Carpe diem Carbon: a promising new dawn for energy managers
June 21st 2009

Feel like you’re holding a winning lottery ticket? As an energy manager,perhaps you should.As Laurent Mineau explains, a combination of climate change related pressures are alerting business leaders of an urgent need for greater energy efficiency within their organisations.

These drivers are making alarm bells ring far louder than rising energy prices ever did. But will it be energy managers or other departments that use this opportunity to show how they can help prepare their organisation for a low carbon future?

It’s long overdue, but at last energy management as a business management issue is moving from the backroom to the boardroom. From AOB to a permanent agenda item.

From also-ran, to pace setter. Whatever your preferred metaphor for this seismic shift in fortunes, it seems clear that energy management has now arrived as an issue of strategic importance and with a long shelf life.

Perhaps this shift is masked by labelling – ‘carbon management’ rather than ‘energy management’. However legislation and other factors are pushing energy efficiency to the forefront of the debate, above other carbon emission sources such as transport. And a quick look at the drivers of this change suggests energy efficiency’s elevated status will be sustained.

It wasn’t always this way

It can be argued that energy management has had several false dawns in recent years. These were typically the result of a short term pressure, price spikes. The fluctuating wholesale price of electricity and gas over the last five years caused pain to many company bottom lines. In particular the price spikes of 2004, 2005 and 2006 led to rapidly rising energy costs being regularly cited as key reasons for reduced profitability by many companies in many sectors. The response was to purchase better – a focus on price, not volumes.

Risk management through flexible energy procurement was the ticket to managing this new business risk. For a while, energy managers with responsibility for energy procurement enjoyed more senior management attention. They could show how their knowledge of the energy markets and a more strategically driven approach to securing future energy prices reduced budgetary risk.

But the management spotlight often returned to other business issues every time energy prices came off the boil. A small drop brings sighs of relief that the crisis is over. Perhaps that’s the nature of focusing on reducing energy prices rather than reducing energy usage to protect against budgetary risk.

What’s different now?

The risk extends far further than budgets. Traditional practices are being questioned as developed nations realise the need to be more resource efficient. Do we really need to use as much raw material, packaging or transport? For energy, the pressures forcing businesses to seriously consider investing in greater energy efficiency are here for the long term. This new dawn for energy management is no false one.

Those long term pressures are the result of a growing sense of urgency and willingness at international and government levels to rapidly and significantly cut carbon emissions to reduce the risk of catastrophic climate change.The greater urgency is fuelled by:

• more alarming scientific evidence of a climate changing faster than originally thought,

• the first few examples of climate change devastating human habitats and creating climate change refugees (the first official ones being the people of the Carteret islands near Papua New Guinea),

• and a dramatic change in the international political context with the arrival of a new American President.

The political will is creating legal imperatives for carbon busting action at national and company levels. The Climate Change Act passed in November last year introduced legally binding carbon reduction targets for the UK (and raised them from previously accepted levels at the same time). Also a national carbon budgeting system to help measure progress towards the targets, and an independent, expert body called the Committee on Climate Change to advise Government on the level of carbon budgets and where cost effective reductions can be made. We’re not alone. The US is in the process of passing its own version of a Climate Change bill, the Clean Energy and Security Act.

Trading on reputations

If the Climate Change Act sets the scene for the UK as whole, the Carbon Reduction Commitment (CRC) sets the scene for business. The CRC, currently in its final stages of consultation, makes participating in a cap & trade carbon management scheme a mandatory requirement for thousands of businesses and public sector organisations from next year. Again,we’re not alone - the US is also proposing an emissions trading scheme for businesses. (If you thought Carbon Reduction Commitment was a mouthful, try Global Warming Pollution Reduction Act.) Both schemes have taken lessons from the EU Emissions Trading Scheme.

You could expect that this topic to only appeal to a niche audience -

the people tasked with ensuring their organisation’s compliance.

However the early signs are that the CRC is of great interest to a much wider audience – from top management to shop floor. In the last twelve months, EDF Energy has run over 30 workshops to explain the mechanics, risks and opportunities of the CRC to its customers. Based on the comments of 700 or so workshop delegates, we believe the CRC is already having a greater impact on senior management thinking than any period of rising energy prices in the last 20 years.A bold statement you might say, especially when the scheme hasn’t even started yet, but what’s really at risk here is corporate reputation.

Rising energy costs, though undesirable, can be managed when energy only accounts for tiny fraction of operating costs. Damaging the ability of a company’s brands to compete through degraded reputations is an altogether different matter!

Seize the opportunity, quickly We know many veteran energy managers have had their carefully researched, sound business cases for investment in energy efficiency initiatives rejected in the past. Even low level investments with super quick paybacks lost out to other seemingly more urgent and more ‘core’ issue – growing market share, expanding production, budget cuts.

But now that energy – through the carbon story – has caught the attention of business leaders, its show time. Revisit those rejected though sound proposals. Be positive. Show how, with your knowledge of energy efficiency and skills to realise your company’s potential, you can help protect the company’s most precious asset – it’s reputation.

And do it quickly, or someone else will. Carbon management is a hot topic with precious few seasoned pros. The energy use of its operations is of course a key component of an organisation’s carbon footprint, but it’s not the only one. There’s transport and the supply chain for starters. Competition for management attention will soon come from those areas.After years of waiting in the wings, it would be a shame if energy managers miss their cue.

See the potential

For energy managers, the Carbon Reduction Commitment is a gift. True, it does come with a few strings attached – accurately reporting on carbon emissions according to the rules of the scheme will create a significant additional workload for many.

However, if used correctly, the CRC will greatly boost your chances for having energy efficiency proposals approved. This is the lever that empowers energy managers to make a meaningful contribution to an organisation’s future success. Pull it.

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