A little lateral thinking goes a long way...
May 1st 2006 With environmental and economic pressures building on industrial energy users, many companies are taking a more lateral approach to energy. By considering everything from how energy is purchased right to when, and where, it is consumed, companies can effectively address overarching concerns regarding energy
Outsourced energy management has a key role in this new approach, Douglas McLeish, Head of Business Development, npower business, looks at the challenges facing commercial energy users and the role energy outsourcing can play.
The impact of the last few years on commercial energy users has been well documented. Unprecedented wholesale energy costs and continued price volatility, as well the political drive to tackle climate change, have forced many companies to change the way they think about energy.
Until the last few years these economic and environmental challenges were not a major concern. Energy and environmental issues used to be a relatively low priority for most companies. During this period of low energy prices, many organisations focussed attention on core commercial business operations and subsequently down-sized energy management teams and spent resources and capital elsewhere.
Traditionally, energy outsourcing was often approached as a tactical matter rather than a strategic one, and it usually focussed purely on the energy supply side, for example running boiler houses. This reduced operations and maintenance overheads and removed the need for in-house expertise, but ignored the potential for reducing significant energy demand in the customer's facilities.
In the new energy market reality, the increasing economic and environmental pressures, coupled with the reduction in technical resources, have increased the demand for outsourcing to do more than simply reduce operation and maintenance costs. With a little lateral thinking and expert support, outsourcing is now playing a much broader energy management role, addressing not only consumption, but also procurement, as energy management evolves into risk management.
Taken to its next logical step, companies in the vanguard are now looking at multi-utility solutions; combining power, gas, water and effluence management programmes. Such wide-ranging projects deliver substantial benefits across a number of business operations.
Diageo is one of the world's leading drinks business, producing a range of well known brands including Guinness, Baileys and Smirnoff.
The company has 20,000 employees in 130 facilities and has a presence in 180 global markets, with revenue of £9 billion.
npower Energy Solutions was brought in by Diageo to implement a multi-utility project at St James's Gate in Dublin, the spiritual home of Guinness. Guinness has been brewed on site since 1759 and annual production at the start of the project was 4 million hectolitres per annum. Pressure to focus on core market competencies, coupled to volatile utility costs led Diageo to look at alternative means to manage its utilities.
The two companies agreed a 15 year utility alliance agreement to cover the provision of all utilities to site, operation and maintenance and the transfer of ownership of all utility assets. The overarching remit was to manage all utilities from the main incoming meters to the last valve or switch before the process. Diageo placed five obligations on the npower Energy Solutions: - Purchase of existing utilities assets
- Transfer of utility operating personnel
- Provision of secondary commodities
- Full responsibility for utility asset O&M and asset replacement
- Design and construction of new utility assets
npower Energy Solutions invested over 2010M euros in asset purchase and utility projects including overhauling the refrigeration capacity, increasing it by over 50% to manage increased production at the site which came about due to the transfer of all Guinness production to Dublin. Not only did the new refrigeration system enhance efficiency in both energy consumption and O&M, it was environmentally sound and greatly improved reliability. Very importantly the system was installed on-time, on-budget and without any disruption to the production line.
Overall the outsourcing project resulted in a 15% drop in utility costs and left Diageo able to concentrate on core business operations.
As growing costs cause UK industry to become increasingly energy minded, and political pressures make them more environmentally aware, outsourced energy and multi-utility management are emerging as key means to meet these ends.
Combined with robust procurement policies, this new approach to energy outsourcing is a strategic solution to what is now a strategic issue.
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