From Plant Room to BoardroomWinning the argument for energy efficiency

investments

Andre Burgess, Partner EMVC SolutionsJune 20th 2014, Energy and Environment Expo 2014

About us

• EMVC Solutions is an energy advisory business, delivering solutions in distributed, low carbon energy generation and energy efficiency services, including smart energy control and monitoring services.

• As a business we believe in putting the power and the value back into the hands of businesses and communities when it comes to how they source their energy and manage their consumption.

384 392 km

In one year, we use 31 billion barrels of oil- stacked on each other is 60 times longer than the distance to the moon…..

... if everyone on earth lived as North Americans…

…we need to change how we consume things……

…all together, we consume almost 50 percent more of the earth's renewable resources than the earth can recover in one year.…

…all the natural resources that we use are also part of the planet…

The Fifth Fuel?

• An estimated £0.5bn (21%) of the UK’s energy spend is being wasted.

• Energy prices are expected to continue to rise and good Energy Management is essential for business survival.

• With estimates of GDP growth resulting from energy efficiency converging on around 1%, energy efficiency should be considered as part of mainstream economic policy rather than an energy issue only

• Even with our ‘advanced’ technologies we have an overall efficiencyof 11%. (Cambridge University, 2005)

• We can never achieve 100% but….improving that performance would bring great benefits in terms of cost reduction, improved energy security, reduced emissions and job creation

The Challenge of

selling Energy Efficiency

The Rebound Effect: claims that key energy savings benefits are often not

realised, because improved efficiency gains are

undermined and counter‐balanced by

increased consumption and expenditures.

The Cost and the Challenge: The failure to properly

evaluate the benefits of energy efficiency likely results in underinvestment in energy

efficiency.

Focus on Creating Value: CEOs don’t generally get to

the top by cost-cutting but by creating strategic shareholder value. Something inherently

dull about saving money, however worthy it is, and

something inherently exciting about creating value.

Selling Multiple Benefits

• Winning the argument in the boardroom involves moving from a cost-cutting approach (single benefit), to a strategic value creation approach of energy efficiency investments (i.e. multiple benefits or “co-benefits” or “non-energy benefits”)

• Co-benefits include: – increased production capacity

– increased productivity

– increased quality

– reduced maintenance costs

– reduced waste disposal costs

– increased employee engagement and satisfaction.

Creating a complete financial picture

0

500

1000

1500

2000

2500

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Year 1 Benefits

Aggregate Benefits (US$ 000’s)

Direct Energy Savings

Utility rebate

Maintenance Savings

Productivity and Safety Gains

Electricity Increase Hedge

Illustrative Example - $4.5 million investment for lighting retrofits in multiple installations

Indirect benefits

Operational Savings

Direct Savings Aggregate

benefits measured over time results in

improved NPV

CSR

• Beyond the cost focus, it’s increasingly important for company leaders to ensure that corporate investments, as a whole, contribute to broader goals.

• CEOs say their major motivating factors for taking action on sustainability issues, including environmental issues, are part of a broader strategy for strengthening brand, trust, and reputation.

External Incentives

• As much as 10% of the total benefits flowing from energy efficiency measures are likely to accrue directly to energy providers

• Increased energy sales require increased capacity, and the cost of installing new capacity and transmission capability is almost always more expensive than energy efficiency measures.

• Slowing demand growth generally provides net benefits to energy providers.

• Utility incentives as well as participation in Capacity Markets

Deep Retrofits – the Value Elements

Enterprise costs

- health costs

- employee costs

- promotions and marketing costs

Property costs and risks

- retrofit development costs

- non-energy property operating costs - savings create value directly for the property owner by increasing net operating income, which is capitalized to create property value, which in turn increases company value (multiple of earnings).

- retrofit risk mitigation (underperforms its forecasts, creates legal and insurance problems, frustrates employees/tenants and facility managers, reduces space flexibility/adaptability, and faces current and future regulatory problems.)

Enterprise revenues

- customer access and sales

- property derived revenues (Increased subleasing, property sales, and other revenues directly translate to value by increasing enterprise revenues)

Deep energy retrofits offer bottom-line benefits for

business beyond energy

cost savings alone.

Rocky Mountain institute

Energy Efficiency: Benefits at Individual, Sector, National and International level

IEA

The Value of Data

• Energy Management Programmes

• Demand Management

– lowering base load

– reducing peak consumption

– making smaller businesses able to participate in Demand response programmes

• Sustainable supply chain management

• Identifying wasteful equipment and processes

• Reduced supplier costs

• Required for government incentives?

Thank You

Andre Burgess

Partner, EMVC Solutions

E-Mail: andre@emvcsolutions.com

Web: www.emvcsolutions.com