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IEA- IIP Policy Pathway - Energy management Programmes


Presentation by Vida Rozite IEA and Julia Reinaud IIP given during the SEAI forum in dublin, Ireland "Creating the Right Environment for ISO 50001" …

Presentation by Vida Rozite IEA and Julia Reinaud IIP given during the SEAI forum in dublin, Ireland "Creating the Right Environment for ISO 50001"

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  • It is a great pleasure to participate at the 2nd International Conference on the Global Impact of Energy Management Systems and discuss with you how to create an environment to accelerate the uptake of energy management systems in industry. This is a joint presentation by the International Energy Agency and the Institute for Industrial Productivity. This presentation will provide guidance on how to implement energy management programmes. It builds on the diversity of approaches to energy management programmes utilised in different countries since what constitutes an effective programme depends on the existing policy framework, objectives, industrial composition and other country-specific factors.Industrial energy use accounts for roughly one-third of global energy demand. While there is significant potential to decrease energy consumption in this sector, opportunities to improve energy efficiency are still under-exploited. Improving energy efficiency in industrial companies provides benefits for the companies themselves as well as for the economy as a whole.Systematic energy management is one of the most effective approaches to improve energy efficiency in industries, because it equips companies with practices and procedures to continuously make improvements and capture new opportunities. An energy management system is a collection of procedures and practices to ensure the systematic tracking, analysis and planning of energy use in industry. Government energy management programmes and associated supporting measures and drivers have been shown to effectively address many of the barriers to energy efficiency and stimulate energy management in industry. The lessons learned during implementation and modification of programmes around the world provide a valuable source of information and guidance for policy makers and programme managers in the process of developing or improving measures. I will start off by providing the context and background for the policy pathway and Julia Reinaud will share with you some of the key findings on how to create an enabling environment to promote the uptake of energy management systems.
  • As mentioned - industrial energy use accounts for roughly 1/3 of total final energy consumption. In recent decades industrial energy intensity has been decreasing at an average rate of 1.7% per year (partly driven by technological change but since 2008 structural change has had a larger impact than technological change). However, consumption in absolute terms rose 35% over 1990 – 2008 and projections indicate that industrial energy demand will continue to grow rapidly over the coming decades. IEA analysis shows that substantial opportunities for energy efficiency improvements exist. The potential energy savings in the industrial sector in 2010 accounted to at least 26 EJ per year by 2030 (corresponding to the current annual electricity consumption of the US and China combined).
  • Analysis of industrial energy consumption per sector shows that while 8 key sectors account for 50% of energy use – energy consumption in industry is spread across a wide range of sectors i.e. we cannot just focus on solutions for some sectors if we are to make a significant impact on energy use. Analysis shows that much of the energy savings potential can be captured through policies for promoting the use and optimisation of energy efficient industrial equipment and systems and through energy management.
  • Investing in industrial energy efficiency makes financial sense – however progress is slow and potentials are not being captured. There is a strong case for policy intervention to stimulate industry to engage in energy saving measures. Energy efficiency in industry contributes to a wide range of policy objectives – irrespective of perspective – climate change mitigation, energy security or industrial competitiveness and development (or all of the above) – promoting energy efficiency in industry needs to be a priority. Energy efficiency in industry has also shown to provide wide range of benefits for companies – decreased costs (not only energy costs but maintenance costs, longer life time of equipment etc), improved productivity, improved product quality, enhanced work safety, reduced risks etc. However, despite clear benefits the market uptake of energy management systems is slow. This is because a number of barriers to industrial energy efficiency exist including limited access to technical know-how and to capital, low energy prices, risk aversion, and transaction costs. Beyond these barriers, there is also a lack of tailoring of energy efficiency policies to what drives a company to invest, as well as insufficient analysis of why are these drivers not fully stimulated.Ways to address the drivers that stimulate decision makers is to speak the same language as the CompanyBoardroom. In other words, in order to influence companies to change their investment priorities in favour of an investment that carries more energy efficiency benefits than another, a stronger and more compelling business case needs to be presented to the boardroom. This means recognising that many industrial energy-efficient improvements are a by-product of investments undertaken for other reasons and that improve overall productivity. It is a myth to believe that companies label “this is an EE project”. For many types of industrial investments, energy efficiency is an inherent benefit of facility upgrading. Investing in replacing old or obsolete technology brings about integrated improvements in productivity, product quality, overall plant efficiency, improved energy efficiency, and broader innovation and process improvements within a company. For high-energy intensive industries such as primary aluminium, steel and cement, energy efficiency gains alone may be a sufficient driver for new investment. This might not be the case for smaller-size or less energy-intensive companies unless there is a strong policy drive to achieve energy savings. Despite its simplistic view of the boardroom, this perspective is a useful way to understand broadly how a typical industrial boardroom operates and thus constructively inform policy design so that policies can effectively stimulate boardrooms to maximise energy efficiency investments.
