EFECTIVE IMPLEMENTATION OF ENERGY MANAGEMENT SYSTEM FOR BUSINESSES PART 2: COMMITMENT FROM THE TOP MANAGEMENT

Commitment by the top management and internal energy management organisation for a sustainable energy management programme.

Commitment from The Top

The commitment from the top management is the key and the most important factor in successful implementation of energy management system in any organisation. The top management must demonstrate its commitment to support the implementation of the system and subsequently agree to continually improve it to ensure the system remain relevant and effective.

From  my experiences as a consultant to various type of industry, the failure to get the buy-in and commitment from the top management personnel especially decision makers will deny potentials to achieve the maximum energy costs reduction from energy management initiatives or will bring everything to the end in the worst case scenario.

It is often about how strong the business case proposal that will be brought forward to their attention and consideration such as monetary impacts in the form of business operational costs that will contribute to profitability and business sustainability that could be expected from implementing an energy management programme.

The top management need to be convinced on the benefits of sustainable energy management programme for the organisation. Some business-related of conferences or seminars could be the suitable platform for them to attend to create some awareness.

The expected commitment and roles to be played by the top management are briefly described as follows: -

• Agree and approve the introduction of energy policy for the organisation with defined scopes and boundaries for the implementation and maintenance of the policy in energy management system;
• Ensure objectives and targets for the policy are established with suitable energy performance indicators;
• Include energy performance in a long-term energy planning with results to be measured, reported and as an agenda in the management reviews at agreed frequency;
• Agree to appoint an authorised representative from the top management to oversee the implementation of the energy management system in the organisation’s facilities through the energy management team;
• Approve the formation of internal organisation in the form of permanent energy management committee at the new building which will play the core functions in the implementation of energy management system; and
• Agree to provide necessary resources required for the development, implementation, maintenance and improvement of the energy management system.

Internal Energy Management Organisation

Once the commitment from the top management is secured, the next important step is to establish the team in order to translate the commitment into actions for the organisation. This normally will come in the form of a permanent team which will function as a task force at the beginning and to progress to become an internal energy management organisation or often established as a committee.

The structure and size of the internal organisation or energy committee will vary from one building to another depending on complexity, line of command and management procedures in each building.

The formation of the structure must be discussed and agreed upon to ensure all members will be able to perform their functions effectively with defined roles and responsibilities.

All permanent members from each department or section must have a permanent alternate member to attend the scheduled committee meetings. This is to ensure the proper information sharing and flow and as well as communication between members to act and update on decisions made from scheduled meetings.

The whole idea of whatever structure to be established for the organisation, it should be able to perform its functions as the driver of the energy management system that will produce intended results expected by the top management.

A Well-Defined Roles and Responsibilities
The energy management committee has a coordinating role with respect to the activities undertaken by the energy managers in implementing energy efficiency practices. For each job title that has been identified in energy management committee, management representative has to list the roles and responsibilities for each person in the term of energy management system, starting with the top management and working through the rest of the organisations.

The roles and responsibilities have to be documented, it is important to define clearly who has authorities for which elements of energy management system. This will avoid any conflict or misunderstanding between energy management committee in implementing energy management system. The management representative should ensure the energy management committee are clear with their responsibilities and to what level they have to play their roles in supporting energy management system.

The basic roles of the internal energy management organisation are as listed below: -

• Develop and proposed energy policy for the approval by the top management;
• Identifying resources required to implement the energy management system;
• Ensuring that energy management system implemented and maintained;
• Reporting on the performance of the system to the management representative;
• Providing recommendations for improvement to the management representative;
• Participating in the successful planning and implementation of action plans;
• Participating in trainings provided to improve energy management skills; and
• Follow through on resulting changes in operations and procedures to improve   energy performance.

Energy Management Representative

The management representative selected and appointed must have certain level of authorities in making decisions for the internal energy management organisation in the organisation. He or she is expected to be assisted mainly by the energy manager in the energy management organisation.  

