Energy Management Report

7/29/2019 Energy Management Report

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Make the most o your energy TM

The uture o energy

management in the UK

Commissioned by Schneider Electric

Researched and written by Vilnis Vesma

July 2010


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. Preace

. How we got to where we are today

. Energy management in the UK in 00

.Who is currently carrying out energy management duties?

. How important is energy management?

. What gives energy management its importance?

.4 What obstacles do organisations ace?

.4. Lack o knowledge

.4. Interest and inuence misaligned

.4. Ground not properly prepared

.4.4 No policy, or lack o support

.5 Public perceptions

.6 Government interventions.7 Willingness to invest in energy management

.8Trade and osetting

.9 Climate change as a motivator

4. Opportunities

4. Sta motivation and awareness

4. Outsourcing

5. Trends

5. Leaders and laggards

6. Futures

7. Conclusion

8. About us

Contents2

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Copyright 2010 Schneider Electric UK Ltd.All Rights Reserved. No part o this publication may be reprinted or reproduced or utilised in any orm or by any

electronic, mechanical or other means, known now or hereater invented, including photocopying and recording,

or in any inormation storage or retrieval system, without permission in writing rom Schneider Electric UK Ltd.

Warning: the doing o an unauthorised act in relation to copyright work may result in both civil claim or damages

and criminal prosecution.


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1. Preace

This report was commissioned by Schneider Electric in 00 to provide insights into the likely uture

o energy management in twenty years time. I have drawn on a number o recent research studies

(including one specially commissioned or the project) and the views o a panel o experienced

practitioners in, and observers o, the energy-management scene. I am particularly grateul to them or

giving generously o their time to help me. Their candid opinions on the state o the art were invaluable

not least because in most respects they bore out my own opinions (which was a relie because although

I have been in the business a long time, I worry that my perceptions might be skewed). But they also

injected a number o valuable new leads and ideas. To give our experts the confdence to speak reely,

we said they would not be identifed in this report.

I would also like to thank the energy managers, consultants and trade-association representatives whom

I interviewed during the course o the work.

For the fnal document, however, I must take ull responsibility.

Vilnis VesmaNewentJune 2010


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2. How we got to where we are today

The pursuit o energy efciency (or, more properly, uel economy) can be

traced back at least to the nineteenth century but we could take as our

starting point the 940s and 950s. Those decades were arguably the

heyday o industrial energy management. In the grip o wartime uel short-

ages, and later in the pinch between shortages and economic growth,

industry was compelled to think about uel economy and to take action.

Oliver Lyles 947 classic

For many it was a simple proposition: make that stock o coal last, or shut the actory. The Ministryo Fuel and Power went into overdrive producing advisory leaets and commissioning heavyweight

textbooks, among them Oliver Lyles classic The efcient use o steam{}. The ministrys team o uel

technologists and efciency engineers would go on in 95 to become a commercial operation

the National Industrial Fuel Efciency Service (NIFES) which was privatised in 97 and ourishes

as an energy management consultancy to this day.

Next came the oil crisis o 97, with overnight tripling o world oil

prices. Factories spent a period on three-day working weeks and

motorists were issued with uel ration books.

You never know, it might come in The authors 97 petrol ration book

NIFES published its Fuel Economy Handbook in 974. Energy conservation was the watchword, with

its connotations o preserving scarce resources or uture generations. The Department o Energy (as it

had become) began producing TV advertisements, leaets, posters and advisory booklets on the Save

it theme and launched the Energy Quick Advice Service. The Department o Industry commissioned its

Industrial Energy Thrit Scheme, visiting companies to provide advice and producing summary reports or

each o over 0 industrial sectors.

In 979 the Iranian revolution injected urther price rises and reinorced ears about security o supply.

At this stage it was less than ten years since the introduction o natural gas or the public supply and

received wisdom was that there was only 0 years supply let: it was regarded as a premium uel and

its use or power generation was not permitted. The public sector pursued energy conservation with

enthusiasm. By the early 980s Essex County Council had a specialist team o 7 (something o a

record, it has to be said) but teams o three or our were not uncommon in county and London borough

councils. The Department o Energy published its Energy Conservation Demonstration Projects series

{} HMSO , 947


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some 75 two-to-our-page profles o practical measures that energy users had undertaken,

complete with indicative costs and savings. By the early 980s a company called Cambridge Inormation

and Research Services was proftably running energy training courses and publishing textbooks on the

subject under its Energy Publications imprint. The annual National Energy Management Exhibition (NEMEX)

had outgrown its home at the Metropole Hotel outside Birmingham and moved to the National Exhibition

Centre. Its name echoed a shit in terminology rom conservation to management o energy, reecting the

new reality which was that uel and electricity were costly commodities but not necessarily in short supply.

Thanks to generous government support or energy surveys, the 980s saw huge growth in the number

o individuals operating as energy consultants. The Institute o Energy compiled a directory limited to those

with credible qualifcations (receiving applications rom nearly two thousand, many o whom patently had

no appropriate experience at all). A prolonged miners strike in 984/85 reignited energy-security ears but

arguably had little eect beyond killing o coal in avour o oil and gas. 986 was made Energy Efciency

Year by the UK government under the Monergy slogan which stressed the twin imperatives o cutting

costs and preserving fnite resources. Energy management had reached its post-war peak.

And then came a lurch backwards: progressive privatisation by the Conservative government, between986 and 99, o gas electricity and water supply. Gradually, controlling energy costs became a question

o merely shopping around in a competitive market: something that fnance directors could do without the

need or specialist energy managers. Not helped by the 99 recession, energy teams were disbanded and

knowledgeable individuals made redundant or assigned to other tasks such as the up-and-coming felds o

environmental management and sustainability. Ater the 99 General Election the Department o Energy

was abolished and the dash or gas began. In parallel with these developments, public-sector bodies

were being restructured or privatised. The story at Gloucestershire County Council may be typical: schools

which once benefted rom central expertise and project unding took control o their own local budgets.

