Sieben Blog

The Importance of a Strategic Energy Plan

Jerry Burin — Mon, 14 Feb 2011 17:00:00 GMT

Most organizations continue to develop energy initiatives based upon tactical decisions and focusing on immediate concerns, rather than recognizing energy management as a strategic opportunity. Decisions concerning energy focus primarily on operating cost management. The utility bill represents a recurring monthly cost, a budget line item that fluctuates up and down over the course of the year, or compared to prior years (with all the focus associated when the cost goes up). The very fact that energy is predominately viewed as a cost and not an “input” to the operation of an enterprise pushes it to the margins of management planning. Dissecting energy into its many parts offers an extraordinary opportunity to impact the enterprise at almost all stakeholder levels.

Energy costs are a function of its metered usage—most commonly, kilowatt-hours of electricity and therms of natural gas. Fifty years ago, metered energy was a cheap and plentiful domestic resource and its impact on the environment, national security, and Earth’s climate simply weren’t accounted for. Sustainability—the effort to have a less harmful, more benign impact on our environment—wasn’t an issue.

Deregulated energy markets, new equipment and operations technology, the tremendous amount of operating data available for analysis, increasing opportunities for renewable energy usage, and the growing demand from customers, investors, and employees for organizations to demonstrate a commitment to sustainability—all issues driven by energy— present challenges for senior management that rarely get the attention they deserve.

Energy’s long history as simply “the utility bill” to be paid by the accounting department before being penalized a late charge, combined with often-decentralized facilities operations, left little opportunity for a holistic assessment of energy’s impact on the enterprise. A roll-up of an organization’s annual energy cost, a picture of its most recent ten-year growth history, and a projection of its cost trajectory over the next ten years—with the potential for climate-related surcharges kicking in within two to three years—would be a splash of icy water in the faces of most organizations’ senior leadership. This perspective on energy consistently fails to get senior management’s attention.

What can an organization do?

No dynamic, thoughtful organization fails to perform long-term planning. It’s safe to assume that, typically, energy has no place in such planning. But it should! It may not necessarily mirror the timeframe of the organization’s long-term plan but, at a minimum, it should look out over the next three years for opportunities and risks.

Developing a multi-year energy plan can begin with an assessment of current energy management and operations performance. How is energy information organized? How much energy is used annually? How is energy purchased and from whom? Have energy-consuming systems been evaluated for waste and improved efficiency? Does energy play a role in the design of new facilities? Does capital planning assess life-cycle costs of energy consuming equipment? Answers to these questions create a baseline from which future initiatives can develop.

Most importantly, senior leadership must acknowledge a commitment to address energy as an important strategic resource. Such an acknowledgement will serve as the catalyst for energy planning across the enterprise. A strategic energy plan needs a statement of purpose, a vision, and near-, medium-, and long-term goals. Many plan models exist. Pushing the energy agenda to the strategic level provides a wide-frame view of its impact on the organization with corresponding benefits to society as a whole.

Latest US Senate Energy Bill Only Lasted a Week

Todd Edwards — Mon, 16 Aug 2010 10:17:00 GMT

Last month (July 2010) Dan Bailey at Sieben Energy Associates created a matrix titled, "Major Energy and Climate Legislation of the 111th Congress" that outlines the various proposed energy and/or climate bills in 2009-2010. This is found at the following link: http://www.siebenenergy.com/LinkClick.aspx?fileticket=2xBuNhlLGvk%3d&tabid=73&mid=676.

Since the time that this document was written, there have been additional attempts to garner the support needed to pass energy/climate legislation in the US Senate. The most recent bill was unveiled on July 28, 2010, which was absent a price on carbon. Instead the July 28^th bill focused largely on offshore drilling and to a lesser extent domestic energy efficiency. This bill did not receive the backing needed to pass and was considered shot down within the first week of August. However, a number of articles written within the past two weeks suggest that Senate majority leader Harry Reid is still confident that an energy and/or climate bill will pass in September before the mid-term elections.

The Oil Question

Dan Bailey — Mon, 19 Apr 2010 18:04:00 GMT

In an opinion piece in the Wall Street Journal last week, R. James Woolsey, chairman of Woolsey Partners and a former director of the Central Intelligence Agency, outlined four strategies to reduce demand for oil. In the U.S., fuels derived from petroleum account for 95% of transportation needs but only 2% of electricity generation. Under the heading “How to End America’s Addiction to Oil,” Woolsey focused on strategies that are already available today:

Improve internal combustion engine electronics to better regulate fuel consumption within automobiles.
Switch to relatively inexpensive and domestically abundant natural gas for bus and interstate trucking fleets.
Begin to add compatible alternative liquid fuels (such as from waste and algae) that do not require engine modification into gasoline and diesel.
Expand and encourage the use of all-electric vehicles.

