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Enterprise Energy Management Software - The Key to Effective Energy Utilization

Written By: Olin Thompson
Published On: August 9 2002

Enterprise Energy Management Software - The Key to Effective Energy Utilization
Featured Author - Olin Thompson - August 9, 2002

Introduction

There is nothing quite as emotional as an "energy crisis". Cars in long lines at the pump, graphs showing spiking trends with nowhere to go but up, and hard luck stories all are grist for the media mill. Elected officials clamor for an "energy policy" and the usual interest groups environmentalists, energy producers, and consumer interest groups - get in on the act. By the time the public fervor crests, the crisis is past and the dire predictions of a return to the dark ages retreat, waiting for the next crisis.

For enterprises managing energy is more complex than just reacting to market conditions. Whether the enterprise in traditional manufacturing, higher education, or general facilities management energy is an important component of the cost structure. Today, nearly every enterprise has renewed their focus on cost reduction. Traditionally, this means line managers who are responsible for the biggest operating costs whether they be feedstock/ingredients, energy, or labor - are asked to develop cost reduction plans.

As the cost reduction plans move forward, the results are relatively easy to measure. Cost accountants can evaluate the input costs on a cost per pound or unit basis, energy costs can be measured in a KWH or cubic foot basis, and labor costs can be measured on a labor cost per hour. But do these measures really tell an enterprise they are saving money?

The problem with this approach is that it addresses the "cost" factors but not the impact of how effective materials, energy, or labor are used in the operating of finished goods. For example, consider the experience of running the new "lower cost" packaging material through the existing packaging machines. Often, the packaging waste associated with the "lower cost" material made it less effective than the "higher cost" product it replaced. Likewise, if the HR department makes big reductions in total compensation labor productivity can be adversely impacted. Measuring the effective use of energy, on the other hand, is an even more complex problem.

The Energy Management Problem

Over the past few years, energy management has become a more complex problem for enterprises. Electrical deregulation and the volatility in natural gas prices have made managers re-evaluate their energy strategies."

According to Allan Schurr, Sr VP of Marketing at Silicon Energy, an Alameda CA provider of energy management software, "Energy management can be broadly defined as the procurement and optimization of fuel, hydrocarbon based feedstocks, and electricity. In most enterprises this function is usually parsed out to line managers. Engineering, operations, purchasing, and accounts payable are all involved but there is seldom a full-time person or a specifically designed business system to manage the enterprise's energy process. "

Most other business processes that are managed cross-functionally Supply Chain, Customer Relationships, and Enterprise Planning are managed with the assistance of computer-based information systems but energy is a significant cost opportunity that is seldom managed as a process. Enterprise Energy Management (EEM) is a relatively new concept that involves the application of software technology to optimize energy purchasing and energy use. Historically, an enterprise may have someone responsible for purchasing energy contracts or energy on the spot market but there are few organizational systems for tracking the use of the energy or monitoring the billing. In reality, few enterprises are able to either apply contracts to energy billings or accurately allocate energy costs to consuming cost centers.

Chris Andreoni, Corporate Vice President of Purchasing for Boise, ID based agri-business J. R. Simplot Enterprise finds, "There needs to be a connection between energy positions, utilization, efficiency programs and the way in which plants pay for energy. These costs are significant and must be managed to the fullest extent possible."

Applying EEM

EEM software addresses the issue of integrating all the business processes involved in energy decision making into one consistent infrastructure. EEM systems consist of a software network that is connected to data collection devices at the point of energy consumption and then interfaced to energy contracts and energy usage billing. The data collected is then used to create energy profiles to enable the comparison of the processes and even facilities. The comparison of processes and facilities results in the identification of the best and worst energy practices, processes, and designs.

EEM also can assist in capital project analysis by modeling the marginal price of additional energy used in a facility. In addition, some capital projects are projected to reduce the peak energy demand. The tool set provided in many EEM software packages includes the ability to analyze the components of peak demand in a operating facility and the ability to provide quantitative analysis of the performance of the investment.

Energy purchasing has become increasingly complex as a result of deregulation. The deregulated market provides more suppliers and more options for supply contracts. Managers who buy energy need to have more information about projected operational energy demand in order to get the best energy prices. Often that data is available only from the very supplier that the Manager is trying to replace. With an EEM system the enterprise can take ownership of its own energy usage data and end the reliance on negotiating on supplier provided data. The combination of complex contracts and volatile markets make quick access to energy information critical.

From his experience at Silicon Energy, Schurr has found that, "Energy management has become more complex as enterprises move toward more intensively managing their energy programs. Most energy suppliers offer energy cost saving programs like load curtailment, or demand response, or they may assign additional costs to exceeding peak demand usage. To take advantage of these potential savings, enterprises must have systems that enable rapid response based on near real time monitoring of their energy demand. Even facilities that have continuous manufacturing processes can, with enough knowledge of its energy consumption, find operations and processes that can contribute to load curtailment opportunities".

EEM can also add value to the process of evaluating energy bills. Accounts payable systems do not have the data to determine the accuracy of utility bills. Through EEM software an enterprise can create pro forma utility bills based on applicable contracts or tariffs that can be used to evaluate utility billing before payment is made.

What Should You Look For in EEM Software

Enterprises looking to invest in EEM software should consider several factors:

  • The software should have functionality that includes all aspects of energy management from bill management to procurement to operating consumption monitoring.

  • If you have complex energy rates in place, the software should have the capability to model your contract structures

  • If you need to manage energy across an enterprise, the software should be capable of enterprise aggregation.

Since EEM software uses data that resides in other systems, it should easily connect to disparate data sources and associated energy management collection mechanisms. Data collection can generate tremendous volumes of traffic that could prove burdensome on an enterprise's WAN. Look for systems that can leverage the Internet to collect data from monitoring locations.

Finally, EEM software should be able to provide predictive capabilities based on future energy usage and rate assumptions and include analytic tools that can present data in a usable format.

Conclusions

Enterprise energy management software systems offer enterprises a new way to control the cost and reliability of the energy they consume. By installing an EEM system to collect data on the consumption of energy, an enterprise will have the necessary information to enable engineering, operations, purchasing, and accounts payable functions to take a proactive role in optimizing energy costs and usage.

About the Author

Olin Thompson, a principal of Process ERP Partners and co-founder of the Chem CIO Forum (www.chemcioforum.com) has over 25 years experience as an executive in the software industry with the last 17 in process industry related ERP, SCP, and e-business related segments. Olin has been called "the Father of Process ERP." He is a frequent author and an award-winning speaker on topics of gaining value from ERP, SCP, e-commerce and the impact of technology on industry.

He can be reached at Olin@ProcessERP.com.

 
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