Lacking a captive clientele, the countys expert energy management unit disappeared, its last remaining

member becoming the countys environmental coordinator; the schools, meanwhile, were too small

individually to aord energy-management knowhow, and their leadership teams had more pressing issues

to deal with. Twenty years later this is seemingly still the defning model in primary and secondary education.

Although energy security would come to the ore in the publics mind again briey in 000 with

blockades o road uel, the last ten years are ar more notable or a dramatic shit in public policy and

pronouncements away rom saving energy and towards the reduction o greenhouse-gas emissions.

The UKs stance internationally is to be applauded but our government is perhaps the only one in the world

to have completely switched its domestic propaganda and support away rom energy saving and cost

reduction. Driven by the climate imperative, the last Labour government created a QANGO, the Carbon

Trust, to pursue the emissions-reduction agenda on its behal. It discontinued the ormer Energy Efciency

Best Practice programme. It is noticeable that in international committees drating the energy-managementsystems standards EN600 and ISO5000, delegates rom other countries fnd the UKs carbon ocus

unusual. Most other countries in Europe and beyond share the UKs view o the environmental imperative,

but provide high-profle support explicitly or energy (rather than carbon) saving. We will argue that the UKs

signifcant change o emphasis rom energy to carbon, and the thinking o which it is symptomatic, have

been damaging to the cause.

1986 was made

Energy Eciency

Year by the UK

government under

the Monergy slogan

which stressed the

twin imperatives o

cutting costs and

preserving nite

resources


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A round-table meeting o long-standing energy-management practitioners, consultants,

and journal editors. This group (which we will reer to as RTM-00) met on 5 January 00

specifcally to provide insights into long-term trends, and continued working by correspondence

or some weeks aterwards.

Telephone interviews carried out specifcally to inorm this analysis by a market research

company, BMG. This will be reerred to as BMG-00;

nPowers Business Energy Index 00 (nBEI-00)

A survey o energy and environmental managers carried out by the British Standards Institution

in 009 (BSI-009)

A regional survey Business opportunities or the energy efciency sector in the South West

o England commissioned by South West o England Regional Development Agency in 009

(SWRDA-009)

A survey report by the Economist Intelligence Unit Ater Copenhagen: Business and climate

change (EIU-00). Published in February 00, this is somewhat tangential to the subject as

it deals with carbon emissions and has an international scope. Its value is that it was compiled

rom interviews predominantly with senior decision-makers in business, and provides insights

into corporate thinking or the medium-term uture

Conversations with other individuals such as the representatives o industry bodies and trade

associations

3. Energy management in the UK in 2010

The burden o this historical account is that energy management in the UK has been in decline or fteen

years, or certainly not progressing. In order to assess where it now stands, we have access to a number

o sources to supplement our personal contacts:


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{} BMG-00 appears to be skewed towards smaller units such as health centres; we would accept that the position

is dierent in, or example, large acute hospitals.

3.1 Who is currently carrying out energy management duties?

From BMG-00, it appears that about a third o those claiming to be responsible or energy

management are administrative and clerical personnel, while another third are proprietors and

senior decision makers. The remainder are either managers or people with identifable proessional

specialisms. This last category specialist proessionals - tended to be ound within larger organisations.

Their employers average headcount exceeded 800, compared with about 80 where the energy manager

is a junior employee:

O the respondents to BMG-00 (who all identifed themselves as having responsibility or energy

management) over 90% reported spending less than a quarter o their time on that specifc duty. Only

6% did it ull time, but careul scrutiny o those specifc responses shows that even they are actually

responsible or a wider range o activities. Not one single respondent exclusively specialised in energy

management.

There are marked dierences between sectors. In health, or example, responsibility appears to be

devolved to relatively junior employees{} whereas in the ood and beverage sector, and in retail, it is the

province o someone classed as a senior decision-maker.

Not one single

respondent

exclusivelyspecialised

in energy

management

Data Centres

Education

Food & Drink

Health

Local Government

Manuacturing

Oil & Gas/ Energy

Retail

0% 20% 40% 60% 80% 100%

Senior decision makerProessional specialist

Manager

Administrative or shop-foor

BMG-2010 results o energy management responsible personnel

Grade of respondent Average organisation

headcount

Proprietor and senior decision maker 04

Specialist proessional 88

Specialist proessional 5

Administrative and clerical 8


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The conclusion that only -6% o organisations have an identifable energy manager is consistent with

the fndings o BSI-009, where 5% o interviewed organisations ell into that category. It seems that the

position o dedicated energy manager, which twenty years ago was thought to be relatively common,

has all but disappeared in the private sector (although it has tended to survive in larger public-sector

organisations). Anecdotally in the private sector a job title covering energy usually also covers

environmental compliance, health and saety, or sustainability.

This trend towards a less-specialised, part-time energy-management proession seems likely to have

resulted initially rom downward pressure on sta numbers in the 990s but the more recent emphasis

on the environmental imperative and its associated trading schemes (on both o which, more later) may

also be partly to blame or skewing public and corporate perceptions o what the job is all about. These

actors are not going to go away and it thereore seems certain that the energy manager o the uture will

in most cases not be a ull-time trained specialist because, in eect, employers will be flling such posts

with the wrong kind o people.

Only -6% o

organisations have

an identifable

energy manager

!

Yes - team

Yes - person

No

60

50

40

30

20

10

0Maintenance Environment Procurement Managerial Facilities Plant Production

/dir management management management

Per cent

Additional responsibilities o those responsible or energy management

Is there a dedicated energy management team or person?

Only 5 BMG-00 respondents (%) had the word energy in their job title and all but two o those

were in the public sector. This bias tallies with evidence in the job titles o individuals attending open

training courses on energy management.

{} Not counting one who worked on renewable energy in the oil and gas sector and is not relevant


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3.2 How important is energy management?

Eight out o ten BSI-009 respondents classifed energy management as important or very important.

Moreover, the trend is or it to become more so. Only 6% said it was currently very important, but 5%

believed it would become so within two years.

