establishing energy as enterprise currency · operating a business often involves using...

Establishing Energy as Enterprise Currency

Minimizing expenses and risks

EAM WHITE PAPER

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Table of contents

2Infor is in no way committing to the development or delivery of any specified enhancement, upgrade, product or functionality. See “disclaimer” paragraph contained herein.

INFOR EAM > WHITE PAPER

Executive summary .................................................................................................................................................................. 3Minimizing energy waste ........................................................................................................................................................ 3The changing view of energy use ......................................................................................................................................... 4Energy waste as a cost factor ................................................................................................................................................ 6The maturity stages of energy management .................................................................................................................. 6Instituting the energy policy .................................................................................................................................................. 7Evaluating the energy management program ................................................................................................................. 9Bringing value to organizations ............................................................................................................................................. 9Technology to support asset sustainability ...................................................................................................................10Conclusion. .................................................................................................................................................................................11


3INFOR EAM > WHITE PAPERInfor is in no way committing to the development or delivery of any specified enhancement, upgrade, product or functionality. See “disclaimer” paragraph contained herein.

Executive summary.CFOs and CEOs today face increasing expense burdens. Rising energy costs—one of the fastest growing expenses—can account for up to 80% of operating and maintenance expenditures. Tighter regulatory compliance mandates on greenhouse gas emissions, waste, and water across global assets also add to their growing concerns.

Organizations are continuously looking for ways to boost the bottom line. Identifying energy inefficiencies as well as opportunities to improve operational efficiencies needs to be a primary objective in order to drive down expenses, meet regulatory standards, and remain competitive. The organization needs to focus on better understanding energy demands and conservation capabilities, including changing various behaviors, and developing and communicating a comprehensive sustainability strategy throughout the enterprise.

Until recently, many companies managed energy in a highly fragmented way, where the accountability and responsibility of energy were not aligned within the organization to create an energy “owner.” To determine the causes of energy waste and expense in a timely way, and to enact programs to reduce or prevent them, organizations must have systematic procedures to determine energy usage of their operating assets as an integral part of their day-to-day enterprise asset management.

A bottom-up approach beginning with the facility and equipment has replaced the traditional top-down, financial perspective—analyze all costs, including utility bills, maintenance and repair costs, replacement expenses, and other quantitative values to configure the energy usage factor in managing assets. This new approach reveals valuable qualitative information on the nature of energy usage, painting a true picture of the sustainability of assets that organizations can use to improve asset performance, reduce costs, and comply with environmental mandates.

This paper addresses how organizations can create a viable method for establishing a strategy, program, and culture of managing energy usage of assets that is accurate, repeatable, timely, and cost-effective—financially and environmentally—to establish energy as an enterprise currency. The paper also describes an end-to-end environmental and energy technology platform that meets most of the ISO standard management elements so that companies can fully manage their sustainability, energy consumption, and the asset and operating infrastructure to align accountability and responsibility within the organization.

Minimizing energy waste.Today, the US loses or wastes approximately two-thirds of every kilowatt produced1. And worldwide energy waste accounts for a similar percentage. Reducing demand and improving the operational efficiency for a wide range of equipment used for facility operations and manufacturing processes are the most direct and economical ways to conserve energy. This approach also goes a long way toward solving our energy and environmental problems for about the next 40 years, until there is a technology breakthrough for clean, reliable, and scalable energy worldwide.

1 Sean Casten, “How Much Energy Does the U.S. Waste?” Grist (http://grist.org/climate-energy/2009-09-11-how-much-energy-does-the-us-waste/), September 12, 2009.



The world consumes 17.78 trillion kWh of energy per year, and the US consumes 20% of it.2 China is now leading the world in energy consumption, with 22% of the total. The cost of energy is a primary corporate expense. That’s why most businesses need to be concerned about energy use.

In fact, energy costs can account for 80% or more of a commercial or industrial company’s non-labor operating and maintenance budget, with the remaining 20% going to asset management expenses, according to the US Department of Energy3. And when energy is wasted, the financial impact on the bottom line of a business is even more dramatic. If any of that 80% cost pays for wasted energy, it weakens a company’s profitability and financial strength.

