Industrial Energy Management is a Minefield Energy Services Firms Should Navigate Carefully
We’re all quite familiar with the focus on cost savings in energy management. It is the obvious starting point for most energy cost saving actions. Most likely, this focus is predicated on the slowly increasing cost of energy, potential savings from energy efficiency, the time of use, and increasingly, operational cost savings other than energy. Despite all of this focus on cost savings – developing business cases that effectively quantify the business case for investing in energy management is still the biggest barrier for firms. But it gets worse.
Developing business cases for industrial energy management investments can be quite complex. When developing business case for energy management strategies, energy services firms should not forget to take into account factors that bring additional complexities, uncertainties and risk (see figure above):
- Adaptability of solutions to changing requirements. Manufacturing facilities are not static entities. Energy requirements can vary depending on production schedules, the number and quantity of products manufactured in a facility and changing organizational structures – such as firms transitioning to a central governance energy management strategy. Historically industrial energy management has been relegated to the facility level with a growing shift towards central energy management governance. The dynamic nature of industrial firms is also related to operational efficiency strategies which may see facilities upgrading equipment as it becomes obsolete or revising processes to be more efficient. Energy services firms will need to keep this in mind as industrial facilities may require several iterations of their energy management strategies to maintain solution applicability.
- Lack of integration between different systems. Coordinating an integrated industrial energy management strategy across IT, operations and facility systems can pose a range of technical and operational challenges for firms. Often the systems used to manage each function are siloed with separate data historians and manufacturing execution systems purpose built to specific requirements and operational scenarios. Energy services firms will need to break down the barriers between these systems to create integrated solutions that will identify the most beneficial energy efficiency opportunities for firms. The challenge will be accomplishing this with little to no operating downtime – a significant barrier to investing in energy management at industrial firms.
- Energy and process data quality and management. Accurately capturing energy and process data across assets with diverse energy requirements and use scenarios can be a challenging endeavour for energy services firms not familiar with the industrial processes and requirements of specific industries. Energy services firms, without specific industry expertise and no previous relationship with the potential industrial client will need to take into account the need to bring on a relevant partner or run the risk of increased project implementation related risks.
- Cost of maintaining systems. Once industrial energy management systems are installed, energy services firms should not lose sight of the ongoing maintenance costs required to continuously monitor and optimise industrial energy performance – especially given the current climate of changing energy and environmental regulations – and recurring process and equipment upgrades. Consideration of operations and maintenance costs should be an integral part of any business case analysis – as these will impact the overall ROI of energy management systems.
The good news? The size of the prize is worth it – witness Rio Tinto Alcan – the firm achieved annual energy savings of $2.5 million from its energy management programme at a West Virginia facility.