The picture is not, however, necessarily uniorm across the size range. Major energy users in nBEI-00

attached higher importance to energy management and reducing consumption than at any time in the

previous six years. But it was not the same or SMEs who scored energy lower (6.5 compared with 8.5

out o ten), a score which in their case was matched or exceeded in three out o the six previous years.

There is evidence rom nBEI-00 o a divergence o opinion, with major energy users expressing greater

concern about energy. This is a problem because, collectively, small users account or a large proportion

o national energy consumption and numerous agencies have tried and ailed to engage them eectively

on this subject. BMG-00, which had a bias towards smaller users, bears this out. When asked to

name, without prompting, an organisation that gives unbiased advice on a broad range o topics, only

8% o respondents named the Carbon Trust, 7% mentioned the Energy Saving Trust, and a mere %

cited the Energy Services and Technology Association.

3.3 What gives energy management its importance?

78% o BSI-009 respondents cited cost as one o the top three reasons or engaging in energy

management (with environmental protection a poor second at %).

95% o SWRDA respondents considered energy prices important or very important as drivers or

energy-efciency investment; in BMG-00, 9% o respondents rated cost important or very important

to their organisations. nBEI-00 concluded that energy costs are perceived as the most signifcant

actor not only or major energy users but also among small and medium enterprises.

EIU-00 shows that climate change is not an important driver. Respondents were divided between

those that did and did not believe the scientifc arguments or global warming, and while attitudes on this

made a substantial dierence to whether or not companies engaged in explicit carbon-reduction activities

(such as the development o green products) it made no dierence to levels o activity on energy

efciency. Skeptics and believers were equally likely to have engaged in energy-saving activities.

EIU-00 presents it as axiomatic that companies want to save energy or reasons o cost reduction.

Collectively, small

users account or

a large proportion

o national energy

consumption

Sources o knowledge to learn about energy management

Specialist or trade press

Training courses

Exhibitions

Sel-taught

From peers

Conerences

Web sites searching by keyword

Websites such as Carbon

Trust, ESTA, Energy SavingTrust, a manuacturers siteor energy specialist

or consultants site

Energy providers

Manuacturers o energyecient solutions

Degree or diploma


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3.4 What obstacles do organisations ace?

BMG-00 questioned those with day-to-day responsibility or energy matters, and 6% o them

considered that their organisations could do more. The three major impediments are lack o resources

(cited by 8%), lack o time (7%), and conicting priorities (%). 5% o respondents cited both time

constraints and conicting priorities.

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%Reducing Reducing Meeting Making room To prolong CSR (Corporate Concern about Increased Accreditations

costs carbon legislation or uture liespan o Social uture uel availability o (e.g. British

emissions growth equipment Responsibility) shortages renewable Standards)

/Promoting your technologies

organisation in

a good light

Lack o cooperation

Lack o resources

Lack o knowledge

Other priorities

Lack o time

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

For the higher-level corporate view we can turn to EIU-00. Here we see three barriers to investment

in emissions-reduction projects. Two are cost-related: (a) unease over deploying solutions that are

perceived as possibly costly; and (b) the need to prioritise spending to keep businesses aoat through

the recession. The third, which is less directly relevant, was regulatory uncertainty.

Drivers or energy saving programmes

V. Important Important Neutral Not very importantNot very importantat all

Factors preventing organistations rom doing more to save energy


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3.4.1 Lack o knowledge

In BMG-00, 0% o people in managerial or specialist proessional roles identifed lack o knowledge

as an obstacle, compared with % or administrative or clerical jobs and a mere 6% o proprietors and

senior decision-makers. When asked what sources they used to improve their knowledge, % cited

web searching by keyword. 0% reported getting advice rom their energy provider. Ignoring the 6%

who described themselves as sel-taught (and who, we presume, are actually using one o the other

sources) the next signifcant choices were training courses and going direct to a known web site (each

being cited by only 9%).

3.4.2 Interest and infuence misaligned

A ew BMG-00 respondents (%) cited the act that they were prevented rom doing more because

they were tenants, or in some other sense not ree to make changes. In some cases this was because

another higher authority was cited as being responsible. What these situations illustrate is a misalignment

between commercial interests (the need to save money by improving efciency) and the ability to

inuence perormance.

This interest/inuence disconnect came out strongly in discussions with people rom the rail and

shipping industries. In reight shipping, arrangements are diverse and responsibilities or uel efciency

oten misaligned. A reighter has owners (who typically provide the crew) but may also have managers,

charterers (whose involvement may span anything rom a single trip to several years), and cargo owners.

Charterers would usually be responsible or uel costs but the crew (whose day-to-day actions eectively

determine uel consumption and efciency) will, i answerable to the owner, have no interest in such

matters. Meanwhile the cargo owners imperatives may dictate sailing speed, which will have a major

impact on consumption.

In the rail industry, the ranchising model creates a bad environment or energy management. As ar as

fxed assets are concerned, a train operating company is generally a tenant in Network Rails premises,

usually on quite a short lease which is not conducive to investment in efciency. Moreover, management

o the acilities is oten outsourced, exacerbating the interest/inuence disconnect.

The other major aspect o rail operations is traction power and this has its own peculiarities. Electricity

or traction is usually provided or a fxed charge, which removes the incentive or economy and makes

management o consumption a meaningless concept. The lack o metering inhibits the development o

regenerative braking. Nor will the introduction o traction metering necessarily have the same beneft that

it might do in many other spheres, because consumption is hugely aected by random external actors

like how many red lights a train encounters on a journey. This o course is an issue which aects dieselengines as well.

One plausible scenario or the next 0 years is the development o network optimisation tools which

coordinate the speeds o trains ollowing each other so as to avoid excessive braking. This, however,

would demand coordinated action by the network and train operators, which unless it has a benefcial

impact on timekeeping, is unlikely to happen.

In the health sector it is known that private-fnance initiative (PFI) contract terms can sometimes inhibit

health trusts rom improving the buildings and acilities installations that they use, since they are in eect

tenants.


