Making energy efficiency work - Dupont`s key to success

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Courtesy of GLOBE Foundation

Many companies have adopted energy reduction strategies to lower costs through increased energy efficiency. Dupont has discovered that achieving significant energy reductions in a cost-effective manner can prove challenging. There are many reasons why companies adopt energy reduction strategies. In addition to lowering costs, there may be a need to align with tighter government regulation or to respond to consumer or shareholder demands for lower corporate carbon footprints.

This is the first test of implementing a strategy that works - determining why the program is needed. Once a clear objective is established a viable implementation strategy can be developed, which if executed properly can lead to substantial cost savings.

Does Improving Energy Efficiency Mean Investing Big Capital?

Many companies believe that an effective energy efficiency improvement program can
only be implemented through a significant outlay of capital. Although major investments may be part of an energy reduction strategy, they are not the only, or even the first items that should be considered.

In fact, this erroneous belief hamstrings many efforts before they even get started since capital outlays for energy improvement projects are often quickly superseded by those related to increasing capacity or otherwise fueling corporate growth initiatives. In addition, the scrutiny for energy efficiency projects can often be severe, with those presenting anything other than the fastest of paybacks often ruthlessly knocked down in the pecking order.

According to William F. Bailey, principal consultant, DuPont Engineering, and leader of the DuPont Energy Center of Competency-and DuPont's energy 'guru'-the company's energy efficiency work has enabled it to avoid more than US$5 billion in energy purchases in that period.

Mr. Bailey's current overview is that, even on top of these improvements, DuPont is still
able to identify and reclaim at least US$45 million in energy savings out of its operations every year with efforts that require minimal out of pocket spending, and that is the basic goal we often set for companies who choose to work with DuPont's consulting practices to achieve similar results.

In addition, DuPont has seen instances where the program can become fully or nearly fully self- funding, actually generating a large portion of its own capital, with the 'small' energy efficiency savings racked up - US$850,000 here, US$90,000 there, and US$400,000 elsewhere, which when collected and re-invested fuels even greater results.

In a recent two year period, these projects generated an internal rate of return (IRR) of about 75% for DuPont, making them a 'no brainer' to pursue. Through experience, it has become clear to DuPont that developing a culture of energy efficiency can release a significant amount of capital to fund energy efficiency efforts, or to fund other corporate initiatives as business leaders see fit.

Driving a Culture of Change

One of DuPont's core strength has been its ability to manage change, to drive it deep into an organizational culture, and to make sure that it becomes engrained. This is not something that can be accomplished in a piecemeal or 'by the seat of the pants' approach, but through a comprehensive systems approach that provides a clear view of the current state of the organization, realistic and measureable goals, and a clear path and direction for forward motion.

In order to develop an effective energy management system that grows in effectiveness over time, as opposed to one which starts off strong but quickly peters out a change culture must reflect many of the following:

Clear commitment from top leaders

Demonstrated leadership commitment-and engagement-is vital to creating a culture that perceives value in implementing and maintaining energy efficiency improvements. Wherever applicable, this commitment should be codified in core values and similar statements, and treated as a long term, strategic issue by the company, with management driving it as such, enterprise-wide. In other words, energy efficiency should weigh in management decisions with a similar priority as production, quality, and profitability related issues.

In addition, there should be one particular member of the senior staff who is recognized as 'The Energy Champion' or 'Energy Guru' in the organization. All this should be very visible throughout the organization.

Long and short term energy consumption and cost reduction goals need to be set and a performance management process put in place to measure progress and drive performance improvement. Tracking energy efficacy metrics is vital to achieving continuous improvement, and these metrics need to be integrated with production metrics, financial metrics, quality metrics, safety metrics, cost metrics and all other metrics tracked by the organization. Metrics should be easily accessible and easy to understand by all levels of an organization and updated continuously, helping to create a widespread 'commitment to improvement' mindset.

Ownership by line management

In DuPont's experience, placing all responsibility for energy efficiency with an administrative or support 'Energy' organization outside of every day production will not lead to success. While supporting organizations are important, an effective energy management system relies heavily on line responsibility. It is mandatory that the line leadership be actively engaged and committed to improving energy use in their units, and that they recognize efficiency as an essential part of running the operation.

This tends to be one of the more challenging parts of the culture change. Getting senior management onboard is often easier, because the business case for energy efficiency can be so compelling. When change is first strongly embraced by the executive suite, by the time line management is engaged, it is clear that the requirements are strategic directives and anything but arbitrary or 'flavor of the month.'

And, of course, it is important for the organization to put money where its mouth is-when goals are met, line managers are rewarded, and energy efficiency performance should quickly be made a part of performance reviews, bonuses and incentive arrangements.

A Center of Competency (COC)

The CoC is a virtual organizational structure with the senior manager energy champion at the top and a clear path connecting all site energy coordinators and other energy subject matter experts throughout the organization.

Through the CoC they are the owners of the corporate energy management system and the processes associated with it. The CoC is a vehicle to network and leverage and share learnings and best practices across the organization. It allows the senior managers to instantly assess the health of the effort at every location.

The culture of multi-disciplinary teams

This is where culture change meets technical competence. If a culture cannot tolerate any deviation from top performance, there needs to be a culture created where everyone is empowered to identify problems, bring them to the attention of others, and, as appropriate, work to solve them. Key to the success of this model-and it has been very successful for DuPont, instrumental in saving the company billions-is having the desire, the ability and the enthusiasm to form multi-disciplinary, cross-functional site teams to tackle these issues.

This is not something that the energy expert or a lone engineer can tackle by themselves. Insight is needed from operators, from maintenance, from mechanics, from core process experts, from energy experts, from engineers and, of course, management supervision to help keep everyone focused, resources flowing and commitment high.

Better training, better skills

Training and development efforts are a key part of implementing culture change, and take many forms in the creation of a sustainable culture where ongoing energy efficiency is organizationally valued.

As one example, since many energy defects are not readily apparent, training technical people to 'sniff out' opportunities for energy efficiency improvements, or, for that matter, improvements in environmental performance or process performance, are vital. General energy efficiency awareness training, such as learning how to calculate energy usage and associated cost, as well as specific training related to the equipment that they operate, should be included in the program.

Conclusions

These are only a handful of the components of a customized, comprehensive, well-integrated, enterprise-wide Energy Management System. Like many cultural changes, they focus upon using what you already have, but using it differently, as opposed to deploying capital to bring in 'something else.'

To companies for whom implementing an energy efficiency program is becoming increasingly urgent, DuPont strongly suggests first turning attention to the cultural, rather than capital aspects of the change.

Based on DuPont's own extensive field experience, implementing cultural change will not only synergize future capital changes you do make, it will help you realize upwards of 40% of the total energy efficiency opportunity, reducing your footprint and generating immediate cash savings, while positioning the organization for ongoing, sustainable success, whatever the future might bring.

And, with a future that promises such advances as distributed generation, the convergence of smart grid, data integration, demand response incentives and other next generation energy innovations, the organization with an enterprise-wide energy culture will be able to capitalize on these and other opportunities faster and more effectively than competitors for whom energy efficiency is merely an incidental interest, and not a true strategic directive.

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