Wasted energy cannot be destroyed, but that energy changes form when it’s not being used for its intended purpose. The change in form often adds an equally important cost. The environmental costs of initially generating the needed energy, whether wasted or not, and the environmental impact of the newly transformed energy—heat, vibration, increased energy usage by the asset—both contribute to the carbon footprint of the company. But instead of dollar valuations, the cost lies in the currency of greenhouse gases and potential climate change.

The changing view of energy use.The traditional view of the financial impact of energy use has been as a fixed cost of doing business. But that view is changing as more and more companies see energy use as an asset-based function, focusing on individual asset efficiency to determine the cost. It’s no longer enough to look at excessive inventory, downtime, and other material factors to reduce overall waste without integrating energy performance into the mix. And organizations that fail to address their energy efficiency face substantial economic risk.

A best-practice approach to asset management, called global asset sustainability, provides a clear and comprehensive definition of efficiency. The definition includes information that helps organizations to determine whether an asset is consuming more energy than expected, and that, in turn, allows enterprises to continuously monitor and manage their assets’ energy consumption while meeting operational objectives. This practice helps not only to manage assets for optimal performance, but also to drive improved financial results throughout the organization.

Global asset sustainability helps organizations to determine whether an asset is consuming more energy than expected, and helps to manage assets for optimal

performance to drive improved financial results.

Energy costs can account for 80% or more of a commercial or industrial company’s non-labor operating and maintenance budget, with the remaining

20% going to asset management expenses.

2 Enerdata, Global Energy Statistical Yearbook 2011 (http://yearbook.enerdata.net/). 3 Daniel Stouffer, eZine Articles, “The New Trend Around Global Asset Sustainability” (http://ezinearticles.com/?The-New-Trend-Around-Global-Asset-Sustainability&id=4948140)



Using advanced enterprise asset management (EAM) technology, companies can engineer the important task of global asset sustainability faster and more effectively than ever before. And with much data generated on energy use from end-to-end business processes, advanced EAM systems can also help to systematically gather, document, and analyze data, as well as identify nonconformities, communicate to stakeholders, and account for the data using accurate, repeatable, and timely methods—a critical need.

Gathering both quantitative data and qualitative data about energy usage is valuable. Quantitative data represents an after-the-fact look at the financial outcome from energy usage, but qualitative information encompasses individual asset information and the sustainability of each asset in meeting projected life-cycle expectations. Whether energy usage is viewed quantitatively or qualitatively, energy usage has a dramatic impact on the corporate bottom line and profitability.

A new standard for viewing energy use.

Organizations can develop a systematic approach to investigating the role of energy usage, gas emissions, waste, and water across global assets using advanced EAM technology combined with a new standard issued by the International Standards Organization (ISO).

The ISO has recently issued ISO 50001:201, Energy Management Systems—Requirements with Guidance for Use, which establishes a reliable, systematic way to investigate the relationship between energy usage and managing assets. Instead of accepting the traditional philosophy of energy usage being a fixed cost, the standard specifies a way to develop, implement, maintain, and improve an energy management system so that an organization can follow an orderly approach for continuously improving energy efficiency, energy use (what asset is consuming energy), and consumption (how much energy is being consumed).

The standard addresses energy cost issues as a way to demonstrate both the financial and environmental benefits that organizations can gain through systematic energy management. Public and private organizations can use this new standard to control their energy costs by reducing waste in their energy usage.

Linking energy management and asset management.

Organizations with major facilities and industrial operations have been practicing enterprise asset management (EAM) for years. Successful EAM involves advanced technology and smarter asset management so that organizations can stay competitive. This is even more important today, as businesses operate in an uncertain economic climate, face growing global competition and tighter regulatory pressures, and manage with an aging infrastructure. The long-term view of EAM has always focused on maximizing asset availability, reliability, and performance, while minimizing the total cost of asset ownership. Today, EAM has advanced to include sustainability in managing assets.

Sustainability focuses on energy efficiency—not only how well an asset performs and how well the asset uses energy, but also when to replace the asset with a more efficient alternative.