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What does this mean or the uture? For public-sector organisations such as transport and health, the

systemic obstacles are highly likely to be recognised and the government should be able to implement

strategies to mitigate them, or example by introducing licence conditions or the rail network operator

obliging them to cooperate with, and encourage cooperation between, train operating companies in the

pursuit o energy efciency.

3.4.3 Ground not properly prepared

A very small number o BMG-00 respondents (under %) identifed a class o problem which in reality

is probably more common, and that is where work on efciency improvements is prejudiced by the poor

state o repair o buildings or equipment. An allied objection is requently encountered in sta attitude

surveys where personnel express a disinclination to cooperate because they eel that existing levels o

service are inadequate, or that their complaints about maintenance have previously gone unheeded.

Related to this is the quality o maintenance o energy systems themselves. In a branch network o a

multi-site organisation, local managers depend on the skills o maintenance contractors sta to

ensure that heating, ventilating and air-conditioning plant is set up to maximise efciency and minimiselosses, and that the controls are properly set up. I the contractors personnel are inadequately trained,

it inevitably results in excessive energy consumption.

In terms o uture development we will suggest later that maintenance contractors could in act be part o

the solution. They are well placed to provide outsourced energy-management services or certain classes

o client. Integrating maintenance and energy management makes it less likely that poor maintenance will

prejudice programmes.

3.4.4 No policy, or lack o support

5% o BMG-00 respondents reported lack o cooperation and some elaborated this as meaning

that there was insufcient support or energy saving, or no policy.

Lack o policy is something that is easily addressed by management and as the drivers or energy

efciency become more compelling it is likely to disappear as an obstacle.

Lack o cooperation and support can be interpreted in many ways. Successul energy management

demands cooperation and support rom key decision makers, middle managers, the workorce and

contractors. In particular, it may need people to change the way they do things, which is a special

challenge. But support can also mean material support in the sense o resources and money. That

means inuencing senior decision-makers and we know rom EIU-00 that they are wary oemission-reduction (read: energy-saving) projects.

EIU-00 shows that climate change is not an important driver. Respondents were divided between

those that did and did not believe the scientifc arguments or global warming, and while attitudes on

this made a substantial dierence to whether or not companies engaged in explicit carbon-reduction

activities (such as the development o green products) it made no dierence to levels o activity on

energy efciency. Skeptics and believers were equally likely to have engaged in energy-saving activities.

EIU-00 presents it as axiomatic that companies want to save energy or reasons o cost reduction.


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3.5 Public perceptions

One concern aired in RTM-00 is that people are being encouraged to do ashionable (but ineective)

things like installing solar photovoltaics, and are being distracted by solutions whose eects are

negligible - like not leaving phone chargers plugged in. The public, it is elt, are being misled by the

media and seduced by the promise o technology. There is a degree o tokenism which, compounded

by ignorance, absolves people rom the need to change their liestyles or business practices signifcantly.

But perhaps more undamentally, given how much the government has pumped into promoting

man-made global warming and climate change as a stimulus or action, we need to consider what to

do when this argument loses its inuence. The global-warming paradigm is widely accepted, but there

are dissenters, and we know rom EIU-00 that roughly hal o senior business executives around the

world are unconvinced o the scientifc evidence. O course there are (and have always been) many other

reasons why we might want to conserve ossil uels, and in order to reinorce the imperative it might pay

us to turn our national attention to those reasons again. They include;

Saving money

Minimising pollution rom combustion

Preserving resources or uture generations (or or underdeveloped economies

there are questions o equity here)

Security o supply


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3.6 Government interventions

The role o government in supporting energy efciency is central (in the view o energy users) but in reality

all government does is set targets or various sectors o the economy and then try to micromanage how

they achieve them. Many o its initiatives are complex, burdensome, and either ineective or arguably even

counter-productive. Some RTM-00 experts were troubled by the concept o the government picking

winners in the sense o backing particular technologies which are not in practice as eective as their

proponents claim.

Combined heat and power, or instance, has been the subject

o government exhortations and interventions since the 940s but in

reality has ever less relevance as the demand or year-round supply

o low-grade heat diminishes. Metering is another example. We noted

rom BMG-00 that 70% (only 70%, notice) o surveyed organisations

regularly monitor their energy use.

However, 6% could not answer a simple question (how much they

spent on energy) and the proportion was the same whether or not they

claimed to monitor consumption. Even among those who identifed

metering explicitly as a eature o their energy programmes, % still

did not know how much they were spending. Anecdotally, the usual

result o installing an automatic meter reading system is that the user

ends up drowning in incomplete data.

Combined heat and power may have changed its name, but it has been a avourite thing

or governments to pick as a winner since 945

Against our Kyoto

target o 12.5%

reduction in GHG

emissions, we have

achieved an actual

23% but mostly due

to closure o coal

red generation

According to RTM-00 the record is not good: by the end o 00, CO emissions were supposed

to have allen by 0% relative to 990 but by the end o 008 had only allen by 0.%. We are only

managing % renewable generation as against an aspiration o 0% and have missed by a wide

margin the target 0 GW o combined heat and power capacity.

Against our Kyoto target o .5% reduction in GHG emissions, we have achieved an actual %,

but mostly due to closure o coal fred generation in the 990s.

There is an argument that government is too concerned with ticking the box and also too ready

to assume responsibility or problems it cannot solve.

RTM-00 considered that there is an abyss between policy and implementation. Examples

o problems and issues include:

weak interpretation o the EU Energy Perormance o Buildings Directive;

Building Regulations Part L not being enorced; and

ailure to recognise the long term actions needed to address poor commissioning and operation

o buildings.


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No infuence

Some infuence

Considerable

Poor enorcement o regulations is likely to get worse as a result o public-sector cut-backs over coming

years. This suggests that even i government policies and programmes were sensible, they would still ail.EIU-00 does not paint a promising picture here. Although a majority o its respondents considered

regulations to have the biggest inuence on their approach to carbon emissions, it concludes that

businesses do not trust governments to get it right and create a level playing feld.

In short, there are roles that government must play (decarbonising public electricity supply, or example),

but it seems that mobilising the country to reduce its consumption o ossil uels is not one or which

it has much aptitude.