Among the key responsibilities of the management representative are as follows:

• Formation of an energy management team and plan energy management activities;
• Overseeing the planning and implementation of the energy management system in the organisation;
• Reporting to top management on the performance of the energy management system and overall energy performance building facilities in the group. Ensure that reports on the performance of the Energy management system are presented to top management for review and used as a basis for recommendation of improvement of the Energy management system including during the management review meetings;
• Set and achieve milestones and deliverables for the group for tasks and always proactive.
• Leverage on initiatives that have been already in place and in progress of implementation.
• To ensure effective communications of the system, performances and focus continual improvement efforts;
• To ensure that the Energy management system is established, implemented and maintained in accordance with the internal or standard and statutory requirements;
• Ensure that resources essential to establish, implement, maintain and improve the Energy management system
• The resources may be human resources, specialized skills, organisational infrastructure, technology or financial resources.
• To assist the chairman of the management review  meetings;
• Formation of management team whenever appropriate; and
• Plan and direct energy management activities.

Energy Manager

The energy manager is expected to someone who is competent and well-versed in the overall development and implementation of energy management system in the organisation. His or her roles is as the “bridge” between the management and middle management and operational personnel and must be well-trained to have the deep understanding in energy management system.

On-going training in very important for energy managers to gain the required knowledge and competency to play their roles effectively.

The energy manager shall focus on reducing the energy through improved energy efficiency practices, equipment modifications and building occupants’ or employees’ awareness. Energy manager can also identify, design and implement no-cost or low-cost energy saving measures and coordinate the implementation of larger capital projects financed through alternative energy financing, such as energy performance contracting or other external funding options available.

The energy manager has to work on-site or clearly delegate tasks to be performed through the assistance at the building to meet energy management system objectives established that will be established by the organisation. 

The energy manager for the organisation needs thesupports and assistance for the day-to-day implementation and monitoring of the system by the assistant energy manager or other technical personnel who are responsible and competent for the operations and maintenance of the facilities.

Amongst key roles and responsibilities for the energy managers are as follows:

• Responsible for the overall energy management system implementation and compliance according to any standard adopted;
• Provide reports and updates on energy management system performance to the management representative, assistance in drafting an energy management policy, conducting energy reviews and preparing the energy management plan;
• Assistance in the dissemination of information, promotion and progress reporting;
• Maintaining, conducting and coordinating facilities for energy consumption and energy management activities;
• Assistance and oversee the improvement of energy performance and supervising energy consumption for significant energy uses;
• Assistance in the preparation of energy efficiency evaluation criteria in energy related contracts for purchasing of equipment, services and projects;
• Identify competency and the on-going training requirements for members of energy management committee; and
• Preparing regular reports to the management representative on energy performance status, results and potential areas can be improved and to ensure compliance towards regulatory requirements.

The above are the two very important members of any energy in-house energy management organisation or committee. They are expected to be the champions to drive the development and implementation of energy management system in the organisation. 

In the next entry , I will share about the roles and responsibilities of other key stakeholders in the organisation such all heads of department or section that are also required to be well-defined and understood from the beginning for more effective and sustainable implementation of the energy management system. Then, I will share further about the next crucial element in the energy management system which is the energy management policy.

EFFECTIVE ENERGY MANAGEMENT SYSTEM FOR BUSINESSES PART 1: INTRODUCTION TO ENERGY MANAGEMENT

Managing energy is more about managing the people than managing equipment in the organisation

When I started exploring the opportunities to further develop my career in energy management I had the impression that being a technically sound person would be the strongest advantage for me to excel or to convince others to save their energy cost. However, that perception started to slowly vanishing as I am moving further exploring energy management with different roles in different organisations. It has been often seed that very brilliant and amazing engineering solutions proposed by many being turned down despite its undisputed benefits, proven success stories and assurance that all that will work to deliver the promised results. I was baffled and clueless on why such things can happen until I realized the key issues that I must understand and what to do to as solutions.

Being out here today in the market trying to sell my services as a consultant has strengthen my feeling that energy management is far beyond just competencies in providing engineering solutions. Finally, I realized that it is not all about how good is the solutions and how much it can save energy costs but it is more about how they see energy with their roles in organisations and in their life. Who decides about energy in any place and that really matters. Then who can influence those who have the final say in energy and these people are also matters and finally it comes to who bear the costs of energy or who pay the bill and they are ultimately matters the most.

Everyone is looking at how they use energy differently. The challenge in promoting efficient use of energy is to convey the same message to different groups of people in the organisation through effective means of communication. 

