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Energy Management Proves Cost Effective in Industrial and Commercial Facilities

May 6, 2021
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Washington, DC—Emerging methods to manage energy use in industrial and commercial facilities are more than paying off through reduced energy costs, according to a new report. The findings are published in a report released today, prepared for the North American SEM Collaborative (NASEMC) by researchers at the Lawrence Berkeley National Laboratory (Berkeley Lab) and the American Council for an Energy-Efficient Economy (ACEEE).

The report provides the most comprehensive snapshot to date of strategic energy management (SEM) —a systematic process to holistically manage energy use to improve efficiency. These management methods, which are at an early stage of adoption but growing in use, are often supported by electric and gas utilities, which provide technical assistance and incentives to spur continuous operational, maintenance, and energy management system changes to reduce energy needs.

The report findings are based primarily on interviews with the administrators of 24 utility programs across North America that support SEM efforts by energy customers. All 11 administrators who reported cost effectiveness values said their SEM programs are cost effective.

“This is the clearest evidence yet that SEM investments by energy customers and utilities with demand-side management (DSM) programs really pay off,” said Ed Rightor, report co-author and director of ACEEE’s industry program. “SEM is a quick way for industrial and commercial facilities to start reducing energy costs and greenhouse gas emissions with low or no capital investment. We see a wide range of successful efforts and are more convinced than ever that these SEM practices and programs should be scaled up.”

There is no single methodology for determining cost effectiveness, and utilities calculate SEM annual energy savings and effective useful life values—both key factors—quite differently. For example, five programs expected annual savings to range from 2% to 5% (as a portion of their baseline energy consumption), while 11 others gave wider ranges. The SEM programs don’t expect a narrow range of energy savings typically, because their participants’ circumstances vary considerably.

“The data show the full value of SEM business practices is not captured in many cost effectiveness studies,” said Peter Therkelsen, report co-author and research scientist at Berkeley Lab. "SEM program designers and regulators can use these data-driven findings to enhance metrics to quantify and track the magnitude and persistence of energy savings as well as the ability of customers to continually improve their own energy management business practices, the namesake concept of SEM programs."

The vast majority of program representatives interviewed said SEM delivers greater energy savings than non-SEM programs, because it is a holistic approach that engages utility customers, helps them understand their energy use more deeply, and teaches them how to continually look for energy efficiency improvements. Most (88%) of those interviewed project that energy savings will persist after SEM program engagement ends.

The interviews with 24 utility program administrators also find:

  • Eighteen serve the industrial sector and 11 serve the commercial sector (some programs serve both sectors).
  • They have, on average, 6.8 years of experience with SEM programs.
  • They generally cater to medium and large customers, with only 17% supporting customers of any size.
  • Nineteen offer some form of financial incentives to customers for participating in the SEM program.
  • The effective useful life (EUL) used by the programs to calculate SEM savings varied widely across the 24 programs.

The report calls for future research to fully compare the cost effectiveness of different SEM measures and practices.

“The NASEMC is grateful for the work from Berkeley Lab and ACEEE on our first research report. We are looking forward to working with our members to determine what research topics we should tackle next,” said John Nicol, program director at Leidos and a member of the NASEMC Leadership Team. NASEMC, a member-driven project of ACEEE begun in 2018 to advance SEM’s impact, will hold its annual SEM summit this July at the virtual 2021 Summer Study on Energy Efficiency in Industry, where it will hold interactive discussions on the report findings.

To learn more about the NASEMC and get involved, please visit aceee.org/nasemc.

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