ISO 50001, SEP Yields >$500,000 Annual Savings and Payback of 1.7 years per Facility on Average
The Superior Energy Performance (SEP) Program is an industrial energy management certification program that uses the ISO 50001-energy management system standard as its foundation, with additional requirements including third-party measurement and verification (M&V) of energy savings. SEP, which is now accepting applications for enrollment from industrial facilities, was developed and implemented by the U.S. Department of Energy (DOE) and the U.S. Council for Energy-Efficient Manufacturing. The authors of this post have supported DOE to interview representatives from nine of the initial SEP-certified facilities; collecting the first dataset that quantifies the costs and benefits of installing an ISO 50001-compliant energy management system (EnMS) through the SEP program (we also authored a detailed paper on the topic). This post is meant to provide a more complete summary of our results, which were highlighted in a March 10, 2014 article that focused exclusively on the program costs, without any discussion of program benefits. SEP certification results in benefits including energy cost savings that favorably impact a facility’s bottom line: our results show over $500,000 annual savings per facility (not including any savings from business-as-usual (BAU) activities, capital project implementation, or productivity gains).
The average payback period to implement an EnMS and be certified in the SEP program was 1.7 years for the nine facilities we analyzed. Payback is calculated by taking into account all program costs (including internal staff time, external technical assistance, metering installation, and certification costs) and benefits that can be attributed to SEP program participation. In short,
Payback = Costs/Benefits = (EnMS and SEP Implementation Costs)/(Operational Energy Savings [attributable to SEP in SEP reporting period]).
As seen in the below figure, the payback period, which is correlated to the baseline facility energy bill, ranges from as low as 4 months (for a facility with a $22 million baseline annual energy bill) to as high as 7.6 years (for a facility with a $0.5 million baseline annual energy bill). Full results are described in more detail in our paper Assessing the Costs and Benefits of the Superior Energy Performance Program.
The benefits used in the above payback calculation were calculated to only include energy cost savings resulting from operational (no-cost/low-cost) actions implemented after the facilities began to develop and implement an EnMS. BAU energy cost savings, productivity gains, and energy cost savings from capital projects were not included in the SEP payback calculation. Across all the facilities, nearly three-quarters of energy cost savings were the result of operational improvements and the remainder from capital project savings. Three of the nine interviewed facilities achieved SEP certification through operational improvements alone. On average, facilities energy savings attributable to SEP equal to 10.1%. Combined with savings attributed to BAU activities, facilities energy performance improvement rose to 13.7% over their baseline.
We utilized a very conservative cost-accounting approach to quantify all costs associated with EnMS implementation, including the value of all internal plant staff time associated with energy management activities and any external costs, including the cost of SEP and ISO 50001 certification, new energy metering equipment, and external technical assistance. These costs totaled to an average of $319,000 per facility. Internal staff time costs accounted for two-thirds of this total ($214,000), while all the other costs accounted for the remaining one-third ($105,000). Importantly, internal staff time includes any staff already employed at the facility, engaged in energy management or other activities. Through additional interviews and analysis, we are learning that the majority of internal staff time costs would have been incurred by facilities regardless of participating in the SEP program. Only infrequently did facilities need to hire new staff or significantly reallocate existing staff effort to work on the EnMS.
It is anticipated that costs will be reduced for facilities seeking re-certification to SEP. Metering costs will shift from purchases of new meters to maintenance of existing meters. Consultant expertise will still be valued, particularly before an external audit, but dependency on external assistance will likely reduce. For a company seeking to certify a second facility to SEP, interviewed facility representatives estimated that staff time requirements would be 20 to 30 percent lower than the staff time to achieve certification at the first facility, reducing the largest cost of SEP participation. In addition, the DOE is exploring ways to make SEP certification easier and more affordable for industrial facilities through two accelerator programs. Through the SEP Ratepayer-funded Program Accelerator Program DOE is partnering with three utilities and energy efficiency program administrators to test SEP as a practical, energy-saving program offering for their industrial customers. And six companies are participating in the SEP Enterprise-Wide Accelerator Program that is designed to implement SEP and ISO 50001 on an enterprise-wide level (such as across a corporation, business unit, or multiple plants) to enable companies to benefit from economies of scale.
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