  • Systematic energy management is one of the most effective approaches to improve energy efficiency in industries, because it equips companies with practices and procedures to continuously make improvements and capture new opportunities. The need to stimulate the uptake of energy management systems has also been emphasised in the IEA 25 Energy Efficiency Policy Recommendations. The key IEA recommendations for industry cover energy management in industry (b) high efficiency industrial equipment and systems (c) energy efficiency services for SMEs and (d) complementary policies to support industrial energy efficiency (centering largely on access to finance and supporting investments in energy efficiency)However, while it is useful to identify key areas to focus on it is even more useful to actually provide actionable guidance on how to develop effective policies which is why the IEA has developed its Policy Pathways series. Policy Pathways publications identify, analyse and communicate key steps and actions for planning, implementing, monitoring and evaluating energy efficiency policies.
  • The Policy Pathway on Energy Management Programmes for Industry was launched in April. It is the product of a close collaboration between the International Energy Agency and the Institute of Industrial Productivity. IIP provides companies and governments with the best energy efficiency practices to reduce energy costs and prepare for a low carbon future. The policy pathway was developed in cooperation with key experts and stakeholders, it builds on lessons learned, good practices, and is illustrated by examples and case studies. While the pathway covers the entire policy cycle from planning – through implementation – to monitoring and evaluation – it is of relevance to policy makers and programme managers that are at the outset of policy development and are looking for information on how to approach the issue, how to involve stakeholders, what to include, what works and what may not work. But it is also of equal relevance to policy makers and programme managers that are looking for ways to improve or expand their programme.
  • This report proposes a policy pathway that supports the development and implementation of energy management programmes comprising four phases: plan – implement – monitor - evaluate. This paper distils the lessons learned by pioneers, helping policymakers benefit from other governments’ successes in using EnMPs to counteract barriers to energy efficiency improvement and promote the transition towards more sustainable energy use in industry. It builds on the diversity of approaches since what constitutes an effective programme depends on the existing policy framework, objectives, industrial composition and other country-specific factors.
  • Energy management programmes (EnMPs) are government-led initiatives to promote effective energy management systems.  EnMP elements are the government-led initiatives, drivers and support systems that, combined, make up the EnMP and encourage enterprises to adopt effective EnMSEnergy management systems (EnMSs) are a means by which organisations establish the systems and processes necessary to achieve operational control and continual improvement of energy performance. (e.g. ISO 50001, EN 16001, Netherlands’ energy management specification).
  • This diagram serves to further clarify the issue that effectively stimulating the uptake of energy management in industry – requires the establishment of a comprehensive programme which includes (a) creating drivers and incentives (b) establishing support systems and addressing industry specific needs and (c) the framework for systematic energy management – standards, guidelines, certification and verification systems. Energy Management Programmes complement traditional industrial retrofit programmes providing financial incentives for verifiable energy saving projects, by opening up a significant new efficiency resource of persistent savings from operational and other behaviour-based changes (Jones et al, 2011). To encourage energy management systems adoption, government incentive and support mechanisms within a broader government-led energy management programme have proven to be necessary. Energy Management Programmes are policies and initiatives that encourage companies to adopt energy management and offer companies both a reason and a method to reduce energy consumption by revealing not only the savings but also improved productivity and competitiveness, even showing new business opportunities. Energy Management Programmes play an important role in showing that improving energy efficiency is not only compatible with - but can also drive - profitable business development
  • The IEA and IIP propose a policy pathway that supports the development and implementation of programmes comprising ten critical steps in the following four phases.It is built on the diversity of approaches to EnMPs utilised in different countries since what constitutes an effective programme depends on the existing policy framework, objectives, industrial composition and other country-specific factors.EnMPs are flexible instruments that can be adapted to changing policy needs, changes in industry and national and regional circumstances. There is no one-size-fits all EnMP: rather, policymakers may consider the elements within each of the four phases to customise the programme from a menu of options. During the four phases, different types and levels of stakeholder consultation and engagement are important to help define the needed interventions, design compliance and verification requirements, comment on proposals and share experience on specific barriersThe 1st phase: Plan: Policy makers begin the process by defining the purpose of the programme and its role in the policy framework, which then serves as the starting point for designing the programme. The design of the programme determines the tasks that should be included in the action plan and the necessary resources.When designing energy management programmes, investing sufficient time and resources in the planning stage can help to avoid future challenges and problems. Careful advance planning ensures that all