EEO - insights from Energetics' clients

EEO - insights from Energetics' clients
10 Dec 2013Archived News Nathan Rosaguti Climate Change Matters

The second five-year cycle of the EEO program is leading participating corporations to refine and improve their approach, and to benefit from first-cycle assessments.

This article summarises some of the views held, and approaches taken, by Energetics clients and contacts located in a large number of participating EEO corporations across all industry sectors. The paper will address some of the administrative aspects of the program (including Department of Industry (DI) interactions with participants, verification, Assessment Plan submission/review etc), recent changes in the EEO program, the approach that Energetics’ clients are taking into the second cycle of EEO and some of the practical lessons learned by clients in the first cycle that inform their approach.

Energetics recognises that different sectors have experienced significantly different economic conditions over the life of the EEO program, in particular in the past few years. As such, it is not unreasonable to expect that the opinion held of programs such as the EEO program may differ across sectors as a result. Furthermore, as a product of exposure to energy cost or historical factors, different industry sectors (or even individual participants) demonstrate greater or lesser resonance with the objectives of the program, with subsequent impacts upon the nature of their response. Where it makes sense, these industry-specific views are differentiated in this article.

 Administration of the EEO program

Our clients have noted a clear change in the way that the DI EEO program team have approached EEO. This change most likely started in the latter years of the first cycle of EEO, and carried through more markedly to the first few years of the second cycle of EEO. A more collaborative approach has been noted, with the EEO team open to understanding current business systems and their ability to fulfil aspects of the Assessment Framework. Some clients have appreciated this amenability, and have benefitted from a flexible and helpful approach from DI. Others have clearly found the approach to be overbearing, most evidently during reviews of second-cycle Assessment Plans in 2012. There was a significant amount of feedback provided by DI about the contents of draft Assessment Plans. The feedback was regarded as meaningless or inconsequential, or requested information that was a requirement of assessments rather than the actual Assessment Plan (e.g. too much energy-use analysis detail was sought).

Some of our clients want the DI EEO program team to administer the Act/Regulations, be clear about what is required and what is not, and not get into “grey” areas around what might suffice under the Assessment Framework. Others are more comfortable with the collaborative approach and progress based on a negotiated agreement with DI.

The verification program for participants of the EEO program has sparked interest for Energetics’ clients. Significant effort has been spent compiling data and information to demonstrate compliance with the EEO program for those participants subject to verification. This significant effort suggests two things:

  1. Audit trial information is not assembled particularly well during the assessment periods. Most of the documentation exists, but not in a form that immediately lends itself to verification.

  2. Participants take EEO verification very seriously, most notably driven by the fact that the CEO (or equivalent) is directly sent the outcomes of the verification audit.

Recent updates to the Regulations

Recent updates to the Regulations have been considered by Energetics’ clients.

Options for a more flexible approach to public reporting have been embraced by several clients. Other approaches relating to greater flexibility in the Assessment Framework have been less enthusiastically embraced, primarily because of the need to submit an amendment to an approved Assessment Plan in order to take advantage of specific options. In many cases, Energetics’ clients and contacts do not want to revisit Assessment Plans for two reasons. Firstly, because of the perceived effort required (as per the efforts in 2012 to achieve an approval status on second-cycle Assessment Plans) and/or secondly, because some participant representatives have insufficient authority under the current Assessment Plan to implement EEO, and fear a “watering down” of requirements will further diminish their influence.

The extension of the Regulations to cover New Developments is relatively new. However, several things are clear among our clients and contacts:

  • Most new participants brought in because of this extension have had no exposure to EEO previously.

  • There is a strong desire to push specific tasks and accountabilities to construction partners such as Engineering, Procurement and Construction Management (EPCM) contractors.

  • Clients are hoping to limit the work required by sensibly revising only significant impacts to energy efficiency during concept and detailed design, and construction.  This is particularly the case where interaction may be required between contractors and owners for decision-making.

