The future of energy management in the UK

Commissioned by Schneider Electric

Researched and written by Vilnis Vesma

July 2010

Make the most of your energy TM

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Contents
1. Preface 2. How we got to where we are today 3. Energy management in the UK in 2010 3.1 Who is currently carrying out energy management duties? 3.2 How important is energy management?
2 3 6 6 9 9 10 11 11 12 12 13 14 18 19 19 21 21 22 22 22 25 26 27

3.3 What gives energy management its importance? 3.4 What obstacles do organisations face? 3.4.1 Lack of knowledge 3.4.2 Interest and influence misaligned 3.4.3 Ground not properly prepared 3.4.4 No policy, or lack of support

3.5 Public perceptions 3.6 Government interventions 3.8 Trade and offsetting 3.9 Climate change as a motivator 4.1 Staff motivation and awareness 4.2 Outsourcing 5.1 Leaders and laggards 3.7 Willingness to invest in energy management

4. Opportunities

5. Trends 6. Futures 7. Conclusion 8. About us

Copyright 2010 Schneider Electric UK Ltd. All Rights Reserved. No part of this publication may be reprinted or reproduced or utilised in any form or by any electronic, mechanical or other means, known now or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from Schneider Electric UK Ltd. Warning: the doing of an unauthorised act in relation to copyright work may result in both civil claim for damages and criminal prosecution.

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1. Preface
This report was commissioned by Schneider Electric in 2010 to provide insights into the likely future of energy management in twenty years time. I have drawn on a number of recent research studies (including one specially commissioned for the project) and the views of a panel of experienced practitioners in, and observers of, the energy-management scene. I am particularly grateful to them for giving generously of their time to help me. Their candid opinions on the state of the art were invaluable not least because in most respects they bore out my own opinions (which was a relief because although I have been in the business a long time, I worry that my perceptions might be skewed). But they also injected a number of valuable new leads and ideas. To give our experts the confidence to speak freely, we said they would not be identified in this report. I would also like to thank the energy managers, consultants and trade-association representatives whom I interviewed during the course of the work. For the final document, however, I must take full responsibility.

Vilnis Vesma Newent June 2010

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2. How we got to where we are today

The pursuit of energy efficiency (or, more properly, fuel economy) can be traced back at least to the nineteenth century but we could take as our starting point the 1940s and 1950s. Those decades were arguably the heyday of industrial energy management. In the grip of wartime fuel shortages, and later in the pinch between shortages and economic growth, industry was compelled to think about fuel economy and to take action.

Oliver Lyles 1947 classic

For many it was a simple proposition: make that stock of coal last, or shut the factory. The Ministry of Fuel and Power went into overdrive producing advisory leaflets and commissioning heavyweight textbooks, among them Oliver Lyles classic The efficient use of steam{1}. The ministrys team of fuel technologists and efficiency engineers would go on in 1953 to become a commercial operation the National Industrial Fuel Efficiency Service (NIFES) which was privatised in 1971 and flourishes as an energy management consultancy to this day.

Next came the oil crisis of 1973, with overnight tripling of world oil prices. Factories spent a period on three-day working weeks and motorists were issued with fuel ration books.

You never know, it might come in The authors 1973 petrol ration book

NIFES published its Fuel Economy Handbook in 1974. Energy conservation was the watchword, with its connotations of preserving scarce resources for future generations. The Department of Energy (as it had become) began producing TV advertisements, leaflets, posters and advisory booklets on the Save it theme and launched the Energy Quick Advice Service. The Department of Industry commissioned its Industrial Energy Thrift Scheme, visiting companies to provide advice and producing summary reports for each of over 30 industrial sectors. In 1979 the Iranian revolution injected further price rises and reinforced fears about security of supply. At this stage it was less than ten years since the introduction of natural gas for the public supply and received wisdom was that there was only 20 years supply left: it was regarded as a premium fuel and its use for power generation was not permitted. The public sector pursued energy conservation with enthusiasm. By the early 1980s Essex County Council had a specialist team of 17 (something of a record, it has to be said) but teams of three or four were not uncommon in county and London borough councils. The Department of Energy published its Energy Conservation Demonstration Projects series

{1}

HMSO , 1947

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 some 175 two-to-four-page profiles of practical measures that energy users had undertaken, complete with indicative costs and savings. By the early 1980s a company called Cambridge Information and Research Services was profitably running energy training courses and publishing textbooks on the subject under its Energy Publications imprint. The annual National Energy Management Exhibition (NEMEX) had outgrown its home at the Metropole Hotel outside Birmingham and moved to the National Exhibition Centre. Its name echoed a shift in terminology from conservation to management of energy, reflecting the new reality which was that fuel and electricity were costly commodities but not necessarily in short supply. 1986 was made Energy Efficiency Year by the UK government under the Monergy slogan which stressed the twin imperatives of cutting costs and preserving finite resources Thanks to generous government support for energy surveys, the 1980s saw huge growth in the number of individuals operating as energy consultants. The Institute of Energy compiled a directory limited to those with credible qualifications (receiving applications from nearly two thousand, many of whom patently had no appropriate experience at all). A prolonged miners strike in 1984/85 reignited energy-security fears but arguably had little effect beyond killing off coal in favour of oil and gas. 1986 was made Energy Efficiency Year by the UK government under the Monergy slogan which stressed the twin imperatives of cutting costs and preserving finite resources. Energy management had reached its post-war peak. And then came a lurch backwards: progressive privatisation by the Conservative government, between 1986 and 1992, of gas electricity and water supply. Gradually, controlling energy costs became a question of merely shopping around in a competitive market: something that finance directors could do without the need for specialist energy managers. Not helped by the 1991 recession, energy teams were disbanded and knowledgeable individuals made redundant or assigned to other tasks such as the up-and-coming fields of environmental management and sustainability. After the 1992 General Election the Department of Energy was abolished and the dash for gas began. In parallel with these developments, public-sector bodies were being restructured or privatised. The story at Gloucestershire County Council may be typical: schools which once benefited from central expertise and project funding took control of their own local budgets. Lacking a captive clientele, the countys expert energy management unit disappeared, its last remaining member becoming the countys environmental coordinator; the schools, meanwhile, were too small individually to afford energy-management knowhow, and their leadership teams had more pressing issues to deal with. Twenty years later this is seemingly still the defining model in primary and secondary education. Although energy security would come to the fore in the publics mind again briefly in 2000 with blockades of road fuel, the last ten years are far more notable for a dramatic shift in public policy and pronouncements away from saving energy and towards the reduction of greenhouse-gas emissions. The UKs stance internationally is to be applauded but our government is perhaps the only one in the world to have completely switched its domestic propaganda and support away from energy saving and cost reduction. Driven by the climate imperative, the last Labour government created a QANGO, the Carbon Trust, to pursue the emissions-reduction agenda on its behalf. It discontinued the former Energy Efficiency Best Practice programme. It is noticeable that in international committees drafting the energy-management systems standards EN16001 and ISO50001, delegates from other countries find the UKs carbon focus unusual. Most other countries in Europe and beyond share the UKs view of the environmental imperative, but provide high-profile support explicitly for energy (rather than carbon) saving. We will argue that the UKs significant change of emphasis from energy to carbon, and the thinking of which it is symptomatic, have been damaging to the cause.

