Energy Management Software - The Key to Effective Energy Utilization
Author - Olin
- August 9, 2002
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.
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.
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?
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.
Energy Management Problem
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."
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. "
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.
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."
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
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.
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.
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".
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.
Should You Look For in EEM Software
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
- 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.
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.
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.
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.
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.
can be reached at Olin@ProcessERP.com.