40 years of industrial energy efficiency audits - what have we learned?

Peter Mallaburn

IEA DSM University

December 10th 2014

Introduction

The usual health warnings … and a thank you

• Focus – industrial energy efficiency audits, although set in a much broader policy context

• Definition – “industry” actually means all non-domestic sectors, excluding transport

• This is meant as a signposting guide, not a blueprint, or an instruction manual

• Most of this is published, some is still quite new, and some is based on personal experience

• Thanks to the eceee and Energifonden for supporting the underlying research

Agenda

• Introduction

• Policy context

• History of audit programmes

• Rationale - what are audit for?

• Setting up audit programmes - some pointers

• Impact – what makes a good audit programme?

• The future of audits

Policy context

Emission reductions – UK is currently on target…

…but there is an 83MtCO2e policy gap in 2025

From “Meeting Carbon Budgets – 2014 Progress Report to Parliament”: UK Committee on Climate Change, July 2014

Many counties are struggling to deliver reductions

• Moving beyond “low lying fruit” is hard

• Deployment of renewables is costly or politically sensitive

• Austerity is scaling down subsidy programmes

• Governments are reviewing their policies and programmes

• Transport and domestic sectors are very difficult

• Industrial programmes are back on the agenda

Industrial audits have always been popular

• Easily the most cited programme type in the literature

• Most countries have them, many for as long as 40 years

• Our understanding of how they work is mature and relatively uncontroversial

• Audits make sense in most jurisdictions and political contexts

• Audits are now mandatory in the EU for larger organisations

History of audit programmes

The Oil Shocks of 1973 and 1978

Early programmes - 1973 to 1983

• First programs began in 1974 in the US, Europe and Japan

• Focused on technologies: • Grants for plant and equipment

• Opportunity assessments

• Best Practice programmes

• Research and demonstration

• Technology roadshows

• Some significant programmes • 1974 - £400m (2014 prices)

• 1977 - £2.8bn

The rise of energy management – 1983 to 1997

• Focused on companies

• Covered both technical and organisational drivers

• 5 Steps: • Commit

• Review

• Plan

• Implement

• Monitor

• Emergence of energy management as a distinct profession

The rise of climate change – 1988 to 20XX

• 1988 – scientific and political consensus develops around climate mitigation

• Consumers begin to demand green products and services

• 1994 – Triple Bottom Line

• 2002 – Carbon Trust begins Carbon Management

• 2004 – Performance indicators eg Carbon Disclosure Project, Plan A, carbon reporting

• 2014 – Carbon Bubble

Rationale - what are audits for?

Audits are seen as change management programmes for energy

• Significantly less energy is saved than is cost effective – the “energy efficiency gap”

• Energy intensive companies tend to behave rationally – they manage energy as a controllable cost

• But for most companies energy costs are not “core business” and are not actively managed

• This can be addressed by influencing the drivers and barriers of change

Barriers and drivers of energy efficiency

• Up-front capital cost

• Hidden costs -

management time

• Technology risk

• Lack of information and

skills

• Ignorance and inertia

• Energy and cost savings

• Other benefits -

maintenance costs

• Enhanced asset value

• Reputation, brand and

compliance

• Workforce satisfaction

Economic & technical

Behavioural & organisational

Barriers Drivers

Audits programmes help to overcome barriers and exploit drivers

• Secure senior level, strategic commitment to reduce energy use over time

• Carry out an organisation-wide review of energy use and the capacity to manage it

• Benchmark energy performance against peers and competitors

• Provide cost effective, practical recommendations and accounting advice

• Provide a structured programme of implementation, monitoring and review

Setting up audit programmes – some pointers

Patrick Thollander and Jenny Palm “Improving energy efficiency in industrial energy systems” Springer 2013

Common features of audit programmes

• A policy objective

• A library of information and market data

• A delivery agency

• A network of auditors and advisors

• A programme of support and/or subsidy

• Account management and CRM

Preparation

• Understand your target sector – barriers, risks and drivers, technology base, investment models, compliance

• Segment the market: • Size of business • Energy bill • Degree of leverage – eg networks

• Decide on degree of subsidy – free or co-funded? • Sort out data issues in advance

• Data needs and sources • Energy utility data and IP

• Decide what success looks like • Absolute vs relative measures • Input vs output measures

Procurement

• Appoint a delivery agent • Decide on in-house or external • Agree KPIs and review process

• Build an auditor network • Scope out skills and capacity • Embed standards and CPD

• Professional account management • CRM, call centres etc

• Develop programme collateral • Information, advice, software • Sources, eg technology companies, utilities • Crowdsourcing – 2degrees network

Impact - do they work?

Do audits work?

• Yes – they are popular for a good reason

• However implementation rates are rarely above 50%, and can be as low as 20%

• There are wide variations between measures... • Technologies and behavioural change

• 100% subsidised and cost-shared

• …and between different types of organisations • Public, private, large, small

• Reputational drivers and risk

Why?

• Barriers and drivers are interconnected • Finance is rarely the only barrier

• Reputational drivers are under-exploited • Retail, defence and financial services

• Skills and experience are usually missing • Both in the organisation and the auditor network

• Companies rarely ask for what they need • Grants versus loans

• Subsidy vs cost-sharing

What makes a good audit programme?

• Operational flexibility – responsive to changing market and political circumstances

• Strong market intelligence – sector, organisation, individual

• Exploit synergies – investor pressure

• Exploiting local networks

• A credible and well-resourced auditor network

• Some degree of compulsion

• Some degree of cost sharing

The future of audits

The future of audit programmes

• Audits began as stand-alone, programme management tools

• The rise of climate change has changed their role from measuring energy use to assessing risk and value

• They are now part of larger, more sophisticated policies and programme such as Long Term Agreements

• But organisations still implement less than half of cost effective measures that audits reveal

• So what are we doing wrong?

Energy efficiency “framing”*

• Audits are all about identifying practical, cost effective energy efficiency measures

• We are getting very good at this, but it is still too hard for most organisations to actually do

• Does the burden of change lying too heavily on the energy-using organisation?

• Should we encourage the technology supply-side industry to help it improve the energy efficiency “offer”

• There are some early signs that this is beginning to happen…

*Hans Nilsson and Charlotte Ruhbaum, eceee Industrial Summer Study proceedings 2014, pp 703–710

Thanks for listening