Measuring energy management commitment and capability

I have written before about how – if we are to really scale up the level of energy efficiency activity – we need to increase capacity in the demand side of energy efficiency, the supply side of energy efficiency and the finance of energy efficiency. All three aspects need to be worked on in a systematic way. Part of building capacity in the demand side i.e. amongst energy users, is developing new tools for developing and running more effective energy management programmes. This post is about a new tool inspired by the Innovation Matrix developed by Tim Kastelle¹.

Although energy efficiency had gone through periods where it received attention several times before – notably in the post-war period when fuel was short and the UK was in dire financial straits – energy management started to develop as a more professional discipline in the late 1970s after the 1973 and 1979 oil crises. Several management tools were developed, starting with what should be the foundation of any energy management programme, Monitoring and Targeting (M&T). M&T consists of agreeing a base line consumption, setting a target for consumption and recording progress against that target. Another tool developed in the 1990s, (originally by the Building Research Establishment), was the energy management matrix which is a way of measuring where organizations are in the different dimensions of energy management including; policy, organization, training, communication and investment. Despite being adopted (and adapted) in the UK, the US and Australia it never really caught on despite some having potential as a useful tool for agents of change to analyze where an organization was in energy management and what actions were required to improve performance. Fundamentally it didn’t go to the heart of the problem – effective action in energy management – like in innovation or just about anything else – needs two things; commitment and capability.

Having seen Tim Kastelle’s innovation matrix, which maps organizations according to their innovation commitment and capability, I thought about how to measure these two characteristics for energy management within organizations. Although energy management isn’t often thought of as innovation it really is a form of innovation or technical change – even if most of the innovation is incremental and utilises existing technology in a specific application or building where it has not been applied before rather than breakthrough, “first of its kind” type innovation. The two factors, commitment and capability, really are the two critical factors for effective change in area – you can have commitment without capability and you can have (and this is often the case in many organizations) real energy management capability at the technical/energy manager level without real top management commitment. Many energy managers would recognise that situation in their own organization.

Commitment by top management to energy management is vital to success just like it is to any activity within an organization. Without high-level commitment things don’t really happen – once that commitment is there they do happen – it is a fact of life.

So I started thinking about what characteristics demonstrate commitment and capability in energy management.

Commitment to energy management can be evidenced by the following:

• Having a board member responsible for energy management
• Regular reporting of energy management performance at board level.
• Reporting can be on different frequencies depending on the organization but it needs to happen and everyone in the organization needs to know that it happens.
• A public target for energy efficiency improvement, typically expressed in energy intensity but increasingly in absolute energy terms. This would often be included in a sustainability report.
• Energy efficiency built into management targets and bonus schemes. Unless management at all levels – and indeed even the shop floor employees – have energy efficiency targets the level of effectiveness of any programme will be hampered. Ideally responsibility for energy efficiency has to be passed to the lowest level of person who can have some influence over energy use – which is often everyone.
• At the end of the day commitment is evidenced by investment. It is hard to be certain what the right level of investment is, and this will vary by industry and organization, but back in the 1980s many examples from the public sector showed that it was possible to profitably invest an amount equal to ten per cent of energy spend into energy efficiency every year for many years.
• Real commitment to investment will be evidenced by use of a specific allocated amount for energy efficiency, possibly differential IRRs to other investments – reflecting the truly strategic nature of energy efficiency which is not always recognized, or the use of external third party funds through some kind of shared savings deal or bond issue such as that recently done by Sainsburys.
• Incorporating best practice, or beyond best practice, levels of energy efficiency into new product development or new buildings shows a high level of commitment. These major decisions always have to have high level support and often opportunities are missed in new building or product projects unless there is high level support, and perhaps even positive pressure, to utilize them.

