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Meeting the Energy Efficiency Challenge in 2014

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Across the United States, the utility industry is facing increasing energy efficiency goals for 2014 and beyond. To achieve these goals, utilities must tap into the market segment that represents the greatest opportunity for energy savings over the next 10 years - the commercial building market. 

According to the US Energy Information Administration, buildings consume more than 40 percent of all US energy, with commercial buildings accounting for half of this total building consumption. Research shows that 30 percent of a commercial building's energy use is commonly wasted. This waste represents a significant energy-saving opportunity - but utilities have yet to fully tap into this potential because of the extreme difficulty in understanding how a building uses and loses energy.

Forward-looking utilities are solving this problem by using big data and analytics to better identify, target and secure these commercial building efficiency opportunities. Here are four ways that big data and analytics are helping utilities meet tough new efficiency mandates by seizing the opportunity in the commercial building market. 

Targeting Energy Efficiency Opportunities

To reach increasingly aggressive energy efficiency mandates, utilities must become more sophisticated and proactive in how they target their commercial customer base with their energy efficiency programs. 

Aligning the right customers with the right programs has historically been a problem. Utilities typically rely heavily on either leads from inbound requests, or by simply focusing on the biggest energy consumers. Understanding how much energy a customer consumes is a poor indicator for actual energy-saving opportunities. Just because a building uses a lot of energy doesn't mean it's not running efficiently - and vice versa. Other industry standard benchmarks that measure energy-use per square foot are not much better at identifying which buildings have significant efficiency potential.

Consider this: 30 percent of the buildings in a utility commercial portfolio account for 70 percent of all energy-saving opportunities (see Fig. 1). In addition, Retroficiency research shows that the highest potential buildings in a given portfolio can save more than 40 percent of their energy with cost-effective upgrades and changes, whereas the lowest potential buildings can save less than 5 percent of their usage. By targeting the subset that has the greatest efficiency opportunity, utilities can focus on the buildings that matter most. 

Fig. 1: Utilities need to target the commercial buildings with the greatest savings potential. In a typical building portfolio, 30 percent of the buildings account for approximately 70 percent of all energy-saving opportunities. 

By using available data to rapidly generate energy models of their commercial building portfolios, utilities can now quickly identify this subset of buildings that provide the greatest opportunity - and use this information to focus their efforts on buildings that really move the efficiency needle.

Improved Customer Engagement

The current marketing strategies many utilities employ to secure new commercial building energy efficiency projects actually encumber them in reaching their commercial efficiency goals. Whatever communications channels utilities or their program administrators utilize -Web, print, or through partners - the message they provide about their efficiency programs is often generic in nature. Some utilities have taken a step in the right direction by providing content for specific business segments, but this does not go far enough.

The problem with this approach should be self-evident, especially in today's marketing-centric world where customers have limited time and attention to give. The one pitch fits all mantra doesn't resonate with enough customers who wonder, why is this important to me

Today's data rich environments and the advancement of analytics have made this marketing approach entirely obsolete. As we've seen in vertical industries such as financial services, retail, and telecommunications, analytics empower organizations to gain greater insight and information on their customer base. As a result, marketing campaigns can be personalized and targeted to specific groups and individuals.

This same approach is now used in the utility market. By engaging the aforementioned 30 percent with customized efficiency opportunities, personalized to their specific buildings, utilities have a much greater chance at securing customer interest in participating in an energy efficiency program.

Converting the Energy-Saving Opportunity

Once a customer is engaged in his/her energy-saving opportunity, the next step in the process is to conduct a comprehensive audit of the building to identify specific steps that can be taken to reduce overall consumption.

As many readers here know, the traditional on-site energy auditing process can be very time consuming, cumbersome, and costly when traditional tools are used. These audits can take up to several weeks or months for one building. In fact, it would cost up to $50 billion and take 22 years just to audit every building in the United States.