the important elements can be incorporated at the outset, avoiding delays, duplication of efforts or confusion. Transparent planning, which involves consulting stakeholders from the beginning, will ensure critical aspects of the programme have been considered, and will help to increase target group buy-in and foreshadow any future implementation issues or difficulties. Also, as mentioned by Vida, Energy management programmes are most effective when planned and implemented as part of broader energy efficiency agreements with the government.A piloting phase can be a good way to ensure that the most appropriate programme design and supporting measures are selected. To maintain effectiveness, the set-up of programmes may need to be periodically revised, and experiences gained can be used to expand the scope to include new sectors or types of enterprises. The 2nd Phase: Implement: The success of the programme rests on providing appropriate institutional assistance and support including training. Securing active participation requires promotion, as well as recognising and communicating achievements. Initially, drivers including incentives play an important role in stimulating industry to engage in energy management. In particular, small- and medium-sized enterprises may require additional support and resources. As the programme matures, programme managers can explore options to phase out support or transfer the responsibility for the programme to the private sector. Depending on the design of the programme, the implementation phase may also require training of auditors and ensuring an effective verification and certification of energy management systems.Robust systems for monitoring and evaluation can provide essential insights into how programmes can be developed and improved.By continuously monitoring implementation and through regular evaluation, policy makers can identify opportunities to include new mechanisms or establish linkages to emerging policies. Capturing and sharing lessons learned are valuable for businesses, as well as for the international energy efficiency policy community. The 3rd phase: Monitor: The first monitoring step is to establish what to measure and how, this includes establishing indicators and data collection methodology. Monitoring also involves assessing compliance and results, and communicating results and outcomes to stakeholders. The 4th phase: Evaluate: Evaluation involves determining what to evaluate and how and to utilise evaluation results to develop, revise and adapt the programme. A key challenge is determining the net results and benefits of energy management programmes. This requires identification of what results stem from the programmes and what results are caused by e.g. other policies, market development, or other factors. Furthermore, to gauge the full impacts of energy management programmes further efforts are needed in the area of quantifying benefits beyond energy savings and emission reduction. While some progress has been made in this area, further efforts could be instrumental in accelerating the uptake of energy management systems.
  • EnMS is not just a certificate – piece of paper…The standard as a very useful framework, but it is clearly not the standard itself that brings energy savings… It is the technical (government) support and the peer-to-peer exchange that adds the most value.  Importance of detailed methods or guidelines for conducting energy reviews.
  • Key success factors include ensuring that programmes are an integral part of broader policy frameworks and adapted to the specific needs of industry, establishing on-going dialogue with industry and other stakeholders and the provision of support and technical assistance. Some examples are training of employees, capacity building, methodologies, tools, access to advisory services and audits or tax incentives. The question of how the programme will be sustained over time without government resources should also be considered. Is an exit strategy envisaged, and can the private sector eventually assume some of the functions and services provided by the government? As the programme matures, programme managers can explore options to phase out support or transfer the responsibility for the programme to the private sector. In Germany and Switzerland’s Learning Energy Efficiency Networks (LEENs), which focus on sharing energy management experience, the costs are shared between the government and private-sector companies, and the goal is to reduce government funding over time. Similarly, the Superior Energy Performance (SEP) programme, the U.S. EnMP, initially has heavy involvement by the U.S. Department of Energy (DOE), but this involvement will decrease as the programme is fully launched and governed by a multi-sector board, the US Council for Energy-Efficient Manufacturing.
  • Capacity building around financingDeveloping capacity on energy management in financial institutions and energy service companies (ESCOs) is crucial to improving energy efficiency in industry. Significant capacity limitations exist with respect to project developers, ESCOs, project hosts (energy users), and local financial institutions (LFI) loan officers and risk managers. LFIs often do not understand energy efficiency technologies and perceive them as more complex projects than their traditional lending. A knowledge gap exists between the organizations developing and implementing energy efficiency projects and the beneficiaries (project hosts) and bankers. Resources for training and capacity building of LFIs and project developers must be a key part of the EnMPs. Support can be provided by governments with training programmes and the provision of technical assistance to LFIs. Further, training officials in charge of implementing the EnMP can help companies to meet the criteria of banks and other investors for energy efficiency project investment, and thereby can play a role in unlocking financing. As part of an EnMP, providing networking opportunities for ESCOs, project developers, and equipment suppliers where they could have the opportunity to interact with financiers and understand their financing decision process and criteria may be useful.