Indeed, it may even be engaging in sel-deeating activity. Take or instance grants, subsidies and tax

breaks: they tend to distort the market. For example solar photovoltaic installations, a completely

uneconomic option with no hope o ever contributing signifcantly to the countrys energy requirements,

now receive subsidies through eed-in taris subsidised by other energy users. Resources that could have

gone into energy saving are being squandered or the sake (presumably) o appearances and trying to

meet politically-appealing targets or renewables.

The infuence o legislation and directives on energy management practices


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Free and subsidised energy surveys are another example discussed by RTM-00, although they would

be at pains to distinguish between ree services provided by commercial companies (transparently acting

in their own interests) and those that are unded, directly or indirectly, out o the public purse. Our experts

agreed that public subsidy is a problem because it has distorted the energy-efciency market, with

proessional consultants now competing against others oering a similar service (or what appears to be

similar) or nothing or at a reduced price. In act, the subsidised product is not the same as what a client

could obtain at market rates: it is likely to be prescriptive in its approach, ocused on carbon rather than

energy, under-resourced and oversold, and encumbered with elements that do not add value but are

there purely to satisy the requirements o the governments agency that administers the scheme.

There is an interesting historical perspective here. In 988 Peter Morrison, then Minister o State or

Energy, closed the scheme and told Parliament:

Thereisnowwidepublicappreciationothepotentialvalueoenergy

surveys,andgrantsorthispurposearenolongerjustifed

In comments rom the ollow-up to RTM-00, the risk was noted o subsidies encouraging cowboy

consultants - who would not thrive i operating in a commercial market and whose poor quality o work

damages the proession.

There is a subtler problem. By providing subsidies, grants and tax breaks or energy efciency work,

the government is sending a signal that these things are somehow not worth doing in their own right.

So what was said in RTM-00 in deence o public-subsidised surveys? In the experience o one expert,

a consultant, they can work well when the client is interested in, and intent on, doing something about

saving energy. He had seen individual examples o ree surveys being very successul. Another

(representing a user) thought them worthwhile because they generally support the views and opinions

o the well-versed energy manager. In other words, a prophet is not without honour save in his own

country: sometimes it takes the endorsement o an outsider to generate management support.

On balance, unortunately, it is doubtul that these localised benefts and we recognise that benefts are

enjoyed at the micro level - outweigh the possible damage done through market distortion at the macro

level.

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

Yes - ree energy survey Yes - subsidised energy Yes - paid or an energy Nosurvey survey

Take up o energy surveys among businesses


17/28Pg 7

RTM-00 welcomed European standardisation work on energy audits, which aims to improve

transparency, clarity, and trust in the outcomes. The development o improved energy audit models,

i combined with the discontinuation o subsidies, could be a very positive step and it is one which

we assume is likely to be taken.

The previous governments approach was to set ambitious targets and then legislate and regulate in detail.

It is to be expected that this will continue to be the case, i only because some elements are transnational

like the EU Emissions Trading Scheme (EUETS) and the Perormance o Buildings Directive (EUPBD) which

has given the UK display energy certifcates (DEC), energy perormance certifcates (EPC) and manda-

tory inspections o rerigeration plant. Any scheme with carbon or climate in its name can be expected

to survive as it would be politically difcult to justiy discontinuing it. There are even private sources o red

tape. The European Standard EN600 Energy management systems: requirements with guidance or use,

which is being promoted energetically by British Standards Institution, adds a voluntary layer o regulation.

RTM-00 discussed this issue and the view advanced here was that regulations, standards and

legislation do not impose additional load because real energy managers are already complying. It was

suggested, too, that these schemes are raising awareness and increasing energy-management activity.

The writer was surprised by the degree o consensus on this having himsel been o the mind that time

spent on compliance could be better spent on energy-saving projects.

Respondents to BMG-00 were specifcally asked about this. One-third agreed that regulations in this

area took up time that can useully be spent on other things. Worryingly, nearly hal said that regulations

had no inuence on their organisations energy management practices. The proportion that gave both these

responses (implying that regulations and schemes were a ruitless distraction) was 4% but they

represented organisations with an average headcount o only 8. Six percent were o the completely

contrary view, not only strongly disagreeing that red tape was a distraction, but also saying it had

inuenced their organisations considerably. They represented organisations with an average headcount

o 657. So it appears that there is a dichotomy and that the red tape is eective in larger organisations

but could be counter-productive elsewhere.

Another key question is this: i managers were not being compelled to spend time complying with

legislation, regulation, and government schemes and initiatives, would it ree them up to spend more time

actively on energy management? The answer rom BMG-00 was a resounding and unequivocal no.

When asked what else they would do i reed up or an hour a week, 98% gave answers nothing to do with

energy saving.

The conclusion is that regulation is accepted as necessary by largerorganisations and although it may be counter-productive in some smaller

organisations, it is necessary across the board in the interests o maintaining

ocus on the subject.


18/28Pg 8

3.7 Willingness to invest in energy management

Investment in energy saving is inevitably a low priority because it is discretionary and not essential to

sustaining the business. At present, as EIU-00 underlines, companies are interested in conserving

cash, which may be why behaviour-change has such a high profle: it gives a quick short-term win.

Renewable technologies

CHP (Combined Heat & Power

High efciency boiler/heating system

Items rom Energy Technology list

Metering

Variable speed drives

Low energy lamps

Lighting controls/ automated

lighting solutions

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

The other side o the coin is that energy projects are perceived as risky. For most organisations they

are a rare excursion into unamiliar territory not only or the decision-makers who would und them,

but or the manager proposing them. The sae and easy option is to reject them. This situation is

compounded by a woeul lack o properly-costed case studies which could give some confdence in

a proposal. Furthermore, it is suspected that ew organisations that carry out such projects have any

way o knowing whether they have worked or not: it appears oten to be an act o aith or based on aconsultants estimate o the beneft. Objective methods o assessment are not widely understood, and

or all the hype surrounding energy metering, it is unusual to encounter a user who can produce reliable

consumption data on request.

