This article looks back at the last twenty-five years of energy management activities in the UK and describes the different phases that energy management has passed through. It also looks forward to what may happen in the next twenty years as technological, social and economic trends impact on energy management and the work of the energy manager.
After more than a quarter of a century it seems an appropriate time to look back at the evolution of modern energy management. In looking back three distinct phases can be identified:
Few organisations had any form of energy Monitoring and Targeting and when they did there was no commonality of approach. Most systems were manual and did not take into account variances due to factors such as weather, production output or product mix. Much effort was put into exhorting staff to "switch off" through the use of stickers over light switches and posters. The effectiveness of this was probably limited.
Engineering based energy managers started to invest in energy saving technologies but with little in the way of investment analysis beyond simple payback period. There was generally a gulf of understanding between energy mangers seeking investment funds and financial managers in charge of capital budgeting and many seminars and courses sought to fill the gap. On the technical front new technologies emerged and were often adopted before they were fully developed e.g. heat pumps – leading to sub-optimal investment. There was also a number of "black boxes" introduced that purported to save energy but which were of dubious value.
Energy supplies were almost totally from the nationalised utilities, British Gas, British Coal and the Electricity Supply Industry in the form of the CEGB and the 12 regional distribution companies. There was little or no scope to negotiate prices even for large users. A few large, sophisticated users, generated their own electricity in CHP schemes with no export of power.
Government activity in this phase concentrated on "propaganda" and exhortation in the form of TV advertisements, posters, and "Switch off" stickers, and subsidising energy surveys which led to the rise of energy consultancy, much of it carried out by people with little or no experience. Towards the end of the period the UK Government started the Energy Conservation Demonstration Projects Scheme which subsidised early adopters of new technologies in return for the right to disseminate information about the results. In an early work the author (1) observed that the scheme was not market orientated and ignored the fundamentals of successful innovation and diffusion.
1973 – 1981: Major energy events and headlines:
In this period Monitoring and Targeting began to be used widely and in a more developed way. This was aided by the introduction of personal computers (then called "micro-computers") in the early 1980s and the rise of the PC as we know it today. Monitoring and Targeting software was introduced and linked to bill analysis software derived from the discipline of utility bill analysis. Computerised M&T systems could take into account relevant factors such as Degree Days for space heating and production levels. M&T was subsidised and promoted by the Government with good effect through the sector Trade Associations (3).
Another approach that emerged in this period was the use of Performance Indicators for focusing attention. This was particularly effective in local authorities in the form of Normalised Performance Indicators (NPIs) developed by the Audit Commission (4) and implemented as a national system.
In this period a key technology that emerged was Building Energy Management Systems (now more often called BMS). These were widely adopted by owners of large portfolios such as local authorities and undoubtedly bought benefits in terms of central alarm handling and control of building services. There is considerable evidence that the cost effectiveness of these investments was not always as advertised. Early systems used mini computers as central stations and were extremely expensive to install but costs fell as PCs were introduced and more "intelligence" was added to outstations, thus reducing field wiring costs.
This period saw the peak of the energy management consultancy market with many large organisations bringing in consultancy teams to establish M&T systems, carry out audits, implement projects and deliver communication and awareness schemes. The latter became more sophisticated with greater user involvement and in some cases incentive payments (for local establishments or individual user groups).
Another major development in this period was the introduction of Contract Energy Management (CEM) which initially went under various names including "third party financing", "performance contracting" and "Energy Service contracting". Early schemes were extremely difficult and expensive to negotiate and implement, particularly in the public sector where external finance was most needed and where arcane Treasury guidelines on local authority expenditure meant that even capital expended by a CEM company counted against the authority's capital budget, thus introducing a no-win situation. These rules were finally changed in 1986 following a concerted effort from the nascent CEM industry and potential customers (including the author).
1981 – 1993: Major energy events and headlines:
In this period the energy consultancy market declined dramatically except in the area of purchasing. In Government activity there was a shift away from subsidies and towards encouraging management approaches through voluntary agreements and management tools such as the Making A Corporate Commitment and the energy management matrix.
The environment emerged as an issue in this period and many companies incorporated energy management into wider environmental initiatives. This did not, however, do as much for energy efficiency as some enthusiasts had hoped. Investments still had to meet the required Internal Rates of Return and often corporate downsizing meant that organisations did not have the staff to identify, evaluate and implement viable energy efficiency opportunities. Even at the reduced energy prices bought about by more effective purchasing much potential for improved efficiency remained untapped (and still does).
1993 – 2000: Major energy events and headlines:
So where does energy management go from here? The following two phases represent a personal opinion based on analysis of current technological, managerial and social trends.
Government activity will shift towards site specific advice and various "arms length" programmes run by the Carbon Trust. Governments everywhere are likely to step up support for renewables and energy efficiency as global warming becomes more of an issue. Additional carbon or other environmental taxes are likely to be introduced in many countries.
In the UK energy market the effects of the New Electricity Trading Arrangements (NETA) balancing system will come into play and the gas market will move towards hourly pricing. The electricity industry will slowly transition towards distributed generation with multiple small sources of power being driven by multiple technologies including micro-gas turbines, multi-fuel engines and renewables.
The energy outsourcing market will develop in new directions away from simple supply of secondary commodity and "cost plus" based FM services. The more innovative energy companies, such as Enron, will lead the market by offering customers a variety of energy solutions that incorporate energy supply and demand side management. These will be contracts in which the supplier is incentivised to reduce consumption in the customer's facilities through the use of performance based design and contracting arrangements which focus attention on optimising total energy life cycle costs, including capital, commodity and O&M costs.
Techniques in which real measured data is used to drive engineering decisions ("intellectual engineering") will become more widely accepted as the price of data gathering and processing comes down still further and this will help to optimise capital and running costs of major plant. Information technology will help close the gulf between design of plant and actual operating performance through the use of real time performance measurement and control over the Internet. Specifiers and contractors will increasingly adopt building control communications standards such as LonWorks.
This period will also see on-site trials of technologies such as fuel cells and an increase in the amount of power generated by renewable sources of energy once barriers caused by NETA are overcome.
2000 – 2010: Major energy events and headlines (actual and predicted):
Major energy events and headlines
Many analysts also saw fossil fuel resources as "running out" and continual increases in oil prices with real prices of up to $100 per barrel. (6).
Obviously the future turned out differently to the forecasts and scenarios, in the words of Arthur C Clarke (7) – "the future isn't what it used to be", and of course this could happen again. Wild cards that could radically change the future such as new wars in the Middle East, terrorism against energy facilities, commercialisation of small scale cold fusion, (8) or some new biological process for converting solar energy made possible through genetic engineering cannot be ruled out. What seems certain, however, that there will be a continuing trend towards improved energy efficiency and the use of clean technologies, economics and consumer demand will see to that. The energy world may change in unexpected directions but efficient and effective management of energy remains a vital activity for all organisations. In order to maximise the uptake of the potential for further energy cost savings the structures and more traditional approaches to energy management will need to change such that true costs are recognised and long- term incentives are in place.
August 2001