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Russell IETC 2014

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Christopher Russell

This document discusses the role of professional risk in implementing industrial energy improvements. It begins with an introduction of the author and his background in energy management. It then discusses how industrial energy use accounts for a large portion of total energy consumption but also presents opportunities for cost savings. The document outlines several types of risks to energy improvement projects, including technical, accountability, measurement, investment, and management risks. It provides examples and considerations for each type of risk. The overall message is that energy improvements involve risks but also opportunities to lower costs if risks are properly addressed.

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THE ROLE OF PROFESSIONAL RISK In Implementing Industrial Energy Improvements Christopher Russell, Principal Energy PathFINDER .com (443) 636-7746 2014
CHRISTOPHER RUSSELL ≒ Principal, Energy Pathfinder Management Consulting, LLC ≒ Visiting Fellow, American Council for an Energy Efficient Economy ≒ Energy Manager for Howard County, MD, 2010-2012 ≒ Director of industrial programs, Alliance to Save Energy (1999-2006) ≒ Author: The Industrial Energy Harvest ≒ MBA, University of Maryland ≒ Master of Arts Urban Studies, University of Maryland ≒ B.A., McGill University Connecting the dots between energy choices and business success. 2息2014 Energy PathFINDER.com
The beginning of knowledge is the discovery of something we do not understand. -- Frank Herbert 1920-1986 Author of Dune 3息2014 Energy PathFINDER.com
Background: Industrial Energy ≒ One third of the US energy pie, 12.5% of GDP ≒ Efficient use offsets need for regional utility infrastructure investment ≒ No energy, no production, no revenue ≒ Cost of doing business (tax deduction) ≒ Energy managers in the cost bulls-eye ≒ Spend money to save money? 4息2014 Energy PathFINDER.com
U.S. Department of Energy, Advanced Manufacturing Office). 2012. Manufacturing Energy and Carbon Footprint, NAICS 31-33). Washington, DC: DOE http://www1.eere.energy.gov/manufacturing/resources/footprints.html 5
Industrial Energy: Gross to Net 6息2014 Energy PathFINDER.com
Risks and Opportunities ≒ Technical risk ≒ Accountability risk ≒ Measurement risk ≒ Investment risk ≒ Management risk 7息2014 Energy PathFINDER.com
Methodology ≒ Casual distillation of 80 interviews of industrial energy practitioners & experts, 2012-14 ≒ No hypothesis only a review of evident trends 8息2014 Energy PathFINDER.com
Opportunity is missed by most people because it is dressed in overalls and looks like work. -- Thomas Alva Edison 1847 - 1931 American inventor and businessman 9息2014 Energy PathFINDER.com
Technical Risk ≒ Fugitive energy: destroys physical assets ≒ Real time energy data = pulse on operations ≒ Failure to M&V = accepting risk of failure ≒ Monetize energy + non-energy benefits ≒ No energy assessment? IAC database 10息2014 Energy PathFINDER.com
Industrial Assessment Database http://iac.rutgers.edu/database/ 15,000 Energy assessment results: Recommendations, costs, savings Sort by plant size, type and location 息2014 Energy PathFINDER.com 1111
Accountability Risk ≒ Competing priorities: output comes first ≒ Invisibility: no performance metrics for energy ≒ Reluctance to change whats not broken ≒ Energy waste = small percent of expenses ≒ Delegation to unempowered staff. ≒ Bias for hardware over soft/human issues ≒ Energy choices: shaping cash flows for years, decades ≒ Energy manager: Inside or outside hire? ≒ Convert recommendations into implementations ≒ Map the decisions: coordinate with/support other agendas 12息2014 Energy PathFINDER.com
Measurement Risk ≒Quantify: energy savings, investment rates of return, participation/support ≒Ill-chosen metrics? Failure to measure? ≒Good metrics: ≒ Easy to collect on an ongoing basis ≒ Easy to understand ≒ Link to staff accountabilities ≒Subject of regular management discussion? 13息2014 Energy PathFINDER.com
Investment Risk ≒ Profit = retained earnings = capital. Capital has to go somewhere Compare investment options? ≒ Common justification = short payback ≒ Benchmark = return on invested assets 14息2014 Energy PathFINDER.com
15息2014 Energy PathFINDER.com Payback vs. Rate of Return
Management Risk ≒ Energy management: conceived in isolation ≒ Top management support? Yeah, but ≒ Sideways, incremental victories ≒ Departmental affinities, complementarities ≒ Departmental turf issues ≒ Budget stand-off? ≒ Monetize: cost, benefits, cost of doing nothing ≒ Document, communicate, celebrate 16息2014 Energy PathFINDER.com
Energy Management 竪 Change 竪 Risk & Reward? 17息2014 Energy PathFINDER.com High YIELD BUSINESS PLAN: PLAN-DO-CHECK-ACT ≒ Monetize energy position ≒ Document costs to do/not do ≒ Seek mutual affinities SYSTEMATIC VALUE HARVESTING COMPONENT APPROACH ≒ Driven by breakdowns, rebates ≒ Compete for capex ≒ Address symptoms, not root causes FEAST OR FAMINE PROJECT HUNTING Low YIELD EMPHASIZE BEHAVIOR, PERSONAL CHOICE ≒ Authority? Moral suasion? ≒ Accountability? Burn out? SPRAY & PRAY DONT MANAGE ENERGY ≒ Minimal change, low hassle factor ≒ Absorb energy price, tech risk DENY & DEFLECT Low RISK High RISK
Change is not compulsory [but then] neither is survival. -- W. Edwards Deming 1900 - 1993 American statistician, professor, author, lecturer and consultant 18息2014 Energy PathFINDER.com
ENERGYPATHFINDER.COM CHRISTOPHER RUSSELL INFO@ENERGYPATHFINDER.COM @ENERGYpathfndr THANK YOU!

