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What Good is an Energy Information System?

Do financial managers see an Energy Information System (EIS) as a toy for facility managers, rather than a money-saving tool? Is there any payback on these things? Isn’t one analysis per year good enough to find energy inefficiencies, rather than a real-time data hog? Probably, Usually, and No. EIS have multiple uses and benefits, therefore different types of payback, depending on whether you are discussing user benefits for a utility, a retail energy (commodity) provider, an energy services provider, or the end-user. While any individual enterprise may well have specific needs for which an EIS is a cost-effective solution, general uses and benefits are reviewed below. EIS offered by a utility
A traditional, regulated distribution utility may provide an EIS as either a customer service, or as a tool to manage other services. For example, some low-end EIS are merely data tables and graphical reports of historical electricity usage, available on the Internet or by email delivery. The usage that is reported is only as recent as the last meter reading and bill processing, yet this type of system is more than adequate for many small commercial businesses. Some historical EIS allow the customer to provide production or process data, facility metrics (such as square feet of space), or weather indices so that the reports can be indexed against relevant usage factors. A twelve- or twenty-four month report of historical usage can be a valuable indicator for budget planning and even rudimentary cost allocation. Historical usage profiles are also necessary when negotiating and quantifying energy supply contracts, in states where electricity and/or natural gas have been re-regulated. Historical EIS, however, have three main drawbacks:
  1. The reported data is dependent on the utility’s metering and billing system, and is therefore not useful as a check against those systems.
  2. The reported data is rarely at a level of usage that reflects discrete cost centers or production times, as could be achieved with sub-metering.
  3. The reported data is not actionable. That is, reading in August that you had set a new peak demand in June, affecting your next twelve-months’ demand calculation – is too late.
Some utility EIS are for Load Management programs, particularly those programs that are price-responsive. The utility changes out the customer’s meter to be a real-time “smart” meter, conveying usage information by wireless or Internet connection. The utility’s Load Management program includes a Notification system, and requires that the program member respond by Internet form within the EIS and/or by telephone. At this point, the price-response program may allow the customer to decline load shedding or submit a “bid” for shedding certain load at certain price points. In order to make this decision, the customer’s EIS shows projected typical usage for the day and allows the customer to monitor actual real-time usage against target profiles. A good EIS also supports cost calculations so that the customer can estimate marginal return for program participation, versus benefits and cost of continued production at full power. By increasing the sophistication level of Notification, price-response flexibility and customer monitoring, the utility can increase participation in its program. Such systems provide a higher level of benefit to both the utility and customer by reducing risk and uncertainty. The utility can monitor and manage participation during the curtailment event and curtail no more than necessary (spend no more than necessary in program payments) or curtail in specific geographic regions. The customer can curtail / shed load just to the marginal economic benefit, and no more than necessary, to assure its optimal combination of expected program rewards and production output. (To make this discussion more complex, a higher level of sophistication and system capacity management can be achieved when introducing remotely monitored on-site generation into a price-responsive load management program.) EIS offered by a retail energy (commodity) provider
A retail energy provider may again offer an historical EIS or a partnered Load Management program, depending on that company’s relationship with the distribution utility(ies) that deliver the contracted commodity to its customers. Further, EIS have significant “back-office” benefits and customer retention benefits. Many of these uses and benefits, however, require different or redundant metering, separate from the distribution utility’s metering. (See “Getting the Data – It’s Simple But It’s Not Easy.”) Logically, the longer a customer monitors usage, the more valuable is the data set. Likewise, the more customers being monitored, the more valuable the aggregated usage data is, for purposes of forecasting, risk management and contracting. Profiles and patterns emerge, which allow the retail provider to establish pricing groups and contract time-blocks (real-time, day-ahead, seasonal or daily blocks). While such variable pricing may be the most profitable for some customer contracts, simple PxQ pricing may be optimal for others. But without historical usage profiles, it’s difficult for the Pricing Analyst to determine which customers should be offered which contract. For new customers, the Pricing Analyst must rely on data available from the distribution utility, and often import that data