A Measured Approach to Success with Energy Metrics

We’ve established that executives who focus on aligning and then optimizing people, processes, and technology in operational excellence models will position their organizations for success. This is true in quality, manufacturing, energy management, and other critical operational focal points.

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For energy management, at a high level, by establishing a CSO (people), following ISO 50001 (processes), and implementing IEM software (technology), companies can take a tiered and tactical approach to meeting operational and financial objectives identified in the operational excellence model.

When it comes to measuring progress toward these objectives, though, the best way to monitor it is with the use of energy management metrics. There are numerous methods, strategies, and key metrics that companies may use for analyzing and benchmarking energy performance.

Below, we’ll provide an overview of the use of energy metrics, and we’ll also discuss some useful best practices around metrics leveraged by organizations today.

Areas of Focus for Energy Management Metrics

When discussing energy metrics, a good place to start is with a major concern for most companies today: understanding and measuring energy efficiency. Many industrial companies have been focused on energy efficiency for years, especially in energy-intensive industries like metals, mining, minerals, pulp and paper, oil and gas, and more.

Efforts for most of these companies have been in several different areas:

• Unit-level optimization – focusing on control solutions that can improve the efficiency of equipment such as smelters, boilers, chillers, and compressed air systems.
• Process-level optimization – implementing software like Advanced Process Control (APC) to begin including energy, not just product costs, into process control systems.
• Energy efficiency projects – implementing new technologies designed to reduce the use of energy in operations. These can include variable speed drives, new lighting systems, solar, wind, combined heat and power, and more. In many cases companies use different hurdle rates for energy efficiency projects when compared to other capital outlays and also often leverage financing options that use future energy savings in the initial capital costs.

Although focus on each of these areas has delivered value to companies, they have not necessarily been part of a larger energy management initiative within the organization. When this is the case, companies often struggle in understanding which metrics to measure and how to monitor performance gains over time.

Best Practices Around Measuring Energy Metrics

As leading companies move to optimize key resources and create a strategic IEM framework, there are some consistent best practices we are seeing implemented around metrics.

• Data granularity – measuring data near real-time and at the unit-level delivers much improved value to tracking metrics
• Converging procurement and use data – by bringing this information together with a single data model, companies look to tie energy procurement decisions to the state of operations
• Viewing energy as a product cost, not fixed cost – companies should not look at energy as a purely fixed cost, instead it should be broken down into a mixture of fixed and variable costs and included within both the Bill of Materials as well as the costing methods in place at the company, (i.e. activity based costing)

Measuring the Right Metrics

The other major question companies must answer today is around which metrics to measure. There are a couple of different factors to consider:

One is whether or not other companies measure the metric; this is important because when a critical mass of companies measure a metric there will be more resources for defining and benchmarking the metric against peer groups.

The second factor to consider is how well-aligned to other company metrics and goals the energy metrics are. If your company is focused on efficiency or cost in operations, this focus should also be reflected in the energy metrics.

Finally, the metrics should be normalized over time and account for changes outside of energy. For example, as the price of energy changes over time energy efficiency gains can be skewed.

For all of these reasons and more, LNS regards the following metrics as central to effective Industrial Energy Management:

• Energy Intensity – as energy is tracked more granularly and tied to the product, it should be normalized for changes in production and changes in energy prices so that a true picture of energy efficiency improvements are made
• Carbon Intensity – mandated in some regions and industries, carbon intensity is often a better measure of efficiency gains than looking at energy itself. Often, it more closely coincides with operational efficiency gains than energy intensity gains alone

Attaining the Level of Granularity Needed with Technology

Accomplishing an effective energy metrics program takes a technology investment that includes system integration between control systems, manufacturing software, and enterprise applications. This mirrors much of the good work already done in the ISA-95 model of MOM system integration.

Many automation vendors are already incorporating energy into data models and networking protocols to ensure this data can flow up through to enterprise systems and dashboarding technologies. In future reports, LNS will be covering a more in-depth analysis of metrics used today as well as how market leading companies are taking advantage of the IEM framework to measure them.

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