Policy & Regulation Finance

Thinking strategically about industrial energy efficiency

05 February 2021 by Rod Janssen
Thinking strategically about industrial energy efficiency

In a recent survey by the Energy Efficiency Financial Institutions Group (EEFIG) of the members of its working group on industry, one respondent said that, more relevant than access to funding is getting buy-in from CEOs and CFOs. The respondent continued. If CEOs and CFOs don’t “get it” they won’t demand it. Intuitively, it is much easier for senior management to consider fuel switching, for example, than improving overall site efficiency. “If there is no strong efficiency culture established at the top level”, there are problems.

 

The Financial Times recently had an article that too many boardrooms are climate “incompetent.” Of a survey of 1,188 board members in America’s top 100 companies, only 0.2 per cent had any climate expertise. Only 0.2 per cent! So, what would it be for energy efficiency? What language do we need to use to talk to the CEO and CFO? We have had energy efficiency programmes in OECD countries since the oil crises of the 1970s and yet we continue to run into the same problems time and time again.

 

Catherine Cooremans and other colleagues in her Multiple Benefits project provides some answers in a short video that lays out the problems and some of the solutions. As they say, identifying and quantifying the multiple benefits are really key.

 

They provide their method of analysis through five steps as shown in the following diagram.

In the company analysis, the first question they ask is: What is the energy-efficiency project's contribution to the company's business model? It is so obvious but how many companies actually start there?

 

 

 

Then the second question is about the decision-making drivers. Instead of focusing on obstacles the emphasis is on the drivers. In the EEFIG survey, there are many suggestions from standardised contracts to better regulations to better sharing of best practice. Another response provides some important insight. “Industrial plants (SMEs especially, cannot understand details of how to improve energy efficiency on their own. They understand their operations and look into their plants and equipment as assets. If they have to “improve” their assets they either have to trust their “equipment manufacturing” providers – their suppliers – or they have to trust someone external to consult them how to improve their existing processes.” See how important the human factor is. Trust is so fundamental yet not easily achieved.

 

Everything I’ve said so far shows the challenges. As Hans Nilsson, one of Europe’s top experts on energy efficiency always says: energy efficiency isn’t difficult, it’s just complicated.

 

Getting through those complications to get companies to look strategically at how energy efficiency can help contribute to the company business model has to be key. And remember that those business models are having to also, inter alia, integrate reducing GHG emissions, address resource efficiency, incorporate circular economy measures and decarbonise. Yes and they have to be competitive. It is a tall task.

 

But, reflecting on the one EEFIG response, we have to ensure senior management “gets it.” Hopefully that means getting more board members who have an appreciation for the strategic importance of reducing energy consumption through efficiency improvements. This also means that our public authorities need to “get it” and our financial community needs to “get it.”

 

That is why I am with Energy Efficiency in Industrial Processes (EEIP) and why EEIP is working with EEFIG. We are all in this together. As we say, energy efficiency isn’t difficult, it’s just complicated.

 

Join us at the upcoming EEFIG plenary. You can register here.


About Rod Janssen

Janssen

Rod Janssen is the President of Energy Efficiency in Industrial Processes (EEIP). Rod is also member of various Steering Groups and boards such the ICP Europe Steering Group, the SEIF advisory board and the board of ECEEE.


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