into a complex spreadsheet program. For existing customers, a good EIS will include a Rate Tool, which applies tariff-like rules to estimate billed usage. This Rate Tool can be manipulated for extensive “what-if” modeling and alternative rate scenarios. Once the retail provider has a substantial database of users over time, user-types can be modeled. That is, a Virtual or Standard Commercial Account can be set up, the Rate Tool applied, and various contract structures tested before offering to new customers. By closely integrating the EIS with risk, hedge and commodity purchasing activities, the tool can increase the accuracy of short- and long-term forecasting, thus lowering risk exposure. For example, one customer grouping’s usage may be particularly weather-responsive. Running the EIS in short-term forecast mode indexed to the National Weather Service can more accurately predict that group’s demand. The retail provider may have excess supply that can be sold on the daily market, or may need to contract for extra supply day-ahead. EIS offered by an Energy Services Provider
Utilities, retail commodity providers and separate service companies all offer a variety of programs intended to reduce energy consumption and/or offer administrative efficiencies. Some are specific or limited, such as space lighting retrofit, and some are comprehensive, as total outsourced energy management or facility management. As just one example, a common energy service is the facility audit and improvement contract, often called “performance contract” as the customer pays for services on the basis of operational improvement. Although Demand Side Management (DSM) is not being promoted as heavily by utilities under uncertain re-regulatory environments, such projects are still recognized as potentially effective in reducing operational expenses. Potentially. How many contracts have ended in dispute for lack of quantified proof of “before” and “after” energy usage, normalized for weather, production, square footage, etc.? The EIS provides M&V (measurement and verification) for contract resolution. Using their own EIS, the services contractor should sub-meter discrete levels of usage with temporary data-loggers or meters, to create an initial baseline. At several stages during the project, the contractor and customer should compare usage against the initial audit, to determine whether the project should be modified or is beginning to achieve expected results. Sub-meters may be re-located, increased or decreased in number, or changed to monitor power quality as well as usage. At the close of the project, specific time-period reports are available and the Rate Tool can be applied, providing actual outcome metrics. At the other end of the scale, a comprehensive energy management service must squeeze any and every opportunity to find resource, operational and production efficiencies, examine utility bills for errors, and reduce client administrative tasks and costs. An EIS’ primary virtue is its single database, into which all sorts of energy-related information may be filed or imported, and from which aggregated or select data sets may be exported to enterprise resource planning (ERP) tools, asset-management software, financial models, annual reports, and simple spreadsheets. From simple Alarm notification to enterprise-wide data mining, the first step is to capture pieces of information and streams of information that may have value when combined with other information. First collect it, then aggregate it, then slice-and-dice it, then disseminate it. Electronically, remotely and automatically. EIS as secured by an end-user
At the least, an EIS must relieve the industrial or commercial enterprise of manual data collection, manipulation and reporting. An EIS is first an enterprise system. Building control systems (BCS) already do facility-centered alarming and monitoring. The central point of an EIS, however, is that it provides integrated information that is available remotely, rather than single-site facility management. The manager who doesn’t have to compile a report will enjoy one of the first administrative savings; the second savings beneficiary is the manager who doesn’t have to call for the report that wasn’t delivered on time. Once usage data has been remotely, automatically and electronically captured and stored without duplicative manual effort, energy usage can be allocated to various cost centers and budgets can be updated and forecasted. (Sub-metering at facilities may be necessary to support accurate allocation when facilities include multiple cost centers within the structure.) The best-in-class enterprise will regularly undertake a production cost audit to compare labor, energy and other resource costs per unit of output, and determine what resource inputs may be changed to lower overall cost-per-unit. For example, the manufacturing process of a block may be more energy-intensive than a cylinder, and should be scheduled for third shift, providing the extra labor cost does not offset the energy savings. Production cost audits will also determine the price-points at which on-site generated electricity (at various fuels’ cost) should automatically replace purchased electricity, and which times of day the energy resource for production may be reliably supported by real-time or block price contracts. These manufacturing production or commercial operation cost audits will increasingly benchmark facilities by energy costs, and as re-regulation advances nationwide will support commodity contract negotiations for multiple facilities across geographic regions. Further, best-in-class industrial enterprises are making sure to report stewardship successes and environmental improvements with verifiable hard data, which can be derived as an additional EIS scheduled report of emissions, discharge and consumption. The end-user’s payback on an EIS is ultimately anecdotal and specific. That is, one company will save costs by avoiding an event, another will save marginally on energy usage, another will significantly cut administrative tasks, and still another will generate future savings in best practices by benchmarking. EIS as an offered service vs. an end-user’s independent advantage