Then I came into the conclusion that managing these people and others who are under their command or employed by them are the most critical factors in effective and successful energy management program in any entity. It is all about management of the human because there are the one who use, select, operate, maintain and pay for anything that using energy in their day to day life at work and home.

Why they do not really care about how they use energy at their workplace?

Based on experiences as a consultant in communicating with different level and group of people in many organisations, I believe the following could be among the possible main reasons:

• It does not matter because they do not pay energy bills themselves;
• There have been no energy supply problems and the use of energy that making them feel is not their job to save energy;
• Existing duties and tasks are that much and they have no time  to think about energy;
• No basis to do anything or clear directives from the top management on how they supposed to use energy in more efficiently.

Energy being seen differently by different types of user in the organisation. Efforts must be taken to ensure every user will understand and play their roles accordingly .

Then how about the decision makers or the top management? 

Why they seem to ignore the importance of managing the energy efficiently too. Again, from communicating with in various capacity over the years, I believe these could be the reasons:

• Most decisions makers sitting in the decision making chairs are not with technical background and their decisions on energy matters are not connected to energy in many business decision. Concerns on energy efficiency often highlighted and proposed by the technical personnel or managers and these always been seen as operational matters that have little effects on business performance directly;
• The focus is more on core businesses of the organisation where more profits as always associated with more production outputs , quality and technology improvement related matters and more sales as  revenue generating strategies and activities;
• Energy cost is too small compare to overall operational costs of the organisation and potentials energy costs savings from energy management do not trigger  or attract much interest of the top management;
• Many decision makers are still not convinced about the results can be achieved especially with the failure of the proponents of energy saving solutions to convince them as viable and attractive business proposals instead of just as technical proposals.

Looking and assessing all the above points, I finally must acknowledge that being technically brilliant and advanced persons could be just not good enough to get energy management moving forward in any organisation. I do not see engineering approaches or solutions would be able to resolve issues related to attitude and habits in using energy in people's life.

The ability the convince decision makers to look at energy management as one of the strategic elements in their business decisions will trigger the bigger wave of the implementation at the organisation. 

Skills and techniques to deal with the human especially in interaction with them are equally important. Then I gradually changed my strategies and approaches in selling the idea of energy management to people from different groups and levels in every organisation. Messages on the importance of energy management need to be conveyed to them in carefully planned strategies and approaches for each target group. In the same time I have been also quickly polishing more of my skills related to human behaviours and how to handle accordingly to get the messages across. 

The main objective is to instil the importance of having a systematic approach and method in connecting all levels of people in the organisation to share common goals and spirit in managing and using energy in their own organisation.

When I summarized all components in an energy management system, I clearly can see and understand  how crucial is the people's management factors in having an effective system to be develop, implement, monitor and finally working for further improvements to sustain and achieve better results.

If you are an engineer and technically sound person with the intention to champion and drive energy management program in your organisation, you must also possess skills in effective communications that will help you a lot all the way. That skills will help you to be more effective and to feel more confident to perform the followings:

• To convey the key messages and convince the top management to indicate their commitment;
• To work with team members in the internal organisation and inspire/motivate them;
• perform the energy  management planning works that will involve personnel from other departments;
• To create awareness to all employees on the energy policy and  their roles and responsibilities in the implementation;
• To obtain on-going feedback from personnel and data gathering to monitor energy performance; and
• To prepare and present progress and results of the system to convince the top management again to continue to give their commitment.

So, the ability to manage the people will determine how successful and how good the intended outputs of energy management program will be produced. The way forward is how to sustain the performance and to get better results by understanding more about how people can be more motivated and excited to get more benefits from energy management in their businesses and life.

Introduction to energy management system and standard

Applying energy management approach is an effective strategy to implement initiatives to reduce energy costs from energy saving measures.

For organisations to be able to achieve sustainable energy management which is mainly to ensure sustainability if energy efficiency initiatives with changes in the organisation and personnel and due to other factors such as costs, competitiveness,  market requirements, depleting energy resources, green commitments  towards mitigating impacts of  global warming and etc.

With the uncertainty of global prices on energy which finally will affect energy users in all sectors, energy management has become a necessity and energy too has become one of the strategic resources that require strategic attention in many organisations especially for business operators or owners from energy intensive industries.