Our initial response, Woolsey says, should be to depend more heavily on electricity, natural gas, and biofuels for transportation. All of these seek to reduce our domestic demand for oil, because Woolsey believes that matters of supply are largely out of our hands, with most of the world’s oil controlled by OPEC nations. Given OPEC’s large reserves and cheap extraction costs, even a significant increase in drilling within the U.S. (which will require ever more expensive techniques) simply will not produce enough to make much of a difference in our daily petroleum diet. Woolsey also believes that cap-and-trade would not have much impact on personal behavior, as his figures suggest that an allowance price of $20 per ton of carbon dioxide means only an extra 20 cents per gallon of gasoline.

Woolsey summarizes his here-and-now recommendation in the final paragraph: “We can get a long way using existing vehicles, existing technology and affordable natural gas. As other improvements become practical…they can be adopted.”

While the focus of Woolsey’s editorial is reducing our dependence on oil for transportation, the second through fourth strategies above do not necessarily reduce carbon emissions. Alternative liquid fuels and natural gas still produce carbon dioxide when burned. And without the infrastructure to enjoy power from relatively carbon-free renewable sources (e.g., wind, solar, nuclear), electricity for vehicles still often comes from fossil fuels, principally coal in many areas of the country.

Also, while it is true that successful, economical drilling for natural gas in shale deposits throughout the country has increased our domestic reserves of the fuel, the price of natural gas could certainly rise. Whether through widespread use as a fleet fuel or as a preferential choice to replace coal in a carbon-constrained economy, natural gas is affordable today because our supply (including Canadian and other imports) is relatively easily able to satisfy demand. If demand for natural gas increases substantially, will it remain as inexpensive as it is today?

The nation is heavily dependent on its critical networks of electric transmission lines and natural gas pipelines. What effects would a major natural or man-made disruption in natural gas refinement and transportation have throughout the country? Depending heavily on any one fuel, even it can be produced in large quantities domestically, opens up oneself to additional risk. While natural gas is a clear early choice to help treat our oil addiction, it is not a long-term solution.

Yet Woolsey’s idea of a portfolio approach to replacing and reducing oil is a good one, as it highlights how a complex problem requires a variety of solutions working in tandem. Ending America’s addiction to oil will not only stem the flow of money overseas; it will also, by necessity, improve our transportation system, advance our technological leadership, and help create jobs here in the U.S. rather than abroad.

Pew Center Conference Review

Jerry Burin — Tue, 13 Apr 2010 22:45:00 GMT

The Pew Center on Global Climate Change held an energy efficiency conference in Chicago on April 6 and 7. This year it was entitled From Shop Floor to Top Floor: Best Business Practices in Energy Efficiency and coincided with their release of a report on the best practices in corporate energy efficency.

Interesting keynote and luncheon speakers ranging from Suzanne Malec-McKenna, the City of Chicago’s Commissioner of its Department of Environment to John Rowe, Chairman and CEO of Exelon Corporation, to former Senator John Warner, helped set the context for the conference—that the world is changing, and that fossil fuel-generated carbon emissions will surely become an economic factor within our society—with an associated cost borne by consumers.

Sustainability and environmental representatives of household name companies such as Toyota, IBM, Best Buy, PepsiCo, Johnson & Johnson, Hewlett Packard, Coca Cola and the Mars Candy described their companies’ efforts to establish and attain sustainability goals. A significant focus of their respective strategies was reducing energy consumption through energy efficiency—the notion of optimizing energy use in everything from heating and cooling of buildings to product manufacturing processes.

Several notable takeaways:

Establish big reduction goals—even if you don’t know how they’ll be met. Big goals inspire people.
Increasingly carbon will be measured as part of the manufacturing and delivery process of bringing a product to market—lots of carbon is embedded in the supply chain—expect to see carbon indices on consumer products as commonly as we see the ingredients of food products listed on their packaging labels.
Electric utilities will be big drivers of energy efficiency to offset the need to build more power plants—increasingly utilities will de-couple their profit motive from the sale of power and find the means to remain profitable as they reduce power sales.

Over the course of two days, speaker after speaker took the opportunity to demonstrate how their organization was focusing on energy efficiency to help meet sustainability goals. The conference served as a wake-up call for companies that, to date, have failed to heed the signs that sustainability, and by inference energy efficiency, is a mega trend at our doorstep.

The New Southern Hospitality: Building Energy Efficiency?

