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Energy management: carbon reduction, cost savings and BS EN 16001

02 Jul 2010
Topics: Energy management, BS EN 16001, EN 16001, GHG, Carbon footprint, Environment, ISO 14001, Kitemark®

New legislation is forcing many organizations in the UK to publicly disclose their carbon emissions for the first time. A compulsory cap and trade carbon emissions scheme culminates in the publication of an annual league table detailing the best and worst businesses at delivering energy savings. What is your business doing to sort out its energy management?

David Cameron's coalition government has already given a pretty clear sign that the security and sustainability of the UK's energy consumption will be a priority for his first five years in office.

Set out in the Queen's Speech in May 2010, the Energy Bill could include ambitious measures such as a framework for sweeping change to electricity supply with the creation of a "smart grid", a Green Investment Bank to stimulate growth in the low-carbon economy, and new information demands on energy companies to empower consumers.

While these measures are not set in stone, however, one commitment already confirmed is the fleshing out of a general "green deal" to help businesses and households benefit financially from their efforts to become more energy efficient.

Moreover, this will follow in the footsteps of the current Carbon Reduction Commitment Energy Efficiency Scheme (CRC) just in force. Launched in April 2010, the CRC is a key part of ongoing attempts to reduce the commercial world's carbon dioxide emissions in accordance with the Climate Change Act 2008.

The CRC combines both carrot and stick. It has the potential to see lower energy-intensive public and private organisations either prosper, or be penalized, depending on their energy management. In a few years, the scheme will culminate in a mandatory market-based emissions trading mechanism - similar to the EU Emissions Trading Scheme in place for the largest polluters - with bonus payments already set aside for those that can cut their carbon emissions the most.

To summarize, any organization that consumed more than 6,000MWh of half-hourly metered electricity in the course of 2008 will have to take part, which is expected to amount to some 5,000 bodies ranging from banks to government departments (and comprising 25 per cent of total UK business emissions).

In addition to carbon trading, these firms will be expected to account for at least 90 per cent of their non-transport, energy-related emissions, provide regular updates on energy performance and company information in "evidence packs" and be prepared for possible annual audits by the Environment Agency.

Even companies that don't meet the electricity threshold must make an energy use disclosure, provided they have at least one half-hourly electricity meter settled on the half-hourly market. A range of penalties is in place for missing information delivery deadlines as well as general non-compliance. Failure to provide an inventory of energy-based emissions, for example, could result in a £5,000 fine that increases with each passing day. Non-compliance generally, or falsifying evidence, may mean a prison sentence.

The government hopes the incentive package put together will also work hard for its objectives though. With carbon credits currently selling at £12 per tonne for the initial phase of allowance purchase - eventually moving to an auction model that sets its own market rate in 2013 - the money raised will then be redistributed to all participants at the end of the compliance year. Crucially, those businesses that reduce emissions more significantly will be rewarded with a higher share of the total pot than they put in, and these bonus proportions will be adjusted to favour the highest savers further with each passing year. What is more, a full league table of participants' performances will also be published for all to see at the end of each allowance year; effectively naming and shaming the worst offenders.

The business case for such efficient energy management has been made many times over of course, but the CRC frames this in a far more tangible way while also adding real reputational risk to the mix. The guidance is clear that the combination of factors means most businesses should find the introduction of new energy efficiency measures to be more financially advantageous than merely buying additional carbon credits as they emit.

However, for many it will also be a significant compliance burden regardless. Data will need to be measured and gathered, documents assembled, management questions answered and employees engaged in the effort.

Even before the businesses are assessed for emissions reduction, their initial ranking for the first year of the CRC will be determined based on a so-called "early action metric": the standards of energy management the company is already able to demonstrate.

A standard approach to energy management

Achieving certification to a standard such as BS EN 16001 Energy management systems is one way businesses that might otherwise risk coming near the bottom of the league table can improve their chances.

Launched in July 2009, this European standard effectively presents a business with a roadmap of the various steps to be taken to ensure it is seen as being serious about energy management. Ultimately providing proof of adherence to industry best practice, regular independent assessments, coupled with practical guidance surrounding potential policy changes, also offer a feasible framework for the business attempting to cut its energy emissions in real terms. The arrangement includes training and useful technology, as well as the information, auditing and certification services, in a package of management know-how that eventually leads to an Energy Management System (EnMS) when fully implemented. Importantly for CRC compliance, this expertise can be applied to any organization regardless of size or sector. Indeed, BSI is in the process of developing a complementary Kitemark® scheme that would see the standard recognized as an alternative equivalent to the Carbon Trust Standard for compliance with the early action metric mentioned above.

