Let me tell you something you already know, “Renewable Energy” – wind, solar and the like – is the “youth movement” of the energy business: young, sexy and vibrant. Movie stars rave about the solar panels on their roofs; and wind farms are now a standard feature in many farming communities throughout the country.
Energy efficiency programs, in contrast, are as boring as middle age -staid, predictable and not very exciting.
The Pew Center on Global Climate Change may change that perception with a landmark study that was published in April (click here). The study concludes that energy efficiency is the quickest and cheapest path to reduced energy consumption and carbon emissions.
Titled “From Shop Floor to Top Floor: Best Business Practices in Energy Efficiency”, the report documents how, in an era of high energy prices and concerns about greenhouse gas emissions, many leading companies have implemented aggressive energy efficiency strategies with surprisingly robust results.
The report includes findings from a detailed survey of the Pew Center’s Business Environmental Leadership Council’s members. It also includes in-depth case studies of six industry leaders: Dow Chemical Company, United Technologies Corporation, IBM, Toyota Motor Engineering & Manufacturing North America, PepsiCo and Best Buy. Based on this information, the report:
1. Identifies the key reasons why many industry leaders have invested so heavily in corporate energy efficiency programs, and
2. Categorizes the programs of these leaders into the “Seven Habits of Highly Efficient Companies”
Why Energy Efficiency? Why now?
Based on these studies, the case for energy efficiency programs, whether you believe in global warming or not, is pretty compelling. Here’s why:
1. Efficiency is often cost-effective with or without GHG considerations. Said differently, it’s hard to argue with cost-effectively saving money on energy consumption, especially given the recent increases in energy costs. According to the study,
* Dow Chemical‘s efficiency programs have “”saved the company $8.6 billion” since the 1990s
* IBM implemented a series of energy projects that reduced or avoided 6.1 percent of its 2008 energy use – nearly twice their goal
* Food Lion LLC has reduced energy consumption over the past 5 years by more than 2.29 trillion BTUs. To achieve the same net income the company would have had to sell another $1 billion of merchandise.
2. Efficiency is the biggest short-term GHG reduction opportunity. As shown in Figure I, almost all the low-hanging fruit in GHG reductions trace to energy efficiency programs.
3. Efficiency “buys-time” for the de-carbonization of other energy supplies. Many GHG solutions, e.g. carbon sequestration, require new technology solutions, and the time to develop them, to become a reality.
And, whether we like it or not, we are all going to be even more concerned with energy consumption in the future, here’s why.
First the era of cheap energy is over. If you haven’t looked at the gas pump lately, prices are increasing and all reports are that they’re going to continue to increase. Respondents in the Pew Center survey reported that their energy costs increased “an average of 60-70 percent since 2000.”
For particularly energy-intensive companies, the research reported that energy costs have more than tripled. Moreover, the study reports that over half the survey respondents “believe that world oil prices will be back over $100/barrel by 2014″
Secondly, climate change issues reframe energy strategies. So far, the preponderance of the climate actions taken in corporate America has been voluntary. (A key exception is for companies operating facilities subject to mandatory regulations such as the European Union’s carbon cap-and-grad program.) However many observers believe that mandatory climate change regulation is only a matter of time, and it probably is.
The Seven Habits of Highly Efficiency Companies
Based on nearly fifty company responses to a rather detailed and lengthy questionnaire in addition to in-depth studies of six efficiency leaders, the Pew Center has identified the following “Seven Habits” (i.e. best practices).
1. Efficiency is a core strategy. For these companies, energy efficiency is a core practice that permeates the organization. It’s an integral part of the company’s aspirations and metrics. These are metrics and strategies that the organization discusses and evaluates at all levels.
2. Leadership and organization support is real and sustained. At these companies, corporate leaders are well-versed in efficiency issues and strategies, and reinforce these issues to their staff. “Our annual Energy Efficiency Indicator research shows that corporate leaders are paying more attention to energy efficiency with 65 percent stating they are paying more attention now than they were in 2009,” noted Derek Supple, Program Director, Global Energy & Sustainability, Johnson Controls. The survey Pew Center survey also noted that in these companies:
* At least one full-time staff person is accountable for energy performance
* Corporate energy managers interact with teams in all business units
* Energy performance results impact individuals’ performance reviews and career paths
3. The company has SMART energy efficiently goals, e.g. specific, measurable, accountable, realistic, and time-bound. Goals”
4. The strategy relies on a robust tracking and performance measurement system. Measuring energy efficiency programs is particularly challenging as energy consumption is both pervasive and indirect. Energy is pervasive in that it’s consumed in virtually every aspect of every facility; it’s indirect in that, except for some manufacturing processes, energy plays a supporting role – lighting, air conditioning, etc. Creating an effective energy tracking and performance systems requires collecting a lot of data from a lot of disparate sources. And, interestingly, the energy bills are often paid by employees who do not use the energy.
* Data collection and reporting is as “granular” as possible.
* The system includes feedback mechanisms that support corrective actions.
* Performance data is effectively visible to senior management.
* Energy performance data is broadly shared internally and externally.
5. The organization puts substantial and sustained resources into efficiency. Basically, these leaders have put their “money where their mouths are” – they’ve invested in energy efficiency projects. The leading companies in this field, however, have not necessarily relied solely on capital investments; they’ve also wrung significant savings through operational practice changes.
* Most companies obtained human resources for their programs through the “reassignment of existing staff.” For the most part, energy was added to the priorities that staff was asked to manage.
* The study goes on to conclude that “three broad observations can be made about the way leading companies funnel resources to efficiency programs.”
* First, the energy manager/team had adequate operating resources. Much, if not all of the resources were reassigned from other projects.
* Secondly, managers found capital to fund projects. Even in the recent recession, some energy efficiency projects moved forward.
* Lastly, these companies invested in human capital. The best companies didn’t just invest in hardware – they invested in people.
6. The energy efficiency strategy shows demonstrated results.
* Many companies met or beat their energy performance goals. For example, United Technologies was five years early in meeting its previous goal to reduce energy used by 25 percent per dollar of revenue below 1997 levels by 2006.
* Resources are sustained over a multi-year period. The best companies in this study had not only set up their programs and met their initial goals, but they expanded their goals as the program’s innovation wave produced new savings opportunities.
7. The company communicates energy efficiency results as part of the core “stories” it tell.
* The companies use internal communications programs to raise awareness of the efficiency goals and strategies. For example, companies like UTC gives formal awards from the Environmental Health and Safety department for energy efficiency improvements.
* Successes are communicated externally. Efficiency goals and successes show up in annual reports as well as public sustainability reports.
Companies whose products and services included efficiency-related features make efficiency part of their paid media campaigns. For example, Best Buy is a leading ENERGY STAR partner that has won national awards for its energy efficiency product marketing efforts.
For further information on the “From Shop Floor to Top Floor: Best Business Practices in Energy Efficiency” study, click here.