littlefield, matthew, LNS

5 Critical Factors to Reduce the Energy Intensity of Operations

With increasing energy prices, increasing pressure for operational cost reduction and major demographic shifts impacting the political and policy sphere, the focus on effective energy management is only increasing. Industrial companies today are being forced to address this trend and focus on cutting energy consumption wherever possible.

To achieve this, visibility into energy expenditures through energy intelligence is crucial, and a key metric for providing insight is energy intensity. This metric measures the amount of energy used to produce a unit of product — for example, the kWh per car or kWh per pound of food expended.

In certain industries, energy intensity can account for more than 50 percent of the costs of production, so even a small reduction in energy intensity can result in a substantial reduction in production costs, which ultimately flow to the company bottom line. Further compounding its value, the strategic reduction of energy can not only significantly reduce costs, it can also drive increased production performance, and subsequently, much greater efficiency. Though variable by industry, the Global Industrial Energy Efficiency Benchmarking Report, published by the United Nations Industrial Development Organization, identifies substantial potential for improvement across industries.

In a recent LNS Research survey of over 250 industrial companies, respondents were asked to report the improvement of energy intensity of operations.

Across respondents there are a number of critical people, process and technology factors that showed dramatic differences in the improvement of energy intensity year over year. Here are five key areas toward success:

  1. Implement an enterprise wide energy management program. An enterprise wide energy management program involves integrating the procurement, use, and reporting of energy across the enterprise. All tightly interrelated, this involves the key alignment of people, processes and technology, supported by a strong metrics program. This all starts with gaining the critical executive buy-in for this type of program, and by forming a key, a cross-sectional team of relevant stakeholders to eliminate informational silos around energy. Survey respondents that had established an enterprise program showed a 75 percent higher reduction in energy intensity respondents lacking these capabilities, at 7 percent improvement vs. 4 percent improvement.
  2. Establish enterprise-wide processes for balancing energy procurement and consumption. There are a number of already established energy management programs such as ENERGY STAR, ISO 50001 and SEP that carry built-in best practices for helping companies with methodologies like “Plan-Do-Check-Act.” Additionally, having enterprise-wide processes in place can help organizations balance production and energy prices through peak load shedding. Survey respondents with this capability more than doubled the energy intensity of companies that had yet to plan these capabilities at 9 percent vs. 4 percent.
  3. Automatically collect energy data at the production asset level. The deployment of energy intelligence technology is central to bringing this strategy to a functional level as it connects data among utilities, manufacturing plants, distribution and warehousing, and the corporate office. Gaining visibility into production asset data through machine integration allows for improved maintenance and monitoring of energy consumption. At the corporate level it also allows management to compare the leading and lagging facilities and production lines. Survey respondents with this capability also reported a 9 percent increase in energy intensity vs. 4 percent for those companies that had not planned to implement it.
  4. Develop ability to monitor and respond to energy at the production asset level. Related to above, the ability to monitor production assets and machinery through the use of a data historian allows businesses to send out automated alerts to shop-floor personnel if the machinery is not performing to condition-based maintenance (CBM) levels or other pre-determined business rules. Having visibility into live equipment status also enhances the efficiency of operations on the shop floor. Survey respondents with this capability in place have double the rate of energy intensity reduction vs. those that have not planned to implement it, at 10 percent vs. 5 percent.
  5. Enable corporate level roll-ups of energy data. Being able to roll-up energy data around an organization’s core areas if key to continuous improvement initiatives. Creating a dashboard that gives role-based visibility into key performance indicators (KPI) from the shop-floor to the top floor greatly enables executive management’s ability to make sure things are happening according to overall plans, as well as provides a better understanding of where those plans need to be tweaked for maximum success. Survey respondents with this capability had a 90 percent higher improvement in energy intensity reduction (9 percent vs. 5 percent) than organizations who did not have this capability in place.

Aligning the Key Areas Across the Enterprise

Undertaking an enterprise wide energy management program is a large undertaking that requires the alignment of people, processes and technology, and it needs to start from the top down. Once management has identified the target areas, technology solutions that support the integration of energy intelligence across utilities, manufacturing plants, and distribution and warehousing is key to obtaining the type of analytics that deliver role-based information to drive agile and effective decision making. As the data shows, companies investing in these capabilities today are reaping huge benefits in energy cost savings, and as the world becomes further recourse-constrained with the rise of populations and standards of living, effectively managing energy management at the enterprise level will only become more critical.

Matthew Littlefield is the President and Principal Analyst of LNS Research. Hear more of his thought leadership at @m_littlefield.

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3 thoughts on “5 Critical Factors to Reduce the Energy Intensity of Operations

  1. As someone interested in environmental issues (energy efficiency being one of them), it’s amazing that I’ve never heard of the term “energy intensity” before but it makes a lot of sense to evaluate a commercial enterprise’s operation based on this metric. Perhaps as energy efficiency becomes increasingly important to business, this term and its associated methods will become mainstream.

  2. Kenneth,
    Energy Intensity is the leading metric being used in measuring how a company, agency, building or campus is using energy. It can be measured in the data center market as PUE or in the government as BTU/SQFT. Either way, it is a great way to set metric comparisons across similar facilities over time and across similar industries. The more the markets will look at EI as a way to lower operational expenses, the more the number will lower from 18 to down around single digits.
    Howard Love
    Program Manager – Zero Net Energy Program

  3. I wholeheartedly agree with Kenneth that energy intensity needs to become a mainstream term. Full disclosure, we created the first real time energy intensity monitoring tool, and I’ll try to refrain from making this a sales pitch. But not only is having the production measurement so crucial to know if your energy efficiency measures are truly saving you money (they might also be slowing production while reducing energy), but when you capture it on an ongoing basis it allows you to make low or no-cost changes to processes, people, environmental conditions, etc., and see the impact of those on overall production efficiency.

    As an example, people don’t really associate lighting with production efficiency, but switching to a full spectrum led light from fluorescent is better for workers’ health and mood and could boost the manual participation in production while using less energy, even though the lighting is not a direct part of the manufacturing process.

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