders.

The spotlight for requiring organizations to report and reduce carbon emissions has shone brightly on the two usual suspects of environmental enforcement: the Environmental Protection Agency (EPA) and Congress.

But amidst a climate bill that faces obstacles at every turn, the spotlight is being shared with new regulators.

Shareholders, consumers and big business have enacted their own forms of climate change legislation for big industry, holding businesses accountable to greenhouse gas reduction targets and broader sustainability initiatives.

Couple this with growing utility deployments of regional smart meters designed to present consumers with energy-usage data in real time, and it’s clear a tidal wave of information is fast approaching.

Pike Research forecasts that smart grid infrastructure, including grid automation upgrades and smart metering, represents a huge market opportunity and will attract $200 billion in worldwide investment between 2008 and 2015.

No matter the size of the organization or the end goals that defining a carbon footprint will serve, all begin at the same principle: You can’t manage what you can’t measure. And measuring is an exercise in data management.

The Back-office of Carbon Accounting

Utilities and other big emitters are finding quickly that these large-scale data management projects require the help of outside, expert organizations that can outsource the basic functions of data capture and verify its legitimacy.

This model helps utilities focus on their core business, selling electricity, without draining internal resources.

Historically, utilities have engaged outsourcing services on a one-to-one project basis. But the requirement of long-term carbon accounting and environmental data management demands a long-term approach that extends beyond a simple software program or fancy dashboard.

Carbon emissions data permeates throughout utilities from plants, to buildings, to vehicles and often is trapped within reporting formats that don’t interact well with one another.

The need for accuracy and transparency alone requires a third-party verification body to clean dirty data.

But this engagement can drill deeper to reduce costs associated with document management and can free engineers and in-house experts to do what they were hired to do.

The First Step: Identifying Your Carbon Maturity

Before utilities outsource carbon-reporting initiatives, the first step is to realize where they rest in the data collection process.

Albert Einstein is quoted as saying that if he had one hour to save the world, he would spend 55 minutes defining the problem and only five minutes finding the solution.

We at FirstCarbon Solutions call this deep, self-reflective analysis “carbon maturity” and have defined five essential stages with varying characteristics of growth.

Often utilities find that disparate groups within an organization fall into the following categories:

  • Level 1: Chaotic. Characterized by unknown obligations for recording carbon and a lack of clearly defined goals for environmental management, this unknown process lends to the unknown business risk.
  • Level 2: Reactive. Here, there’s knowledge of tracking obligations, and likely some simple data collection is being recorded annually. But carbon data exists in silos, and the data collected is not being verified.
  • Level 3: Proactive. Obligations exist in documented form and are known within the organization. Carbon emissions data are being collected manually on a quarterly basis, and reduction goals have been set based on simple data collection.
  • Level 4: Service. Obligations are managed and tracked online and more broadly known throughout the organization. Carbon emissions are tracked monthly, and a centralized online data collection system exists. Emissions data is compared against specific reduction goals and verified externally.
  • Level 5: Value. Carbon emissions obligations have progressed into known risks, and those risks help trigger operational improvements. Carbon emissions data collection and reporting is automated, and reductions are based on operational efficiency. Advanced data leads to carbon trending, analysis and predictions.

For utilities without a data management infrastructure, accurately and consistently recording carbon emissions can be challenging.

This challenge extends beyond the publicized yearly deadlines of EPA mandates.

Utilities will be required to report and optimize carbon emissions for years, and the volume, costs and manpower needed to do so are immense.

The new market category of EMO is proving to help the clean industry realize its carbon maturity. EMO combines two previously disparate services in environmental management: expert environmental consulting and carbon emissions management software.

This new managed services category can offer utilities significant value while preserving precious internal resources.

The choice to outsource or manage carbon emissions reporting starts at one central point: understanding your data.

Data defines what a footprint is, and it will define how utilities stay competitive.

Author

Tom Hamilton is director of energy efficiency at FirstCarbon Solutions, a pioneer in environmental management outsourcing (EMO). He is a nationally recognized energy efficiency expert with knowledge of policy development, auditing, energy analysis and municipal program management. Reach him at thamilton@firstcarbonsolutions.com.

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