As GTM Research noted in its recent report, Intelligent Efficiency: Innovations Reshaping the Energy Efficiency Market, the energy efficiency landscape is changing from a capital-intensive, services-oriented model to a software- and energy-data-analytics-driven model focused on operational efficiency.
The report provides a comprehensive, industry-level view that confirms our experiences as more than a trend: the field of energy management is in the midst of a paradigm shift, and both energy users and providers of energy management services and technology must take note.
However, even with this seismic shift in attitudes underway, we’re still not seeing quite the groundswell of energy management investments and related activity at the rate we’d expect. A late 2012 Imperial College London Energy Futures Lab report that surveyed companies from the Forbes Global 2000 list and which was written in collaboration with Bloomberg New Energy Finance, Ceres, and Carbon Disclosure Project revealed that 55 percent of respondents cited energy efficiency project investments as less risky than core business investments, but they hold these same energy efficiency investments to higher hurdle rates than other operational investments: 26 percent versus 23 percent.
Why the contradiction? Our hypothesis: it stems from an inability to make sense of the largely fragmented, muddled landscape -- coupled with a healthy dose of fear of the unknown. Businesses routinely leverage information technology to squeeze out every last penny of savings from just about every business function -- from HR to finance, robust software systems are used to track and analyze data, improve operational efficiency, and deliver a competitive edge. Businesses will invest hundreds of thousands of dollars in customer relationship management (CRM) systems, business intelligence (BI) solutions, or enterprise resource planning (ERP) solutions, yet they’re still balking at even modest investments in energy management software, and few use real-time data to manage costs.
Sophisticated companies might use a utility bill management solution, but even that’s a rearview-mirror approach with very little actionable data. Up until now, real-time energy data has been hard and expensive to get (and at scale) -- but it is here and the time to start using it is now. With proactive, data-driven energy management, not only does the bucket stop leaking, but it likely starts filling with dollars.
Companies may also hesitate to invest in energy management solutions because we're operating in an apples-to-oranges environment: some providers focus on energy efficiency, others stress carbon management, and yet others still focus on dashboards or reporting capabilities. Some solutions are targeted at energy managers with operational responsibility; others are designed to appeal to external stakeholders (like students, tenants, or shareholders). As an energy manager trying to compare options with limited time, information, and budget, this makes for an overwhelming task and thus the decision gets tabled or indefinitely delayed and the status quo prevails.
With the advent of intelligent efficiency, energy intelligence, or enterprise energy management (the naming convention is far less important than the philosophy) -- the industry is slowly solving this problem, giving rise to a class of holistic energy management solutions with robust technology platforms to power them.
This energy intelligence revolution may also help to end siloed energy decision-making. I can’t tell you how many times I’ve walked into a meeting with a senior executive and asked, “How much do you spend on energy in a year?” -- only to be greeted with a blank stare.
Even this very basic data point is often buried across departments, across individual sites or facilities, or just not making its way to the desk of those in charge of making financial decisions for the organization. With energy management decisions often punted downstream, money is left on the table, plain and simple. In fact, the Imperial College London report found that 44 percent of energy investment decision-making is carried out by different personnel than those who are responsible for selecting core business investments. It’s time for the C-suite to be more involved, evaluating these investments in the same way executives analyze other capital expenditures.
The GTM Research report covers several other viable market barriers as well, including lack of technical capability, lack of certainty about savings, and lack of capital for projects, among others. But the fact remains that every business faces its own challenges, and the real problem is likely a cocktail of several of the issues mentioned above.
So what’s the solution? To EnerNOC, the answer lies in creating a category within which we and other providers can be measured by the true sum of our parts. By creating an Energy Intelligence Software (EIS) category with a common set of expected deliverables and value propositions, we can facilitate smart investment strategies that meet business objectives because customers, investors, analysts, and other stakeholders will finally be using a much-needed common language and evaluation criteria. In our view, there are three critical components of any viable EIS solution.
Real-time data: It's plain and simple: you can’t manage what you’re not measuring. Uploading data into spreadsheets and doing manual analysis once the money is already spent isn’t intelligent energy management.
Actionable insights: There’s a reason very few organizations use the term “carbon tracking” or “carbon accounting” anymore -- tracking does not equal change. It’s passive. EIS is about continuous improvement, and with robust data, energy managers can ensure they are meeting or exceeding their goals at any point in time -- or alert managers to take the necessary steps to get back on track quickly if not achieving desired progress.
Quantifiable savings: There are many reasons to care about energy efficiency, but the first, second, and third are all the same: the bottom line. If you cannot measure the impact of your investment, getting organizational alignment around the value of an EIS solution will be next to impossible.
The new GTM Research report expands upon these solutions, and acknowledges the change afoot in the energy management industry toward a data-driven model.
There is a clear need for a new category to define this emerging and necessary field of holistic, data-driven energy management, which will prompt clearer conversations around what is holding back those organizations that are still hesitating on energy efficiency or broader energy management investments.
Time and time again, we see that once customers open the door to their data and see those initial energy-efficiency project successes, they "catch the bug" and they want to do more. And with the vast majority of energy-efficiency measures requiring no or low cost to implement, there’s no reason not to get started today.
The skeleton key is simply a set of organizing principles -- outlined via EIS category creation -- that will enable this attitudinal sea change to connect with correspondingly transformative action.
EnerNOC’s SVP of Marketing and Sales, Gregg Dixon, will be speaking on a smart grid panel at the upcoming Avant EE conference on July 29, 2013 in San Francisco.