A new breed of energy manager has emerged as concerns over carbon and costs have risen up businesses’ agendas. Steve Hurst looks at what they want from their energy suppliers
With a stagnant economy, rising energy expenditure has become a pertinent issue for businesses. Management teams have been turning to efficiency as a way to increase profit. The effect on the role of the energy manager has been profound. Other external drivers such as government legislation and awareness of the sustainability and carbon agenda are also transforming the position from one that was previously out of sight in the boiler room to an “energy executive” who is comfortable in the boardroom.
Today’s energy managers must possess technical and commercial knowledge because they now have an impact not just on margins and revenues but on company strategy. Mervyn Bowden, head of energy management at Marks & Spencer, sums up the changing landscape. “M&S knew a lot about how we used and paid for energy across our diverse estate of stores, warehouses and offices. Energy efficiency has always been a company priority. What we hadn’t done was join this with all the additional benefits of carbon savings, and the positive environmental message to customers and employees,” he says.
In its recent white paper The Evolution of the Energy Manager: from Boiler Room to Board Room, Acre Resources talked to industry experts about how the role of the energy manager has changed. Previously, the commoditised nature of energy procurement contracts limited the skills, organisational scope and impact of the role. But the introduction of demand management has created a need for a broader and more sophisticated skill set.
Trevor Seddon, director of energy consulting at Johnson Controls, explains: “Data management and reporting is becoming a much bigger part of the role. It is also a much softer skills set – you now need to understand issues such as social responsibility.” No longer is energy management associated just with compliance and monitoring energy; it is now a strategic as much as a technical role.
Aside from technical competence, this expanded and more sophisticated skill set can be categorised into three key areas.
Leadership: a programme that includes long-term objectives will need to be formed and elements of a change management programme integrated. There may also be a need to manage contractors, an approach often taken by companies where energy or carbon reduction is less core to their business – as such, they may achieve better results through leveraging the expertise of third parties. Acre Resources has observed a fast-developing market for advice and financing, including for energy performance contracts and energy services companies.
Financial skills: the shift to demand management creates a need for a greater emphasis on assessing and managing an investment programme. A level of comfort in dealing with analytical tools such as marginal abatement cost curves and whole life costing to establish a “spend to save” principle are essential to forming a credible business case.
Communication: perhaps an unfamiliar element to the role, communication has also come to the fore. This is simply because there is an essential need to communicate energy strategy to stakeholders, the board and to the procurement function.
These skills do not have to be embodied in a single person, but they are important facets to be shared among a team.
While not every company is a part of this changing approach, those that are engaged are reaping the rewards. Richard Tarboton, director of energy and carbon at BT, is very much one of the new breed. He has grown his team into one of the largest contemporary energy divisions in the UK – from three to 28 people – with five internal divisions. Over the first two years of its programme, Tarboton’s team delivered £35 million gross energy reduction primarily through smart control (£13 million), equipment replacement (£10 million) and rationalisation programmes (£12 million).
BT is not alone in recognising that energy is an area of core company strategy. Marks & Spencer’s Plan A generated £70 million in profit in 2010, with energy efficiency the biggest contributor.
A more strategic approach to energy could even give rise to the development of new revenue streams. Here again BT is ahead of the curve and is currently developing remote energy control centres that will allow it to engage in grid balancing and offer remote energy management services to customers.
So what does this new generation of energy managers want from its energy suppliers? Fundamentally, they want flexibility. First, in terms of a more varied portfolio such as access to renewable energy and combined heat and power – and more transparency around the exact sources of renewables to allow for more detailed carbon footprint reporting. There is also clear and present need for smart procurement to better manage volatility in the wholesale energy markets.
More consultancy is needed too. This could take the form of advice on more energy efficient technology, implementation or legislation. And there is a desire for a more joined-up approach to services and consultancy. Suppliers, say the energy managers, often only submit a tender for a part of a company’s energy plan while trying to offer consultancy on a seemingly separate basis, rather than offering an all-encompassing package of services and consultancy.
The agreement last year between EDF and the supermarket chain Morrisons, whereby the utility guarantees that energy-efficiency programmes will deliver energy savings of £1 million a year, is an example of the type of deal that may become more commonplace.
In its white paper, Acre Resources went on to ask the experts: “With this new diversified skill set, will the energy manager ever become the chief executive?” Contributors were understandably reluctant to predict that the energy manager would become the boss of a major company, but if BT was to build a major new division of energy services, it would involve the strategic and management expertise that is required of the chief executive role.
Steve Hurst is a marketing executive at executive search and recruitment specialist Acre Resources
This article first appeared in Utility Week’s print edition of 15 June 2012.
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