Industrial energy audits were amongst the first energy efficiency policy measures developed in response to the oil shocks of the 1970s. Since then they have become enormously popular in industrialised economies. In the EU they are mandatory for large organisations under the EU Energy Efficiency Directive. Developing countries are considering them as they scale up their own climate programmes. So interest in audits can only grow. But, from a policy-maker’s perspective, do they work? How do they work? How could they work for me? Certainly, in principle, audits are extremely important because they get to the heart of how a company uses energy. But after 40 years, the scientific literature on audits is large and complex and difficult for the non-specialist policy-maker to wade though. This webinar tell the story of audits in a way designed to cut through this complexity. It recounts the history of audits and sets out why they are important. It sets out some of the main features of successful audit programmes, and, from the practical experience of the speaker, how to go about putting one together. It then considers the main problems with audits and how these can be addressed. Finally the talk will look ahead to see how audits might evolve in the near future.

1. 40 years of industrial energy efficiency audits
- what have we learned?
Peter Mallaburn
IEA DSM University
December 10th 2014

2. Introduction

3. The usual health warnings … and a thank you
• Focus – industrial energy efficiency audits, although set in a much
broader policy context
• Definition – “industry” actually means all non-domestic sectors,
excluding transport
• This is meant as a signposting guide, not a blueprint, or an
instruction manual
• Most of this is published, some is still quite new, and some is based
on personal experience
• Thanks to the eceee and Energifonden for
supporting the underlying research

4. Agenda
• Introduction
• Policy context
• History of audit programmes
• Rationale - what are audit for?
• Setting up audit programmes - some pointers
• Impact – what makes a good audit programme?
• The future of audits

5. Policy context

6. Emission reductions – UK is currently on target…

7. …but there is an 83MtCO2e policy gap in 2025
From “Meeting Carbon Budgets – 2014 Progress Report to Parliament”: UK Committee on Climate Change, July 2014

8. Many counties are struggling to deliver reductions
• Moving beyond “low lying fruit” is hard
• Deployment of renewables is costly or politically sensitive
• Austerity is scaling down subsidy programmes
• Governments are reviewing their policies and programmes
• Transport and domestic sectors are very difficult
• Industrial programmes are back on the agenda

9. Industrial audits have always been popular
• Easily the most cited programme type in the literature
• Most countries have them, many for as long as 40 years
• Our understanding of how they work is mature and relatively
uncontroversial
• Audits make sense in most jurisdictions and political contexts
• Audits are now mandatory in the EU for larger organisations

10. History of audit programmes

11. The Oil Shocks of 1973 and 1978

12. Early programmes - 1973 to 1983
• First programs began in 1974 in the US, Europe and Japan
• Focused on technologies:
• Grants for plant and equipment
• Opportunity assessments
• Best Practice programmes
• Research and demonstration
• Technology roadshows
• Some significant programmes
• 1974 - £400m (2014 prices)
• 1977 - £2.8bn

13. The rise of energy management – 1983 to 1997
• Focused on companies
• Covered both technical and
organisational drivers
• 5 Steps:
• Commit
• Review
• Plan
• Implement
• Monitor
• Emergence of energy management
as a distinct profession

14. The rise of climate change – 1988 to 20XX
• 1988 – scientific and political consensus develops around
climate mitigation
• Consumers begin to demand green products and services
• 1994 – Triple Bottom Line
• 2002 – Carbon Trust begins Carbon Management
• 2004 – Performance indicators eg Carbon Disclosure Project,
Plan A, carbon reporting
• 2014 – Carbon Bubble

15. Rationale - what are audits for?

16. Audits are seen as change management programmes for
energy
• Significantly less energy is saved than is cost effective – the
“energy efficiency gap”
• Energy intensive companies tend to behave rationally – they
manage energy as a controllable cost
• But for most companies energy costs are not “core business”
and are not actively managed
• This can be addressed by influencing the drivers and barriers
of change

17. Barriers and drivers of energy efficiency
• Up-front capital cost
• Hidden costs -
management time
• Technology risk
• Lack of information and
skills
• Ignorance and inertia
• Energy and cost savings
• Other benefits -
maintenance costs
• Enhanced asset value
• Reputation, brand and
compliance
• Workforce satisfaction
Economic &
technical
Behavioural &
organisational
Barriers Drivers

18. Audits programmes help to overcome barriers and
exploit drivers
• Secure senior level, strategic commitment to reduce energy
use over time
• Carry out an organisation-wide review of energy use and the
capacity to manage it
• Benchmark energy performance against peers and
competitors
• Provide cost effective, practical recommendations and
accounting advice
• Provide a structured programme of implementation,
monitoring and review

19. Setting up audit programmes – some pointers
Patrick Thollander and Jenny Palm “Improving energy efficiency in industrial energy systems” Springer 2013

20. Common features of audit programmes
• A policy objective
• A library of information and market data
• A delivery agency
• A network of auditors and advisors
• A programme of support and/or subsidy
• Account management and CRM

21. Preparation
• Understand your target sector – barriers, risks and drivers, technology
base, investment models, compliance
• Segment the market:
• Size of business
• Energy bill
• Degree of leverage – eg networks
• Decide on degree of subsidy – free or co-funded?
• Sort out data issues in advance
• Data needs and sources
• Energy utility data and IP
• Decide what success looks like
• Absolute vs relative measures
• Input vs output measures

22. Procurement
• Appoint a delivery agent
• Decide on in-house or external
• Agree KPIs and review process
• Build an auditor network
• Scope out skills and capacity
• Embed standards and CPD
• Professional account management
• CRM, call centres etc
• Develop programme collateral
• Information, advice, software
• Sources, eg technology companies, utilities
• Crowdsourcing – 2degrees network

23. Impact - do they work?

24. Do audits work?
• Yes – they are popular for a good reason
• However implementation rates are rarely above 50%, and can
be as low as 20%
• There are wide variations between measures...
• Technologies and behavioural change
• 100% subsidised and cost-shared
• …and between different types of organisations
• Public, private, large, small
• Reputational drivers and risk

25. Why?
• Barriers and drivers are interconnected
• Finance is rarely the only barrier
• Reputational drivers are under-exploited
• Retail, defence and financial services
• Skills and experience are usually missing
• Both in the organisation and the auditor network
• Companies rarely ask for what they need
• Grants versus loans
• Subsidy vs cost-sharing

26. What makes a good audit programme?
• Operational flexibility – responsive to changing market and
political circumstances
• Strong market intelligence – sector, organisation, individual
• Exploit synergies – investor pressure
• Exploiting local networks
• A credible and well-resourced auditor network
• Some degree of compulsion
• Some degree of cost sharing

27. The future of audits

28. The future of audit programmes
• Audits began as stand-alone, programme management tools
• The rise of climate change has changed their role from
measuring energy use to assessing risk and value
• They are now part of larger, more sophisticated policies and
programme such as Long Term Agreements
• But organisations still implement less than half of cost
effective measures that audits reveal
• So what are we doing wrong?

29. Energy efficiency “framing”*
• Audits are all about identifying practical, cost effective energy
efficiency measures
• We are getting very good at this, but it is still too hard for
most organisations to actually do
• Does the burden of change lying too heavily on the energy-
using organisation?
• Should we encourage the technology supply-side industry to
help it improve the energy efficiency “offer”
• There are some early signs that this is beginning to happen…
*Hans Nilsson and Charlotte Ruhbaum, eceee Industrial Summer Study proceedings 2014, pp 703–710

30. Thanks for listening