Sustainability focuses on energy efficiency—not only how well an asset performs and how well the asset uses energy, but also when to replace the asset with a more efficient alternative. Managing the energy usage efficiently means managing the asset effectively.

Energy waste as a cost factor.Operating a business often involves using energy-consuming assets ranging from motor-driven equipment to heating, ventilating, and air-conditioning systems, and from chillers and boilers to material handling and production equipment. When these assets operate at optimal levels, they add to the profit that keeps the business solvent. Assessing how effective they operate traditionally involved examining three factors: availability, performance, and quality. Today, a fourth factor—energy efficiency—has a major impact on that assessment.

These same four factors make up the index that measures global asset sustainability. When energy is wasted, it neither becomes usable for its intended purpose, nor can it be recycled for other uses. And that energy cost not only remains, but actually increases over time as more and more energy is wasted while an asset functions at suboptimal levels. A negative feedback loop results, where the more the asset functioning declines, the more energy the asset wastes. The energy loss transforms into heat energy or vibrational energy, and greater energy usage is needed to overcome the inevitable friction occurring as assets slow down and become less efficient. The asset eventually becomes unsustainable, and the cost of maintenance and repair adds up throughout this chain of events.

The maturity stages of energy management.To reduce energy costs, consumption, and environmental impacts, organizations need to achieve five goals:

1. Establish enterprise policy and programs.

2. Establish baselines.

3. Identify nonconformities and conservation opportunities.

4. Mitigate energy waste.

5. Establish management controls.



As enterprises work to achieve these goals, they typically progress through an energy and environmental maturity model that involves five attitude stages. Best-of-breed asset sustainability solutions promote the organization’s energy and environmental maturity through these five stages:

• Stage 1. Consume—No comprehension of how energy and environmental management impacts operational, financial, or environmental performance, with energy waste levels of 40% or higher. Organizations in this stage pay the bills, maybe complaining about the expense or assuming it’s a cost of doing business, and pass the cost on to their ultimate customers—consumers or taxpayers.

• Stage 2. Quantify—Recognition that energy and environmental management could be improved, but unwilling to provide funding.

• Stage 3. Assess—Understanding of fast return on investment and even more positive future returns.

• Stage 4. Optimize—Full understanding of financial, operational, and social benefits, with internal mandate to support.

• Stage 5. Innovate—Global view promoting innovation in energy efficiency and social responsibility to internal and external stakeholders, with energy waste dropping to less than 7.5%.

As organizations reach maturity stages three through five, they begin to understand that they can better manage their energy usage, taking positive steps to assess their situation and making changes to reduce energy usage, costs, and environmental impacts.

Instituting the energy policy.To secure the benefits of energy and environmental management, organizations need to develop a formal policy and program, and communicate it widely throughout the enterprise. Executives must not only drive improvements within their organization at the facility level, but also conduct changes from the boardroom and develop initiatives that include creating financial incentives or penalties to encourage best practices in energy and carbon management. This formalized policy accomplishes the critical task of combining accountability and responsibility into one energy and carbon management function.

In many enterprises, responsibility and accountability have been separate functions managed by different individuals or departments. If communication among those who manage those functions is not direct and flawless, the inherent relationship between energy and environmental responsibility (paying the costs) and accountability (knowing what drives the costs) may not be apparent. Creating a formal policy and program links the two together.

In formalizing the policy, executives can demonstrate their total commitment to energy and carbon management in many ways, supporting employee activities that empower, motivate, train, and reward them. Management teams conducting long-term planning can also include energy and carbon management factors such as energy sources, energy performance, and energy performance improvements in their planning activities, as well as greenhouse gas emissions, waste, and water across global assets by implementing the energy policy.

This formalized policy accomplishes the critical task of combining accountability and responsibility into one energy and carbon management function.



The energy policy is the driver for implementing and improving an organization’s energy and carbon management system and energy performance. The policy may be a brief statement that every member of the organization can readily understand and apply to work activities. Communicating the energy policy across all business levels can be a driver to gain and manage behavior that has energy and cost impacts throughout the business.

Measuring against a standard.