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3. Energy management in the UK in 2010

The burden of this historical account is that energy management in the UK has been in decline for fifteen years, or certainly not progressing. In order to assess where it now stands, we have access to a number of sources to supplement our personal contacts: A round-table meeting of long-standing energy-management practitioners, consultants, and journal editors. This group (which we will refer to as RTM-2010) met on 15 January 2010 specifically to provide insights into long-term trends, and continued working by correspondence for some weeks afterwards. Telephone interviews carried out specifically to inform this analysis by a market research company, BMG. This will be referred to as BMG-2010; nPowers Business Energy Index 2010 (nBEI-2010) A survey of energy and environmental managers carried out by the British Standards Institution in 2009 (BSI-2009) A regional survey Business opportunities for the energy efficiency sector in the South West of England commissioned by South West of England Regional Development Agency in 2009 (SWRDA-2009) A survey report by the Economist Intelligence Unit After Copenhagen: Business and climate change (EIU-2010). Published in February 2010, this is somewhat tangential to the subject as it deals with carbon emissions and has an international scope. Its value is that it was compiled from interviews predominantly with senior decision-makers in business, and provides insights into corporate thinking for the medium-term future Conversations with other individuals such as the representatives of industry bodies and trade associations

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3.1

Who is currently carrying out energy management duties?

From BMG-2010, it appears that about a third of those claiming to be responsible for energy management are administrative and clerical personnel, while another third are proprietors and senior decision makers. The remainder are either managers or people with identifiable professional specialisms. This last category specialist professionals - tended to be found within larger organisations. Their employers average headcount exceeded 800, compared with about 80 where the energy manager is a junior employee:

Grade of respondent

Average organisation headcount

Proprietor and senior decision maker 104 Specialist professional 838

Specialist professional 152 Administrative and clerical 82

There are marked differences between sectors. In health, for example, responsibility appears to be devolved to relatively junior employees{2} whereas in the food and beverage sector, and in retail, it is the province of someone classed as a senior decision-maker.

BMG-2010 results of energy management responsible personnel

Data Centres Education Food & Drink Health Local Government Manufacturing Oil & Gas/ Energy Retail 0% 20% 40% 60% 80% 100%
Senior decision maker Professional specialist Manager Administrative or shop-floor

Of the respondents to BMG-2010 (who all identified themselves as having responsibility for energy

Not one single respondent exclusively specialised in energy management

management) over 90% reported spending less than a quarter of their time on that specific duty. Only 6% did it full time, but careful scrutiny of those specific responses shows that even they are actually responsible for a wider range of activities. Not one single respondent exclusively specialised in energy management.
{2}

BMG-2010 appears to be skewed towards smaller units such as health centres; we would accept that the position is different in, for example, large acute hospitals.

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Only 15 BMG-2010 respondents (3%) had the word energy in their job title and all but two of those were in the public sector. This bias tallies with evidence in the job titles of individuals attending open training courses on energy management.

Additional responsibilities of those responsible for energy management

60 50 40 30 20 10 0
Per cent

Maintenance Environment Procurement Managerial Facilities Plant Production /dir management management management

The conclusion that only 3-6% of organisations have an identifiable energy manager is consistent with the findings of BSI-2009, where 5% of interviewed organisations fell into that category. It seems that the position of dedicated energy manager, which twenty years ago was thought to be relatively common, has all but disappeared in the private sector (although it has tended to survive in larger public-sector organisations). Anecdotally in the private sector a job title covering energy usually also covers environmental compliance, health and safety, or sustainability.

Is there a dedicated energy management team or person?

Yes - team Yes - person No

Only 3-6% of organisations have an identifiable energy manager

This trend towards a less-specialised, part-time energy-management profession seems likely to have resulted initially from downward pressure on staff numbers in the 1990s but the more recent emphasis on the environmental imperative and its associated trading schemes (on both of which, more later) may also be partly to blame for skewing public and corporate perceptions of what the job is all about. These factors are not going to go away and it therefore seems certain that the energy manager of the future will in most cases not be a full-time trained specialist because, in effect, employers will be filling such posts with the wrong kind of people.

{3}

Not counting one who worked on renewable energy in the oil and gas sector and is not relevant

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3.2

How important is energy management?