Approach to second cycle assessment

There is a cohort of participants that have effectively “dusted off” first-cycle data analysis and project lists and are providing updates (via public and government reports) for these projects. In doing so, they avoid significant assessment activity in the second cycle. On the other hand, Energetics has observed many participants learning from the experience of the first cycle and employing strategies to improve performance.

In many cases we see participants regarding EEO as a stand-alone program. As a result, the effectiveness of the program suffers because it is not able to absorb broader business opportunities. Discussions around whether an opportunity is “an EEO project” are frustrating, as most improvement projects can be included in EEO, and the program used as a conduit for business improvements. Despite some significant examples to the contrary, Energetics is yet to see EEO integrated into business improvement programs to the extent that might have first been anticipated.

We note that, among our clients, the language of energy efficiency is being replaced by the language of energy productivity, namely shifting energy use KPIs from GJ/T (for example) to $/GJ. This is allowing conversations across multiple management levels in organisations, and we anticipate that this will elevate the discussion of energy improvement beyond narrow technical improvements to broader benefits.

Much of the first cycle of EEO was characterised by positive business conditions and a growing economy featuring increasing commodity prices. These conditions impacted on the way that resource sector corporations delivered EEO in the first cycle. Energy efficiency projects were competing on a level playing field with capital that could be deployed to deliver volume. This competition for funds meant that while there were genuine opportunities to install new efficient equipment and implement practices while volume was being increased.  Retrofitting opportunities were difficult as the improvement projects were competing with the value of new production.

In the second cycle of EEO, changes in economic outlook continue to influence participants’ approach. As the focus on growth in the resources sector is replaced by a focus on improving the efficiency of existing operations, some clients reported a shift to more retrofit changes, which alters the project economics (e.g. production halts must be included as a cost).

Overall, it may be said that participants have reined in the ambition of their EEO program, shifting focus to more pragmatic project delivery. Many participants reported during the first cycle that the list of identified opportunities was overwhelming, and that more opportunities did not mean more implemented projects. Now, rather than generating a list of +50 opportunities and trying to advance them all without success, participants are seeking to identify and deliver quick wins with low upfront cost. As an example, one corporation known to Energetics has four zero-to-low capital opportunities that they are pursuing. This can be compared to the outcomes for this participant in the first cycle of EEO, where more than 30 opportunities were being pursued at the equivalent stage.

Apart from the influence of the business cycle described above, this change in approach reflects the experience of those tasked with delivering EEO. It is important for the reputation of the program that projects are seen to be delivered and savings realised. Experienced operators have realised this.

During the first cycle, EEO and NGER drove businesses to set up systems and resources to manage energy more strategically, which in turn drove them to establish corporate strategies and targets. These corporate strategies and targets are now significant drivers. Identified opportunities have been shown to be more successful where they also address the broader corporate energy and emissions goals.

The following sections address specific aspects of the Assessment Framework.

Leadership

The value of conspicuous leadership in energy efficiency in participating corporations has been obvious and will be maintained in the second cycle.

Drawing parallels with the methods used to communicate safety messages through businesses, leadership is a low-cost, high-return step that assists in the development of a culture that fosters energy efficiency. Communicating the outcomes of the EEO process reinforces the value and relevance of the program and engages staff in the process.

Successful execution of Key Element 1.1 supports execution of 1.2. When leaders can see the value that the program brings to the company, they are more likely to make staff and resources available when assessments and project delivery commence.

With this in mind, many senior managers have made energy management a priority in the second cycle. The leadership has extended from company heads to senior and line-item managers, looking to energise their teams and realise cost savings.

“If you’re not looking at cost reduction, you’re in the wrong business”

People

In general, participants are more discerning when deciding who should take specific roles with in the delivery team for EEO. The list of contributors invited to participate in opportunity identification workshops is informed by lessons learned in the first cycle.

In the second cycle, opportunity identification workshops are primarily attended by operations and maintenance personnel, and the role of environmental engineers is limited to that of a coordinator. This is driven by the desire to deliver practical projects more closely aligned to core business drivers (e.g. production, quality etc). Participants have realised that those working most closely with process equipment are best able to judge the feasibility and value of an opportunity as the opportunities are raised during the workshop.