I reluctance to invest is a problem now, it is difcult to see why that situation should change over the

orthcoming twenty years. It would require a transormation in the way energy users collect and analyse

consumption data (and related inormation needed to interpret it), allied to a huge eort to build up

a credible library o independently-verifed case histories.

Solutions included in business energy saving programmes


19/28Pg 9

3.8 Trading and osetting

RTM-00 debated carbon trading: schemes such as the Climate Change Agreements (CCA) and EUETS.

It was elt to be a good concept and that there is even a will to participate and meet targets. Finance

directors having to part with money to buy carbon credits ocuses their minds. But repeated collapses in the

price o emissions permits make it difcult to see how trading will have any permanent eect. This sentiment

is echoed in EIU-00 where it mentions the inhibiting eect o regulatory uncertainty.

One risk is the well-rehearsed concept o carbon leakage which occurs when energy-intensive industries

relocate rom the UK to countries without carbon caps; it would work better i it were a global market.

A number o RTM-00 experts talked about the possible need or import taris on goods rom countries

with no carbon constraints. It is not inconceivable that such measures will indeed be introduced in the next

twenty years.

Another risk was noted that carbon trading becomes an activity disconnected rom energy saving,

since it is speculation in an abstract commodity. In the cynics view, the rewards go to brokers in the

commission they earn moving credits rom organisations that were inadvertently or deliberately given toomany, to organisations that have done nothing. This aspect is more important when considering the uture

o energy management because it encourages a culture where organisations would rather employ a carbon

trader than an energy efciency expert.

Osetting is another development which causes concern in case it is used by businesses as a way to let

themselves o the hook. RTM-00 experts were dubious about the credibility and value o osetting

(paying the RSPCA so you can kick your dog). They see it as something which does little more than

contribute to an organisations corporate image and (as EIU-00 notes) it is difcult to see how things

done to improve public relations would lead to lasting energy efciency improvements.

3.9. Climate change as a motivator

BMG-00, EIU-00, nBEI-00, SWRDA-009 and BSI-009 all concur that cost is the main driver

o energy-efciency improvements. So did trade-association representatives and so, with the exception

o some public-sector players, did individual energy managers that we spoke to. But recent governments

have chosen to ignore this and to play pass the parcel with their climate-change commitments, assuming

that the language o carbon reduction will appeal to end users. Has this been a costly mistake? RTM-00

debated the proposition that climate change is too big, too abstract, too remote and too contentious to be

an eective driver or energy efciency.

In avour o the carbon ocus, it has created a lot o publicity and raised awareness at all levels; it is amassive issue which impacts everyone, and has united lots o people with a common purpose; and the

capitalist system loves the kind o opportunity presented by the carbon trading. But the contrary arguments

cannot be ignored. For ordinary people, climate change is too distant: it is something which only some

higher power can address. Viewed rom the UK it is also distant in the sense o where the adverse impacts

all (on Bangladeshis and polar bears, or example). UK citizens can justiy inaction on the basis that other

countries are ar worse oenders (USA) or threats (entire developing world). Furthermore they can see

perectly clearly that nothing they do as individuals will have a signifcant eect.


20/28Pg 0

There was some doubt in RTM-00 that enthusiasm or carbon reduction is universal, and there

is anecdotal evidence that there is a public weariness with the message. The writer was present at a

town-council meeting where an organisation seeking moral support or a community home-insulation

campaign was explicitly advised by the elected members to play down the environmental aspects. A recent

survey{4} by Cardi University ound that ewer Britons believe climate change is happening at all (down rom

9% to 78% in the last fve years), and that only % o the public consider it to be wholly or mainly

a man-made phenomenon. Remember also that according to EIU-00, hal o senior decision-makers

are unconvinced about the science o man-made global warming.

Using the climate-change lever may already have had one signifcant adverse consequence, in

characterising the problem as an environmental one, and thereby creating a corporate perception that

energy management is part o environmental management. Actually a very dierent skill-set is required

and most environmental managers will struggle to do the job eectively.

The climate-change message is a message o ear, probably ar more likely to induce paralysis than to

spur action. And lastly, the frst prolonged spell o cold weather in the UK will nulliy its eect. RTM-00

members agreed climate change might be one lever but that there were other better ones: price, securityo supply, and the moral duty to conserve resources or uture generations.

{4}Public Perceptions of Climate Change and Energy Futures in Britain (Understanding Risk Working Paper 10-01), Welsh School

of Architecture and Department of Psychology University of Cardiff, March 2010


21/28Pg

4. Opportunities

4.1 Sta motivation and awareness

95% o BMG-00 respondents reported that their organisations encourage sta to change their

behaviour in pursuit o energy saving. This is without doubt a key activity. Among BSI-009 respondents,6% reported undertaking motivation and awareness programmes. Major energy users surveyed or

nBEI-00 saw it as the most easible energy-saving measure and scored it 7.8 out o ten or importance

as something to do in the next six months - the highest score given. In SWRDA-009, 86% o

public-sector and 8% o private-sector respondents reported having ongoing behaviour-change

programmes.

The attractions o tackling the human-actors aspect are obvious: it is inexpensive and should have a

rapid eect. There are challenges, though. It requires time, knowledge and some degree o management

authority on the part o the person driving the project; and the eects will inevitably decline (and do so at

a rate that is difcult to measure).

Today, awareness tends to centre on global warming and climate change a somewhat precarious

oundation, as we have argued elsewhere and many o the prescriptions and solutions are trivial or

conused olk myth. Tokenistic attention to mobile phone chargers{5} is mixed with antagonism to plastic

bags (apparently on the grounds that plastics, being derived rom petroleum, are implicated in global

warming).

As we say elsewhere, two things are likely to happen over the next 0 years that will reinorce awareness

in a way that supports uel conservation. One is price rises; and the other is constrained supply. Both will

serve to reinject some realism into public thinking.

{5} David MacKay sums it up well in his book Sustainable energy without hot air: If we all do a little, well achieve a little


22/28Pg

4.2 Outsourcing

RTM-00 reviewed Future o energy management 000, a report by the market research company

Datamonitor. This looked ahead to 005 and was mainly asking the questions what will industrial and

commercial customers require, and what role will energy-services companies play?

