Energy IQ: How your company can strengthen its energy management strategy

The steps outlined below will provide a starting point and help you compile your thoughts in building an effective energy management strategy. Once you review these steps and are ready to take your energy strategy forward, you can simply get in touch with an expert from Cummins to partner with you. 

An effective energy management strategy integrates the current realities your business operates in, with its future aspirations and expectations

"To build an effective energy management strategy it is equally important to know the needs of today as well as the flexibility to adapt to future changes. Understanding the current operating realities will help tailor the solution to meet one's unique business needs. Furthermore, building in flexibility allows  to future-proof the investment from regulatory, technology and market changes that are inevitable in this energy transition," said Satish Jayaram, General Manager of Distributed Generation Business at Cummins.

Understand your current operating realities

• Energy Costs
  • The starting point is to understand the composition of your current energy expenses ranging from electricity and heating bills to transportation fuel costs. This will help you uncover opportunities to focus within your energy management strategy. For example, businesses with high heating expenses can explore combined heat and power applications within their strategies.
  • Your demand profile is another important consideration for electricity expenses. If your electricity demand is peaking when the prices are the highest, participating in a demand response program could be a consideration for your strategy.
  • If your business has equipment and technology that draws large amounts of power when they start (even for a very short period), your energy bills might go up significantly due to demand charges. In this case, your energy management strategy could feature an infrastructure where you can avoid these charges by having on-site generation or energy storage.
• Sustainability Goals
  • The starting point is to outline your motivation to pursue sustainability within your business. If regulations are the sole reason, then you might have less to do, yet you might not be unlocking the complete value for your business. If sustainability is critical for your employee engagement, brand image or marketing message, then your energy management strategy would need to have a more comprehensive and ambitious position on sustainability.
  • Next, consider your business' specific sustainability goals. Whether it's the preservation of water, soil or clean air, environmental sustainability has many fronts. A mine site and a healthcare facility would have very different goals, and it is important to detail out the goals specific to your business to build the right energy management strategy.
• Energy Disruptions
  • Start with understanding how critical energy is for the continuity of your operations. If an energy disruption is an inconvenience and your operations continue, then your energy management strategy could be lighter on building extra resiliency. In contrast, your energy management strategy would need to be heavier in building extra resiliency if your business faces significant risk in the case of an energy disruption.
  • Consider how the aging transmission and distribution infrastructure impacts your business. Extreme weather events are also putting an increased strain on this aging infrastructure, and in some cases force utilities to execute rolling blackouts. Having a diverse base of distributed energy resources in your energy management infrastructure could be a consideration if your business is facing this scenario.
  • Whether you are currently grid independent or grid-tied is a significant input to your energy management strategy. An off-grid or grid independent business, whether by choice or due to location, will rely on a different energy management strategy given the absence of access to a central grid.
• Location-driven Aspects
  • Local emission regulations will help you understand the baseline expectations your energy management strategy needs to deliver to comply with local regulatory needs.
  • Local level of electricity market regulations will introduce constraints or options to your energy management strategy. If your business is in a fully de-regulated power market, you would have more options to consider while building your strategy. In contrast, if your business is in a regulated power market, some of the options within your strategy will be out of table.
  • The likelihood of power outages could change between your own locations. Severe weather is the number one reason for power outages, and in most cases, you can evaluate the risk your business is facing based on historical outages.
  • The local cost of fuel and energy is a key driver of making choices between different electricity generating assets. A clear understanding of the local cost of renewable energy will help you outline which fuels and renewable options could be displaced in your energy infrastructure.

Become future ready

• Set the Aim
  • Start with what will be the goal of your energy management strategy. If your primary goal is around financial gains, your strategy will look different than if you focus on sustainability related goals. While your goals don't need to be binary between sustainability, financial gains and resiliency, having clarity in relative importance will help you make the right choices in building your strategy.
• Improve Energy Efficiency
  • Efficiency can be defined as doing more with less. This could mean greater business outcomes with the same energy use, or the same business outcomes with less energy use. Any energy management strategy must have an efficiency aspect. This could include simpler improvements such as the use of LED bulbs. Businesses seeking more significant efficiency gains could consider cogeneration solutions, instead of sourcing electricity and heat separately.
  • Optimizing load management is the second aspect of efficiency. Load management processes have been made more effective with the progress in advanced control systems. If your business features large electrical loads and a varying demand profile throughout the day, then the use of these technologies could help you distribute your load more evenly and reduce your costs and environmental footprint.
• Build Flexibility
  • Future rate structure changes also need to be considered in building your energy management strategy. Factors ranging from regulations and fuel costs to new technologies impact electricity rates, and it is very difficult to speculate the timing and scale of these rate changes. Meanwhile, for energy intensive businesses, commodity hedging could be a component of their energy strategy to address this risk associated with rate changes.
  • Increasing the share of wind and solar continually displace carbon heavy fuels and reduce our energy infrastructure's environmental footprint. Meanwhile, the more energy we source through wind and solar, the higher variability we will experience with their outputs. An effective energy management strategy can address this by building flexibility through complementary energy storage and electricity generation assets.

You can build an effective energy management strategy by considering your current operating realities and integrating them with your business’ future objectives. The steps above aim to provide you with a comprehensive frame of thinking in your journey. There is not a one size fits all when it comes to energy management strategies, however, you can contact an expert from Cummins to partner with you in building a custom energy management strategy.

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