When the audit is finally completed, energy savings measures are often missed due to the time required and complexity of evaluating every potential improvement. For example, an auditor that visits a building in the middle of the winter may not realize the building could save energy by taking advantage of free cooling during the spring and fall months. 

The availability of incredibly accurate and insightful building data, combined with analytics, can transform the auditing process - from scoping to performing Level I, II, or III audits. By using available data combined with analytics, auditors have access to thousands of energy conservation measures to generate recommendations and offers for each customer in hours - opposed to the months it typically takes. 

This approach ensures utilities and their auditor partners can make the necessary recommendations to customers while they are still interested in the energy efficiency discussion, and that all of the measures that fit within a customer's payback criteria are implemented.

Tracking Energy Efficiency Results

Securing the efficiency opportunity is always the most important step in the process - but tracking efficiency results and success is the key to long-term engagements, additional projects, and overall customer satisfaction.

Left to their own devices, customers (other than the most sophisticated ones) will typically attempt to estimate savings by seeing how total consumption is changing. Similar to using only total consumption for targeting, this is a poor indicator of whether efficiency programs are working. There are simply too many variables.

The advent of big data and analytics makes tracking a critical differentiator for utilities. Not only does the availability of data enable accurate representations of current projects, it empowers utilities to dynamically retarget and re-engage customers with new opportunities as technologies, incentives, and building conditions evolve over time.

Imagine that the pricing of LED lighting falls by 30 percent next year or a new incentive is introduced. With analytics and a model of every building, utilities can re-evaluate their portfolio with the click of a button to restart the process again.

Closing the Loop on Energy Efficiency Delivery

Data can be leveraged at every point of the energy efficiency program selling process to improve the interaction with the customer, and ultimately, to get to a better outcome for the utility. In the general business world, this is often referred to as closed-loop marketing. Therefore, utilities that fully leverage data analytics are embracing what I call closed-loop energy efficiency

Utilities now have the power at their finger tips to identify the greatest opportunities in their portfolio; engage those customers on a one to one basis; drastically improve the audit process in terms of time, cost, and impact; and account for how impactful their programs will be in identifying new opportunities. As we enter into 2014, utilities that want to meet rising efficiency mandates will need to practice closed-loop energy efficiency. 

Bennett Fisher's picture

Thank Bennett for the Post!

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Discussions

Michael Keller's picture
Michael Keller on Feb 7, 2014 7:00 pm GMT
Strikes me that utility led "efficiency" programs are a bit of an oxymoron. Seems to me, firms and citizens should get direct tax breaks and help, while keeping the utilities out of the whole effort. My thinking is that the utility is an unneeded middleman who skims-off money, and really has a profit incentive to sell more power, not less.

I actually saw a perfect example of the peculiar utility mindset in action last year. The local utility was pushing for a rate increase to help with energy efficiency efforts and wanted money for the profit they would otherwise not get as more energy was conserved. WTF?

Private companies and entrepreneurs are more nimble and would be much more adept at helping firms and folks use energy more efficiently.

Malcolm Rawlingson's picture
Malcolm Rawlingson on Feb 18, 2014 7:00 pm GMT
Michael -we think alike on this matter. It is a bit like the Ford Motor Company being paid by its customers not to sell them Ford cars.A sure fire way to go broke if you ask me. So the utilities are going to get their money somewhere along the line and it will come out of the only pockets available - yours and mine.

The job of the utility is to make and sell electricity. The more electricity they sell the more money they make for their shareholders. If they are forced to sell less electricity by engaging in efficiency campaigns then they will simply charge more for the megawatts they do make. If they do not they are out of business.

It has always seemed remarkably odd to me that electrical utilities are singled out for these efficiency boondoggles. Gas companies do not appear to need to promote more efficiency measures neither do oil companies or propane companies.

As you quite rightly say energy efficiency is best left to the end user. That way the concepts can be applied to all forms of energy not just electricity. That makes much more sense to me.

Asking electrical utilities to do it is like leaving the Fox in charge of the Hen House somewhat misguided.

Malcolm

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