Power up: strategies for effective energy management

Mar 21, 2023

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data

Reliable, affordable and sustainable energy is essential for any organization to function. But recent crises have shown that such an energy supply cannot be taken for granted. For example, recent record prices for oil and gas weigh heavily on the operating expenses of companies in many industrial sectors, severely impacting their profitability. Which is why ‘energy management’ is once again a hot topic in board rooms and strategy meetings. Michael Bulthé, Supply Chain Transformation Lead at delaware, discusses two levers companies can pull to take control of their energy costs, and their reporting obligations.

1. Reducing consumption

“The cheapest and greenest energy is the energy you don’t consume,” Michael starts. “The first step in successful energy management is thus to reduce demand as much as possible. Doing this requires a step-by-step approach that starts with a company-wide assessment of your current energy needs and consumption profile. How are you currently measuring, storing and distributing energy? Are there any internal energy sources available? If you’re in manufacturing, how is production organized, and is there a more energy-efficient way to do so? What happens with any energy surplus or residual heat from manufacturing processes? These are all questions that help organizations pinpoint room for improvement.”

3 dimensions of energy management

Once specific improvement opportunities are identified, they need to be further refined and evaluated. “You need to estimate both the energy savings of each initiative and the cost of the required changes. For example, do the energy savings of a heat pump justify its investment? Based on this information, you can prioritize investments and identify the low-hanging fruits to be considered first.

2. Smarter energy sourcing

No matter how much you’ve managed to reduce your total demand, you’ll most likely still face a significant quantity of energy to source. “For many companies, these invoices can get pretty complex,” says Michael. “Some businesses, like telecom operators or retailers, have hundreds or even thousands of metering points across different regions, and need to pay multiple providers and grid operators. In these situations, getting a clear view of total energy consumption could be a major challenge.”

In order to negotiate the best energy prices, however, you need to create an ‘energy consumption profile’. Michael: “Start by analyzing all the historical data, identifying cyclical and annual trends, and taking into account any planned strategical or operational changes. Only when you have a very detailed view of your energy needs in terms of volume, profile, quality and origin will you be able to prepare your RFPs, negotiate and contract the best conditions. Quite often, there is already a positive business case for speeding up the transition from analog to smart meters.”

energy consumption profile

“The benefits of efficient energy procurement, hedging and budgeting are a lower risk of unforeseen charges, hidden fees, and costs, more informed load forecasting, reliable sources, and control over your energy costs and types. It also allows you to make demands in terms of energy quality and sustainability from green sources.”

A reactive approach to energy management doesn’t cut it anymore. To be successful, companies need to have a clear plan. An external partner with the right expertise is essential.

Michael Bulthé, Supply Chain Transformation Lead

3. Reporting obligations and ESG

Over the last decade, environmental, social and governance (ESG) criteria have become more important for investors and the general public. In addition, regulatory bodies like the EU have introduced specific reporting obligations when it comes to carbon footprint and energy consumption. “Here, energy management and sourcing play an important role as well,” says Michael.

According to leading corporate standards, greenhouse gas emissions are now classified into three scopes:

Scope 1: direct emissions from company-owned facilities and vehicles
Scope 2: indirect emissions from purchased electricity, steam, heating and cooling
Scope 3: indirect emissions that occur in the value chain but aren’t owned by the company, e.g., transportation, employee commutes, business travel, and much more.

“Scope 1 and 2 are mandatory to report, and in the upcoming CSRD scope 3 reporting will be required as well. Thorough energy management allows you to establish a baseline and adequately report actions and results.”

reporting on energy management graph

Three birds with one stone

“Obviously, 2023 is a difficult year,” Michael concludes. “Energy suppliers are de-risking their portfolio which leads to unexpected costs, unclear budgets and higher complexity. As a result, companies are forced to address energy demand, costs and sourcing, and ESG and reporting obligations, all at the same time. A reactive approach to energy management will no longer work. To be successful, they’ll need to have a clear plan, and support from subject matter experts. That’s where delaware comes in.”