Eight out of ten BSI-2009 respondents classified energy management as important or very important. Moreover, the trend is for it to become more so. Only 36% said it was currently very important, but 52% believed it would become so within two years. The picture is not, however, necessarily uniform across the size range. Major energy users in nBEI-2010 attached higher importance to energy management and reducing consumption than at any time in the previous six years. But it was not the same for SMEs who scored energy lower (6.5 compared with 8.5 out of ten), a score which in their case was matched or exceeded in three out of the six previous years. There is evidence from nBEI-2010 of a divergence of opinion, with major energy users expressing greater Collectively, small users account for a large proportion of national energy consumption concern about energy. This is a problem because, collectively, small users account for a large proportion of national energy consumption and numerous agencies have tried and failed to engage them effectively on this subject. BMG-2010, which had a bias towards smaller users, bears this out. When asked to name, without prompting, an organisation that gives unbiased advice on a broad range of topics, only 18% of respondents named the Carbon Trust, 7% mentioned the Energy Saving Trust, and a mere 2% cited the Energy Services and Technology Association.

Sources of knowledge to learn about energy management

Specialist or trade press Training courses Exhibitions

Web sites searching by keyword Websites such as Carbon Trust, ESTA, Energy Saving Trust, a manufacturers site or energy specialist or consultants site Energy providers Manufacturers of energy efficient solutions Degree or diploma

Conferences From peers Self-taught

3.3

What gives energy management its importance?

78% of BSI-2009 respondents cited cost as one of the top three reasons for engaging in energy management (with environmental protection a poor second at 33%). 95% of SWRDA respondents considered energy prices important or very important as drivers for energy-efficiency investment; in BMG-2010, 92% of respondents rated cost important or very important to their organisations. nBEI-2010 concluded that energy costs are perceived as the most significant factor not only for major energy users but also among small and medium enterprises. EIU-2010 shows that climate change is not an important driver. Respondents were divided between those that did and did not believe the scientific arguments for global warming, and while attitudes on this made a substantial difference to whether or not companies engaged in explicit carbon-reduction activities (such as the development of green products) it made no difference to levels of activity on energy efficiency. Skeptics and believers were equally likely to have engaged in energy-saving activities. EIU-2010 presents it as axiomatic that companies want to save energy for reasons of cost reduction.

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Drivers for energy saving programmes

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Reducing Reducing Meeting Making room To prolong CSR (Corporate Concern about Increased Accreditations costs carbon legislation for future lifespan of Social future fuel availability of (e.g. British emissions growth equipment Responsibility) shortages renewable Standards) /Promoting your technologies organisation in a good light

V. Important

Important

Neutral

Not very important

Not very important at all

3.4

What obstacles do organisations face?

BMG-2010 questioned those with day-to-day responsibility for energy matters, and 62% of them considered that their organisations could do more. The three major impediments are lack of resources (cited by 28%), lack of time (27%), and conflicting priorities (23%). 15% of respondents cited both time constraints and conflicting priorities.

Factors preventing organistations from doing more to save energy

Lack of cooperation

Lack of resources

Lack of knowledge

Other priorities

Lack of time 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

For the higher-level corporate view we can turn to EIU-2010. Here we see three barriers to investment in emissions-reduction projects. Two are cost-related: (a) unease over deploying solutions that are perceived as possibly costly; and (b) the need to prioritise spending to keep businesses afloat through the recession. The third, which is less directly relevant, was regulatory uncertainty.

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3.4.1 Lack of knowledge

In BMG-2010, 20% of people in managerial or specialist professional roles identified lack of knowledge as an obstacle, compared with 12% for administrative or clerical jobs and a mere 6% of proprietors and senior decision-makers. When asked what sources they used to improve their knowledge, 33% cited web searching by keyword. 30% reported getting advice from their energy provider. Ignoring the 16% who described themselves as self-taught (and who, we presume, are actually using one of the other sources) the next significant choices were training courses and going direct to a known web site (each being cited by only 9%).

3.4.2 Interest and influence misaligned

A few BMG-2010 respondents (3%) cited the fact that they were prevented from doing more because they were tenants, or in some other sense not free to make changes. In some cases this was because another higher authority was cited as being responsible. What these situations illustrate is a misalignment between commercial interests (the need to save money by improving efficiency) and the ability to influence performance. This interest/influence disconnect came out strongly in discussions with people from the rail and shipping industries. In freight shipping, arrangements are diverse and responsibilities for fuel efficiency often misaligned. A freighter has owners (who typically provide the crew) but may also have managers, charterers (whose involvement may span anything from a single trip to several years), and cargo owners. Charterers would usually be responsible for fuel costs but the crew (whose day-to-day actions effectively determine fuel consumption and efficiency) will, if answerable to the owner, have no interest in such matters. Meanwhile the cargo owners imperatives may dictate sailing speed, which will have a major impact on consumption. In the rail industry, the franchising model creates a bad environment for energy management. As far as fixed assets are concerned, a train operating company is generally a tenant in Network Rails premises, usually on quite a short lease which is not conducive to investment in efficiency. Moreover, management of the facilities is often outsourced, exacerbating the interest/influence disconnect. The other major aspect of rail operations is traction power and this has its own peculiarities. Electricity for traction is usually provided for a fixed charge, which removes the incentive for economy and makes management of consumption a meaningless concept. The lack of metering inhibits the development of regenerative braking. Nor will the introduction of traction metering necessarily have the same benefit that it might do in many other spheres, because consumption is hugely affected by random external factors like how many red lights a train encounters on a journey. This of course is an issue which affects diesel engines as well. One plausible scenario for the next 20 years is the development of network optimisation tools which coordinate the speeds of trains following each other so as to avoid excessive braking. This, however, would demand coordinated action by the network and train operators, which unless it has a beneficial impact on timekeeping, is unlikely to happen. In the health sector it is known that private-finance initiative (PFI) contract terms can sometimes inhibit health trusts from improving the buildings and facilities installations that they use, since they are in effect tenants.

