Wising up to EMS

More and more businesses are turning to energy management to boost their profits. And those that aren't, need to get wise to this low-cost strategy, writes Jo Reeves

It's all over the news: legislation and regulation is tightening by the minute, and no one at boardroom level can ignore it - the issue of energy consumption.

Cost, supply and efficiency are all matters of concern, and most company directors are starting to realise that reviewing their energy management strategy can offer substantial savings direct to the bottom line.

The government's recent Energy Review has reinforced targets set by 2003's Energy White Paper and looks at the future for industry and the public and how to implement the necessary legislation to make significant cuts in carbon dioxide emissions. With the UK increasingly relying on imported oil and gas, fears over dwindling supplies and the impossibility of us being self-sufficient have made the movement towards energy-efficient technologies even more crucial.

Massive price rises in electricity and gas - wholesale gas prices are up by 80% since last year - mean that energy costs are eating into profit margins and are even a catalyst in some businesses going bankrupt.

The government is finally taking stock of the situation and realising that we all need to contribute towards reducing carbon emissions and slowing climate change. UK businesses are feeling the impact both through the cost of energy and through legislation designed to improve emissions.

In recent years, a raft of new laws and regulation from the EU and in the UK has come into force with the aim of reducing energy consumption, maximising energy use and reducing CO2 emissions. The 2001 Climate Change Levy (CCL) is an explicit tax on the use of energy in industry, commerce and the public sector.

Intended to maximise energy efficiency, reduce its consumption and in the process reduce carbon emissions, the CCL has already had an impact on energy-intensive manufacturing industries. The trade associations for 40-plus sectors have now signed up to CCL agreements which offer major energy users an 80% discount on the Levy in return for agreeing challenging targets for improving their energy efficiency or reducing carbon emissions.

Many of these organisations now also come within the ambit of the fledgling EU Emissions Trading Scheme (EU ETS), which came into force last year and which sets a mandatory limit on the amount of carbon dioxide companies in certain energy-intensive industries may produce.

The CCL, EU ETS and Climate Change and Energy Sustainability Act, all encourage industry to choose energy-efficient technologies and solutions to avoid fines and taxes - not to mention reducing their own costs.

The plethora of legislation can be confusing and some schemes are voluntary, whereas others are obligatory. An increasing number of energy consultants are rising to meet business needs and offer strategies to enable them to make changes to processes.

Vince Wells, managing director of Surrey-based energy management consultancy Energys, says that an increasing number of businesses are looking for help in managing their energy consumption and looking at how to cut costs. He says: "We enable clients to set realistic targets and plan effectively to adhere to relevant regulations. Our service is tailored to meet client needs, but we try to encourage a lasting relationship with continuous assessment, in order for companies to get the best long-term financial benefits."

One of Energys's clients is energy supplier Centrica, which it has worked with on a long-term management plan to enhance energy efficiency. "We began with a clean sheet as nothing had been done before to assess energy," says Wells.

"The process started with putting a proper, accurate reporting system in and identifying the least efficient buildings. Then we programmed site visits, made preliminary assessments of energy performance, agreed what needed to be done, set up site teams and worked out where maintenance sub-contractors need to be involved. All through this, we used our reporting system to measure the impact of Energys's work."

Following on from the initial assessment stage, the second phase involved going back into sites and looking in more detail at problem areas. Then the firm provided a detailed set of recommended capital expenditure investments relating to aspects of major energy use, such as chiller systems, and established a progressive programme on how to optimise energy efficiency.

Following on from this, the programme analysed how to monitor individual sites more accurately and target performance. For this, it set up a real-time data acquisition network and monitoring system. This included regular reviews and set targets for performance and main areas of energy use.

It started with the improvements which caused the least disruption and capital expenditure, then moved on to other issues that had been highlighted. So far this process has been ongoing over three and a half years and Energys is still working with Centrica to improve its overall efficiency.

Bottom-line savings depend on how quickly the client actually implements the recommendations. Centrica is currently saving around £850,000 a year, but it has the capacity to save between £1.1M and £1.3M a year. And all capital expenditure will be self financing after two years. No two energy management programmes can be the same because every company is different, so working towards common goals and targets is vital for the process to ensure maximised efficiency.

Depending on the size of the company's estate, it is sometimes necessary to assess energy usage by sampling. The facilities management company of the National Offender Management Service (Noms) - previously the Probation Service - needed help in improving its energy efficiency. But because its estate consists mostly of a large number of smaller buildings, it was impractical to assess each site individually.

So instead it looked at a number of representative buildings and produced a sample assessment, which illustrated the opportunities existing across the multiplicity of premises in the estate managed by the company.

"Energy management needs to be approached in an organised way for greater efficiency, producing a sample and generic strategies to work into the programme," Wells explains. "If this isn't well structured, it can become fragmented and waste time. There needs to be an efficiency scale applied to the entire process."

So, at any level, co-ordination is key and creates a more productive process producing demonstrable reports and programmes. It is all about consistency and this is the driver for Energys to encourage client thinking. The work with Noms is new and ongoing, but already a successful system for collecting meter readings has been implemented which has enabled individual sites to put their data into a website - to measure performance in a detailed way.

Despite the enormous economical savings that can be gained through energy management, some companies are still show a lack of appreciation for the rewards.

"The attitude to energy efficiency differs depending on the company", says Wells. "Decisions surrounding the subject are often delegated to middle management rather than the boardroom as they are deemed less important than, say, an investment that will boost sales. The returns of energy management, though, are often very substantial and cut more off the bottom line as these savings go straight there."

There is little doubt that calls for energy efficiency will continue to push their way to industry's centre stage. Another opportunity for the government to demonstrate its commitment to carbon trading will come to light before the Kyoto Protocol expires in 2012. Ministers are keen to extend the current system so that sectors with low energy intensity, and eventually individual consumers, have their own scheme. That means businesses will have an even greater incentive to save energy on top of the savings on their fuel bills - if they use less than their carbon allowance, they will be able to sell the surplus. But if they exceed the allowance, they not only have to buy allowances from elsewhere, they also have to pay a fine (£27 a tonne at the moment, but due to go up to £68 a tonne by 2008).

Business needs to get smarter. Any profitable commercial enterprise makes profit its priority - and cutting costs at the bottom line can only enhance that. Realising that improving energy efficiency is a low and sometimes investment-free process, with a very fast return, will enhance any company's economic situation, not to mention demonstrating its commitment to improving the environment.

Jo Reeves works for IMS Consulting

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