Dan Bailey — Mon, 12 Apr 2010 17:52:00 GMT

The Georgia Institute of Technology and Duke University’s Nicholas Institute have jointly released a report that summarizes the potential for energy efficiency in buildings across all 16 southern and mid-Atlantic states and the District of Columbia. Entitled “Energy Efficiency in the South,” the key metrics are astounding. The authors conclude that substantial (but by no means exhaustive) energy efficiency programs, implemented aggressively in businesses and homes across the entire region, have the potential to reduce utility bills by $41 billion, create 380,000 new jobs, limit the need for new power plants, and save 8.6 billion gallons of freshwater by 2020. Georgia Tech’s own press release about the study provides additional details and background about the co-lead researchers, Dr. Marilyn Brown of Georgia Tech and Etan Gumerman of Duke.

Measures to reduce energy consumption often show the least traction in southern U.S. states, where the demand for air conditioning during periods of intense summer heat places an outsized burden on the nation’s power generators. For these reasons, the adoption of energy efficiency in southern states is very important. From simple weatherization measures and improved building codes to advanced retrofits and updated appliances and other equipment, achieving truly energy-efficient buildings through cost-effective strategies is a goal that everybody can support.

The Southeast Energy Efficiency Alliance (SEEA), a non-profit that promotes energy efficiency, is hosting the 180-page full report (as well individual state profiles) on its website. Included at the beginning of the full report is an excellent 14-page Executive Summary that provides a fairly detailed overview of the major findings, methodology, and background, complete with charts, tables, and graphs. The residential, commercial, and industrial sectors are considered individually. Special emphasis is given to economic considerations, including energy bill savings, the cost-effectiveness of energy-efficiency policies, and the impact on electricity rates, employment, and gross regional product (GRP). The possible ramifications of a price on carbon are also factored into their analysis of how energy-efficiency programs might be perceived and implemented.

Yesterday, The Dallas Morning News reported on the study’s numbers for Texas, which is by far the largest of the states addressed in the study. According to the article, strict energy-efficient guidelines for Texas businesses and homes could, by 2020, save $13.7 billion in electric bills, create 96,300 jobs, and prevent the construction of 17 new power plants. Texas has a population of nearly 24 million (8% of the nation) but consumes 11.6% of the electric power. Messing with Texas, in terms of realizing energy efficiency in their buildings, could have a large influence on the rest of the South, if not the entire country.

America’s Building Stock – The Second Saudi Arabia

Dan Bailey — Wed, 24 Mar 2010 16:29:00 GMT

The energy (reduction) potential in America’s building stock is a tremendous resource, equivalent to tapping a second Saudi Arabia. The energy appetite of America’s buildings is enormous, but we can begin to cut back on the excess without sacrificing comfort or performance.

Craig Sieben spoke to this theme last week before the Realty Club of Chicago in a speech entitled “America’s Building Stock – The Second Saudi Arabia.” Craig referenced the excellent work of Art Rosenfeld, an award-winning scientist, one of the earliest promoters of energy efficiency in the U.S.—and one of Craig’s personal mentors.

In his speech, Craig emphasized smart and simple examples of what building owners and managers can do to cut back on their energy consumption. Reducing the energy appetite of our buildings is one small step towards a goal of U.S. energy independence. How can this be? Let’s do the math.

In 2008, the U.S. imported 1.5 million barrels of oil per day from Saudi Arabia. We consumed about 19.5 million barrels per day, which means that 8% of our appetite was satiated by Saudi Arabia’s vast oil reserves. Also in 2008, total U.S. energy consumption (all types) was 100 quadrillion BTU—3% of that total, or 3 quadrillion BTU, was the oil imported from Saudi Arabia. Our nation’s buildings accounted for 40 quadrillion BTU, or 40% of our total energy consumption in 2008.

If we’re able to cut the energy consumption of our buildings by just 15%, or 6 quadrillion BTU, we would reduce our total energy consumption by 6%, and we would offset twice the amount of energy that we import each year (in the form of petroleum) from Saudi Arabia. That’s a huge opportunity.

Retrofitting existing buildings is essential to reducing their energy consumption. Even simple steps, however, such as painting roofs white so that they reflect rather than absorb a greater amount of sunlight, can help mitigate cooling costs. Chicago alone has over 23,000 commercial, institutional, and industrial buildings—in addition to over one million residential units that range from single-family homes to condominium towers.

From the experience of hundreds of projects that Sieben Energy Associates has completed over the years, the energy consumption of a typical commercial, institutional, or industrial building can be reduced by 2–10% with very inexpensive (or even essentially free) energy efficiency measures. With a little more up-front investment that pays for itself with two or three years through lower energy bills, a reduction target of 15%, or even greater, is often easily achievable. Reducing energy consumption also reduces corresponding greenhouse gas emissions.

