Industry is generally encouraged by government to reduce energy consumption with the assumption that prospect of lower energy costs are of interest to firms.
However, whilst many organisations do undertake energy audits, very few actually implement the recommendations despite cost savings being identified. This article examines the problem and suggests solutions.
The reasons industry is encouraged to undertake energy audits are generally two fold. Firstly, governments need to ensure industry remains competitive, and second, governments need to meet CO2 reduction targets. Encouragement by government is via the carrot and stick approach. The carrot is the prospect that costs will be reduced and for smaller firms, there is the offer of free and subsidised energy audits. The stick is that some sectors will be mandated to undertake energy audits; either through conditions in IPC licences or through the EU Energy Efficiency Directive (EED).
Having an energy audit does not necessarily mean that energy consumption will be reduced. A recent energy audit promotion by NIE resulted in 60 energy audits being carried out, but not a single recommendation being implemented. This poor success rate is not unusual amongst other bodies promoting energy efficiency.
It would appear strange at first sight that an organisation would commission an energy audit, then not wish to implement the savings. Where energy audits are offered free of charge or highly subsidised, then the internal process of agreeing to have an audit is at a relatively low level. However, once the recommendations are made, the financial implications are more significant and the decision making process tends to go higher up. Often non-technical managers are then involved and other demands on time and money will surface.
The problem of low implementation of energy audit recommendations is that for those managing businesses, energy costs are not significant and there are more pressing issues to be addressed. A recent article in the Harvard Business Review suggested that there are just two rules for successful companies, concentrate on better products rather than cheaper products, and importantly for this article, concentrate on increasing revenue rather than cutting costs. Therefore the prospect of reducing energy costs is not a convincing argument for many firms; concentrating on increasing revenue is seen as more important.
What is then required to help achieve national CO2 emission reduction targets is for governments and energy professionals to focus on aspects that are truly of concern to senior management of firms, rather than appealing to cuts in energy costs. One aspects stand out, carbon reduction.
For many businesses, reduction in carbon emissions may be far more important than cuts in the cost of energy. Some multinationals, e.g. Coca Cola, will favour investment decisions that reduce carbon. And large multinationals will favour, all other things being equal, those suppliers with a commitment to lowering their carbon footprint. For example, Marks and Spencer’s will regularly ask supplies for their carbon footprint. For those organisations concerned with increasing sales and revenue the recommendations to reduce the carbon is more likely to win top management support than energy cost savings.
In essence, government promotion of energy savings by the prospect of cost savings is out of step with what industry requires. Most organisations want carbon reduction for purposes other than cost reduction and this means that the message from government and similar bodies must change. The new message should be to promote carbon reduction instead of cost reduction and state the benefits in terms of increased sales, greater sustainability instead of reduced costs.
The author, Bob Sutcliffe, is a Chartered Engineer with significant experience of energy in the UK and Ireland. Bob has worked with the Carbon Trust, Invest Northern Ireland and Sustainable Energy Authority of Ireland delivery energy audits and helping implement savings. Bob is also on the Enterprise Ireland Green Plus and Green Transform register of approved consultants. Bob can be contacted at energy@iol.ie