But it is important to stress that the standard is not merely a teaching process or box-ticking exercise for proof of procedures already in place. Rather, it offers a methodology for building active energy monitoring into a key business priority that is continually under management review.

"The systematic approach that a management system standard brings enables you to drive down your energy consumption each year and continually improve," explains Mark Fraser, BSI global portfolio manager, sustainability.

In other words, each business needs to tailor its approach to the particulars of its industry and objectives. The standard recognizes that businesses' reduction targets will not all be identical, and nor will their strategies. The specifics, such as budgeting as well as other forward planning, are likely to change as an organization's business model evolves.

This resonates with the CRC guidance, which states that big business changes such as very recent acquisitions must also be accounted for in total emissions calculations and overall compliance. Indeed, in addition to energy data records, annual CRC evidence packs must include records of any such special events. Assessment of performance after the initial year also includes a second metric to recognize the growth of companies - measured in reduction in emissions per unit of turnover.

Fraser adds that the standard actually offers an even fuller energy picture, allowing calculation of relative energy use as well. "The normalization of energy use in line with driving factors such as production volume and temperature required in BS EN 16001 enables organizations to understand their relative energy efficiency. This is a more rigorous approach to the issue of absolute and relative energy efficiency," he explains.

Thus the standard can help businesses to ask the right questions of themselves and adjust their internal processes and decision-making accordingly. Ultimately, the pathfinding process follows a four-stage Plan-Do-Check-Act (PDCA) framework: establishing objectives and processes, implementing some changes, monitoring their results, and finally acting again to deliver incremental improvements in performance over time.

"Organizations are typically good at the 'doing' bit, but not as good at the checking and planning bits," says product marketing manager Victoria Barron. "You can't get away with failing to have operational controls in place, but whether you know how well they're working, and what needs to change, is another matter."

"It's those practicalities that will help an organization to improve."

Fraser adds: "There is an environmental management standard that is already widely adopted, but energy is just one of many environmental impacts. There is a need for carbon dioxide emissions resulting from energy use to be managed more tightly.

"An energy manager starts with an initial review, often leading to a data gathering exercise, looking at consumption over time, seeing patterns and comparing actual emissions against those expected."

Under the standard those managers must first review, list and understand the impact of all their various energy aspects - another first-year CRC requirement - after which it must prioritize, set reduction targets and implement a reliable measurement regime. There is also a useful emphasis on considering energy in procurement decisions (although not compulsory), and eventually instilling a business-wide culture of energy efficiency through effective leadership and communication of objectives.

The latter is especially useful, as alongside their league table positions CRC participants will be required to disclose whether they have a named director with specific responsibility for carbon reduction planning.

"The approach gets embedded in the organization, providing the discipline for continual improvement because people know they are going to be audited," says Fraser.

Office design company Morgan Lovell - part of construction group Morgan Sindall plc - saw certification to BS EN 16001 as a reliable way to ensure compliance with the various CRC criteria over the coming years. Indeed, it became the first British company to be certified in April 2010 (others are progressing through application).

Energy management is especially important to Morgan Lovell in any case, as a core part of its business is providing energy-efficient office design ideas for its own clients.

"It is crucial that we are seen to be acting responsibly and in a truly sustainable way ourselves," explains head of marketing Paul Kelly. "We thought we were already good when it came to sustainability. However BS EN 16001 has helped us identify aspects that we can still do better.

"We have always been a 'green workforce', but energy reduction is an ongoing process. There is always an opportunity to save more."

Cost reductions

Morgan Lovell has already made significant progress through the PDCA process, including installing power-down technology for computers when idle, introducing motion-sensitive lighting (dimming depending on natural light available) and a heating and cooling system that redistributes 'rejected' heat to other office floors and areas where required. The business-wide communication aspect is also covered off. "Everyone has a part to play in reducing energy consumption so we have been running energy workshops to engage everyone on a personal level," Kelly continues. "It is really important to make our energy saving results meaningful to our customers but also to our employees. We are also trialling a number of energy saving devices at the desktop level."

