The Evolution of the Energy Manager


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Our white paper highlights the commercial returns that can be achieved by investing in the latest energy management skills.

The position of Energy Manager is evolving into someone who is comfortable in the board room as well as the boiler room, with technical and commercial knowledge – and the increasing ability to impact on margins and revenues.

Commentary from high-profile industry experts from BT, Marks and Spencer, Siemens and Johnson Controls.

The paper looks at how companies in a stagnant economy are increasingly turning to energy efficiency as a way to increase profit – impacting the scope and function of their energy teams.

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The Evolution of the Energy Manager

  1. 1. The Evolution of the Energy ManagerFrom Boiler Room to Board RoomWhite PaperFebruary 2012
  2. 2. Acre is a recruitment and executive search firm that specialises in peoplewho build better and more sustainable organisations. Since 2003, wehave built our reputation in the energy, sustainability, environmental andcorporate responsibility functions and increasingly work in the ancillaryfunctions including strategy, supply chain and communications.Acre:• Has placed over 900 candidates in the sustainability arena• Has placed candidates at 38% of the current FTSE100• Leads the organic Google rankings for sustainable jobs search terms• Was rated the most recognised recruitment firm in an independent survey (Green Monday, October 2010)Contact us:Olivia 44 (0) 20 7400 5586www.acre-resources.com2nd Floor, Chancery Station House, 33 High Holborn, London, WC1V 6AX. 2 | The Evolution of the Energy Manager: from Boiler Room to Board Room | Acre Resources | February 2012
  3. 3. ContentsThe drivers of change 5Internal skills vs. 3rd parties? 6From manager to strategist 6Conscience as an accelerant 7The energy skill set 8Where the skills come from 9The reporting line 9Team structures 9BT’s roles and responsibilities 10BT case study 11How big an opportunity? 12Energy function to CEO? 12Conclusion 12About the contributors 13 The Evolution of the Energy Manager: from Boiler Room to Board Room | Acre Resources | February 2012 | 3
  4. 4. Introduction Recent analysis of the Carbon Reduction Commitment (CRC) league table suggests that 40% of the reporting companies are yet to takeThe role of the Energy Manager is any steps to improve their energy efficiency1. Thisundergoing profound change. Over indicates the high level of opportunity that is yetthe past 20 years we have witnessed to be taken by the broad corporate community, as well as the risks that are not being addressed.the emergence of a new breed;someone who is comfortable in the We hope this report gives confidence to those who are hiring energy teams as they build moreboard room as well as the boiler successful and sustainable And he - or increasingly she - isstarting to have a material impact on Thank you to our expert contributors for their input.margins and revenues.This report draws on the views and experienceof four leading figures in corporate energymanagement (see the table opposite and Contributors:biographies on page 13). Together, they • Mervyn Bowden – Head of Energydemonstrate that the introduction of energy Management, Marks & Spencer*expertise will typically result in new businessmodels, attractive investment programmes and in • Richard Tarboton – Director of Energy andsome cases new revenue streams. It is an exciting Carbon, BTtime to be in energy management. • Stephen Barker – Head of Energy Efficiency, Siemens Industry Sector UKWe expect energy management to rise furtherup the corporate agenda in 2012. With the UK • Trevor Seddon – Director of Energy Consulting,economy looking stagnant at best, management Johnson Controlsteams are increasingly turning to efficiency as Written by Jim Woods, Non-Executive Director ata way to increase profit. And with oil prices Acre Resourcesshowing little sign of abating from recent highlevels, the investment returns should remain Cover illustration by David Lewis,attractive. * Some of Mervyn Bowden’s contributions were taken from his book ‘Preparing the Company Energy and Carbon Plan’ (November 2010). Andrew Cartland Jim Woods Managing Director Non-Executive Acre Resources Director Acre Resources 4 | The Evolution of the Energy Manager: from Boiler Room to Board Room | Acre Resources | February 2012
  5. 5. The drivers of change “Change has felt slow, but when you take a step back it is quite profound.What factors are driving energy up the corporate 5 years ago there was a spike inagenda? Our contributors identify two main energy prices, and people starteddrivers: the emergence of climate change as to talk about demand management.a business issue and rising energy prices. Low The CRC, EU ETS and CCAs -margin, energy intensive sectors need to respondto rising energy costs, whilst sectors with high coupled with the increasingreputation capital may be more driven by the awareness of reputational issues -climate change agenda. have since all added to the business case.”The impact of rising energy prices Stephen BarkerAccording to government figures, the price that Awareness of positions in the Dow JonesUK companies paid for their energy rose by an Sustainability Index can generate ambitiousaverage 12.2% per annum between 2002 and