Energy and building management costs are no longer just a line item paid each month. Now facility professionals can perform deeper analysis — using cloud-based software — to automatically check data for accuracy, automatically identify problems and generally make data-driven decisions. This move to strategic energy cost management enables organizations to spend more time actively managing these costs instead of spending precious time collecting, normalizing and managing various data feeds from many systems.
There are a variety of advantages to strategic energy cost management, but before we highlight them, it is worth considering: Why hasn’t strategic energy cost management been the norm at organizations all along? Why hasn’t energy been treated like other costs, such as overall facility expenses, supply chain costs, or the raw materials for manufacturing?
We think there are plenty of reasons, but here are a few notable ones:
- The data is dated. Historically, the source of energy cost data has been the utility bill. This serves as “the truth,” but it arrives about 45 days after the end of the billing cycle (on May 15, you’ll see your March 1–31 utility bill). That’s too late to actively manage those costs, especially with complex tariffs that utilize time-of-use pricing and significant demand charges.
- The data isn’t aggregated. There are more than 3,000 utilities in the United States. Most organizations have at least one utility account per resource type (and three primary resources: electricity, gas, water) for each region in which they operate, resulting in dozens or hundreds of utility accounts across dozens of utility providers. Additionally, only a subset of these utilities provide electronic data access, which means that there may be no way to get utility data until the paper bill arrives in 45 days. It’s no surprise then that it can be extremely difficult to centralize this information across an enterprise in a way that decision-makers can act on.
- What does the data even say? With the monthly utility bill, discovering specific inefficiencies, identifying retrofit opportunities and developing an action plan remains time-consuming and imprecise. This makes it hard for facility professionals to create a compelling business case for other stakeholders, and investments in better energy management are overlooked for other projects.
- The missing data behind the data. The operators of the buildings within the facilities team typically provide basic information on energy costs to the finance team, but rarely do they have the time or tools to go beyond basic reporting of generalized key performance indicators. The lack of granularity within a utility bill makes it hard to provide explanations or justification for deviations from the budget.
This list could continue on, but most of the issues can be summarized by poor data access or poor tools to analyze and act on the data, which leads to time wasted to make up for these inefficiencies, or organizations that haven’t invested in strategic energy cost management.
With modern, intuitive building management software, these issues can be resolved, and building and facility professionals can move to data-driven decision-making. This makes strategic energy cost management within reach for many organizations. Collecting utility bills across even the largest enterprises can be automated, reducing manual data entry and manipulation. This time can be better spent analyzing the information and taking action to reduce costs. Moreover, with automated data collection and error checking, cost reports can be automatically distributed to all stakeholders, ensuring all parties have the information they need. Additionally, creating an accurate budget to forecast energy spend in future years does not have to be something done manually in Excel and stored on a single computer. More advanced solutions, like tracking and forecasting peak demand to avoid costly demand charges, also are within reach.
These are just a few examples, but we’ve seen many compelling ways that leading organizations are using software to advance their energy cost-management efforts. At the core, software will augment the work that facility professionals perform daily, allowing them to move to higher value tasks. In all cases, these leading organizations have implemented a few foundational elements, including:
- Interoperability with existing systems. The software must be able to collect a variety of energy sources and systems: the automatic collection of monthly utility bill data is a base requirement, and the availability of smart meter data means that you may be able to get real-time data with no additional hardware. Even if your utility does not have smart meters or does not provide access to the data, integrating energy data from on-site submeters can be done without costly integrations.
- Ability to act on the data collected. An enterprise-grade reporting and alerting platform is required because it means that reports can be generated automatically and relevant information distributed to colleagues. Automating the generation of these reports means that no manual effort is required to manipulate data and format charts and tables. Alerts that can highlight certain events and thresholds allow employees to be more responsive to issues that really matter, such as setting a new peak or overspending a monthly budget.
- Use dollars as the consistent organization-wide metric. Using a rate engine to translate the KW and KWH data — the language of energy and facility managers — into real dollars and cents — the language of finance professionals and senior decision-makers — enables communication and alignment on opportunities to reduce energy spend.
Beyond these foundational pieces, the software should enable a higher level of analysis that provides better financial outcomes for the business:
- Measurement and verification of energy retrofits: Most buildings could realize significant energy cost reduction with some upfront investment in retrofits. Without a method to track and show a positive ROI for these projects, most facility professionals don’t ask for money to take on even clearly advantageous projects. With measurement and verification (M&V) capabilities, software can rapidly build a baseline model of building performance and estimate current energy use using weather, occupancy and other data. The result is a reliable way to show what energy costs would have been without the retrofit, compared to actual post-retrofit costs. The difference likely is a compelling ROI.
- Peak demand management: As more utilities put more building owners on time-of-use rate structures, and as real-time energy data becomes more available, monitoring real-time loads to reduce demand charges is more important but also more realistic for novices. The key is to use your current installed metering infrastructure to quickly access actionable guidance on demand trends in your facilities, predictions of when you might set a new peak and the cost implications of doing so.
- Estimating bills before the end of the cycle: With interval data access and a rate and tariff engine, it is possible to estimate utility bills before they even arrive. Recall receiving a very expensive utility bill, making an update to the budget and then spending hours trying to figure out when in the month that additional energy was actually consumed and what caused it to be so high. Having data at hand will make these conversations much more comfortable across the organization. With advanced software, it is possible to give advance notice to stakeholders, immediately identifying the cause of the heightened use and promptly making an adjustment to the budget.
- Accurate budgeting: Generating budget forecasts for the coming quarters and years typically is done based on only a few simple inputs, such as an estimated 5 percent increase in energy consumption. By automating the creation of the budget forecast, it is possible to add more variables, analyze past performance more intimately and generate a more accurate budget. Moreover, the budgeting process should align with any organization-wide long-term energy reduction goals (such as a 10 percent reduction in the next five years). Modern software can help ensure annual budgets align with multi-year targets.
You may think that you don’t have the time nor the tools to move your organization in this direction. But, there have been many advances in hardware and software; it may be time to reassess this decision. Modern, cloud-based software enables data-driven energy cost management, which has positive financial returns for the business and creates a more productive relationship between facilities and finance teams. Instead of facilities teams spending hours estimating costs and pulling together data from many sources, they can use software to generate even more insightful information in a fraction of the time. This means that they can spend more time focused on strategic energy cost management: reducing costs and directing time and resources toward this goal, instead of just trying to understand the state of affairs of their buildings.
Joseph Aamidor serves as director of product at Lucid. He is a subject matter expert in building, energy and sustainability issues with 12 years of experience in consulting and software product management, sales and implementation. He has experience measuring and verifying savings of commercial building energy efficiency retrofits and leading development of national and corporate GHG inventories.