The authors thought that the uture would eature total energy packages, in a market or services worth

an estimated bn. Having identifed a gap between demand and availability, they suggested that the

supply utilities would somehow fll the vacuum (probably by buying up energy-services companies). The

authors claimed that industrial and commercial customers would welcome energy management serv-

ices provided by electricity and gas suppliers.

This view reected common wisdom at the time but within a ew years would have been proved radically

wrong (SWRDA-009 proves just how wrong: only 5% o respondents outsource energy management,

compared with 57% who outsource property maintenance). Ater 000, energy suppliers retreated into

simple competition on price and the market consolidated. There was no growth in the energy-services

market, thanks to widespread suspicion and mistrust o the service companies. This low opinion wasprobably justifed: energy-service companies were oten providing little more than slightly enhanced

maintenance contracts and rarely had sufcient capital to undertake radical investments on their clients

behal.

Having said that, SWRDA-009s fndings on outsourced property maintenance suggests a tantalising

opportunity. In BMG-00, 87% indicated that their buildings were signifcant in energy terms{6} . It might

thereore be that Datamonitor were barking up the wrong tree in 000 thinking that energy suppliers

would provide such services. In act, it might be more logical, practical and acceptable i maintenance

contractors were to add energy efciency to their portolios (or or clients to speciy such services in

tender enquiries).

5. Trends

5.1 Leaders and laggards

Something that comes out quite strongly rom EIU-00 is the idea that, in terms o responses to the

climate threat, companies worldwide are diverging with some defnitely emerging as leaders and the rest

currently static. nBEI shows a divergence between SMEs and major energy users in terms o the impor-

tance they attach to energy management.

In BMG-00, organisations with an energy-management programme are in a minority, but have anaverage o 86 employees against 7 or organisations without. There was a similar dierential between

those with and without a dedicated energy-management team or individual.

We think it likely that this polarisation will persist.

{6}This comprises 76% who cited buildings, and 9% who did not, and yet cited warehouses or retail outlets which were

among the other choices


23/28Pg

In the short term, the agenda or energy management will continue to be dictated by the climate

imperative. Successive governments will persist with the rhetoric o radical action but in practice will shy

away rom anything truly radical, such as imposing annually-reducing caps on total sales o ossil uels.

Their attempts to contain the growth in energy use will be dominated by announcements o targets that

nobody believes can be met, complemented by legislation, regulations, schemes and initiatives (some

o which may be ill-ounded or even counter-productive) and by a compulsion to pick winners. There

will always be some commercial interest to lobby in support o even the most deective measures, and

criticism o any given initiative will be dismissed with the catch-all justifcation that it raises awareness.

6. Futures

We know that energy management ourishes when:

Energy prices are high (or example ater 970s oil price shock).

Energy is scarce (or example in UK ater the Second World War).

There are problems in security o supply, or the threat o it (For example China today, or UK

road uel strikes in 000). This is not the same as b) as it is possible to have abundance but

poor supply inrastructure; but in both cases, necessity is the mother o invention and signifcant

advances will result.

There is an eective carbon trading system in place.

We can also reasonably assume that energy management would ourish i:

Regulation had teeth (contrast the eectiveness o environmental, health and saety legislation)

People realised that energy conservation is the number-one sustainability agenda relative

to other issuesThe market recognised the multiple skills needed or energy management, and rewarded

eective practitioners accordingly

Energy efciency became a cultural norm: the way things are done around here,

or even just the way other organisations are perceived to operate.

Energy waste could be systematically identifed and end users held accountable.

We would pick price and shortages as the most likely drivers or uture progress


24/28Pg 4

Gradually, however, we could see attempts at regulation oundering, partly because there will not be

sufcient resources to police compliance. The recent recession and its atermath will see to that. Partly,

also, the governments ocus will shit rom prevention o climate change a battle which, it can be argued,

is lost or as good as lost to adaptation and mitigation.

It seems highly likely that as the global-warming message wanes, the issues o price and availability will

start to impinge more seriously on the countrys consciousness.

Availability will come to the ore because the UK lacks a long-term strategy or electricity supply and is

sleepwalking into an era o shortages as older nuclear power stations are derated or shut down while

replacements are not ready. Electricity transmission and distribution inrastructure may well also ail to

keep pace with rising demand as investment goes into adapting it to cope with distributed generation.

The eects o this will not be evenly distributed but there are parts o the country (particularly the Home

Counties and maybe the south in general) which are likely to be more severely aected. It is entirely possible

that in fteen to twenty years time we will go through an era o supply constraint. This may be no more

serious than limitations on peak demand, rather than the wholesale rota power cuts o the early 970s,

but it will be a powerul spur to action. The likelihood o this scenario is heightened by the recent recessionand its implications or public spending.

Oil and natural gas and supplies may also be limited, particularly as we come to rely more on liquefed

natural gas brought in by sea. The UK will be in competition with other countries or those supplies and

i we do not experience actual shortages we can expect severe spikes in wholesale prices.

We can expect crises: the deteriorating energy scene may be exacerbated by uel blockades and possibly

even civil unrest. We may suer terrorist attacks on supply inrastructure and the roles o random natural

disasters like volcanic ash clouds should not be overlooked: when the situation is precarious, with little

spare margin, such events can trigger chaos.

Our one consolation in this is the British talent or exibility and improvisation. One way or another, we will

cope, and whatever happens, there will be a desirable outcome: like it or not, we will end up consuming

less energy.

So what will energy management look like in 00?

There is no reason to suppose that there will ever be a resurgence in the numbers o dedicated,

specialist energy managers, although such positions will continue to be ound in large energy-intensive

industrial sites, and in organisations such as retail chains or universities that are large users by virtue o

the size o their estates. We suspect that as the realities begin to bite, there will be a shit o emphasisaway rom the somewhat vague concept o sustainability towards a viewpoint that values more practical

measures (be they human-actors or technical in nature).