The typical basic structure of a sustainable energy management system is in a cycle which consists of six main components namely commitment from the top management, energy management policy, energy planning, implementation, system checking and  system review for improvement as illustrated in the figure below.

The typical sustainable energy management system implementation cycle for organisations

Details and tips on each element in the system development and implementation will be explained further in my upcoming entry in this Effective Implementation of Energy Management System for Businesses Series.

The importance of each element as shown in the above figure will depend on at what stage the organisation will start their energy management initiatives and for them to move forward in having a comprehensive and more sustainable system in place.

For example, if the organisation is starting from the Business As Usual (BAU) practices or energy is not properly managed on how it is being used in the organisation, obtaining the commitment from the top management would be the most important challenge to overcome.

What is ISO50001 Standards? 

The development, implementation and performance monitoring of the energy management system can use key requirements outlined in the ISO50001:2011 Standard as the reference which is an internationally recognized standard for energy management system.

ISO 50001 Standard on Energy Management System was launched by International Standardization Organisation on 15 June 2011. The standard later adopted by Malaysia and known as Malaysian Standard MS ISO 50001:2011 Energy Management Systems - Requirements with Guidance for Use in November 2011.

The standard is a global guide on requirements that establishes a framework for commercial, institutional, and governmental facilities; and entire organisations to manage energy efficiently. It is targeting broad applicability across national economic sectors, it is estimated to influence up to 60 % of the global energy use.

The adoption of ISO50001:2011 Standard in energy management program development and implementation will assist in the followings:

• To provide organisations with technical and management strategies to increase energy efficiency, reduce costs, and improve environmental performance with a recognized framework for integrating energy efficiency into the organisation’s management practices; and
• To provide organisations an access to a single, harmonized standard for implementation across the organisation with a logical and consistent methodology for identifying and implementing improvements.

In summary, the standard covers the following requirements for organisations to have a comprehensive and sustainable energy management program implementation to achieve their intended targets and for continual improvements:

• The appointment of management or an authorized representative by top management of the organisation to lead and sustain the energy management program;
• The establishment of internal energy management organisation with clearly defined roles and responsibilities of its members;
• Preparation of energy management  policy for the organisation;
• Identification and ensuring compliance against legal  and  other requirements;
• Conducting energy reviews of existing energy sources and consumption;
• Creating energy base line as benchmark for improvement in energy performance at each the facilities;
• Establish energy performance indicators for energy performance monitoring and checking;
• The establishment energy management objectives and targets to be achieved;
• Preparation and approval  of energy management action plan for implementation;
• To provide necessary trainings for energy management system development and implementation;
• Establishing  necessary operational controls for control of energy consumption;
• Procedures and criteria on the design of energy efficient facilities, equipment, infrastructure, systems and processes right from project stage
• Procurement procedures and criteria of energy efficient equipment, instruments and services;
• Monitoring and measurement of energy  consumption , performance indicators, significant energy uses  and related variables; and
• Internal audit and scheduled management reviews for energy management system implementation.

The energy management system implementation will enable the organisation to ensure all employees to contribute in achieving the common objectives and targets for all its energy management program for the company in long term.

It is expected with the process of development and implementation of effective energy management system, all levels of personnel will gradually embrace the energy efficiently culture in their daily life at work and also at home.

The fundamentals of the proposed energy management system is based on the Plan-Do-Check-Action (PDCA) management cycle concept. It has been proven in many organisations that by adopting a systematic approach in developing and implementing energy management system coupled with main low and no-cost energy saving measures, the reduction from 5% to 10% of the total energy consumption cost is achievable and can be sustained in a long term as well.

In the next entry, I will share about the expectations from the top management and tips on how to convince them for the organisation to be able to develop and later implementing the energy management system effectively. This is mainly because the commitment from the top management is the key and the most important factor in successful implementation of energy management system in any organisation. The top management must demonstrate its commitment to support the implementation of the system and subsequently agree to continually improve it to ensure the system remain relevant and effective in the way forward.