Linked to the delivery focus, multi-site opportunities are now identified in site workshops, but delivered at the corporate level, to match the corporate decision making process. For example, an opportunity involving the tuning of settings used on a comminution circuit was raised in a recent site workshop. Since this opportunity had the potential to apply to multiple sites, corporate head office was able to take a coordinating role in both the evaluation and delivery of the project across multiple sites.

Information, data and analysis

Data quality and access remains a significant issue in many corporations. However, Energetics has noted greater participant confidence in regard to the Key Requirement.

The first cycle identified shortcomings in the coverage and accuracy of data, but formulating a business case for new sub-metering remains difficult. The potential opportunity must be large to provide enough savings to cover the sub-metering and possible subsequent energy efficiency project. Metering projects have not been widely implemented as a result.

Beyond this problem, the data that is available is frequently of poor quality and difficult to use. Many remote sites do not have a comprehensive SCADA systems and rely on data historians attached to the meters and sub-meters to collect data. As these can be interrupted, damaged or misused, and are not well monitored, the data is frequently incomplete or corrupted. As with the sub-metering business cases mentioned above, the costs of solving these problems far outweigh the benefits.

The first cycle drove more metering projects across some sectors, but in many cases these were not informed by experience and so the planning of the data that should be collected was absent. This has meant that the data being collected now may not be fit for purpose. Some meters are measuring the wrong parameter, but more frequently they are measuring at the wrong resolution, meaning the amount of data is overwhelming and unworkable, or inadequate. Ideally businesses would have identified data needs during the first cycle, then allocated budget and implemented appropriate sub-metering for the second cycle.

Commercial clients in particular have benefited from the growth in energy analysis capabilities and are taking lessons into the second cycle. There has been increasing sophistication in the analysis of representative sites, lowering the cost of assessment while still delivering bankable projects. There has also been improved internal communication regarding future developments and site closures, ensuring less effort is wasted.

Opportunity identification and analysis

The process of opportunity identification has matured from the first to the second cycle. Workshops are more targeted, with fewer disinterested attendees. The style of projects being pursued is characterised by two schools of thought, but with broadly the same outcome. Because of the intense competition for capital, participants are pursuing the highest value opportunities. For some this means the low-to-zero capital projects (including behavioural change and operational improvements), while others are using the opportunity to design large capital projects that deliver more significant savings.

An increased focus on productivity is likely to characterise the approach among a significant number of Energetics’ clients in the second cycle of EEO. For example, monitoring and improving blowdown events in the oil/gas sector, or waste in manufacturing processes, directly impacts upon the specific energy use indicator, reflecting improved energy efficiency or final product delivery. Couching EEO as a whole of business improvement opportunity denominated against energy consumption has gained traction, and elevates the discussion from environment and engineering teams to financial controllers and senior management.

Energetics has noted an increasing appetite for improvements to be measured against business as usual. This approach lends itself to recognising energy efficiency improvements while actual energy use increases (i.e. where an increase in energy use is offset by a proportionately greater increase in production).

Decision making

Parallel decision making is out of favour in the second cycle of EEO, with more companies seeking to use existing decision-making processes to drive energy efficiency projects where they exist.

Comparison of the merits of individual projects across operations, borders and activities has helped businesses make wiser investments. Energetics has delivered many carbon and energy abatement cost curves on the back of EEO assessments, providing decision making support by comparing opportunities in disparate locations and activities. Often, though certainly not always, these tools are used to set internal (and sometimes external) targets, built from the ground up of real opportunities.

Communicate outcomes

Few corporations have had the opportunity to go to the board or communicate outcomes in the second cycle. However, many have identified that this was done poorly in the first cycle and are looking to improve for the second cycle.

As noted in the Leadership section, many corporations view communicating of outcomes as a valuable opportunity to demonstrate leadership and are investigating ways of incorporating this into their normal reporting and communication channels. Ideas being discussed at the moment include using the CEO’s blog more frequently or using the existing safety communication channels to also communicate efficiency messages.

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