Utilities Engage Industrial Customers in Strategic Energy Management

June 20, 2016 | Neil Kolwey

As utilities look for new programs to help achieve their energy savings goals, it makes sense to consider enhancing the programs for industrial and other large customers. In addition to prescriptive and custom incentive programs, the best industrial programs include good-quality technical assistance and allow longer time-frames to complete projects. Some programs also offer multi-year planning assistance and bonus incentives to help get larger projects implemented.

Building on this foundation, some utilities are aiming even higher, toward helping industrial customers develop a “strategic” or continuous improvement approach to energy management. Utility Strategic Energy Management (SEM) programs provide training and incentives to help customers develop the key systems for optimizing their own energy use. SEM programs help utilities achieve more consistent energy savings from industrial customers as well as improved customer satisfaction. There are currently at least 15 utility/ratepayer-funded SEM programs in the U.S. and Canada.

Strategic Energy Management (SEM) programs help utilities achieve more consistent energy savings from industrial customers as well as improved customer satisfaction.”

From the industrial customer’s perspective, SEM means taking a holistic approach towards the goal of continuously improving the facility’s energy performance. This holistic approach reaches into the company’s organizational culture and business practices and includes operations and maintenance (O&M) improvements as well as implementing capital projects/equipment upgrades. The key elements of SEM include:

  • Obtain management support for developing and setting long-term energy goals
  • Dedicate resources, including an energy champion/team
  • Develop and execute on annual energy plans
  • Develop a baseline of energy use and track progress towards goals
  • Quantify and report on energy savings from capital projects and O&M improvements

Utility SEM programs help customers develop these elements or management systems through a series of training/coaching sessions that typically occur over the course of 9 to 12 months. These can occur through one-on-one coaching with an SEM advisor, or through a series of trainings with a group (often called a cohort) of other companies. The latter approach also involves individual coaching between cohort sessions. To supplement in-person training sessions, there are online SEM training modules that can be licensed from the Northwest Energy Efficiency Alliance. Also, DOE’s eGuide is an excellent free resource.

In addition to coaching and technical support, SEM programs typically include incentives for O&M energy savings achieved, such as $.025/kWh. Some programs also provide incentives to hire an energy manager, based on the company’s total annual energy savings. (Check out SWEEP’s recent report for more on utility energy manager co-funding.)

Pacificorp/Rocky Mountain Power (RMP) in Utah offers a comprehensive suite of energy efficiency programs for industrial and large customers, including training in SEM principles and co-funding for energy managers. Since the SEM program was launched in 2013, RMP has provided SEM training and incentives to three cohorts of at least 10 customers each, and to five customers individually, and achieved 6.2 GWh of electricity savings in 2015. The SEM participants include manufacturers, hospitals, wastewater treatment facilities, and a school district.

The Energy Trust of Oregon and Bonneville Power Administration (BPA) have been offering SEM programs since 2010. Of the total energy savings that they are achieving from their industrial and agricultural customers, 20% comes from SEM programs. (Energy savings attributed to SEM programs are from O&M measures only; savings from capital projects are allocated to other programs.)

BPA and Energy Trust have found that helping customers develop and implement SEM principles leads to greater customer satisfaction. Over time, the customer-utility relationship can develop into a valued partnership in energy management. (See Figure 1.) 

As industrial customers establish SEM principles within their business culture, these customers are motivated to achieve their energy efficiency goals. As they work to identify and prioritize projects, they seek out the utility’s technical assistance and incentive programs, rather than waiting for the utility to “sell” their services to the customer. As customers take more initiative to implement projects and O&M savings on their own, the utility’s costs of achieving energy savings decrease. SEM customers continue their efforts to improve energy efficiency, relying on the utility for on-going support, and the cycle continues.

Through this process, industrial customers and the utility achieve ongoing energy savings and help each other meet their goals. Industrial customers begin to see value in their relationship with the utility. There are challenges to reaching this “holy grail” of utility-customer partnership. But for a growing number of utilities, it is worth making the effort.

Neil Kolwey is Industrial Program Director at SWEEP where he promotes best practices in utility energy efficiency programs for industrial customers throughout the region.