The results of Morgan Lovell's energy management activity have been dramatic. The company has not only seen a 30% reduction in head office energy bills but was also named the 14th Greenest Company in the UK by the Sunday Times in 2009.

Some companies will be new to the whole concept of energy management of course. "It's always easier for somebody to grasp the approach if they already have another management system in place, but this could be their first," says Fraser. "If that is the case they will be starting a learning journey about how to develop procedures, documentation, train staff, conduct audits; all the things which embed a management system in an organization."

Barron adds that BSI has four training courses available alongside guidance booklets, including a one-day introduction and two-day or five-day courses for auditors and "lead" auditors respectively.

Ultimately, BS EN 16001 has helped Morgan Lovell to formulate an energy strategy - to understand what it needs to measure and how improvements can be achieved in a cost-effective manner. Since certification the company has also installed its offices with new smart metering technology to assist in the effort.

Read the full Morgan Lovell case study.

Other businesses that have done the same will benefit when it comes to calculation of the early action metric forming 100 per cent of assessment in this first year of the CRC. The reason for this first phase is the government wants to give some credit to those companies that have already made a start with energy management - ranking them initially before the reduction measurement regime is in force. It is doing this by using basic information such as whether automatic meter reading has been installed, as well as recognizing emissions that may already be covered under schemes such as the Carbon Trust Standard - and BSI's own Kitemark® scheme for energy reduction verification.

It clearly signals the authorities' belief that what gets measured will eventually get done - a principal that firmly underpins the thinking behind all business standards.

For information on BSI's 3rd Annual Energy Management Conference & Workshop, London, 16-17 September 2010

For more information on Energy Management Systems (BS EN 16001).

For more information on Greenhouse Gas Emissions Verification (GHGEV).

For more information on Kitemark® scheme for Energy Reduction Verification.

Read case studies on companies who have implemented BS EN 16001.

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THE INTERNATIONAL PERSPECTIVE

LG: Energy management in India

In October 2009, one of the world's largest electronics companies, LG, achieved certification to BS EN 16001 in India. This was a key part of its bid to cut energy consumption across offices, research facilities and manufacturing plants alike. The Indian operation does not need to satisfy the CRC of course, but the company is targeting a 5.2 per cent reduction in greenhouse gas (GHG) emissions by 2020 in any case.

Aware the cost of energy in India was also rising very rapidly, the business had approached a number of certification bodies, but selected BSI for its support framework, particularly its introductory training on working towards an EnMS.

The company had already implemented a number of features and process improvements to increase energy efficiency, including installing energy sensors, a heat recovery unit and new lighters and chillers, as well as introducing solar power. Compressed air systems had also been modified, and the company no longer uses compressed air for cleaning machines.

Useful as these changes were, however, the company realized that it needed to harmonize such measures and gain more reliable data to measure progress. After the fourth month of implementation, the new system introduced the measurement of every energy aspect (as required by the CRC), defined responsibilities and energy reduction targets for each department. There is also a procurement policy, and LG visits its suppliers' sites to pass the best practice on.

"We found that BSI is the only company that can guide us properly, who can support us if we are stuck, who can show us the way ahead," says Raju Kalra, assistant general manager of LG's Energy, Environment, Safety and Health (EESH) team. "We have found a new horizon for energy management. We thought what we did before was good, but BSI opened our eyes to the fact that we are just at the beginning."

"Check-sheets, work instructions and training: these are the three areas which are helping us get the results," he adds.

And almost a year after certification, LG is already seeing tangible results in terms of cutting energy costs. It no longer needs to conduct "energy patrols" of employees and has more than doubled its total first year energy reduction target, from 10% to 22% - in spite of production soaring some 32% this year.

"BS EN 16001 will assist us in a managed reduction of energy consumption which will directly help us meet our emission targets," concludes Kalra.

Business Standards © 2010. Editorial produced by Caspian Publishing in association with The British Standards Institution. Editorial opinions expressed on are not necessarily those of BSI Group or Caspian Publishing. Neither Caspian Publishing nor BSI Group accept responsibility for advertising or editorial content, nor for that appearing on linked third-party websites. Reproduction in whole or in part is forbidden without written permission from BSI Group or Caspian Publishing.

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