Seven reasons why energy efficiency programs do not generate the expected results

Submitted by Bruno Santos Pimentel on Tue, 04/03/2018 - 18:22
Seven reasons why energy efficiency programs do not generate the expected results

In the article “Energy efficiency and corporate sustainability", we comment on the synergy between energy efficiency initiatives and corporate sustainability, and explore how the cycles of positive reinforcement contribute to sustaining results. Our goal in this new article is to investigate the main reasons why improvement initiatives, in particular of energy efficiency, can fail.

Interesting research conducted by MIT presents, based on a number of case studies, the principal elements that make up the structure of efficiency gains in processes, identifying some important aspects.

First of all, despite contributing to more permanent gains, investment in efficiency does not contribute to the immediate improvement of the performance of a process. The initiative needs time to get to the root cause of inefficiencies and to develop, evaluate, and implement the necessary solutions; and larger or more complex industrial processes will certainly require more research time.

In addition, investments in efficiency can also carry some degree of risk, that is, the causes of problems may not be found and investments in new equipment or processes may not generate the desired results.

Finally, the improvements implemented tend to lose their effect over time due to normal wear and tear of equipment, technological obsolescence, and processes becoming out of date.

As a result, despite investments in efficiency having the potential to produce significant and lasting gains, these investments contribute little to resolving the problems that organizations face in the very short term, which generates tensions in the prioritization and application of the necessary resources.

On the other hand in many successful cases the leadership of the organization has made it a priority to reinvest the gains obtained from efficiency projects, reinforcing even more the cycle of improvement and organizational learning – but unfortunately these cases are the exception, not the rule.

In addition to the concepts above, other important sources reinforce the understanding of the organizational elements that can make the difference between success and failure in energy efficiency initiatives.

 

1. Goals not aligned with the business

As investments in energy efficiency can represent larger technical or financial risks than other types of investments, it is common to see unreasonable expectations regarding the speed and magnitude of returns. In addition, the uncertainty inherent in the business and in the markets leads to excessive emphasis being placed on short-term results. As a result, it is essential to establish and communicate goals that are realistic and aligned to the characteristics of the business and of the markets operated iniv. Organizations that fail in this respect end up compromising both the credibility and the sustainability of energy transformation efforts.

 

2. Costs poorly understood

The potential for gains from energy efficiency initiatives can be unrealistic when the organization ignores costs associated with management, production losses, training of the teams involved, and the acquisition, analysis, and application of information about the energy performance of processes of interest.

 

3. Conflicting interests

The opportunities for improvement in energy efficiency initiatives can be lost when the actors fail to appropriate the benefits of investment. For example, if the departments of a large organization are not held accountable (positively or negatively) for their energy consumption, they will have no incentive to invest in improving their energy efficiency.

Also see Energy and Utilities Cost Accounting - Part 1

 

4. Leadership absent or poorly defined

In alignment with the item above, every initiative of organizational transformation requires clear leadership with well-defined roles and authority so that resources can be allocated appropriately around well-prioritized activities with objective measurement of the impacts attained. The role of upper management is essential here, as goals and specific directives should be unfolded around the topic with more realistic maturation horizons.

 

5. Little understanding of the scope of the initiative

The spectrum of options of energy efficiency can extend from operational actions that reduce the demand for energy (insulation, reduction of losses, reduction of useless energy consumption, etc.) to investments in new and more efficient control or production technologies. Each end has very different characteristics regarding costs and periods of implementation (and return on investment), the training required for the teams involved, and the total cost of ownership, among others. Organizations that ignore these characteristics increase the risk of total failure (abandonment, for example) or partial failure (returns below potential) of the initiatives.

 

6. Incomplete or imperfect measurement

The effective measurement of energy consumption is the cornerstone of efficiency initiatives. The maxim “you can't manage what is not measured” applies directly in these cases, and it is common to see examples of industrial operations that have insufficient measurement infrastructure or that make little or poor use of the infrastructure available. Moreover, when the focus is energy efficiency, any measured value of energy consumption (in a machine, process, or plant) should be directly associated with a given context (level of production, operational condition, incidents, etc.) It is common to see organizations that focus too much on the first group of measurements without worrying about the second, which weakens the potential gains of the initiative.

 

7. Measurement without verification

Complementing the item above, the main objective of the activities of Measurement and Verification (M&V) is to evaluate the performance of energy efficiency efforts and quantitatively evaluate whether the initiative will achieve the expected results. The concept is simple, but its implementation is challenging. Ascertaining the gains depends on a reference baseline against which the post-project situation can be compared. Properly establishing this baseline, the variables of interest (consumption, specification, and state of the equipment) and the entire context of the system requires effort, attention and discipline – characteristics that are often lacking in organizations and that profoundly undermine the chances of success of the energy efficiency efforts.

The seven elements above are not exhaustive, but represent a large part of the sources of risk to energy efficiency initiatives. Keeping them in mind when proposing new programs can make a significant difference in the magnitude and sustainability of results.

The Viridis platform for energy and utilities management provides capabilities to directly support energy efficiency initiatives of industrial organizations, covering functions including monitoring, planning, contracting, costing, measurement and verification, simulation, and optimization of energy consumption. The monitoring functions permit the identification of opportunities for process improvement, stratifying energy consumption in terms of different dimensions, in addition to allowing the quantification of gains in terms of costs and greenhouse gas emissions. The integration of monitoring data with planning functions reinforces the transformation initiative, since it confers greater sophistication, consistency, and accuracy in the prediction of future consumption and, consequently, in planning of costs and the comparison with the actual values. Finally, the Viridis platform enables integrated management of projects of continuous improvement with a focus on energy efficiency, seeking strategic alignment from the conception, implementation, and evaluation of the investments carried out by the organization by the specific functions of measurement and verification. 


Product Manager, Viridis

Viridis Product Manager, with more than 20 years of leadership in innovation and technology programs in large industrial organizations. PhD and masters degree in computer science from UFMG, bachelor’s degree in mechanical engineering, innovation and sustainability fellow at Sloan School of Management, MIT. Extensive experience in project management and open innovation teams with industry, academia, and startups, applying digital technologies and analytics to challenges in productivity, strategy, and sustainable development.

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