Energy is one of the largest controllable costs in most organisations, despite the rise in energy costs, there is plenty of opportunity to reduce consumption through careful energy management.
Any organisation needs good management for long-term success and efficient operation, and energy management is no different. However, the management of energy is often neglected, even though there is considerable potential to save energy and reduce costs. At the same time, there is also increasing pressure from rising energy prices, climate change legislation and the need to be seen to be environmentally responsible by customers and stakeholders. Saving energy makes business sense, and having a structured, co-ordinated and integrated approach maximises these benefits. Without good energy management, cost-effective opportunities can be easily overlooked.
The purpose of this guide is to help businesses better understand the concept of energy management and how they can benefit from it and implement it.
What is Energy Management?
Energy Management Systems (EMS)
Energy Management Systems typically provide a framework to enable a systematic approach for continuous improvement of an organisation’s energy efficiency. Like all management disciplines, energy management should be applied in a manner appropriate to the nature and scale of the organisation. Energy management for a small office-based organisation will be at a very different level to that for a complex industrial company with a multi-million pound energy bill. Energy Management System can be certified to internationally recognised standards if desired, this requires the system and procedures to be fully documented (more in the ‘Certifying your Achievements Section’ on this).
Energy, carbon and environmental management
Carbon management is the management of an organisation’s greenhouse gas emissions (GHGs). In addition to carbon dioxide from energy use, this includes the release of GHGs from other sources; for example, methane from landfill, leakages of refrigerant gases and emissions from chemical processes. However, for most organisations’ energy use is the main contributor to their carbon footprint, and so energy management is one of the main elements of carbon reduction. As businesses evolve into more sustainable working practices and act to reduce their company carbon emissions, environmental management also considered the effects of climate change on the organisation and the need to increase resilience to the impacts of extreme weather events.
Features of a Successful Energy Management System
Energy management must evolve and remain continuous. The key elements to energy management are discussed below.
Initial review
Your initial review should give you an understanding of:
- your organisation’s energy use and costs
- factors affecting energy use, such as weather conditions or production rates
- key issues, such as regulatory obligations or planned organisational changes
- where your organisation stands in relation to its aims for energy management
- benchmarking to compare your energy use to other organisations in your sector
The initial review should provide sufficient information for you to make a case to senior management to take an energy management strategy forward.
Senior management commitment
Energy management requires leadership and commitment with resources in place to manage the process. The justification for implementing an energy management system will require an understanding of the following: -
- What is an energy management system?
- Why is an energy management system needed?
- What are the benefits?
- What it will cost?
Senior level commitment and endorsement will encourage an organisation-wide approach, raising its profile and presenting visibility of the issues across the company.
Energy policy
You will need an energy policy and strategy. At its simplest, an energy policy is a written statement of an ongoing commitment to managing energy consumption. An energy policy should normally include:
- endorsement from senior management – preferably the chief executive or equivalent
- the organisation’s energy/carbon vision and aspirations, with specific objectives and targets
- a commitment to ensuring the integration of energy management in all relevant decision making
- a commitment to ensure that sufficient resources are in place to meet policy objectives
- a commitment to meeting the training and development needs of energy management staff and to raise the energy awareness of all staff
- a commitment to develop and maintain an up-to-date energy strategy and/or action plan to meet the objectives of the energy policy
- a commitment to a regular and formal review.
Some smaller organisations may not need a specific energy policy – an environmental policy and a board-level mandate coupled with a good energy plan may be enough. However, for larger organisations a policy is normally a key component of energy management.
Energy strategy
An energy strategy is a document setting out an action plan of how energy will be managed in the organisation to meet the policy objectives. There are eight key areas the strategy should address, although they are not all applicable to all organisations:
Organising energy management
Led by the Energy Manager (or whoever is responsible for energy management), the energy management team has responsibility for the day-to-day delivery of the energy policy through the implementation of the energy strategy. There is no ideal model for an energy management team – the structure will depend upon how your organisation works. Where the members of the team have other duties it is important that they have sufficient time, expertise and resources to perform their energy management responsibilities effectively. Formal responsibility for energy management may be assigned to:
- the chief executive and other senior managers
- other key managers and their departments, such as production or service delivery, or asset management/property
- facilities
- estates
- maintenance
- capital projects, such as finance, procurement, IT, human resources, or security, cleaners and caretakers
Much like health and safety, everyone in the organisation should be responsible for their own actions with respect to energy efficiency. However, in contrast to health and safety where there are legal obligations on all employees, energy efficient behaviour is more appropriately driven through developing an energy efficient culture.
