Improving Energy Efficiency

Martin Hanssmann, President and CEO of Millennial Net, and Rick Nicholson, VP of Research at IDC, discuss how and why energy smart businesses are reducing their energy waste and taking further steps to improve building efficiency.

BM. Volatile energy costs and a growing awareness of the climate change issue are leading many companies to re-examine their energy usage policies. Why does energy efficiency make good business sense?
Martin Hanssmann. Businesses strive for predictable performance. Any volatility is an impediment to business optimization. In the commercial sector, energy is consumed primarily in buildings for lighting, comfort, data centers and office equipment. Despite all the investments in energy efficiency in new construction and renovation since the 1970s, energy consumption today is literally out of control in most commercial buildings. Upon further investigation, these buildings operate wastefully because energy consumption is not aligned with need. For example, most buildings heat and cool regardless of occupancy, and unoccupied offices consume electricity in non-essential lighting and idle office equipment. Such waste yields no business benefit and is a non-productive contributor to greenhouse gas emissions. Energy smart businesses continuously re-examine usage policies to target and reduce energy waste and take further steps to improve building efficiency.

Rick Nicholson. It makes good business sense for a couple of reasons. For consumers of energy – the enterprises – it gives them the opportunity to decrease their energy costs and decrease their carbon footprint. So I think those are the bottom line benefits to the consumer. The energy providers, on the other hand, are coping with demand growth for energy, and in many cases, regulatory mandates or goals that regulators have set for energy efficiency. At the same time, they’re facing very high costs and long lead times for building additional generation. So they’re squeezed, and energy efficiency makes a lot of sense for them too.

BM. Can you give us some examples of the ways in which companies can improve their energy efficiency?
MH. Energy efficiency improvements to existing buildings can be achieved in a number of ways. Recently, energy efficiency has become synonymous with larger investments, focusing on capital improvements such as replacing HVAC, office equipment, windows, lighting fixtures, roofing and insulation. These typically have paybacks of five to 10 years or more. However, there are many moderate measures with a one to two year pay back that can yield dramatic savings with minimal disruption to business operations. Today, businesses can justify energy efficiency investments based on savings and through reducing the impact that volatility has on their business. They are further encouraged by utility and government incentives.

RN. The commercial sector – and by this I mean office buildings, schools, hospitals, retail facilities, etc., rather than residential or high-end industrial users – tends to be where there’s a lot of interest right now. And the areas where they could increase energy efficiency include things like commercial lighting and cooling, HVAC systems, data centers and other IT equipment. Those tend to be areas where they can get some additional savings. And that’s also where you tend to see a lot of the utilities focusing their energy efficiency programs – in promoting more sophisticated building energy management systems, whether that’s heating, cooling, lighting or IT equipment.

BM. Is there a role for technology here? What solutions are emerging to help companies better analyze and manage their approach to energy use?
MH. Technology can play a critical role. Consider the advances made in communications and information technology since the 1970s, compared to that of energy alternatives. Companies can now measure and control energy consumption in ways previously impossible, through the combination of low-cost sensors/controls, robust wireless mesh networks and ubiquitous access to the internet. Leveraging these technologies, Millennial Net is helping companies establish energy policies, enforce compliance, measure performance and improve continuously, based on real-time information. We see smart wireless devices as ideally suited for retrofitting existing buildings in a non-invasive approach, so companies can rapidly and affordably deploy energy management solutions across their enterprise in a consistent manner.

RN. A lot of the low-hanging fruit has already been picked. And those tend to be low-tech solutions, to a certain extent – replacing incandescent lights with compact fluorescents, that type of thing. The less sophisticated energy management systems have already been installed in most of these facilities, so what we’re looking at is getting much more sophisticated around those areas of heating, cooling, lighting and managing the power consumption of IT equipment.

There’s been a lot of R&D done around sensor networks that enable you to, at a relatively reasonable cost, put a network of sensors around a building or in a data center that collect information about temperature, movement, whether people are in a room or not, etc. And these sensor networks can collect a lot of information, and use that for much more sophisticated analysis to optimize energy usage. That’s probably one of the biggest developments we’ve seen.

BM. In previous downturns, going ‘green’ was seen as a luxury that companies could not afford. Is there a danger that energy efficiency might get pushed to the bottom of the agenda given the current climate? And why would this be a mistake?
MH. In an economic downturn, when companies need to cut costs and restructure, there is a tendency to evaluate investments in traditional economic terms, with less regard to long-term social and environmental costs. However, it would be a mistake to push energy efficiency programs to the bottom of the agenda. While it is true that the downturn has reduced energy prices from the extreme highs in 2008, already we see energy prices rising again.

Energy smart businesses apply technologies in a pragmatic approach to achieve significant long lasting improvements in efficiency and reduction of energy waste, typically with relatively short one to two year pay back. These companies take advantage of utility and government incentives to invest in energy efficiency programs that will enhance their competitiveness and contribute to economic recovery. Millennial Net’s solutions are a pragmatic way to gain significant savings now by reducing the cost of energy waste and ensure that this savings is sustainable over the long-term even when the business cycle improves.

RN. I don’t think it will. Actually, when we did our top 10 predictions for the year, our number one prediction was that energy efficiency was going to become what we called the first fuel of choice for electric utilities. And I think it’s because of this confluence of the ability for energy consumers to save money – and in today’s environment, everybody’s looking to save money – and the situation that the utilities are in, where it’s very hard for them to satisfy demand growth with traditional means. So if it was all being driven around sustainability and going green, then I’d say yes that it would get pushed down. But if it can save people money, help them control their energy costs, then I think it’s going to remain up at the top of the stack. Now that will probably change over time, but in the current economic climate, if it helps manage costs then I think it’s going to stay at the top.