ISO 50001 Energy Performance Management

Energy Management Systems Driving Financial Results

Don Macdonald, Director of Sustainability UL DQS, Inc.

Quality Systems Demonstrate Shareholder Value

Drive Return on Investment (ROI) across manufacturing & operating silos via Quality Systems
Process level execution critical to performance Continuously managed energy processes:
Reduce exposure to energy costs (Internal hedging and volatility management) Reduce carbon related emissions without negative effect on operations Continual improvement of energy intensity Value both avoidance & savings for internal and external metrics (e.g. emissions, utility credits, reduced labor intensity, CAPEX, etc.)

Why an Energy Management Standard

Energy is a corporations currency Strengthens management focus on energy, injects organizational discipline across functional silos Creates opportunity for cultural shift; encourages commitment across company, beyond low hanging fruit Introduces and sustains a systematic approach to efficiency, wise use of resources Requires management commitment of resources appropriate to the goals of the EnMS and can be linked QMS / EMS that tie back to profit margin Based on measurement and verification
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ISO 50001 Key Elements

Energy policy Cross-divisional management team Energy review Baseline (s) Energy performance indicators (EnPIs) Energy objectives and targets Action plans Operating controls and procedures Measurement, verification, and documentation Reporting of progress

Executives Seek Certainty

Specific operational strategy must be the key part of the Energy Policy and M & V Strategydone properly, will often times lead to a positive ROI on the overall Benchmarking, Certification or Non-Certification process

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Source: McKinsey

Organizational barriers to improving energy management

Energy not valued as an organizational currency Continuous monitoring, metrics and performance measurement absent

Deep Process quality management systems not embedded Stakeholders focus on production and not efficient use of energy or resources Functional silos vs. cultural silos IT data, monitoring and systems

Economic performance, financial and qualitative benefits (ROI) absent

First costs more important than recurring costs

Disconnect between capital and operating budgets

Technical training lacking

Sustainability culture immature

Harnessing the power of process

ENERGY MANAGEMENT STANDARDS

Business processes for competitive advantage: Six Sigma Lean Manufacturing Continuous Improvement ISO 9001 ISO 14001 Plan-do-check-act

Formal energy management standards (ANSI, BSI):

40% 35% 30% 25% 20% 15% 10% 5% 0% Energy Management Standard Continuous Improvement ISO 9001 or 140001 Six Sigma Lean

JCI, 2011
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COMPREHENSIVE ENERGY MANAGEMENT RARE

Training for employees: 76% Many organizations adopting specific practices Formal review of energy policy: 47% Incentives for energy efficiency success: 45% Effective & empowered energy team: 41% Enterprise level energy data: 29% Corporate reduction goal: 28% Energy action plan for organization: 28% Formal energy policy: 27% C-level responsibility: 27% Adopted energy standard: 27%

Of the 83 organizations surveyed

40 35 30 25 20 15

s t z i n a g O f o r e b m u N

10 5 0 0-2 3-4 5-6 Energy Management Score 7-8 9-10

JCI JCI 2011 2011

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PIECES OF ENERGY MANAGEMENT WORLDWIDE

Evidence from global Energy Efficiency Indicator survey

62% have increased occupant awareness about energy saving opportunities 40% monitor energy usage data weekly or more frequently 30% have a publicly stated carbon reduction goal 30% have sent operations staff to training sessions 19% have energy or climate set-asides in the capital budget 13% have hired a dedicated energy manager
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JCI, 2011
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Sustainability & Energy Management System Maturity

Benchmark your Organization

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Energy Investments & Operations

Impact on companies will be multi-dimensional, each organization will be unique. Facility level and procurement energy managers are current industry focus leads for these activities. Foundational tools for existing and new energy management programs are critical.

Source: UNIDO 2010

Source: UNIDO

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Shareholder Perspectives EnMS Accounting for Value

Profit Margin Procurement - energy hedging and volitatility management Product design can embody energy Supply chain costs - energy, raw material & transportation Extend QMS and EMS systems whether certified or Self Declared Sales Growth Life cycle energy reductions embedded in product and manufacturing Competitive advantage, less energy and related raw material processing Investment Working Capital Reduced excess energy and materials, waste prevention, recycling, raw material substitution
Investment Fixed Capital Energy process modifications often lead to end-of-the-pipe pollution control facilities Tax Rate Availability of grants, utility program credits, insurance ratings Cost of Capital Improve loan characteristics Energy risk management attracts shareholders which leads to lower cost of debt and equity Non-disclosure of energy efficiency, like environmental & CSR corporate performance may have short-term impacts that lead to premium capital costs

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Client Impact
Coordinating stakeholders for common goals Framework for:
Educating stakeholders Defining goals Budgeting resources Recognizing hurdles Defining accountabilities Identifying rewards

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Energy Benchmarking

ISO 50001 provides a proven model that helps organizations systematically plan, benchmark and manage energy use. ISO/PC 242 Chair, E. Pinero.