carbon reduction targets.20102. This has been a significant business issuefor the manufacturing and food processing The CRC energy efficiency scheme and the EUsectors, where energy costs can account for more Emissions Trading Scheme have added to thethan 10% of pre-tax profit. weight of sustainability as a driver. By adding a carbon price to the high carbon UK grid, it has “We expect energy prices to rise in effectively become an energy tax. the coming years due to supply side Energy is increasingly regarded as the core area or issues such as nuclear withdrawal, even the “cash cow” of sustainability strategies. increased renewable generation Compared to other sustainability initiatives, and less coal fired power stations.” energy reduction combines the best commercial Trevor Seddon returns with the most tangible benefits.All of our contributors expect energy prices tocontinue to rise in the medium term, a view “M&S knew a lot about how wesupported by Peter Voser, CEO of Royal Dutch used and paid for energy across ourShell. He told the Financial Times in September diverse estate of stores, warehouses2011 that “rising energy prices are here for the and offices. Energy efficiency haslong term... get used to that.”3. always been a company priority. What we hadn’t done was join thisThe impact of sustainability with all the additional benefits ofFor the banking sector, reputational risk has carbon savings, and the positivea bigger impact on energy management environmental message toprogrammes. Energy costs are insignificant customers and employees. Anwhen compared with their profitability, but the energy plan forms the foundationsBarclays’ CEO stated in November 2011, that they on which to build a credibleneed to be seen as “better citizens”4. corporate sustainability strategy.” Mervyn Bowden The Evolution of the Energy Manager: from Boiler Room to Board Room | Acre Resources | February 2012 | 5
  6. 6. Internal skills vs. 3rd parties? From manager to strategistOnce an organisation has identified the need to Energy management has traditionally been achange, one of its first strategic decisions is what narrow role based on procurement, equipmentskills to hire internally, versus what to outsource and technical knowledge. The increasinglyto consultants and other providers. There is a commoditised nature of energy procurementfast developing market for advice and financing, contracts in the past decade has limited both theincluding Energy Performance Contracts (EPCs) skills requirement and the organisational impactand Energy Service Companies (ESCOs). of the role.Companies with the greatest risks or opportunities The introduction of demand managementtend to favour building internal teams. They can has created a need for a broader and moreleverage their expertise to reduce their margins, sophisticated skill set. Team leaders are nowchange their business models, and may also expected to impact the way the companygenerate revenue opportunities (see the BT case operates, moving the emphasis from the technicalstudy on page 11). to the strategic. “BT is now in a position where all We asked our contributors what they regard as the skills needed in a modern energy team, and of its strategic energy capabilities we map their responses on page 8. It is not the are in-house. We use consultants a expectation that all these skills will be held by any lot less than at the beginning – we one person, but be held collectively through a tend now to retain consultants more hierarchical team structure. The BT team map on for technical work.” page 10 gives an example of such a structure. Richard Tarboton The four key skills areas of leadership, finance,Organisations where energy or carbon reduction communication and technical are discussed on theis less “core” to their business may achieve better next page.results through leveraging the expertise of thirdparties. They may hire an internal expert to “The days of the traditional energydetermine the opportunities and to manage small manager are fast disappearing.internal teams and third party contractors. This These days you need to know yourpractice is particularly adopted by the financial way around a boiler room, butsector. will rarely work in a boiler room. It is increasingly a desk-based role “There has been a trend towards where saving money is not enough outsourcing, especially for project - you need to have a package of management. I don’t see that skills.” reversing – as energy becomes more Trevor Seddon complex, those that see energy as a non-core business activity will still want greater efficiency.” Trevor Seddon 6 | The Evolution of the Energy Manager: from Boiler Room to Board Room | Acre Resources | February 2012
