Navigant Research Blog

Industrial Energy Management Systems – Tools to Overcome the Biggest Barriers to Energy Efficiency

Casey Talon — July 9, 2015

The U.S. Department of Energy (DOE) has released a report to Congress and an accompanying study on the barriers to industrial energy efficiency as mandated under the authority of the American Energy Manufacturing Technical Corrections Act.  The study concludes that if specific economic and financial, regulatory, and informational barriers can be overcome, there is the potential to deliver energy savings of 15% to 32% by 2025 in the industrial sector.  Industrial energy management systems (IEMSs), as defined by Navigant Research, are viable tools to help overcome some of the biggest barriers identified by the DOE and help industrial customers realize cost savings, operational efficiencies, and sustainability improvements.

An IEMS analyzes and manages data associated with energy consumption and operations within an industrial facility, and it also delivers actionable information to building stakeholders.  The system’s analytics-based tools help industrial customers make more strategic investments and equipment improvements and monitor the impacts of energy efficiency measures from capital-intensive system replacement to no-cost operational changes.  Broader adoption of IEMSs can help the industrial segment overcome specific barriers to deep improvements in energy efficiency, as identified by the DOE:

  1. Failure to recognize non-energy benefits of efficiency: Not considering non-energy or co-benefits of an end-use energy efficiency project weakens the business case.
  2. Split incentives: Companies often split costs and benefits for energy efficiency projects between business units, which complicates decision-making.
  3. Energy price trends: Volatile energy prices can create uncertainty in investment returns, leading to delayed decisions on energy efficiency projects.

The Specifics

First, the most sophisticated IEMS enables customers to shift the maintenance paradigm from a reactive to predictive approach.  IEMS-supported predictive maintenance is more strategic and reduces costs by prioritizing and streamlining response to alarms and managing equipment before it causes the most costly impacts of downtime. This is a critical non-energy benefit for industrial customers.

Second, an IEMS can be an effective tool for overcoming the split incentive. When the capital expenditure of an energy efficiency improvement is covered by the budget of one business unit, but the savings are realized through reduced operating expenses from a different business unit, an organization is often unable to overcome this internal hurdle to investment.  An IEMS can utilize the equipment and facility data to inform each business unit of costs and derive the proportionate energy savings generated by the energy efficiency investment. An industrial customer could use this capacity to quantify costs and allocate capital expenditures across the organization to help generate broader vested interest in energy efficiency.

Finally, an IEMS gives customers insight into their facility’s performance, tools for capital planning, and strategies for operations and maintenance (O&M) that can help limit the impact of energy price uncertainty or volatility.  An IEMS gives customers transparency into the impact of variable energy costs, and some even provide services for energy procurement that can further reduce the uncertainty and risks associated with energy price volatility.

Watch for a new Navigant Research report on IEMSs, expected to publish this year in our Building Innovations research service.

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