Regulatory compliance
All organisations should understand the regulations that apply to them and what they need to do to comply. The main regulatory schemes are:
- Energy Performance Certificates (EPCs) and Minimum Energy Efficiency Standards (MEES)
- Green house gas (GHG) and streamlined energy and carbon reporting (SECR)
- The Climate Change Levy (CCL) and Climate Change Agreements (CCAs). (CCAs are voluntary, but put requirements on those that participate)
- The EU Emissions Trading System (EU-ETS)
- Fluorinated Gas (F-gas) Regulations
- Energy Saving Opportunity Scheme (ESOS)
Effective energy management provides the basis for efficient regulatory compliance and allows organisations to take advantage of incentive schemes such as Enhanced Capital Allowances.
Investment
Most organisations will need investment to take full advantage of cost-effective energy efficiency opportunities. Projects that cut energy costs should be compared on a rational basis with other investment opportunities. It is common for energy efficiency projects to lose out to other demands on funds perceived to be of greater importance. Good investment practice can be characterised by:
- a ring-fenced budget for energy efficiency/ sustainable energy under the control of the Energy Manager. This avoids the danger of funds being diverted
- retention of a proportion of energy savings by the function to which they relate. This provides an incentive and reward for pursuing energy efficiency
- appraisal on a whole lifecycle basis when comparing energy efficiency investment with competing demands on capital
- presenting senior managers with clear and thorough business cases for investment
- accessing funded schemes such as the Carbon Trust’s interest free loans scheme or the Green Business Fund, which offers capital contribution towards the cost of implementing energy efficiency technology
Procurement
There are two areas of procurement critical to an effective energy management strategy: one is the procurement of energy itself; the other is procuring energy-using equipment, services and buildings. These areas are summarised below.
Energy procurement
It is important to recognise that, although they are necessary, activities related to energy procurement should represent only a small part of energy management. The energy management function should focus on the reduction of energy demand rather than the procurement and administration of energy supplies.
For example, a finance department is often responsible for buying energy, but not for managing it, so it’s important that they have access to the relevant information in order to make decisions about procurement. They can only save money if they understand the markets and know how your organisation uses and will use energy.
Procurement of equipment and services
The energy performance of an organisation is influenced by the equipment and services it uses. Best practice requires that the energy performance of such items is taken into account when procurement decisions are being made. This will normally involve formal input from the energy management function.
Procurement of buildings
Procuring buildings, whether through a lease or purchase, can be a key factor in an organisation’s long-term energy performance. As a matter of policy it would be appropriate to only lease, purchase or commission buildings that meet the highest of energy efficiency standards.
Metering, monitoring and targeting
Energy metering, monitoring and targeting (MM&T) is the management information system that supports energy management. Also known as just monitoring and targeting (M&T), it is central to good energy management. Simply, you cannot manage what you don’t measure and what is not measured is not managed. Effective MM&T enables you to reduce costs through understanding your organisation’s energy consumption and identifying waste and targeting inefficiency.
The stages of MM&T are:
- collection of data on energy and on influencing factors such as weather conditions or production volumes
- analysis to convert data to information
- communication to convert information to knowledge
- actions to improve efficiency and eliminate waste
This is a continuous process, and once established should not be overly complex or time consuming. MM&T allows you to:
- detect avoidable energy waste that might otherwise remain hidden
- quantify savings achieved by energy projects and campaigns
- identify fruitful lines of investigation for energy surveys
- provide feedback for staff awareness, improve budget setting and undertake benchmarking
- calculate energy and carbon reduction targets rationally to reflect achievable performance – often, targets are set without consideration of practical application or achievability
MM&T also supports energy invoice checking and tariff negotiation. Sometimes the term is inaccurately used to just mean bill validation, whereas true MM&T provides much more. Automatic metering (AMR) systems use meters that do not have to be read manually. AMR considerably eases meter reading and makes it possible to collect energy data at a more detailed level. For example, you will be able to easily see how much energy is being used ‘out of hours’. This brings with it the risk of ‘data overload’, but you should balance the practicality and cost of metering with the benefits it will deliver.
