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Strategic Energy Management Should Expand to Focus on Decarbonization

July 10, 2023
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Strategic energy management (SEM) programs have long helped energy-intensive industrial and commercial businesses reduce their electricity and gas costs. Now these programs could be expanded and tailored to maximize their impact on reducing greenhouse gas (GHG) emissions. A new ACEEE white paper explores how SEM can support decarbonization efforts and provides strategies that policymakers and practitioners can use to broaden the scope of these programs to better meet today’s GHG emission reduction goals.

SEM is a set of organizational practices and principles that creates the foundation for continuous, long-term energy savings. SEM programs—primarily funded and delivered by utilities—focus on operational energy savings, rather than installing new technologies or infrastructure that require major capital investments. These programs range from helping companies achieve minor efficiency changes (e.g., leak detection) to meeting or exceeding the requirements of the ISO 50001 Energy Management Standard.

SEM programs have helped save energy for decades. Now they should focus on reducing emissions.

The traditional SEM approach focuses on avoided energy consumption, meaning the electricity, gas, or other energy resource savings that result from behavioral, operational, and efficiency measures. It was not designed for tracking or reducing carbon emissions.

While these low- to no-cost programs are appealing for their energy reduction potential (participants often realize a 2–10% energy consumption reduction in their first year), many companies are now also eager to adopt practices and solutions to help meet ambitious GHG reduction targets. Developing SEM programs that could also work with customers to identify and apply decarbonization strategies such as electrification, demand response, or on-site renewables would help them achieve those goals.

How can SEM programs drive carbon reduction?

Maximizing emissions reductions is more complex than reducing energy consumption, but strategic energy management is well positioned to support carbon reduction, thanks to its focus on goal setting, benchmarking, and organizational capacity building.

Uniquely situated between energy consumers and providers, these programs can help companies adapt to a power grid that has become much more variable in its carbon intensity. In grid regions with significant solar power, for example, grid power consumed in the mid-afternoon is likely much less carbon intensive than power consumed in the evening, which could be a higher priority to reduce. Companies and utilities will need to communicate better about the availability of low-carbon electricity, and facilities will need to use more-responsive energy management approaches. SEM programs today use energy management information systems to analyze a company’s energy performance. These data platforms could collect more granular data on when and where energy is used to enable companies to maximize carbon reductions on an hourly basis. Reducing electricity use at times of high-carbon intensity will also reduce peak demand charges, which can be a substantial portion of commercial and industrial businesses’ utility bills.

Additionally, investing in education and fostering long-term partnerships with customers are already core elements of SEM programs. This could help the programs raise awareness of and provide technical assistance on decarbonization options that may be too complex or novel for customers to assess easily on their own.

There are three main pathways to expand the scope of SEM programs

While some programs are already recognizing the importance of carbon reduction (DOE’s 50001 Ready program recently added decarbonization management guidance to its navigator tool, for example), additional financial, political, and program design support is needed to scale these opportunities. Under the current utility ratepayer model, SEM program scopes must fall within individual state public utility commission (PUC) mandates, which currently account only for avoided energy, not GHG reduction. Most current program funding models also do not include GHG reduction in their purview. To overcome these challenges, we propose three general pathways for federal and state agencies, NGOs, and SEM practitioners to consider when deploying SEM for decarbonization.

Work with utility regulators to broaden SEM program mandates. State legislators and utility regulators could build on policy successes (e.g., Canada, Connecticut, the District of Columbia) and redesign PUC mandates so programs can include carbon metrics. The SEM community should partner with the federal government and the NGO community to communicate these needs to policymakers.

Identify federal funding opportunities to support SEM program development. DOE, EPA, and the NGO community should work to connect federal carbon-reduction funds with existing utility-funded SEM programs to help rapidly accelerate carbon reduction.

Update SEM reporting and accounting standards. Utilities, energy management software companies, and SEM implementers should work together to improve tracking, transparency, and sharing of time-variable carbon intensity metrics and ensure there are sufficient workforce training resources to build this knowledge base. DOE and other agencies should establish national guidelines and more robust measurement & verification standardization methods that include carbon and GHG emissions metrics for SEM evaluators.

With a little policy innovation, clear funding mechanisms, and a strong support network of federal, state, utility, and community stakeholders, SEM could become a key GHG-reduction pathway for industrial, commercial, and other energy-intensive customers. The framework is already in place; now is the pivotal moment to harness it and enable SEM to reach its full potential.

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