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Matthew Littlefield

Quality Insider

Achieving Measurable Improvements With Energy Management Metrics

Use a tiered and tactical approach to meet objectives

Published: Monday, March 18, 2013 - 11:17


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.

For energy management at a high level, companies can take a tiered and tactical approach by appointing a chief strategy officer (to optimize people), following the ISO 50001 standard (processes), and implementing industrial energy management software (technology). By doing this, they can meet operational and financial objectives identified in the operational excellence model.

The best way to measure progress toward these objectives, though, is by using energy management metrics. Numerous methods, strategies, and key metrics are available to companies for analyzing and benchmarking energy performance. Following is an overview of how energy metrics are used, along with some best practices that are used by organizations today.

Areas of focus for energy management metrics

When discussing energy metrics, start with the major concern for most companies today: understanding and measuring energy efficiency. Many industrial companies have focused on energy efficiency for years, especially in energy-intensive industries like metals, mining, minerals, pulp and paper, and oil and gas. 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) so that energy, and not just product costs, is included in 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 others. Companies often use different hurdle rates for energy-efficiency projects as compared to other capital operational outlays, and also leverage financing options that can take advantage of future energy savings during the initial capital costs.

 

Although focusing on each of these areas can deliver 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 to understand which metrics to measure and how to monitor performance gains over time.

Best practices for measuring energy metrics

Companies that optimize key resources and create a strategic industrial energy management framework follow these best practices when analyzing 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 can tie energy procurement decisions to the state of operations.
Viewing energy as a product, rather than a fixed cost. Companies should not look at energy as a purely fixed cost. Instead, energy costs should be broken down into a mixture of fixed and variable costs and included within both the bill of materials and the costing methods in place at the company (e.g., activity-based costing).

Measuring the right metrics

The other major question companies must answer is which metrics to measure. There are a couple of different factors to consider; one is whether 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, 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 Research 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 energy prices so that a true picture of energy efficiency improvements is 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.

Use technology to attain the level of granularity needed

Accomplishing an effective energy metrics program takes a technological 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 manufacturing operations management (MOM) system integration.

Many automation vendors are already incorporating energy into data models and networking protocols to ensure these data can flow up to enterprise systems and dashboard technologies. In future reports, LNS Research will offer a more in-depth analysis of metrics used today as well as how leading companies take advantage of the industrial energy management framework to measure them.


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About The Author

Matthew Littlefield’s picture

Matthew Littlefield

Matthew Littlefield is president and principal analyst for LNS Research based in Brookline, Massachusetts. LNS Research provides executives a platform for accessing unbiased research and benchmark data to improve business performance. Littlefield writes for the LNS Research blog where he covers topics including enterprise quality management software, manufacturing operations management, asset performance management, sustainability, and industrial automation 2.0.