Trends show that America is moving in this direction. In June 2009, The U.S. House of Representatives passed the American Clean Energy and Security (ACES) Act, or Waxman-Markey bill. For new buildings, this legislation calls for a national commercial building code with energy use reduction of 30% relative to ASHRAE 2004 (upon signing), 50% by 2015, and 75% by 2030. And for existing buildings, the bill requires implementation of a Retrofit for Energy and Environmental Performance (REEP) program, administered by the states, to help spur retrofitting throughout the country.

In July 2009, McKinsey & Company projected a 23% decrease in energy demand and energy savings of $1.2 trillion (net $680 billion) through 2020 from energy efficiency improvements in our nation’s buildings.

And in December 2009, New York City passed a substantial energy legislation package with energy audit and lighting retrofit laws that apply to existing buildings.

As more and more building owners and managers work to understand their energy usage and environmental impact, more and more are turning to energy efficiency as a cost-effective solution for their business and their community. Sieben Energy Associates has over two decades of experience in the energy efficiency industry and can help your organization improve the performance of your buildings while reducing your operating expenses.

Sieben Energy in Attendance at North American Energy Conference

Dan Bailey — Mon, 01 Mar 2010 14:23:00 GMT

On Wednesday, March 3, Jerry Burin and I will be attending the North American Energy Conference sponsored by Enbridge Gas Services. This annual event, to be held this year at the Westin Lombard Yorktown Center, provides background on the U.S. natural gas market—where it has been, where it is now, and where it may be going.

The first of two scheduled keynote speakers is a director from the American Gas Association. He is expected to provide fundamental analysis of natural gas supply, demand, production, and consumption. The second speaker, a vice president from United ICAP, is expected to provide a technical and financial perspective on the natural gas market and the economy as a whole. Previous conferences have provided a wealth of information. This year, it will be particularly interesting to hear what the speakers may have to say about prospects for climate legislation, including cap-and-trade.

Over the past few years, the natural gas market has certainly been in flux. Prices rose to multi-year highs in the summer of 2008 before plunging to multi-year lows just over a year later. We are constantly monitoring the pulse of the market to help our clients manage their exposure to energy price fluctuations. Sieben Energy Associates has developed energy purchasing strategies for a number of large organizations to help them minimize the impact of high energy prices.

If Enbridge’s North American Energy conference this year is as good as it has been in previous years, we can expect to come away with a great deal of insight that will inform the work we at Sieben Energy Associates perform on behalf of our clients. Of course, nobody can predict the future with 100% certainty; for that reason, we are continually capturing energy commodity market news from a variety of sources, reviewing and filtering it to understand the consensus position, and communicating the relevance of it to our valued clients.

Craig Sieben to Lead Discussion at Wall Street Journal Conference

SEAadmin — Wed, 24 Feb 2010 05:00:00 GMT

Next week, March 3-5, the Wall Street Journal is once again hosting its premier environmental event for chief executives and policymakers "who are shaping the green business market." This year’s ECO:nomics Creating Environmental Capital Conference will be held in Santa Barbara, California at the Bacara Resort and Spa.

Just a few of the many leaders who will be participating are Dr. Steven Chu (Energy Secretary), Robert A. Iger (President and CEO of The Walt Disney Company), Peter Voser (Chief Executive of Royal Dutch Shell), Michael G. Morris (Chairman, President, and CEO of American Electric Power), T. Boone Pickens (Chairman of BP Capital Management), and Amory Lovins (Chairman and Chief Scientist of the Rocky Mountain Institute).

The Wall Street Journal describes the motivation for the conference as follows:

At this critical moment, with prospects for a global carbon emissions regime in flux, there is an urgent need for new answers. Corporate CEOs and entrepreneurs alike must alter their strategies to address a continuing recession and extended regulatory uncertainty. Where should decision makers focus? Find out at ECO:nomics, where the best minds in business and policy uncover the real risks and opportunities in the fast-changing world of environmental capital.

Craig Sieben, who participated in the event last year, was once again invited to serve as a Discussion Leader on the third day of the conference. He will be in attending events throughout the conference. Besides sharing his own expertise on energy efficiency with others, Craig is sure to come away with fresh insights from leaders and speakers that will help shape the valuable strategic perspective that we at Sieben Energy bring to all of our client engagements.

The three-day event promises to be a highly informative, influential, and entertaining. Attendees should come away with a better understanding of today’s strategic opportunities and risks at the intersection of business and environment.

Energy Top Ten for 2010

Dan Bailey — Mon, 21 Dec 2009 08:32:00 GMT

Some thoughts about what the United States can expect with respect to energy in 2010 with some humor thrown into the mix

Remarks on Wind Energy at Crain's Chicago Business

SEAadmin — Mon, 07 Dec 2009 05:52:00 GMT

Craig Sieben has remarked at Crain's Chicago Business on the development of wind energy in Illinois and its potential for helping advance a new energy economy