In my last Corporate role I asked my staff to develop an energy strategy for the company. Said company is generally not used to developing strategy and prides itself on responding to needs, so it took a while to put a strategy together. There were many reasons for the slow pace that are common to most large companies, but the biggest issue was that there never had been a strategy. Don’t get me wrong, there were a lot of people working to procure energy and the company had a long-term agreement with an external provider that helped sites procure energy at the lowest possible prices. But procuring energy at the lowest cost, while a desirable thing, does not make an energy strategy.
Another issue you always face in large companies is inertia. There are many people with vested interests who have done the same things for many years and for the most part, management accepts that those things are important, useful and generally well run. After all, if it is being managed by the business, the business knows what is best and certainly no one from a Corporate staff function is in a place to tell the business that there is, frankly, a better way to run its business. Heresy, I know. A final reason is the perception that either someone’s job will be affected, lost, or otherwise changed for the worse. It’s a very real fear for many.
Following a lot of hard work and negotiation with a variety of stakeholders, we established a four-part energy strategy: energy efficiency, energy conservation, strategic procurement and new technologies. Of those four, the easiest one to sell is efficiency; probably because it appeals to the engineering mind and the gratification that comes with a seeing capital project through from beginning to the end. I touched on this in an earlier post, and besides engineers, every business person I know gets energy efficiency – let’s buy a more energy-efficient appliance, motor, lights, chiller, etc. Find a way to do the same thing with less energy and this translates into lower costs.
The problem with energy efficiency, as was pointed out as early as the middle of the 19th century, is that in every case to date, the more efficient you become in using something, the more of it you use. Our hero of the moment is an economist, William Stanley Jevons (1835 – 1882), who in his 1865 work “The Coal Question” stated “It is wholly a confusion of ideas to suppose that the economical use of fuel is equivalent to a diminished consumption. The very contrary is the truth.”1
That is to say, what Jevon’s observed with coal is that as steam engines became more efficient, and they did very rapidly become much more efficient, more steam engines were put into service. This efficiency fueled the industrial revolution and replaced human labor in many parts of the economy, so more coal was used, not less. This is, incidentally, also the start of the anthropogenically-fueled rise of CO2 in the atmosphere, but that’s another post for another day.
The modern equivalent to Jevon’s observation that I like to recall is the often asserted idea in the 1980’s that with the advent of the personal computer and cheap electronic storage media, the world would use less paper. In the words of Jevon’s “The very contrary is the truth.” Per capita paper consumption increased, not decreased, as everyone printed many more things since it was now so much easier to do so. The point is that a singular pursuit of energy efficiency is not a strategy either.
That’s where conservation comes in. The world needs to evolve to a point where we shift from an “always on” state to an “always ready” state. Extensive sensors and networks must be employed to turn things off when equipment is not in use. Computers and software have to be written so that when the computer is powered down, the program does not lose all the data and/or lock the computer into a non-responsive state. When we go home at night, we turn things off. We design buildings with more daylighting or make use of fiber optics to deliver light to interior rooms. In my opinion, this is an under exploited opportunity.
That brings me to strategic procurement of energy. Here, too, there is considerable opportunity for large companies that is not realized. There has also been a lot written about this, but it has been my experience that for one reason or another, companies still procure energy as though the market has not changed for the past 20 years. It is true that you have pockets of enlightenment and one utility or another that is more proactive than most.
There are at least three plays to be made here. One is in the selection of the utility or utilities supplying electricity, and the particular mix of fuels that one utility uses over another. A second is working with grid operators and utilities to employ demand response strategies as well as predictive energy management. The third is distributed energy generation and this is intimately tied to demand response and predictive energy management. I think very few companies understand this opportunity and the potential of distributed generation because it is a complex, potentially capital-intensive, and may have more than a one year pay back. Distributed energy generation is also not terribly popular with utilities whose business model depends on highly centralized energy generation, but that’s another story.
Lastly there are new technologies – wind, solar (photovoltaic and thermal), storage, etc. In the face of fracking and the precipitous drop in natural gas prices, these technologies in the past year have seen the brakes being applied pretty forcefully. It is personally immensely distressing that the U.S. is always ready and willing to go the fossil fuel route to the exclusion of renewable energy sources. This will work for a while, but as with every other type of fuel out there, there are impacts to be traded. I know that our solipsistic, short-sighted and xenophobic business and political leaders can only think to the next quarter or the next poll, so I have every expectation that we will continue to take the fracking option for the foreseeable future. A pity since other forms of energy have far fewer impacts not to mention that it’s a shame to waste all that carbon on fuel.
I hope you can see that having an energy strategy is important, in spite of the U.S. Government not having an energy strategy. So many people in the business sustainability community I know keep saying that we can’t move forward with energy initiatives until we have a price signal on carbon. I think that is very naïve, shows an incredible lack of leadership, and it’s certain to create problems for the company in the not-to-distant future.
As always, let me know what you think.
1.) The Jevon’s Paradox and the Myth of Resource Efficiency Improvements, Polimeni, J.M., Mayumi, K., Giampietro, M., and Alcott, B., (2008) Earthscan, p. ix.