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Energy as a strategic GHG & Climate Driver

Uncertainty in carbon markets, environmental regulations, concerned investors, climate change policy pose risks that cannot be managed using existing norms and procedures
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Market Adoption Indicators

ISO 9001 ROI benchmarks 9-13%
MNCs mandated or implied Tier 1 & 2 adoption Competitive advantage & supply chain drivers added further incentives Operational benefits realized but marginally documented No real performance metrics

ISO 14001 ROI Benchmarks 7-12%

Similar drivers as ISO 9001, plus Environmental responsibility Evolving into CSR & CSV No real performance metrics

Information Security

Quality Mgmt

Environ Mgmt

ISO 50001
Published ROI Benchmark Data Suggests 5-15% range expected Performance metrics (self-defined) incorporated Web-based & continuous performance tools Measured benchmarking EN 16001 & SEP

Procurement

Energy Mgmt

Risk Mgmt

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Green Buildings & ISO 50001

Real Estate Executives seek to demonstrate LEED Investments LEED conditioned spaces: Sustainable Sites

Water Efficiency

Energy and Atmosphere

Materials and Resources

Indoor Environmental Quality

Innovation Credits and Design/Build Process

Independent verification of these critical environmental & energy components is a key

part of the ISO 50001 M & V process in achieving energy efficiency, optimization and ultimately...measurable sustainability B. Reichel BPT
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Manufacturing Carbon / Green House Gas & ISO 50001

Example Goal reduce GHG impact by 10% over next five years
Traditionally a 10% reduction in mixed fuels consumption might be selected as a target. However, this may restrict organization

Holistic approach based on the problem (impact) rather than the cause, increases options Flexible planning in investments,
Reduce CFCs & related emissions Energy mix & allocation End of pipe methane or co-generation options Production process changes cooling, heating, drying

CSR Implications
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IT Data Centers & ISO 50001

Observed ROI~ For every dollar saved, savings of $6 - $8 in operational costs realized. Additional in-direct savings of labor, maintenance, etc.

IT solutions alone, without validation and verification, ultimately can under-perform without the disciplined structure of continuous energy performance combined with IT data certification methodologies.
Prioritization of investment tasks to secure reduced energy costs and maximize ROI. Provides consistent reporting to drive development of data center energy efficiency change programs. Utilize proven and documented assessment methodologies, defers consulting costs for baseline and assessment activities. Contributes to requirements for acceptance and ongoing compliance reporting for participant status.

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Food & Packaging ISO 50001

ISO 50001 is expected to standardize energy management across the Food Supply Chain

Early indicators of benefit support

Examples: Fertilizer and pesticide production Plastics Packaging Manufacturing Supply Chain

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When Does it Make Sense to Look at Energy?

Seeking the opportunities to become green, sell more product branding Need to reduce energy bills, hedging Improve bottom line financials Customer demands it Modifying major mechanical systems Retro fitting manufacturing processes Capturing incentives and rebates, taxes Expanding or moving the facility

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The BusinessasUsual Energy Audit Value

Energy balance Optimized system model Menu of specific improvements: Results in one time PROJECTS Maybe some behavioral changes
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Parallel Agendas
Safety 18001 Environmental - 14001 Capital asset planning Emissions & environmental liabilities (carbon & GHG) Space management Sustainability (internal housekeeping)
Waste reduction Supply chain marketability New product/service opportunities Employee engagement, volunteerism, quality workplace

Sustainability (retail: market differentiation)

New green products and services
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Who are the Decision Makers

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Targeting the right audience

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Possible Outcomes of an Energy Audit

Adopt energyefficient technologies
Use less energy while maintaining the same level of service Opportunities to upgrade to bestpractice procedures

Diversify energy risk

Identify alternative energy formats and suppliers

Optimize energy expense

Timeofuse, account/meter configuration, procurement strategy, demand response
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Classic Energy Audits(With all due respect) Technical people, technical language! Meters, probes, sensors, charts, audit checklists, formulas Opportunities = One time projects PROJECTS.
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Quality Management Processes drive performance improvement by moving away from individual projects to the system level

The BusinessasUsual Audit Client Plant superintendent, facilities engineer. Probably not the quality manager! Focus: system reliability Audit goals:
Find whats broken Write a report Fix it (something we have avoided, until recently) Return to businessasusual
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The BusinessasUsual Outcome You get, one time benefits: Energy input/output model or an audit report Normative energy budget, operating benchmarks, certification List of recommended projects Payback or other costbenefit measures Summary of applicable rebates and incentives

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ISO 50001 Delivers a Systematic Process Improvement

With a Disciplined Process you receive:
An evaluation of time & risk posed by recommendations An explanation of energy solutions in larger business context Scenarios: What if you do? and what if you dont? Alternative paths to implementation Identification of critical success factors A compelling answer to Whats in it for me? (ROI or time weighted investment decision making)

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Words of Caution
Audit has a bad connotation to some/most Procurement Directors will:
See an audit as a commodity You must sell value not benefit, You get what you pay for

Efficiency can scare some people

Downsizing? CHANGE?

Need to identify all stakeholders Explain energy performance in PLAIN ENGLISH, not technical terms or referencing a Standard
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PostAudit Issues
Which projects do we start with? How do we compete for capital dollars? Which department pays? Which department implements? Which department books the Quality Management Processes drive savings? performance improvement by moving away from Verification? individual projects to the system level Incentives?
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Energy Benchmarking

ISO 50001 provides a proven model that helps organizations systematically plan, benchmark and manage energy use. ISO/PC 242 Chair, E. Pinero.

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What Top Management Needs to Know

C. Russell
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What Business leaders want to Know, and will likely ask you!

What is the benefit to me?

How many dollars? How quickly do the dollars accrue? What is the risk of investing? What is the risk of not investing?

Whats the most I should pay for it? How does it compare to other ways to use the same money?
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Most Audits End up Collecting Dust on a Shelf: WHY?

Lack of a clear agenda: Lack of focus within scope. To what end: Savings? Productivity? Accuracy? No clear ownership of the results Failure to prepare staff for the idea of an energy audit Is this a witch hunt, or what? Will the results embarrass me? A dense, technical document that only an engineer could understand Lack of exit discussion with key managers:
Discuss findings, weed out options with political issues Link the findings with other business priorities: Whats in it for YOU.
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Market Response To Certification

Clients will pursue if Clear Value to bottom Line Required by corporate management Required by customers Necessary to gain traction and overcome organizational inertia Standard is recognized as a differentiator Allows them to sell more widgets

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