  7. 7. “The BT Operate CFO says the • Technical – Most of the initiatives in a reduction energy team is the best at programme are technology-based. This presenting business cases in the necessitates an understanding of the emerging Group. That’s been critical to efficiency technologies around lighting, heating and transport - as well as renewable energy. securing the investment capital we need.” In 2010 the Energy Institute introduced a Richard Tarboton Chartered Energy Manager grade, reflecting the increasingly unique skills of the energy role. One• Leadership – To be successful, the energy role of our contributors noted that some of their needs to be integrated with - and related to recent research indicates that only 5% of energy - the company’s core business strategy. The managers have any formal energy qualifications, energy leader will need to build a programme which emphasises the development of the role that includes easy wins and long term that is still to come. objectives. This includes significant components of a change management programme. “There isn’t necessarily any conflict between a personal desire to make• Financial – The shift to demand management creates a need for new financial skills. Invoicing a business model sustainable and and forward contracts remain part of the effective commercial decision- remit, but there is now a greater emphasis making. If you can use the drive on assessing and managing an investment of the former to identify the programme. Some of the most valuable opportunities, then it’s a win-win”. innovation in energy strategy has been around Richard Tarboton analytical tools. Energy strategists now need to build Marginal Abatement Cost Curves (MACC), calculate ‘whole life costing’, and establish a Conscience as an accelerant ‘spend to save principle’. We discuss the skills required by modern energy• Communication – Strong communication skills managers overleaf, but it is worth noting that have become important to the energy role, many of the most effective energy strategists have something that has not traditionally been more than a passing interest in sustainability. All the case. He or she needs to communicate of the contributors to this paper have a societal with many internal groups, from the Board interest in climate change. to the procurement function. An inability to communicate can cause a good programme to A concern about climate change can be a positive fail. and a negative. It can add a level of determination to the role, but it can also be associated with having an agenda that at times may be at odds “Data management and reporting is with commercial decision-making. 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.” Trevor Seddon The Evolution of the Energy Manager: from Boiler Room to Board Room | Acre Resources | February 2012 | 7
  8. 8. The energy skill set When to use third party Appraisal tools: Appointing and nancing MACCs, ‘whole life managing consultants solutions costing’ , NPVs and scenario Stakeholder analysis. management Financial Delegation Strategy Management When should you take innovative risk? Experience in ISO 50001 Innovation StandardsWhat are the revenue Project management Value of data, software New markets opportunities? The energy skill set Data management Share knowledge Collaboration Heating, lighting, between sectors, vehicles, etc within sectors E ciency technologies Marketing Gen. technologies Wind, solar, CHP, etc Can you sell a strategy to the Board? Internal engagement Regulation Preparing for new policies Know how to motivate people - competition vs. co-operation Policy risk can have a big impact on returns Key Financial Technical “The modern energy manager needs to have wide commercial experience, with Communication a full range of management skills to cope with a demanding role. A role which Leadership includes large budgets, managing risk, a need to influence others to achieve your aims, programme management and people management - to name but a few.” Mervyn Bowden 8 | The Evolution of the Energy Manager: from Boiler Room to Board Room | Acre Resources | February 2012
  9. 9. Where the skills come from “There is a need for everyone in the organisation to be involvedAs with any new role, the supply of energy in some way, or at least to beprofessionals is restricted and many employerslook for transferrable skills from other functions or aware of how they personally canmore developed markets outside the UK. contribute to their organisation’s energy efficiency. It needs toEffective energy team leaders can come from start at the top, with the CEO orother internal positions with management Director responsible sponsoringand communications skills. As in any change and supporting the individual whomanagement role, the ability to influence the is producing the long term plan.”organisation quickly is at a premium and transfersfrom other functions can be effective. Mervyn BowdenMany successful leaders of the energy team come Richard Tarboton’s reporting structure hasfrom a strategy background. Richard Tarboton has changed since he joined BT, but energy hasa background in strategy and management, with consistently reported into the operationalan MBA from Cranfield Business School. functions. In addition to the 28-person Energy and Carbon team, Richard has a direct email dialogueRichard expanded his team by adding business with a further 200 people at BT.and data management skills to the existingtechnical skills. The Head of Energy Programmescame from Mercedes Benz in Germany, one of Team structuresthe most developed energy management markets BT has one of the most developed contemporaryglobally. energy team structures - and with an energy spend of around £200m per annum, it has one ofTrevor Seddon’s background in broadcasting the larger teams in the UK. We are grateful to BTand utility metering gave him transferrable for sharing the structure and technical skills. Since movingto Johnson Controls in 2007, he has built out an BT’s energy team divides into 5 lines that reportEMEA team of over 100 people. into the Director. Two reflect the main operational areas that the team covers (networks and dataThe reporting line centres, and BT Estate), and two cover the main areas of investment (smart meters andThere is no universal solution for how the energy renewables). The final area is strategy.function reports into an organisational structure.Larger teams may report into an Energy Directoron the main Board, whilst others report intofunctions such as property, procurement orfinance. A growing number of companies arereporting energy through the sustainabilityfunction. The Evolution of the Energy Manager: from Boiler Room to Board Room | Acre Resources | February 2012 | 9