Utilities, retail energy providers and managed service providers hope to attract and keep profitable customers in increasingly competitive environments. An EIS is another customer benefit to create “stickiness.” As the customer becomes dependent on the convenience and usefulness of usage reports, billing reports, alarm / alert summaries, benchmark comparisons and other analysis by Internet or email, it gets harder to leave that data behind to go to a different commodity or services provider. The customer becomes invested in that historical database. If the EIS provider has leveraged multiple benefits of its EIS, there are potentially additional services the customer enjoys, supported by monitoring and data integration, further increasing the opportunity cost for switching providers. Conversely, the savvy energy user may exercise proactive management by investing in its own EIS, giving itself data independence from any provider and flexibility in the energy marketplace. The data is still available for modeling, pricing and forecasting, but the end-user is in control. Once-in-a-while or continuous real-time analysis
This is essentially a debate over static versus dynamic business decisions. For some end-users a static analysis once every year or two is perfectly adequate. This type of periodic analysis can check for utility billing errors, model a usage profile for contract negotiation and suggest areas of facility and system inefficiencies. Regular utility bill processing systems also provide enterprise-wide usage analysis. But it’s (a) data from the billing source and (b) not usually in an inherent format for integration with other enterprise information. The more complex and dynamic the business and its energy usage, the more likely that business will need and value a real-time EIS. Very few businesses are truly static. Factors such as occupancy, production, weather, employee complacency, building improvements, company growth and reporting requirements change from year to year and quarter to quarter. But more important, in an economy where “Lean Manufacturing” isn’t a feel-good proverb but is a bottom-line necessity, a real-time and dynamic EIS can help the utility, energy provider and end-user manage energy to a fine degree. Whether electricity, gas or water, this is another business cost where waste is a reducible expense that directly affects profitability. Conclusion
Generally, all of the tasks above are currently being done to one degree or another, through facility management systems, utility billing systems, or my favorite, the old (but not reliable) “clipboard and spreadsheet.” Perhaps it’s not cost effective for an entity to license a powerful EIS to monitor all electricity, gas, water, wastewater, air-handling systems, furnaces, emissions, voltage, … in real time. An historical system may be adequate for one company, a daily summary for another company, real-time monitoring for another, and sophisticated monitoring, modeling and forecasting for the next. Although the descriptions above are only representative and not exhaustive, we see that EIS uses vary, therefore payback varies. The only way to assure payback, however, is to (a) carefully define expected needs and benefits, (b) carefully select and install the appropriate system, and (c) fully and habitually use the system once installed. It’s easy for an enterprise software system to be too expensive, take too long to install, and disappoint the ultimate user. Nobody’s willing to make that career-ending decision to spend up to three hundred thousand dollars on a massive system with every bell and whistle. But don’t let that stop you from a reasonable investment that should pay for itself in lower administrative costs, lower utility bills, lower risk, higher productivity and greater energy stewardship.

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Response to Tracey Forrest: While the energy information system(s) described in the above article focus on automatic data collection, there are systems that convert utility billed data into a reportable database.

Essentially, one contracts for a monthly service and authorizes that all utility bills are sent to that service directly. The service keys in usage and cost data. Various services provide levels of analysis, usage / cost checking and auditing, and additional bill payment steps.

The analysis reporting can provide usage benchmarks, profiles and exception reports.

However, this is data reported by the utility, after meter reading and bill generation. While it is certainly a streamlined bill process and allows historical analysis, it is not the same level of energy management as described above.

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