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What does this mean for the future? For public-sector organisations such as transport and health, the systemic obstacles are highly likely to be recognised and the government should be able to implement strategies to mitigate them, for example by introducing licence conditions for the rail network operator obliging them to cooperate with, and encourage cooperation between, train operating companies in the pursuit of energy efficiency.

3.4.3 Ground not properly prepared

A very small number of BMG-2010 respondents (under 1%) identified a class of problem which in reality is probably more common, and that is where work on efficiency improvements is prejudiced by the poor state of repair of buildings or equipment. An allied objection is frequently encountered in staff attitude surveys where personnel express a disinclination to cooperate because they feel that existing levels of service are inadequate, or that their complaints about maintenance have previously gone unheeded. Related to this is the quality of maintenance of energy systems themselves. In a branch network of a multi-site organisation, local managers depend on the skills of maintenance contractors staff to ensure that heating, ventilating and air-conditioning plant is set up to maximise efficiency and minimise losses, and that the controls are properly set up. If the contractors personnel are inadequately trained, it inevitably results in excessive energy consumption. In terms of future development we will suggest later that maintenance contractors could in fact be part of the solution. They are well placed to provide outsourced energy-management services for certain classes of client. Integrating maintenance and energy management makes it less likely that poor maintenance will prejudice programmes.

3.4.4 No policy, or lack of support

15% of BMG-2010 respondents reported lack of cooperation and some elaborated this as meaning that there was insufficient support for energy saving, or no policy. Lack of policy is something that is easily addressed by management and as the drivers for energy efficiency become more compelling it is likely to disappear as an obstacle. Lack of cooperation and support can be interpreted in many ways. Successful energy management demands cooperation and support from key decision makers, middle managers, the workforce and contractors. In particular, it may need people to change the way they do things, which is a special challenge. But support can also mean material support in the sense of resources and money. That means influencing senior decision-makers and we know from EIU-2010 that they are wary of emission-reduction (read: energy-saving) projects. EIU-2010 shows that climate change is not an important driver. Respondents were divided between those that did and did not believe the scientific arguments for global warming, and while attitudes on this made a substantial difference to whether or not companies engaged in explicit carbon-reduction activities (such as the development of green products) it made no difference to levels of activity on energy efficiency. Skeptics and believers were equally likely to have engaged in energy-saving activities. EIU-2010 presents it as axiomatic that companies want to save energy for reasons of cost reduction.

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3.5

Public perceptions

One concern aired in RTM-2010 is that people are being encouraged to do fashionable (but ineffective) things like installing solar photovoltaics, and are being distracted by solutions whose effects are negligible - like not leaving phone chargers plugged in. The public, it is felt, are being misled by the media and seduced by the promise of technology. There is a degree of tokenism which, compounded by ignorance, absolves people from the need to change their lifestyles or business practices significantly. But perhaps more fundamentally, given how much the government has pumped into promoting man-made global warming and climate change as a stimulus for action, we need to consider what to do when this argument loses its influence. The global-warming paradigm is widely accepted, but there are dissenters, and we know from EIU-2010 that roughly half of senior business executives around the world are unconvinced of the scientific evidence. Of course there are (and have always been) many other reasons why we might want to conserve fossil fuels, and in order to reinforce the imperative it might pay us to turn our national attention to those reasons again. They include;

Saving money Minimising pollution from combustion Preserving resources for future generations (or for underdeveloped economies there are questions of equity here) Security of supply

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3.6

Government interventions

The role of government in supporting energy efficiency is central (in the view of energy users) but in reality all government does is set targets for various sectors of the economy and then try to micromanage how they achieve them. Many of its initiatives are complex, burdensome, and either ineffective or arguably even counter-productive. Some RTM-2010 experts were troubled by the concept of the government picking winners in the sense of backing particular technologies which are not in practice as effective as their proponents claim.

Combined heat and power, for instance, has been the subject of government exhortations and interventions since the 1940s but in reality has ever less relevance as the demand for year-round supply of low-grade heat diminishes. Metering is another example. We noted from BMG-2010 that 70% (only 70%, notice) of surveyed organisations regularly monitor their energy use. However, 36% could not answer a simple question (how much they spent on energy) and the proportion was the same whether or not they claimed to monitor consumption. Even among those who identified metering explicitly as a feature of their energy programmes, 33% still did not know how much they were spending. Anecdotally, the usual result of installing an automatic meter reading system is that the user ends up drowning in incomplete data. Combined heat and power may have changed its name, but it has been a favourite thing for governments to pick as a winner since 1945

According to RTM-2010 the record is not good: by the end of 2010, CO2 emissions were supposed to have fallen by 20% relative to 1990 but by the end of 2008 had only fallen by 10.3%. We are only managing 3% renewable generation as against an aspiration of 10% and have missed by a wide margin the target 10 GW of combined heat and power capacity. Against our Kyoto target of 12.5% reduction in GHG emissions, we have achieved an actual 23%, but mostly due to closure of coal fired generation in the 1990s. There is an argument that government is too concerned with ticking the box and also too ready to assume responsibility for problems it cannot solve. Against our Kyoto target of 12.5% reduction in GHG emissions, we have achieved an actual 23% but mostly due to closure of coal fired generation RTM-2010 considered that there is an abyss between policy and implementation. Examples of problems and issues include: weak interpretation of the EU Energy Performance of Buildings Directive; Building Regulations Part L not being enforced; and failure to recognise the long term actions needed to address poor commissioning and operation of buildings.

