How to overcome energy management barriers for commercial & industrial customers

More often than not, commercial and industrial firms’ primary business objective is to drive a high volume of sales. Commercial facilities are focused on ensuring high comfort level for the occupants and the industrial facilities care about their Key Volume Indicators; so energy management is not a business goal. While reducing energy waste can help increase a company’s bottom line, it is an initiative that most organizations do not feel equipped to undertake.  Listed below are some of the main reasons that organizations feel deterred when implementing an energy management program and how to overcome them.

Two major categories of such barriers are:

  1. Informational
  2. Economic

The Industrial sector accounts for the largest share of energy consumption in the United States, followed by the Commercial sector. Data from 2016 shows that together the Commercial and Industrial (C&I) segments of the economy consume 51 percent of the total energy in the United States.[1] While energy efficiency initiatives increased over the past few decades to combat climate risks and mitigate financial risks (due to energy price volatility), many C&I organizations still face barriers in energy management program implementation.

The commercial and industrial sectors differ in the ways they use energy. In the commercial sector, most of the energy consumption can be attributed to lighting and space conditioning. In the industrial sector, on the other hand, these end-uses make up only 15 percent of the total energy consumption.[2] The specifics of the remaining 85 percent of energy consumption can vary vastly between industries, and even between plants in a certain industry. Even though the end energy use is quite varied amongst sectors and subsectors, there are a few common barriers that exist in energy program implementation.

Informational Barriers to C&I Energy Management Program Implementation

  1. Lack of in-house technical expertise: Conducting an energy demand and consumption evaluation requires the facility staff to examine the operations from a perspective different than that focused on sales volume. Being aware of various energy saving opportunities is key to developing an energy plan tailored towards a facility’s needs.  Lack of in-house energy assessment professionals can be a major hurdle in the deployment of energy management systems. Furthermore, the opt-out programs make it easier for large customers without the know-how of energy management programs to stop participating, leading to an even greater lost opportunity in terms of energy and cost savings.
  2. Lack of energy consumption and demand data: Lack of granular energy consumption and demand data can prevent identification of potential energy saving opportunities. The same way as real data helps validate conventional wisdom about business operations, disaggregated energy data can help organizations understand their energy consumption trends and demand levels at the facility level, the process level, and even the equipment level.
  3. Difficulty measuring and verifying energy and cost savings: Often, a year’s worth of data is required to build and validate an energy baseline model (representative of the usual energy consumption and demand levels). In order to verify savings due to energy initiatives, it is imperative that this model be valid during the verification phase. If a major facility change is undertaken during this period, the model may be rendered useless, jeopardizing the future of the energy program at the facility.
  4. Awareness of incentives: Many business owners are unaware of the federal, state, and utility rebate incentives available to participate in an energy management program.

Economic Barriers to C&I Energy Management Program Implementation

  1. Internal competition for capital: Energy Management Programs are often associated with a high upfront investment that is required to cover various costs ranging from equipment upgrades, deployment of energy data gathering systems to training the in-house staff on energy conservation initiatives and even hiring outside specialists to reduce the carbon footprint of an organization. When facility management is strapped for cash, other corporate projects often take priority over energy efficiency projects.
  2. Short payback requirements: Many organizations require short payback periods for energy efficiency projects. These requirements impede the development of capital energy efficiency projects such as equipment upgrades leading not only to losses due to energy waste but also creating serious maintenance issues at a later time.
  3. Split incentives: Split incentives occur when those responsible for paying energy bills are not the same entity as those making the capital investment decisions. The benefits and costs of an energy efficiency project are, therefore, not seen equally by all agents involved in the process, complicating the decision making process.[3]

Solutions to overcome Informational and Economic Barriers in C&I Energy Program Implementation

The informational and economic barriers to energy management program implementation can be significant for organizations depending on their corporate policy, budget constraints, philosophy, and many other factors. While it is not possible to address all concerns, here are some solutions to the above listed barriers.

Barrier: Lack of in-house technical expertise.

Potential Solutions

  1. Develop an energy efficiency best practices knowledge base within the organization. Begin by identifying small scale opportunities and expand to bigger initiatives as the knowledge base grows.
  2. Utilize the research results and information made available by academic institutions, not-for-profit organizations and industry leaders to develop an in-house energy management program.
  3. Participate in federal energy management programs to initiate energy assessments of your facility. The Department of Energy has established Industrial Assessment Centers (IACs) that offer free energy audits and provide energy efficiency recommendations for industrial facilities.

Barrier: Lack of energy consumption and demand data.

Potential Solutions

  1. Create a comprehensive database of monthly energy bills available from your utility providers
  2. Install interval metering onsite to collect 15-minute interval demand data of major processes
  3. Invest in tools and resources required to compile and evaluate this data

Barrier: Difficulty measuring and verifying energy and cost savings.

Potential Solutions

Building an Energy Management System helps organizations systematically track and analyze their energy usage. To begin:

  1. Create a robust energy baseline using a year’s worth of data
  2. Determine the major users of energy and the major drivers of energy demand.
  3. Refine the model on a periodic basis to ensure its applicability to verify savings, and make adjustments when necessary.
  4. Develop a continuous assessment program to ensure an up-to-date and refined energy baseline and a valid energy consumption model.

Barrier: Minimal awareness of incentives.

Potential Solutions

  1. Increase participation in utility energy management programs
  2. Research the Database of State Incentives for Renewables & Efficiency (DSIRE) or other similar information sources
  3. Hire outside specialists or develop an in-house team to understand and oversee energy efficiency rebate applications.

Barrier: Internal competition for capital.

Potential Solutions

  1. On-bill financing: The utility finances energy efficiency improvements for a customer and recovers the investment via a small surcharge on the customer’s monthly utility bill.
  2. Performance contracting: Energy Savings Performance Contracting (ESPC) is a budget-neutral approach to make facility improvements that reduce energy and water use and increase operational efficiency [4]. By partnering with an energy service company (ESCO), a facility owner can use an ESPC to pay for today’s facility upgrades with tomorrow’s energy savings—without tapping into capital budgets.

Barrier: Short payback requirements.

Potential Solutions

  1. Rebate programs: Take advantage of qualifying rebate programs can reduce the upfront investment required to make an energy efficiency improvement, thereby reducing the payback period.
  2. Recognize the non-financial benefits of increased energy efficiency such as better comfort, reliability, and controllability: Build a comprehensive assessment of benefits achieved via an energy efficiency initiative helps build the business case in its favor. Expand the area of focus beyond simple payback to potential increases in productivity, minimal downtime, and building a reputation as an environmental leader.

Barrier: Split incentives

Potential Solutions

Facilitating communication amongst all involved stakeholders can help ease the decision-making process for energy efficiency projects. Some organizations have adopted an Energy Champions program that brings personnel responsible for procurement together with those responsible for billing to help with operational and investment decisions.

Find Help

While many barriers exist to implementing energy management programs, overcoming them can pay dividends for both customers and the environment. If you lack the internal resources to research energy efficiency options, consider hiring an energy efficiency consultant, such as kW Engineering, to act as your energy management department. An independent, third-party energy expert is motivated only by your needs and constraints and can deliver savings to meet any of your energy and fiscal goals.

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This post was modified from an original article in AESP’s Strategies Monthly Member e-magazine.


[2] EIA 2013b “2010 Manufacturing Energy Consumption Survey.”



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