  • Successful programme implementation also requires securing active participation and promotion of the programme, as well as recognising and communicating achievements. Co-benefitsGovernment agents must be able to communicate to companies in a way that reflects business realities and that identifies the benefits of energy efficiency to potential programme participants. A survey of the literature in this field outlines that the broader range of co-benefits of energy efficiency may in fact be more important to enterprise decision-making on energy efficiency investments than the actual energy savings. Methodologies for costing multiple benefits in industry could contribute more accurate assessments of cost effectiveness and form the basis of the development of tools within EnMPs. Such tools could help energy managers establish a compelling financial case that is supported by a description of all project costs and benefits, i.e. beyond energy savings. In Ireland, EnMSs are seen as and marketed to companies as business improvement tools because of the significant gains that companies have achieved through EnMS implementation.By decreasing payback periods and thereby increasing the quantity of cost effective options, efforts to incorporate co-benefits in program design and promotion could also help design more ambitious EnMPs. This is especially important in the context of EnMS program design, climate change and energy security discussions. While some progress has been made in this area, further efforts to gauge the full impacts of EnMPs and quantifying benefits beyond energy savings could be instrumental in accelerating the uptake of EnMS.Aside from its role in programme promotion, external recognition is an important element for the success of the EnMP. Certification (and the proof of the certificate) is a way for companies to demonstrate to external stakeholders that they are actively managing their energy use. Beyond the achievement of certification, governments may initiate additional means of recognising excellent corporate energy management, and these efforts can be an important incentive for EnMS adoption. Governments may provide external recognition through awards, labels and case studies. For example, the SEP programme in the United StatesEncouraging EnMPs in supply chain initiativesEnMS may become a promising component of corporate supply chain initiatives. EnMS standards provide a recognised framework for organisations to encourage suppliers to better manage energy and provide benefits for both buyers and suppliers. An energy efficient supply chain can result in benefits for buyers by reducing their exposure to climate policy and energy risks passed through from their supply chain. In addition, improved energy management may also contribute to improved quality and management of other resources by the supplier, resulting in a potentially better product and pass-through of cost savings (Goldberg et al. 2012). In China and Taiwan for example, Hewlett Packard is encouraging its electronics suppliers to implement EnMS standards (Hamilton, 2012). Through the deployment and recognition aspects of EnMPs, governments may have a role to play in facilitating buyer and suppliers relationships and driving buyer demand for the energy performance of their suppliers.
  • We do EE and aim is to reduce GHG emissions; 3 main regions, 3 industries (I&S, cement and chemicals), 3 important items: BP dev and disse, piloting scalable projects for GHG mitigation,innovative financial mechanismsWe think about everything it takes to increase energy productivity.Transformative change: We focus on sector-wide market transformations.Technology: What tools and management systems are available and best suited to industry.Policy: Which government or company policies foster and facilitate energy efficiency, climate and industrial productivity benefits.Financing: What incentives or financing products will work.


  • 1. Pathways to Energy Management Programmes – Gaining through Saving Julia Reinaud (IIP) & Vida Rozite (IEA)
  • 2. Why is the industry sector important? Final industrial energy demand is projected to grow rapidly (behind power generation) during 2009-2035, particularly in© IEA/OECD, 2009 developing countries
  • 3. Energy use by industrial sector World OECD Energy intensive industries like iron & steel, chemical etc account for half of total final energy consumption in industry© IEA/OECD, 2009
  • 4. Decision-makers Matter! Need to make a compelling business case to the board Productivity gains “sell” Chief Technology Officer “Do we know what energy efficiency practices and technologies are available?” Financial Director Driver: knowledge “ Do we have the money to invest and are we willing to spend it on EE?” Driver: Financials CEO “ Are we committed to prioritize EE above other investments?” Driver: Commitment Marketing Director“ Do the public and market demand us taking EE measures?” Driver: Public and market Regulatory Affairs Officer demand “ Does this government policy require us to take EE measures?” Source: Ecofys in Reinaud and Goldberg (2011) Driver: Policy obligation