We believe that, in simplistic terms, the government will pursue its emissions agenda while the people

re-engage with cost reduction. With the government helpully leaving a vacuum in the energy-efciency

advice feld, commercial providers o energy audits, advice, training, and technical solutions will be able

to ourish without competition rom low-grade ree and subsidised oerings. The market will demand what

they have to oer or all the reasons described earlier.

The dierences in approach between organisations will be dictated not so much by the sector in which

they operate but by the attributes o how they are organised. So, or example, in small and medium-sized

enterprises relatively junior members o sta will continue to have responsibility or energy management but

the training, advice and practical resources available to them will be better than they are today.

There will be a shit

o emphasis

away rom the

somewhat vague

concept o

sustainability

towards a viewpointthat values more

practical measures


25/28Pg 5

In larger organisations, a team approach is likely to evolve as the avoured model, as senior managers

realise that a successul energy-efciency programme needs a blend o skills spanning the technical,

human-actors, and data-analysis aspects.

In our most optimistic scenario, maintenance contractors play a pivotal role. As we have already pointed

out, they are highly inuential. Where their feld personnel are ill-trained or incompetent, they needlessly

increase their clients energy consumptions; but where they are knowledgeable and skilled, and properly

managed within a contract whose terms give their frms the right incentives, they can be a powerul orce

or good. Firstly, the way they set up, adjust and maintain equipment directly aects efciency and losses.

Secondly, when plant that they are responsible or reaches the end o its lie (be it a light bulb or a boiler),

they are in a position to recommend, procure and install a replacement which not only has superior energy

perormance but, just as importantly, is not needlessly oversized as would oten, currently, be the case.

Through economies o scale, a maintenance contractor could in principle provide knowhow and apply

management processes that would be beyond the aspirations o most o their customers individually. This

is akin to the shared energy manager concept which has been mooted as a solution or many years butrarely i ever adopted; its advantages are that (a) energy management can be inset within an existing and

necessary contract and (b) there are no other parties involved. Remember that 57% o SWRDA-009

respondents outsource their maintenance whereas only 5% outsource energy management.

Moreover, the energy-enhanced maintenance approach works right across the board. It is not just a

solution or big players. These days, even small mechanical and electrical contractors will in some cases

have acquired training and certifcation enabling them to ft biomass boilers or solar photovoltaic panels,

or example. It would be a small step or them to refne their knowledge o (say) heating and lighting control

techniques so that they can at least provide one-o energy efciency services to domestic and SME

customers; where they have ongoing contracts with SMEs they could then, thanks to so-called smart

metering and low-cost building energy management systems, oer to provide routine supervisory,

monitoring and waste avoidance services alongside all the other benefcial activities already mentioned.

Remember that 57%

o SWRDA-2009

respondents

outsource their

maintenance

whereas only 5%

outsource energy

management


26/28Pg 6

For larger customers, bigger maintenance contractors could align themselves with specialised

energy-management frms that provide motivation, awareness and training services, enabling those

customers to improve the eectiveness o the human-actors projects which, as we have already seen,

many are keen to implement. The dierence would be in a better-resourced, more imaginative and more

proessional oering, allied with post-campaign monitoring o eectiveness which (we would hazard) is

totally lacking in the vast majority o home-grown campaigns.

We hope and trust that maintenance and acilities-management contractors will rise to the challenge, and

develop eective energy-management outsourcing models that will appeal to those clients or whom it is a

convenient and eective solution. We believe it will only take a ew o them to lead the way, and the rest will

ollow.

Underpinning these developments we see the emergence o ully-commercial training and advisory services

run by numerous independent providers, with a major ocus on high-quality, practical, in-depth training.

Schneider Electric or example already has some o the necessary acilities in the orm o an academy

ocused on electrical technology and building energy management systems; Spirax Sarco is well-known

or its steam-systems courses; Gastec at CRE has a acility or practical training on combustion appliances.Others will emerge in the next fve years to cover individual topics such as lighting and compressed air.

All these developments would be accelerated by solution-providers

publishing many more credible case histories similar to those published

under the Energy Conservation Demonstration Projects scheme o the

980s (right).

7. Conclusion

We are under no illusions: our predictions will, inevitably, prove wide o the mark. But we do have some

tricks up our sleeve. The process o researching and writing this report has already begun to nudge

things in the right direction. The experts in RTM-00 decided that they will meet again and continue

to collaborate, and some have begun to start planning initiatives that will aid progress outside the ambit

o government schemes. Secondly, when the maintenance-contracting raternity digests our conclusions,

there will be some who recognise the business opportunity and who knows decide that they can make

money by making it happen.


27/28Pg 7

About Vilnis Vesma

Vilnis Vesma is a graduate chartered engineer specialising in energy management. He read engineering

science and economics at Oriel College, Oxord. Initially employed as a research engineer in the electricity

generation industry, he wenton to work as an energy manager in local government beore becoming an

independent energy consultant.

He advises commercial, industrial and public sector clients on energy-management methods, mixingpractical projects in the feld with sotware development and monthly regional training workshops.

He is the author o Managing energy with a desk-top computer (Energy Publications, 988) and Energy

management principles and practice (BSI, 009). He has also written several government advice booklets

and numerous magazine articles related to energy management, as well as writing and editing a ree

advisory web site on the subject.

Vilnes served on the committee drating BS EN 600:009 Energy management systems requirements

with guidance or use and its international successor, ISO 5000 Energy management systems. He is

currently chairman o the CEN/CENELEC joint working group writing a European Standard on energy

audits. He sits on the governing council o the Energy Services and Technology Association and is a ormer

council member o the Energy Institute.

About Schneider Electric

Schneider Electric, the global specialist in energy management, oers integrated solutions making energy

saer, more reliable, efcient and productive in the energy and inrastructure, industry, data centres and

networks, buildings and residential markets.

With sales o 5.8 billion Euros in 009, the companys 00,000+ employees in over 00 countries help

individuals and organisations make the most o their energy.

www.schneider-electric.co.uk


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Energy Management Report