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Russell IETC 2014

  • 1. THE ROLE OF PROFESSIONAL RISK In Implementing Industrial Energy Improvements Christopher Russell, Principal Energy PathFINDER .com (443) 636-7746 2014
  • 2. CHRISTOPHER RUSSELL ≒ Principal, Energy Pathfinder Management Consulting, LLC ≒ Visiting Fellow, American Council for an Energy Efficient Economy ≒ Energy Manager for Howard County, MD, 2010-2012 ≒ Director of industrial programs, Alliance to Save Energy (1999-2006) ≒ Author: The Industrial Energy Harvest ≒ MBA, University of Maryland ≒ Master of Arts Urban Studies, University of Maryland ≒ B.A., McGill University Connecting the dots between energy choices and business success. 2息2014 Energy PathFINDER.com
  • 3. The beginning of knowledge is the discovery of something we do not understand. -- Frank Herbert 1920-1986 Author of Dune 3息2014 Energy PathFINDER.com
  • 4. Background: Industrial Energy ≒ One third of the US energy pie, 12.5% of GDP ≒ Efficient use offsets need for regional utility infrastructure investment ≒ No energy, no production, no revenue ≒ Cost of doing business (tax deduction) ≒ Energy managers in the cost bulls-eye ≒ Spend money to save money? 4息2014 Energy PathFINDER.com
  • 5. U.S. Department of Energy, Advanced Manufacturing Office). 2012. Manufacturing Energy and Carbon Footprint, NAICS 31-33). Washington, DC: DOE http://www1.eere.energy.gov/manufacturing/resources/footprints.html 5
  • 6. Industrial Energy: Gross to Net 6息2014 Energy PathFINDER.com
  • 7. Risks and Opportunities ≒ Technical risk ≒ Accountability risk ≒ Measurement risk ≒ Investment risk ≒ Management risk 7息2014 Energy PathFINDER.com
  • 8. Methodology ≒ Casual distillation of 80 interviews of industrial energy practitioners & experts, 2012-14 ≒ No hypothesis only a review of evident trends 8息2014 Energy PathFINDER.com
  • 9. Opportunity is missed by most people because it is dressed in overalls and looks like work. -- Thomas Alva Edison 1847 - 1931 American inventor and businessman 9息2014 Energy PathFINDER.com
  • 10. Technical Risk ≒ Fugitive energy: destroys physical assets ≒ Real time energy data = pulse on operations ≒ Failure to M&V = accepting risk of failure ≒ Monetize energy + non-energy benefits ≒ No energy assessment? IAC database 10息2014 Energy PathFINDER.com
  • 11. Industrial Assessment Database http://iac.rutgers.edu/database/ 15,000 Energy assessment results: Recommendations, costs, savings Sort by plant size, type and location 息2014 Energy PathFINDER.com 1111
  • 12. Accountability Risk ≒ Competing priorities: output comes first ≒ Invisibility: no performance metrics for energy ≒ Reluctance to change whats not broken ≒ Energy waste = small percent of expenses ≒ Delegation to unempowered staff. ≒ Bias for hardware over soft/human issues ≒ Energy choices: shaping cash flows for years, decades ≒ Energy manager: Inside or outside hire? ≒ Convert recommendations into implementations ≒ Map the decisions: coordinate with/support other agendas 12息2014 Energy PathFINDER.com
  • 13. Measurement Risk ≒Quantify: energy savings, investment rates of return, participation/support ≒Ill-chosen metrics? Failure to measure? ≒Good metrics: ≒ Easy to collect on an ongoing basis ≒ Easy to understand ≒ Link to staff accountabilities ≒Subject of regular management discussion? 13息2014 Energy PathFINDER.com
  • 14. Investment Risk ≒ Profit = retained earnings = capital. Capital has to go somewhere Compare investment options? ≒ Common justification = short payback ≒ Benchmark = return on invested assets 14息2014 Energy PathFINDER.com
  • 16. Management Risk ≒ Energy management: conceived in isolation ≒ Top management support? Yeah, but ≒ Sideways, incremental victories ≒ Departmental affinities, complementarities ≒ Departmental turf issues ≒ Budget stand-off? ≒ Monetize: cost, benefits, cost of doing nothing ≒ Document, communicate, celebrate 16息2014 Energy PathFINDER.com
  • 17. Energy Management 竪 Change 竪 Risk & Reward? 17息2014 Energy PathFINDER.com High YIELD BUSINESS PLAN: PLAN-DO-CHECK-ACT ≒ Monetize energy position ≒ Document costs to do/not do ≒ Seek mutual affinities SYSTEMATIC VALUE HARVESTING COMPONENT APPROACH ≒ Driven by breakdowns, rebates ≒ Compete for capex ≒ Address symptoms, not root causes FEAST OR FAMINE PROJECT HUNTING Low YIELD EMPHASIZE BEHAVIOR, PERSONAL CHOICE ≒ Authority? Moral suasion? ≒ Accountability? Burn out? SPRAY & PRAY DONT MANAGE ENERGY ≒ Minimal change, low hassle factor ≒ Absorb energy price, tech risk DENY & DEFLECT Low RISK High RISK
  • 18. Change is not compulsory [but then] neither is survival. -- W. Edwards Deming 1900 - 1993 American statistician, professor, author, lecturer and consultant 18息2014 Energy PathFINDER.com