Energy management efforts need to be measured against some recognized standard to be effective. The costs of ineffective attempts are too expensive to leave the structure of the policy and program to chance. The risk of escalating the financial impact, the environmental impact, and the negative impact on previously committed employees who are now disaffected because of a failing program is very real and potentially damaging to the organization in many areas. For those reasons, the new ISO standard is ideal for measuring the success of an energy management process.

A framework for success.

The new International Standard, ISO 50001, is based on the Plan-Do-Check-Act (PDCA) cycle of continual improvement incorporating energy management into everyday organizational practices. With the PDCA, organizations will:

• Plan: Conduct the energy review and establish the baseline, energy performance indicators, objectives, targets, and action plans needed to deliver results that will improve energy performance according to the organization’s energy policy.

• Do: Implement the energy management action plans.

• Check: Monitor and measure processes and key operational characteristics that determine energy performance against energy policy and objectives, and report the results.

• Act: Take actions to continually improve energy performance and the energy management system.

ISO 50001 calls for establishing a formal energy policy that guides all efforts to manage and measure energy use. It is an organization’s top management statement of overall intentions and direction related to energy performance, providing a framework for acting and for setting energy objectives and targets. It involves actions such as establishing the energy policy, defining organizational alignment, providing for energy review mechanisms, and establishing baseline measurements and energy performance indicators.

Energy planning guides an organization in its ongoing efforts to effectively manage its energy. In review, the plan analyzes energy use and consumption, identifies areas of significant energy consumption, and points to opportunities for improving energy performance. The planning function looks at legal and regulatory requirements that the organization needs to comply with relating to use, consumption, and efficiency. The planning requires continual energy review at defined intervals and establishes an energy baseline, energy performance indicators, energy objectives, energy targets, and energy management action plans.



The success of an energy management program depends on continually monitoring energy usage. The organization monitors, measures, and analyzes at planned intervals the key operational characteristics that determine energy performance. Checking also involves evaluating compliance with legal and other requirements, conducting internal audits of the program, identifying nonconformities and correcting them, taking preventive actions, and establishing individuals responsible for controlling the program records and the methods of controlling them.

Evaluating the energy management program.Ongoing review of an energy management program is critical to determine whether progress is being made. Management review provides an opportunity to understand what is being spent on energy consumption and where it is being spent, and to measure conformance with standard benchmarks such as policies, legal requirements, and regulatory requirements. It also provides visibility into how all interdependent factors weigh in on the energy policy and energy performance. The management review reveals how the energy management program is accomplishing established goals or highlights where goals are not being met.

Five discrete performance indicators are a major part of the management review:

• Energy consumption—measures how much energy is being consumed.

• Energy use—measures what asset is consuming energy.

• Energy intensity—shows the correlation of energy use to the products or services needed for business operations.

• Energy quality—measures energy waste in the business process.

• Energy efficiency—measures how much energy is being consumed compared to how much energy should be consumed.

These indicators tell the story of how well the program and policy are working to manage energy effectively in an organization.

Bringing value to organizations.The use of ISO 50001 as a standard against which an organization measures its energy management program has several clear benefits. Using the standard will:

• Strengthen management’s focus on energy and inject organizational discipline across functional silos within the business.

• Create opportunity for cultural shift and encourage commitment to the program across the company, beyond easy but incomplete fixes.

• Introduce a systematic approach to achieving energy efficiency.



• Require management commitment of resources to energy reduction goals and link them directly to the organization’s profit margin.

• Measure and verify against the proven effectiveness of an energy management program.

Most importantly, using the international standard establishes energy as an enterprise “currency” for evaluating operational expenses.

Technology to support asset sustainability. The technology platform is the foundation of an effective energy usage policy and program for gathering, measuring, analyzing, presenting, and managing the extraordinary amount of data in a repeatable and accurate way. Without a system to perform that task, the organization risks a less-than-optimal return on its investment of both time and money in the effort to manage its energy usage.

The Infor10™ Enterprise Sustainability Suite offers a combination of energy, asset, environmental, and sustainability management capabilities unlike any other software available4. Delivering one of the most comprehensive, end-to-end energy, sustainability, and environmental technology platforms available today, Enterprise Sustainability Suite identifies areas of energy use and consumption, and then prioritizes those areas as opportunities to mitigate.