Opportunities identification
Opportunities for improving energy efficiency can be identified through:
Analysing energy data through MM&T, including comparisons with internal or external benchmarks.
Carrying out energy surveys or equivalent. These range from surveys of staff behaviour to detailed appraisals of particular technical plant or the physical condition of buildings. You may also find useful information from existing building and equipment condition surveys, asset registers and building energy certificates.
The only way to be really sure of what opportunities there are to save energy is by looking at the buildings, plant and equipment and identifying energy wastage and inefficiencies. It does not always require an energy efficiency professional to find savings – many opportunities can be found with applied common sense.
Find some tips on what to look out for in the sector specific factsheets and the heating and lighting guides.
Organisational culture
An energy management strategy must include engagement with staff at all levels, from the chief executive to the part-time worker. This means you must make employees aware of the importance of saving energy, both for the organisation and for their own working conditions. People are more likely to change their habits if they understand how their actions affect consumption. Staff should feel confident to make suggestions and be informed enough to take action. Senior management should be seen to be leading this and setting a good example.
Behavioural change can be encouraged by including energy efficiency tasks in everyday operating procedures, for example, shut-down procedures and maintenance schedules. Visit the Energy Saving Trust’s Employee Engagement web page for further information and materials to support awareness campaigns.
Communications
Good internal communications are an important part of developing a culture supportive of energy efficiency. To demonstrate green credentials, organisations are communicating their endeavours to customers, suppliers, shareholders, the local community and other stakeholders.
Spreading good news is important because it encourages people who have contributed towards the success and lets stakeholders know their interests are being met.
The ‘public relations’ aspect of energy management is important for the organisation because:
- the promotion of results can be rewarding and motivational to those directly and indirectly involved.
- the publicising of energy achievements can enhance the reputation of the organisation.
Management Review
As with any management process, regular energy management reviews are vital to ensure that progress is being made and that policy, strategy and action plan documents are up-to-date and relevant.
An action plan will help keep an energy management strategy on track, but there will come a point when a more detailed assessment is needed. This might include measuring performance against the original plan, or against changing organisational policy.
Some organisations include management assessments as part of their overall energy policy, ensuring that progress is regularly measured and results reported to senior management. This gives the opportunity to manage unsatisfactory performance straight away, before it starts to have a negative impact.
Assessments will generate valuable feedback that can be used to:
- reaffirm top-level commitment
- review and amend policies and objectives
- revise action plans
- redefine roles and responsibilities
- amend reporting arrangements
Minor reviews could be scheduled at three or six-monthly intervals, with a full annual analysis to keep the strategy on course. Remember to involve all staff. One way of achieving ongoing involvement in energy management is to have an annual energy week to promote the next year’s plan.
Next Steps
Now that you have gained a good appreciation of what is required for effective energy management, you can plan how you are going to put in place a system for your organisation. The next steps should be to:
- understand your organisation’s energy use, costs and legal obligations
- assess where you are on the energy management journey
- gain senior management support and allocation of resources
- develop an energy policy and initial strategy
- work to formalise energy management and integrate it throughout the organisation
If you are already well down the energy management journey, you should be:
- concentrating on delivering reductions.
- reviewing the system.
- promoting awareness.
- identifying new opportunities.
Certifying your Energy Management System and achievements
Organisations can have their Energy Management System certified to a recognised standard if desired. Certification is a way of demonstrating and communicating your energy management commitments and achievement, and is more frequently being required and expected by customers. Common energy management systems include BS EN 16001, ISO 140001 and ISO 50001. For more information, visit ISO here.
An alternative to such standards is the Carbon Trust Route to Net Zero Standard which sets performance criteria for the measurement, management and reduction of an organisation’s carbon footprint. It gives a clear message that action is being taken to reduce carbon emissions year on year. This is a strong sign of ongoing commitment and a clear sustainability credential. To achieve certification against the Carbon Trust Route to Net Zero Standard, your organisation will need to:
- measure its carbon footprint
- demonstrate a reduction in carbon emissions
- provide evidence of good carbon management
For more information, please visit Carbon Trust website.