Energy management capability is demonstrated by:

• Having a Monitoring and Targeting (M&T) system that demonstrates energy use, targets energy savings and records progress against targets for each building, factory or facility. M&T was developed in the 1980s and proven to be highly successful in all situations and sectors. Without M&T there can be no effective energy management programme.
• Having a full-time energy manager. Clearly this is related to the size of the organization and its energy spend. In smaller organizations this requirement could be relaxed but in those cases there should be access to the equivalent of an energy manager, possibly through retained consultants or an energy management bureau.
• The energy manager having a formal qualification in energy management. In the UK this qualification would be through the Energy Institute or in the USA it would be Certified Energy Manager through the Association of Energy Engineers. Energy management is now codified and practitioner should have appropriate qualifications.
• Responsibility for energy usage has been passed onto line managers. This is based on the principle that although specialized energy managers can run M&T systems and identify, develop and implement energy efficiency projects they cannot control energy use day by day, minute by minute, in every building or factory within their organization. Responsibility for energy management has to be passed onto those people who can control energy use and that is building, factory, line, cost-centre managers or even shop floor operatives. Many organizations still fail to do this – fostering the belief that energy management is something done by an energy manager or engineering support function.
• Staff engagement programmes have been found to be effective in improving energy efficiency. The existence of a staff engagement programme is evidence of further capability as they usually involve training and hence build capacity amongst all staff members. It is important, however, to remember that “awareness is not everything” – most research in the field shows that simply having more factual information about a situation influence peoples’ attitudes or action².
• Recent work by the IEA³ and others have documented the multiple benefits of improving energy efficiency. These are many and various but include, even at the level of the host organization, factors such as improved productivity, improved employee engagement, reduced sickness time and reduced need to invest in energy supply infrastructure. Work by Cooremans⁴ has highlighted that energy efficiency can be a strategic investment –but is all too often simply viewed as a cost saving investment which inevitably receives less attention than strategic investments. It is important that the strategic nature of energy efficiency investments, and as far as possible, all the co-benefits – are included in energy efficiency business cases. Forward thinking organizations such as Lego do this – even when quantifying benefits is difficult they recognize them and make reasonable, defensible estimates. Inclusion of co-benefits in business cases for energy efficiency is a measure of advanced energy management capability.
• ISO50001, the energy management standard, was introduced in 2011. Like all standards it has to be used with care. As someone said about the quality standard ISO9001 you could have ISO9001 for making concrete lifejackets as long as you made them to a consistent standard. However ISO50001 means that for the first time the management of energy is subject to a standardized process. It is based upon the PDCA approach – Plan, Do, Check, Act – and sets out processes for energy management systems that enable an organization to continually improve energy performance. Achieving ISO50001 demonstrates a high level of energy management capability (as well as commitment).

A truly effective energy management programme, one in which the organization consistently improves energy productivity by a combination of good control of day-to-day energy use, employee engagement, and continuous creation, development and implementation of viable energy efficiency projects, is likely to have high levels of both commitment and capability. Effectiveness will ultimately be shown by continuous improvement in energy productivity.

Some of the best management tools use 7 factors; “The McKinsey 7-S Model” by Bob Waterman, Tom Peters and Julien Phillips⁵, “Seven Deadly Diseases” by W. Edwards Deming⁶ and of course “The Seven Habits of Highly Effective People” by Stephen R. Covey but in this case a 7 x 7 matrix presentation didn’t really work so I came up with a 2 x 7 matrix. The final version of the matrix is shown below.

This new energy management matrix can be used by senior management, other agents of change, and analysts to determine where an organization is in both the important dimensions of energy management, capability and commitment, and where it can be improved. The ideal situation is to have a high score, ideally 7, on both scales. My hypothesis (based on years of observation and involvement in many energy management programmes) is that an organization’s overall ability to manage energy, its energy management effectiveness – as evidenced by improvement in energy efficiency over time – will be higher the higher the level of commitment and capability. Academic – or practical – research could test the hypothesis. It would be good to get feedback and hear of any results of applying the matrix.