  10. 10. BT’s roles and responsibilitiesEnergy Saving Networks & BT Estate CRC, EU ETS Self GenerationProgramme Data Centre Sponsor ISO 14001/ 9001Reporting Sponsor Programmes Programmes SustainabilityDC Papers Equipment Report Equipment ReplacementCapex Horizontal Replacement Smart Systems & Smart Control ProcessesUnit Opex Smart Control Engagement MeteringPropositions Data Quality Tenants Electricity Supply Director of Energy & Carbon Energy & Head of Energy Head of Energy Head of Smart Head of Carbon Programmes - Programmes - BT Energy & Supply Renewable Strategy Network & Data Estate & Energy Manager Centre Engagement Energy Senior Energy Senior Energy Smart Energy Senior PMO Energy Control Energy Data & Energy Risk & Demand Manager Manager Manager Manager Compliance Systems Supply Response - Data - Networks Manager Manager Manager Centres Energy Energy Senior Senior Project Engagement Control Energy Project Manager Manager Manager Manager Manager - Onsite - Estates - Wind Generation Energy Energy Energy Energy Demand Project Control Control Control Metering Response Manager Specialist Analyst Specialist Manager Manager - Wind CHP Project Project Manager Manager - Solar 10 | The Evolution of the Energy Manager: from Boiler Room to Board Room | Acre Resources | February 2012
  11. 11. BT case study BT’s UK Energy ConsumptionBT illustrates what can be achieved by anintegrated energy team. Over the first two years GWh/aof the programme, BT delivered £35m grossenergy reduction, primarily through smart control 2,400(£13m), equipment replacement (£10m) andrationalisation programmes (£12m).The impact can be seen visually in the chart 2,200opposite. Energy consumption, which was risingby 3% per annum prior to 08/09, has fallen by 6%over the last two years despite a growth in the 2,000network roll-out and revenues increasing by 9%. 04/05 05/06 06/07 07/08 08/09 09/10 10/11In 2011/12, Richard Tarboton expects BT to reduce Heating oil Gas Electricityits energy consumption by a further 3%.Since hiring a Director for Energy and Carbon in The Energy Control Centre2008, the annual capex budget has increased from£500k to £15m in 2010/11, delivered by a team of BT is developing an ‘Energy Control Centre’28 people. with a matrix to monitor and optimise energy consumption. This will enable it to compareKey ingredients of success and remotely optimise its 6,000 sites through dashboards and alarms. This investment will allowRichard attributes the success of his team to the BT to engage in grid balancing and offer servicesfollowing: to customers.1. Presenting the business case. Using MACCs, From costs to revenues they got the Board’s attention by estimating that BT could save £60m in 5-10 years. It is on BT estimate that only 1% of companies know how track to meet or exceed this forecast. much energy they actually consumed last year, as they lack the data collection capability. With2. Communicating with all of the stakeholders, the knowledge that BT is generating, it will be in particularly those in senior positions, to a unique position to extend its Energy Control motivate the organisation to engage in the Centre as a service to clients and create a revenue changes. stream.3. Monitoring and measuring progress. BT has How big is this market? BT estimates that there already invested 22,000 smart meters across its is a £6bn market in the UK for third party energy 6,000 sites, and is installing 120 smart building management services. With its infrastructure, control systems per month. reputation and relationships, it could be in a4. Effective project management. The energy strong position to take market share. team is using Application Implementation BT is reluctant to put a figure on how much Methodology (AIM) to manage its 40-50 revenue this could generate. But once Richard ongoing projects. has BT’s 6,000 sites under control, he sees other companies inefficiencies as opportunities for BT. And if BT is successful in this, it could generate a substantial new revenue stream. The Evolution of the Energy Manager: from Boiler Room to Board Room | Acre Resources | February 2012 | 11