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ROLES OF THE KEY STAKEHOLDERS FOR THE GROWTH OF ENERGY SERVICE INDUSTRY IN MALAYSIA

The potentials of energy service industry in the form of investment opportunities and   the creation of new jobs is enormous which can contribute significantly to the growth of our economy. With the potentials valued at billions of dollars at regional markets which will be more opened with the upcoming ASEAN Economic Community(AEC)  introduction and the implementation of Trans Pacific Partnership Agreement(TPPA), Malaysia could not afford to just ignore it and not participating.

Like any other industry, energy service industry where energy efficiency is the core part of it, a holistic approach is required to ensure all efforts to be place will bear fruits in long term and able to be sustained to create more opportunities in the way forward.

In this last part on this topic, let us examine on what is exactly expected from key stakeholders in this country in terms of roles and responsibilities that need to be played by each of them to grow and sustain the energy services industry. The more we delay in tapping opportunities from this industry, more we are going to lose its economic opportunities that could benefits us in short and long terms especially in the current challenging economic climate.

The Figure 1 below illustrates that overall framework, key elements, thrusts needed and process flow to grow the energy efficiency industry where energy service is the core feature where big scale investments and new jobs creation is concern.

Figure 1: The schematic framework, thrusts and process flow of the holistic approaches to grow energy efficiency industry at the national level.

For energy service or energy efficiency industry players, what is needed is a clear platform with a conducive business ecosystem for them to play their roles to tap the already available and newly created business opportunities. Like any other industry, there are factors that will contribute to the industry growth such policies, institutional framework for administration and regulatory supports, availability of funding and financial supports for loans, fiscal incentives, awareness and etc. All these factors require involvement of all stakeholders to play their specified roles that will enable industry players to step out and explore existing and new opportunities that will be created with the growth of the industry.

At the national level, Malaysia requires and clear and well national energy efficiency policy with its own policy goals and targets to be achieved at stipulated period. This policy will serve as the common goal for all sectors to refer and figure out ways on how they can play their roles to achieve that national targets according to their sector.

To grow the industry in more sustainable manner, there are thrusts that need to be established which will involve all stakeholders with defined roles. These thrust could also be seen as tools to achieve the national policy targets. On top of that, inclusiveness in policies development and reviews is also required to ensure goals and targets established to be well understood and accepted with commitment by all stakeholders.

Firstly, for the government, there is an urgent need to build a strong governance for energy efficiency administration and effective and comprehensive regulatory frameworks. In the same time, the government need to look and act on energy efficiency measures or programs holistically and urgently for prioritized targeted groups and not with project-based approaches which often no further efforts to sustain and improve performances beyond the project period.

Secondly, there must be a commitment for funding because there is need to establish as sustainable sources of fund to finance big scales energy efficiency projects implementation. The government should play its roles in getting the financial institutions to be involved more in energy efficiency industry like other types of industry. The fund can be in the form of a revolving fund with loan facilities administered and managed by the government appointed entity. To add the availability of fund for energy efficiency projects investments, commercial financial institutions need to be roped into the picture.

The fund or loans facilities established can be utilized by parties involved to implement such projects among large energy users themselves and industry players such as Energy Service Companies (ESCOs) who are mainly involved in energy performance contracting projects that require large amount of fund.

The mechanism to distribute the fund should also made as business-friendly possible to attract large energy users and industry players to use it with assessment criteria for the eligibility to suit the energy service business models such as energy performance contracting type of projects and if the fund to be sourced as loans by the large energy users themselves.

The inputs from industry associations representing both sides from large energy users  from various sectors such as manufacturing, healthcare, hotels and etc. and industry players such Malaysia Energy Service Companies Association can be sought to establish the financial and technical assessment criteria that will be adopted by the administrator of the fund and financial institutions.

Thirdly, there is a need for some consistency, uniformity and accountability in implementing energy efficiency programs by any agency empowered and made responsible by the government. This agency can be a one-stop-center for all parties especially investors and industry players to refer for energy efficiency related matters that will finally resulted in more big scale energy efficiency projects to be implemented in faster mode.

The last two thrusts that also need to be made available to support the growth of energy efficiency industry which are the continuous dissemination of information, awareness creation and education for targeted sectors and the initiative to have more research and development in energy efficiency technologies and applications.