  • 5. IEA Policy Pathways series  Provide actionable guidance on how to implement IEA 25 Energy Efficiency Recommendations  Identify, analyse and communicate to governments pathways (steps and actions) for planning, implementing, monitoring and evaluating energy efficiency policies© IEA/OECD, 2009
  • 6. Policy Pathway on Energy Management Programmes for Industry  Partnership with the Institute for Industrial Productivity  Lessons learned, examples and case studies programmes  Involvement of international experts  Country examples, case studies© IEA/OECD, 2009
  • 7. Overview  What: Definitions  Why: Importance of managing energy in industry  Role of energy management programmes  How to design and deliver energy management programmes (plan, implement, monitor, evaluate)© IEA/OECD, 2009
  • 8. Definitions  Energy management programmes: government-led initiatives to promote the uptake of energy management systems  Energy management programme elements: government led initiatives, drivers and support systems encourage uptake  Energy management systems: means by which organisation establishes processes to achieve control and improvement of energy performance (e.g. ISO 50001)© IEA/OECD, 2009
  • 9. Energy Management Programmes Link to policy • Target-setting policy package Drivers & • • Mandatory EnMS Policy exemptions Incentives • Subsidies / Tax rebates • Public reporting • External Recognition • Networking Support • • Workshops Direct technical assistance • Tools, training Energy • Standard or specification Management • EnMS incl. Energy review guidelines Systems • Certification or verification
  • 10. POLICY PATHWAY PLAN IMPLEMENT -Define the programme -Provide institutional -Design the programme assistance -Develop action plan -Promote and recognise achievements EVALUATE MONITOR - What and how - What and how - Revise and adapt - Assess compliance - Communicate© IEA/OECD, 2009
  • 11. Key Messages (1)  Energy management is a tool to change behavior, processes and technologies – continuous process  Significant co-benefits • Game-changer in influencing investment decisions • Need to speak the same language as C-level to encourage uptake • Communicate (co-)benefits and costs for companies, especially SMEs • Payback period is lower when co-benefits are included • E.g., An initial cost of $5000 in consulting fees for purchasing a three- fan, variable inlet valve (VIV) controlled system, created a potential incremental annual revenue $375 000 for Alcoa  Need for Energy management systems “+”© IEA/OECD, 2009
  • 12. “EnMS +”: Implementation Support  Energy review, benchmarking and technical tools assist in identifying EE opportunities, defining targets and key performance indicators (KPIs) within their EnMS  Individual pieces of equipment – lights, boilers, motors, etc.  Processes / Sub Systems Assessments, e.g. boiler systems  Production Energy Use - in relation to demand  Whole-of-system, including Energy Mass Balance  Direct programme and/or technical assistance  Case studies showing peer experience  Guidance materials  Workshops, networks and other fora for best practice exchange© IEA/OECD, 2009
  • 13. Key Messages (2)  Government policy and enabling finance has a key role in accelerating uptake – policy package  Company buy-in & consultation is key  Importance of integrating into business operation and improvement (synergies with other systems/tools)  Sustainability of the programme and resources • Exit strategy envisaged? • Role of private sector?© IEA/OECD, 2009
  • 14. Implementing EnMPs  Energy management systems +  Facilitating and tailoring: - Training of different stakeholders - Communication with Financiers - Sector specific guidelines for EnMS (China) - Government reporting© IEA/OECD, 2009
  • 15. Promoting EnMS  Co-benefits (boardroom)  Certification and external recognition  Role of stakeholders - Industry associations - Utilities - Companies (supply chain) - Financial Institutions (FIs) and IFI  Case studies and networking opportunities© IEA/OECD, 2009
  • 16. Contacts:  IEA vida.rozite@iea.org  IIP julia.reinaud@iipnetwork.org amelie.goldberg@iipnetwork.org www.iea.org/papers/pathways/industry.pdf© IEA/OECD, 2009 www.iipnetwork.org/publications
  • 17. Appendix© IEA/OECD, 2009
  • 18. IEA International Energy Agency is an intergovernmental body committed to advancing security of energy supply, economic growth and environmental sustainability through energy policy and technology cooperation. It consists of 28 industrialised countries. The IEA promotes energy efficiency policy and technology in buildings, appliances, transport and industry, as well as end-use applications such as lighting. Our analysis identifies best- practice, highlighting the possibilities for energy efficiency improvements and policy approaches to realise the full potential of energy efficiency for our Member countries. www.iea.org© IEA/OECD, 2009
  • 19. IIP at a glance… The Institute for Industrial Productivity provides companies and governments with the best energy efficiency practices to reduce energy costs and prepare for a low carbon future. • Sharing and disseminating best practices, including bridging the gap between The IIP team and Strategic Advisory Group government policy and industry implementation • Piloting scalable projects for GHG mitigation • Facilitating the creation of innovative financial mechanisms www.iipnetwork.org© IEA/OECD, 2009