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The influence of legislation and directives on energy management practices

No influence Some influence Considerable

Poor enforcement of regulations is likely to get worse as a result of public-sector cut-backs over coming years. This suggests that even if government policies and programmes were sensible, they would still fail. EIU-2010 does not paint a promising picture here. Although a majority of its respondents considered regulations to have the biggest influence on their approach to carbon emissions, it concludes that businesses do not trust governments to get it right and create a level playing field. In short, there are roles that government must play (decarbonising public electricity supply, for example), but it seems that mobilising the country to reduce its consumption of fossil fuels is not one for which it has much aptitude. Indeed, it may even be engaging in self-defeating activity. Take for instance grants, subsidies and tax breaks: they tend to distort the market. For example solar photovoltaic installations, a completely uneconomic option with no hope of ever contributing significantly to the countrys energy requirements, now receive subsidies through feed-in tariffs subsidised by other energy users. Resources that could have gone into energy saving are being squandered for the sake (presumably) of appearances and trying to meet politically-appealing targets for renewables.

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Free and subsidised energy surveys are another example discussed by RTM-2010, although they would be at pains to distinguish between free services provided by commercial companies (transparently acting in their own interests) and those that are funded, directly or indirectly, out of the public purse. Our experts agreed that public subsidy is a problem because it has distorted the energy-efficiency market, with professional consultants now competing against others offering a similar service (or what appears to be similar) for nothing or at a reduced price. In fact, the subsidised product is not the same as what a client could obtain at market rates: it is likely to be prescriptive in its approach, focused on carbon rather than energy, under-resourced and oversold, and encumbered with elements that do not add value but are there purely to satisfy the requirements of the governments agency that administers the scheme.

Take up of energy surveys among businesses

90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Yes - free energy survey Yes - subsidised energy survey Yes - paid for an energy survey No

There is an interesting historical perspective here. In 1988 Peter Morrison, then Minister of State for Energy, closed the scheme and told Parliament:

There is now wide public appreciation of the potential value of energy surveys, and grants for this purpose are no longer justified

In comments from the follow-up to RTM-2010, the risk was noted of subsidies encouraging cowboy consultants - who would not thrive if operating in a commercial market and whose poor quality of work damages the profession. There is a subtler problem. By providing subsidies, grants and tax breaks for energy efficiency work, the government is sending a signal that these things are somehow not worth doing in their own right. So what was said in RTM-2010 in defence of public-subsidised surveys? In the experience of one expert, a consultant, they can work well when the client is interested in, and intent on, doing something about saving energy. He had seen individual examples of free surveys being very successful. Another (representing a user) thought them worthwhile because they generally support the views and opinions of the well-versed energy manager. In other words, a prophet is not without honour save in his own country: sometimes it takes the endorsement of an outsider to generate management support. On balance, unfortunately, it is doubtful that these localised benefits and we recognise that benefits are enjoyed at the micro level - outweigh the possible damage done through market distortion at the macro level.

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RTM-2010 welcomed European standardisation work on energy audits, which aims to improve transparency, clarity, and trust in the outcomes. The development of improved energy audit models, if combined with the discontinuation of subsidies, could be a very positive step and it is one which we assume is likely to be taken. The previous governments approach was to set ambitious targets and then legislate and regulate in detail. It is to be expected that this will continue to be the case, if only because some elements are transnational like the EU Emissions Trading Scheme (EUETS) and the Performance of Buildings Directive (EUPBD) which has given the UK display energy certificates (DEC), energy performance certificates (EPC) and mandatory inspections of refrigeration plant. Any scheme with carbon or climate in its name can be expected to survive as it would be politically difficult to justify discontinuing it. There are even private sources of red tape. The European Standard EN16001 Energy management systems: requirements with guidance for use, which is being promoted energetically by British Standards Institution, adds a voluntary layer of regulation. RTM-2010 discussed this issue and the view advanced here was that regulations, standards and legislation do not impose additional load because real energy managers are already complying. It was suggested, too, that these schemes are raising awareness and increasing energy-management activity. The writer was surprised by the degree of consensus on this having himself been of the mind that time spent on compliance could be better spent on energy-saving projects. Respondents to BMG-2010 were specifically asked about this. One-third agreed that regulations in this area took up time that can usefully be spent on other things. Worryingly, nearly half said that regulations had no influence on their organisations energy management practices. The proportion that gave both these responses (implying that regulations and schemes were a fruitless distraction) was 14% but they represented organisations with an average headcount of only 18. Six percent were of the completely contrary view, not only strongly disagreeing that red tape was a distraction, but also saying it had influenced their organisations considerably. They represented organisations with an average headcount of 657. So it appears that there is a dichotomy and that the red tape is effective in larger organisations but could be counter-productive elsewhere. Another key question is this: if managers were not being compelled to spend time complying with legislation, regulation, and government schemes and initiatives, would it free them up to spend more time actively on energy management? The answer from BMG-2010 was a resounding and unequivocal no. When asked what else they would do if freed up for an hour a week, 98% gave answers nothing to do with energy saving.

The conclusion is that regulation is accepted as necessary by larger organisations and although it may be counter-productive in some smaller organisations, it is necessary across the board in the interests of maintaining focus on the subject.

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3.7

Willingness to invest in energy management

Investment in energy saving is inevitably a low priority because it is discretionary and not essential to sustaining the business. At present, as EIU-2010 underlines, companies are interested in conserving cash, which may be why behaviour-change has such a high profile: it gives a quick short-term win.

Solutions included in business energy saving programmes

Renewable technologies CHP (Combined Heat & Power High efficiency boiler/heating system Items from Energy Technology list Metering Variable speed drives Low energy lamps Lighting controls/ automated lighting solutions 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

The other side of the coin is that energy projects are perceived as risky. For most organisations they are a rare excursion into unfamiliar territory not only for the decision-makers who would fund them, but for the manager proposing them. The safe and easy option is to reject them. This situation is compounded by a woeful lack of properly-costed case studies which could give some confidence in a proposal. Furthermore, it is suspected that few organisations that carry out such projects have any way of knowing whether they have worked or not: it appears often to be an act of faith or based on a consultants estimate of the benefit. Objective methods of assessment are not widely understood, and for all the hype surrounding energy metering, it is unusual to encounter a user who can produce reliable consumption data on request. If reluctance to invest is a problem now, it is difficult to see why that situation should change over the forthcoming twenty years. It would require a transformation in the way energy users collect and analyse consumption data (and related information needed to interpret it), allied to a huge effort to build up a credible library of independently-verified case histories.