Decision makers from financial institutions and business owners among large energy users are the most important target groups that require strategic approaches for them to look at business and investment potentials in energy efficiency industry. This will require a well-planned strategy to educate and create the awareness among them and this role is expected to be played by energy service industry players with the assistance and facilitation by the government.

Awareness creation and education among business leaders on potentials of investments in energy service industry must be an on-going process through seminars, dialogues and conferences facilitated by the government.

All the five key thrusts will serve as a very strong platform for the whole energy efficiency industry to grow where energy service industry players will have to play their roles to tap the opportunities created in the process and in the way forward as the industry keep growing in the future.

With the inclusion of the preparation of a strategic national plan for the demand side or the energy users’ side of the energy sector in the 11^th Malaysia Plan between 2015 and 2020 by the government, all the above five thrusts are strongly recommended to be  included in the plan. The inclusion of initiatives for the demand side management is mentioned in the 11^th Malaysia Plan document, Chapter 6 under the title of Pursuing Green Growth for Sustainability and Resilience.

The initiative which is led by the Economic Planning Unit under the Prime Minister’s Department  is from adopting the sustainable consumption and production concepts where managing the demand side is one of the  key criteria as illustrated in the Figure 2 below. The formulation of the strategic national plan for the demand side is expected to come in the form of a comprehensive master plan which will include types of energy consumption which are electrical, thermal and transport energy sectors.

Energy efficiency measures for the demand side will be focused according to different types of users which are industrial, buildings and households.

Figure 2: The plan by EPU in the 11^th Malaysia Plan for the establishment of a national energy efficiency strategic master plan.

For ESCOs in Malaysia, the biggest potentials to be exploited from the energy efficiency growth the possible adoption of energy performance contracting business model by large energy users the new strategic business strategies for business sustainability. More efforts are needed to sell the idea among key decision makers from all sectors to consider other alternatives of funding to implement big scale energy efficiency projects that are already available and proven in developed and developing markets such as in USA,Europe and Thailand and China.

What are needed to stimulate the growth of the investments in the energy efficiency industry through energy performance contracting projects is illustrated in the Figure 3 below. Energy service companies who will play the key roles to promote and to ensure the successful adoption of energy performance contracting business model need supports from other stakeholders which are the designated government agency, financial institutions and professional bodies to provide the supporting measures covering the financing, technical assessment, fiscal incentives and performing the independent energy performance measurement and verifications works.

These supports measures are not only required by ESCOs as the industry players but also by each stakeholder in order for them to play their roles effectively. For example, banks will required an independent and competent party to assess technical proposal on loan applications for energy performance contracting projects investments by energy service companies and companies with large energy consumption.

Another example is, fiscal incentives provided by the government in the form of tax exemptions or investment tax allowance for large investments in energy efficiency projects implementation will attract more companies to consider to invest with their own internal fund or from commercial loans.

Figure 3: Support measures required from stakeholders to stimulate the take-up of EPC model by large energy users and ESCOs.

THE CONCLUSIONS

Despite its enormous potentials, the investments and business opportunities in energy service industry in Malaysian market is still relatively very much “untapped” due to factors that have been discussed this article and my last two articles in this topic. It means there are so much more need to be done by all stakeholders to stimulate the growth of the industry  that will benefit all in many ways.

Energy performance contracting model has been proven as a viable and effective business model for faster big scale energy efficiency projects implementation for large energy users. However, with the lacking of national level holistic approach to implement energy efficiency programs and also the lacking support measures to implement energy performance contracting projects have been main barriers.

More successful energy performance contracting projects are required to attract more attention of business owners from large energy users, financial institutions and other investors to look at energy service industry as another attractive platform to invest their money for more profits to grow their businesses.

In the same time ESCOs must have and continue to develop their competency and capability to ensure successful EPC projects implementation to who more success stories to the market and all stakeholders. The upcoming AEC implementation for ASEAN countries and TPPA to be implemented in markets in participating countries, Malaysian ESCOs must also look at these markets to expand their investments and sell their expertise.

All stakeholders must work hand in hand to grow and stimulate the energy service industry from the holistic approach of energy efficiency implementation for Malaysia to benefit from its potentials as the new source of economic growth for the current and  future development to become a greener nation for our future generations.

Note:

The contents of this article is also featured in my column in the Green Plus magazine.