This solution facilitates critical inputs to the planning process, including information from existing utility bills, sources of energy, the environmental mission, the design basis of the facility, individual assets, benchmarking with peer groups—facility-to-facility—and external benchmarking with similar facilities in the same market sector around the world. The platform’s output affects policies, baselines, targets, and objectives. It integrates with day-to-day operations and maintenance of the infrastructure, property, plant, and equipment. The output also integrates energy with the procurement process, design process, and behavioral change.

These comprehensive capabilities come together in just one application, available with easy-to-access dashboard visibility and easy-to-use analysis tools. The dashboard displays information that consistently describes energy inefficiencies, helping to identify opportunities to drive down operating expenses. With this technology, energy and financial managers no longer have the onerous task of interpreting data from numerous spreadsheets dedicated to everything from individual assets to individual facilities. Ultimately, this suite of software solutions delivers the financial and physical controls the enterprise needs to be in full control of its sustainability, energy consumption, and the asset infrastructure that supports them.

4 Verdantix, Green Quadrant® Energy Management Software (Global), December 2011, p. 25.

Most importantly, using the international standard establishes energy as an enterprise “currency” for evaluating operational expenses.



With ISO 50001 as the industry standard, Enterprise Sustainability Suite mirrors key elements of ISO 50001 and supports the standard in significant ways. It drives stakeholder ROI across the entire enterprise, establishes the process execution level critical to performance, and continuously manages energy processes so organizations can:

• Cut energy costs.

• Reduce carbon-related emissions without disrupting operations.

• Continuously improve energy intensity.

• Use both energy avoidance and savings to evaluate internal and external metrics.

Enterprise Suitability Suite also allows organizations to establish the systems and processes needed to improve energy performance, including energy efficiency, use, and consumption. It facilitates an organization’s development and implementation of an energy policy and establishes objectives, targets, and action plans that consider legal requirements and information related to significant energy use. Most importantly, it allows an organization to achieve its policy commitments, take actions needed to improve its energy performance, and demonstrate how well the system conforms to the requirements of an international standard.

Conclusion.As organizations with equipment and facilities strive to minimize costs and improve profit margins while complying with tighter regulatory requirements, more are relying on advanced enterprise asset sustainability solutions. Energy usage is an important factor in enterprise asset management, adding significant costs to operational expenses. Asset sustainability solutions help identify energy inefficiencies and point to areas where companies can reduce waste. To manage their energy use and identify nonconformance issues, enterprises need to take the following steps:

• Use global asset sustainability to determine whether an asset is consuming more energy than expected.

• Continuously monitor, measure, and manage the energy consumption of each asset as part of day-to-day operational enterprise asset management, identifying energy inefficiencies and areas for improvement.

• Develop, implement, maintain, and improve an energy management system to focus on energy efficiency, including determining when to replace the asset with a more efficient alternative.

• Develop a formal energy and carbon management policy and program, and communicate it throughout the enterprise, including combining accountability and responsibility into one function.

• Use an accepted standard to measure energy management efforts, such as ISO 50001, including establishing energy performance indicators, objectives, targets, and action plans—and creating energy as a currency to evaluate operational expenses.

• Use advanced asset sustainability solutions, such as Infor10™ Enterprise Sustainability Suite, to identify areas of excessive energy use and consumption, and then prioritize those issues to reduce energy, greenhouse gases, waste, and water. The platform meets most of the ISO standard management goals and includes financial and physical controls to fully manage sustainability, energy consumption, and the asset and operating infrastructure that aligns accountability and responsibility.


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Disclaimer

This document reflects the direction Infor may take with regard to the specific product(s) described in this document, all of which is subject to change by Infor in its sole discretion, with or without notice to you. This document is not a commitment to you in any way and you should not rely on this document or any of its content in making any decision. Infor is not committing to develop or deliver any specified enhancement, upgrade, product or functionality, even if such is described in this document.

Copyright © 2012 Infor. All rights reserved. The word and design marks set forth herein are trademarks and/or registered trademarks of Infor and/or related affiliates and subsidiaries. All other trademarks listed herein are the property of their respective owners. www.infor.com.




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