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3.8

Trading and offsetting

RTM-2010 debated carbon trading: schemes such as the Climate Change Agreements (CCA) and EUETS. It was felt to be a good concept and that there is even a will to participate and meet targets. Finance directors having to part with money to buy carbon credits focuses their minds. But repeated collapses in the price of emissions permits make it difficult to see how trading will have any permanent effect. This sentiment is echoed in EIU-2010 where it mentions the inhibiting effect of regulatory uncertainty. One risk is the well-rehearsed concept of carbon leakage which occurs when energy-intensive industries relocate from the UK to countries without carbon caps; it would work better if it were a global market. A number of RTM-2010 experts talked about the possible need for import tariffs on goods from countries with no carbon constraints. It is not inconceivable that such measures will indeed be introduced in the next twenty years. Another risk was noted that carbon trading becomes an activity disconnected from energy saving, since it is speculation in an abstract commodity. In the cynics view, the rewards go to brokers in the commission they earn moving credits from organisations that were inadvertently or deliberately given too many, to organisations that have done nothing. This aspect is more important when considering the future of energy management because it encourages a culture where organisations would rather employ a carbon trader than an energy efficiency expert. Offsetting is another development which causes concern in case it is used by businesses as a way to let themselves off the hook. RTM-2010 experts were dubious about the credibility and value of offsetting (paying the RSPCA so you can kick your dog). They see it as something which does little more than contribute to an organisations corporate image and (as EIU-2010 notes) it is difficult to see how things done to improve public relations would lead to lasting energy efficiency improvements.

3.9. Climate change as a motivator

BMG-2010, EIU-2010, nBEI-2010, SWRDA-2009 and BSI-2009 all concur that cost is the main driver of energy-efficiency improvements. So did trade-association representatives and so, with the exception of some public-sector players, did individual energy managers that we spoke to. But recent governments have chosen to ignore this and to play pass the parcel with their climate-change commitments, assuming that the language of carbon reduction will appeal to end users. Has this been a costly mistake? RTM-2010 debated the proposition that climate change is too big, too abstract, too remote and too contentious to be an effective driver for energy efficiency. In favour of the carbon focus, it has created a lot of publicity and raised awareness at all levels; it is a massive issue which impacts everyone, and has united lots of people with a common purpose; and the capitalist system loves the kind of opportunity presented by the carbon trading. But the contrary arguments cannot be ignored. For ordinary people, climate change is too distant: it is something which only some higher power can address. Viewed from the UK it is also distant in the sense of where the adverse impacts fall (on Bangladeshis and polar bears, for example). UK citizens can justify inaction on the basis that other countries are far worse offenders (USA) or threats (entire developing world). Furthermore they can see perfectly clearly that nothing they do as individuals will have a significant effect.

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There was some doubt in RTM-2010 that enthusiasm for carbon reduction is universal, and there is anecdotal evidence that there is a public weariness with the message. The writer was present at a town-council meeting where an organisation seeking moral support for a community home-insulation campaign was explicitly advised by the elected members to play down the environmental aspects. A recent survey{4} by Cardiff University found that fewer Britons believe climate change is happening at all (down from 91% to 78% in the last five years), and that only 31% of the public consider it to be wholly or mainly a man-made phenomenon. Remember also that according to EIU-2010, half of senior decision-makers are unconvinced about the science of man-made global warming. Using the climate-change lever may already have had one significant adverse consequence, in characterising the problem as an environmental one, and thereby creating a corporate perception that energy management is part of environmental management. Actually a very different skill-set is required and most environmental managers will struggle to do the job effectively. The climate-change message is a message of fear, probably far more likely to induce paralysis than to spur action. And lastly, the first prolonged spell of cold weather in the UK will nullify its effect. RTM-2010 members agreed climate change might be one lever but that there were other better ones: price, security of supply, and the moral duty to conserve resources for future generations.

{4}

Public Perceptions of Climate Change and Energy Futures in Britain (Understanding Risk Working Paper 10-01), Welsh School of Architecture and Department of Psychology University of Cardiff, March 2010

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4. Opportunities 4.1 Staff motivation and awareness

95% of BMG-2010 respondents reported that their organisations encourage staff to change their behaviour in pursuit of energy saving. This is without doubt a key activity. Among BSI-2009 respondents, 63% reported undertaking motivation and awareness programmes. Major energy users surveyed for nBEI-2010 saw it as the most feasible energy-saving measure and scored it 7.8 out of ten for importance as something to do in the next six months - the highest score given. In SWRDA-2009, 86% of public-sector and 83% of private-sector respondents reported having ongoing behaviour-change programmes. The attractions of tackling the human-factors aspect are obvious: it is inexpensive and should have a rapid effect. There are challenges, though. It requires time, knowledge and some degree of management authority on the part of the person driving the project; and the effects will inevitably decline (and do so at a rate that is difficult to measure). Today, awareness tends to centre on global warming and climate change a somewhat precarious foundation, as we have argued elsewhere and many of the prescriptions and solutions are trivial or confused folk myth. Tokenistic attention to mobile phone chargers{5} is mixed with antagonism to plastic bags (apparently on the grounds that plastics, being derived from petroleum, are implicated in global warming). As we say elsewhere, two things are likely to happen over the next 20 years that will reinforce awareness in a way that supports fuel conservation. One is price rises; and the other is constrained supply. Both will serve to reinject some realism into public thinking.