  12. 12. How big an opportunity? Energy function to CEO?The majority of companies who have initiated In the Acre paper ‘The Emergence of the Chiefdemand production programmes have found Sustainability Officer’ (March 2011), we askedbenefits that substantially outweigh the capital if there will be a time when the CSO becomescost and time dedicated to it. the CEO. Because of the diversity and similarly of the skill set, we concluded that this isBT saved £35m in 2 years from its programme with entirely plausible in a sector being disrupted byinvestments of less than £15m per annum. M&S’s sustainability.Plan A generated £70m in profit in 2010, withenergy efficiency being the biggest contributor. Could the same be said of the energy leader? OurThe table below looks at 7 organisations that have contributors were reluctant to imagine a timeinvested an average £22m over a 36 month period where the energy leader becomes the CEO of awhilst achieving average paybacks of 2.4 years. FTSE 350-sized organisation. Some argued the sustainability lead stood a better chance than the Financial paybacks from selected energy energy lead. efficiency programmes But we wouldn’t want to discount it. If BT is Investment Payback able to turn its energy management knowledge Company £m (years) from an efficiency tool to a significant revenue McDonalds 10.0 2.0 stream, it would amount to a valuable change Siemens 90.0 2.5 management programme. And the skills behind 3M 43.0 1.0 that success could be similar to those required by Barts & London NHS 1.2 1.5 a CEO. Imperial Tobacco 2.5 3.1 SAP 1.4 3.5 Conclusion Johnson Controls 8.1 3.1 Average 22.3 2.4 The future for the energy team looks good. With widespread agreement that energy prices will Source: The Green Monday Energy Efficiency White Paper rise in the long term, and with new innovations coming into the market, most businesses canThe CRC energy efficiency league, released develop attractive investment programmes. Ain November 2011, indicated that 60% of the weakening economic environment may further2,000 organisations are actively managing their strengthen consumption. But 800 organisations are We hope this document establishes theyet to invest in a significant energy management commercial returns that can be achieved byprogramme. Why is that? investing in the latest energy management skills.Our contributors speculate that the main barrier And when one adds the intangible benefits aroundto action is a lack of knowledge of the returns reputation, it seems that the energy expert hasthat can be expected from a programme. Until an important role in transforming the corporatethese organisations have hired enough internal landscape in the years to come.expertise to identify the opportunities, they maybe reluctant to act.1 Defra 20103 Financial Times, 21st September4 Banks need to be better citizens, admits Barclays boss”, Guardian Newspaper 3/11/11 12 | The Evolution of the Energy Manager: from Boiler Room to Board Room | Acre Resources | February 2012
  13. 13. About the contributorsStephen Barker | Head of Energy Efficiency & Environmental Care, Siemens plc,Industry Sector UKStephen leads a team dedicated to the deployment of a ‘best practice’ approach toenergy, cost and carbon reduction.A chartered electrical engineer with over 25 years’ postgraduate experience, Stephenhas worked in Siemens since 1990 in variety of positions including Business Manager ofIndustrial Drives and Motors. He is a former chairman of an IEC standards committee andis the current chairman of the VSD group of the UK industry association, Gambica.Stephen is an active member of the Energy Services and Technology Association (ESTA).Richard Tarboton | Director of Energy and Carbon, BTRichard’s team is managing a number of projects across BT to achieve an 80% reductionin carbon by 2016 from 1996 levels. He is also leading the BT wind project, the largestwind power project by a company outside the energy sector.In 2006, Richard was seconded to the UK Government to develop the Government’sclimate change strategy for local authorities. He previously worked in strategy consultingfor Arthur D Little, where he managed renewable energy projects for clients includingShell and BG group. Richard holds an MBA from Cranfield Business School.Mervyn Bowden | Head of Energy Management, Marks & SpencerMervyn heads a large team of specialists who are constantly pushing the boundaries ofenergy efficiency and innovation in procurement risk management and the renewablemarket. He has been a key player in setting strategy as well as implementing measures toachieve the stretch targets involved.A Fellow of the Energy Institute, and one of the first to attain Chartered Energy Managerstatus in the UK, he authored a book entitled ‘Preparing the Company Energy and CarbonPlan’ (November 2010), focussing on M&S’s successes in the energy space. He has beena key pillar in launching the MEUC Training Academy to help raise awareness of energyissues across the UK. He also sits on a number of customer stakeholder groups and is onthe membership panel of the Energy Institute.Trevor Seddon | Director of Energy Consulting, Johnson ControlsTrevor manages a team of energy professionals providing global energy and carbonreduction services to major blue chips - with clients that include Deutche Bank, DB,Barclays Bank and Kraft. Previously, he was Head of Operations at building servicescompany EIC Limited and General Manager of Revenue Collection Systems atSchlumberger. He started his career as a broadcast engineer, where he developed hismetrology and metering skills. Since then he has worked in business development andmanagement. The Evolution of the Energy Manager: from Boiler Room to Board Room | Acre Resources | February 2012 | 13
  14. 14. Acre is an international recruitment and executive search firm specialisingin the corporate responsibility, energy efficiency, carbon, environmentaland health and safety markets.Olivia (0) 20 7400 5586www.acre-resources.com2nd Floor, Chancery Station House, 33 High Holborn, London, WC1V 6AX.