{5}

David MacKay sums it up well in his book Sustainable energy without hot air: If we all do a little, well achieve a little

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4.2 Outsourcing
RTM-2010 reviewed Future of energy management 2000, a report by the market research company Datamonitor. This looked ahead to 2005 and was mainly asking the questions what will industrial and commercial customers require, and what role will energy-services companies play? The authors thought that the future would feature total energy packages, in a market for services worth an estimated 2bn. Having identified a gap between demand and availability, they suggested that the supply utilities would somehow fill the vacuum (probably by buying up energy-services companies). The authors claimed that industrial and commercial customers would welcome energy management services provided by electricity and gas suppliers. This view reflected common wisdom at the time but within a few years would have been proved radically wrong (SWRDA-2009 proves just how wrong: only 5% of respondents outsource energy management, compared with 57% who outsource property maintenance). After 2000, energy suppliers retreated into simple competition on price and the market consolidated. There was no growth in the energy-services market, thanks to widespread suspicion and mistrust of the service companies. This low opinion was probably justified: energy-service companies were often providing little more than slightly enhanced maintenance contracts and rarely had sufficient capital to undertake radical investments on their clients behalf. Having said that, SWRDA-2009s findings on outsourced property maintenance suggests a tantalising opportunity. In BMG-2010, 87% indicated that their buildings were significant in energy terms{6} . It might therefore be that Datamonitor were barking up the wrong tree in 2000 thinking that energy suppliers would provide such services. In fact, it might be more logical, practical and acceptable if maintenance contractors were to add energy efficiency to their portfolios (or for clients to specify such services in tender enquiries).

5. Trends 5.1 Leaders and laggards

Something that comes out quite strongly from EIU-2010 is the idea that, in terms of responses to the climate threat, companies worldwide are diverging with some definitely emerging as leaders and the rest currently static. nBEI shows a divergence between SMEs and major energy users in terms of the importance they attach to energy management. In BMG-2010, organisations with an energy-management programme are in a minority, but have an average of 816 employees against 71 for organisations without. There was a similar differential between those with and without a dedicated energy-management team or individual. We think it likely that this polarisation will persist.

{6}

This comprises 76% who cited buildings, and 9% who did not, and yet cited warehouses or retail outlets which were

among the other choices

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6. Futures
We know that energy management flourishes when: Energy prices are high (for example after 1970s oil price shock). Energy is scarce (for example in UK after the Second World War). There are problems in security of supply, or the threat of it (For example China today, or UK road fuel strikes in 2000). This is not the same as b) as it is possible to have abundance but poor supply infrastructure; but in both cases, necessity is the mother of invention and significant advances will result. There is an effective carbon trading system in place.

We can also reasonably assume that energy management would flourish if: Regulation had teeth (contrast the effectiveness of environmental, health and safety legislation) People realised that energy conservation is the number-one sustainability agenda relative to other issues The market recognised the multiple skills needed for energy management, and rewarded effective practitioners accordingly Energy efficiency became a cultural norm: the way things are done around here, or even just the way other organisations are perceived to operate. Energy waste could be systematically identified and end users held accountable.

We would pick price and shortages as the most likely drivers for future progress In the short term, the agenda for energy management will continue to be dictated by the climate imperative. Successive governments will persist with the rhetoric of radical action but in practice will shy away from anything truly radical, such as imposing annually-reducing caps on total sales of fossil fuels. Their attempts to contain the growth in energy use will be dominated by announcements of targets that nobody believes can be met, complemented by legislation, regulations, schemes and initiatives (some of which may be ill-founded or even counter-productive) and by a compulsion to pick winners. There will always be some commercial interest to lobby in support of even the most defective measures, and criticism of any given initiative will be dismissed with the catch-all justification that it raises awareness.

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Gradually, however, we could see attempts at regulation foundering, partly because there will not be sufficient resources to police compliance. The recent recession and its aftermath will see to that. Partly, also, the governments focus will shift from prevention of climate change a battle which, it can be argued, is lost or as good as lost to adaptation and mitigation. It seems highly likely that as the global-warming message wanes, the issues of price and availability will start to impinge more seriously on the countrys consciousness. Availability will come to the fore because the UK lacks a long-term strategy for electricity supply and is sleepwalking into an era of shortages as older nuclear power stations are derated or shut down while replacements are not ready. Electricity transmission and distribution infrastructure may well also fail to keep pace with rising demand as investment goes into adapting it to cope with distributed generation. The effects of this will not be evenly distributed but there are parts of the country (particularly the Home Counties and maybe the south in general) which are likely to be more severely affected. It is entirely possible that in fifteen to twenty years time we will go through an era of supply constraint. This may be no more serious than limitations on peak demand, rather than the wholesale rota power cuts of the early 1970s, but it will be a powerful spur to action. The likelihood of this scenario is heightened by the recent recession and its implications for public spending. Oil and natural gas and supplies may also be limited, particularly as we come to rely more on liquefied natural gas brought in by sea. The UK will be in competition with other countries for those supplies and if we do not experience actual shortages we can expect severe spikes in wholesale prices. We can expect crises: the deteriorating energy scene may be exacerbated by fuel blockades and possibly even civil unrest. We may suffer terrorist attacks on supply infrastructure and the roles of random natural disasters like volcanic ash clouds should not be overlooked: when the situation is precarious, with little spare margin, such events can trigger chaos. Our one consolation in this is the British talent for flexibility and improvisation. One way or another, we will cope, and whatever happens, there will be a desirable outcome: like it or not, we will end up consuming less energy. So what will energy management look like in 2030? There is no reason to suppose that there will ever be a resurgence in the numbers of dedicated, specialist energy managers, although such positions will continue to be found in large energy-intensive industrial sites, and in organisations such as retail chains or universities that are large users by virtue of the size of their estates. We suspect that as the realities begin to bite, there will be a shift of emphasis away from the somewhat vague concept of sustainability towards a viewpoint that values more practical measures (be they human-factors or technical in nature). We believe that, in simplistic terms, the government will pursue its emissions agenda while the people re-engage with cost reduction. With the government helpfully leaving a vacuum in the energy-efficiency There will be a shift of emphasis away from the somewhat vague concept of sustainability towards a viewpoint that values more practical measures advice field, commercial providers of energy audits, advice, training, and technical solutions will be able to flourish without competition from low-grade free and subsidised offerings. The market will demand what they have to offer for all the reasons described earlier. The differences in approach between organisations will be dictated not so much by the sector in which they operate but by the attributes of how they are organised. So, for example, in small and medium-sized enterprises relatively junior members of staff will continue to have responsibility for energy management but the training, advice and practical resources available to them will be better than they are today.

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In larger organisations, a team approach is likely to evolve as the favoured model, as senior managers realise that a successful energy-efficiency programme needs a blend of skills spanning the technical, human-factors, and data-analysis aspects. In our most optimistic scenario, maintenance contractors play a pivotal role. As we have already pointed out, they are highly influential. Where their field personnel are ill-trained or incompetent, they needlessly Remember that 57% of SWRDA-2009 respondents outsource their maintenance whereas only 5% outsource energy management increase their clients energy consumptions; but where they are knowledgeable and skilled, and properly managed within a contract whose terms give their firms the right incentives, they can be a powerful force for good. Firstly, the way they set up, adjust and maintain equipment directly affects efficiency and losses. Secondly, when plant that they are responsible for reaches the end of its life (be it a light bulb or a boiler), they are in a position to recommend, procure and install a replacement which not only has superior energy performance but, just as importantly, is not needlessly oversized as would often, currently, be the case. Through economies of scale, a maintenance contractor could in principle provide knowhow and apply management processes that would be beyond the aspirations of most of their customers individually. This is akin to the shared energy manager concept which has been mooted as a solution for many years but rarely if ever adopted; its advantages are that (a) energy management can be inset within an existing and necessary contract and (b) there are no other parties involved. Remember that 57% of SWRDA-2009 respondents outsource their maintenance whereas only 5% outsource energy management. Moreover, the energy-enhanced maintenance approach works right across the board. It is not just a solution for big players. These days, even small mechanical and electrical contractors will in some cases have acquired training and certification enabling them to fit biomass boilers or solar photovoltaic panels, for example. It would be a small step for them to refine their knowledge of (say) heating and lighting control techniques so that they can at least provide one-off energy efficiency services to domestic and SME customers; where they have ongoing contracts with SMEs they could then, thanks to so-called smart metering and low-cost building energy management systems, offer to provide routine supervisory, monitoring and waste avoidance services alongside all the other beneficial activities already mentioned.

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For larger customers, bigger maintenance contractors could align themselves with specialised energy-management firms that provide motivation, awareness and training services, enabling those customers to improve the effectiveness of the human-factors projects which, as we have already seen, many are keen to implement. The difference would be in a better-resourced, more imaginative and more professional offering, allied with post-campaign monitoring of effectiveness which (we would hazard) is totally lacking in the vast majority of home-grown campaigns. We hope and trust that maintenance and facilities-management contractors will rise to the challenge, and develop effective energy-management outsourcing models that will appeal to those clients for whom it is a convenient and effective solution. We believe it will only take a few of them to lead the way, and the rest will follow. Underpinning these developments we see the emergence of fully-commercial training and advisory services run by numerous independent providers, with a major focus on high-quality, practical, in-depth training. Schneider Electric for example already has some of the necessary facilities in the form of an academy focused on electrical technology and building energy management systems; Spirax Sarco is well-known for its steam-systems courses; Gastec at CRE has a facility for practical training on combustion appliances. Others will emerge in the next five years to cover individual topics such as lighting and compressed air.

All these developments would be accelerated by solution-providers publishing many more credible case histories similar to those published under the Energy Conservation Demonstration Projects scheme of the 1980s (right).

7. Conclusion
We are under no illusions: our predictions will, inevitably, prove wide of the mark. But we do have some tricks up our sleeve. The process of researching and writing this report has already begun to nudge things in the right direction. The experts in RTM-2010 decided that they will meet again and continue to collaborate, and some have begun to start planning initiatives that will aid progress outside the ambit of government schemes. Secondly, when the maintenance-contracting fraternity digests our conclusions, there will be some who recognise the business opportunity and who knows decide that they can make money by making it happen.

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About Vilnis Vesma

Vilnis Vesma is a graduate chartered engineer specialising in energy management. He read engineering science and economics at Oriel College, Oxford. Initially employed as a research engineer in the electricity generation industry, he wenton to work as an energy manager in local government before becoming an independent energy consultant. He advises commercial, industrial and public sector clients on energy-management methods, mixing practical projects in the field with software development and monthly regional training workshops. He is the author of Managing energy with a desk-top computer (Energy Publications, 1988) and Energy management principles and practice (BSI, 2009). He has also written several government advice booklets and numerous magazine articles related to energy management, as well as writing and editing a free advisory web site on the subject. Vilnes served on the committee drafting BS EN 16001:2009 Energy management systems requirements with guidance for use and its international successor, ISO 50001 Energy management systems. He is currently chairman of the CEN/CENELEC joint working group writing a European Standard on energy audits. He sits on the governing council of the Energy Services and Technology Association and is a former council member of the Energy Institute.

About Schneider Electric

Schneider Electric, the global specialist in energy management, offers integrated solutions making energy safer, more reliable, efficient and productive in the energy and infrastructure, industry, data centres and networks, buildings and residential markets. With sales of 15.8 billion Euros in 2009, the companys 100,000+ employees in over 100 countries help individuals and organisations make the most of their energy.

www.schneider-electric.co.uk

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Make the most of your energy TM

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