NEW & CHANGING PERSPECTIVES ON ENERGY MANAGEMENT: FROM SAVING COSTS TO CREATING STRATEGIC VALUE

NEW & CHANGING PERSPECTIVES ON ENERGY
MANAGEMENT: FROM SAVING COSTS TO CREATING
STRATEGIC VALUE
Over the past years, energy management has slowly but steadily climbed up the corporate agenda.
Increasingly, the trend towards business approaching energy as a driver of value is continuing, taking
energy management beyond the traditional focus on minimizing operational and sourcing costs.
Building on the insights from Condugo Energy Management, a Belgium based company offering
energy-related software and advisory to energy intensive companies, Condugo CEO Xavier de Moor
takes a deep dive into the success factors of energy management: from merely saving costs to to
driving strategic value.
INTRODUCTION
For many companies, energy
continues to represent a large
share of their (variable) costs.
Alongside rising energy prices, a
number of recent developments
have challenged the traditional
drivers for energy management.
These trends include the growing
potential of innovative energy
solutions and technologies,
booming investments in renewable
energy, and the need for business
to respond to carbon regulation
and create a more sustainable
footprint on society.
As a result, energy as a theme is
entering boardroom discussions
and business perspectives on
energy management are changing. Decisions take into account a broader set of risks and
opportunities. They are more often taken proactively and their outcomes are measured against
objectives that are directly tied to the company’s core business.
The most visible result is that energy management is no longer only the remit of energy managers.
They obviously remain the main drivers, but they increasingly cooperate with other corporate
functions like operations, finance, purchasing, sales – up to the executive board and CEO.
At Condugo, our work with energy-intensive companies shows that the level of ‘energy maturity’
within a company drives the creation of new energy business value. An integrated approach to
energy across the company, combining operational with strategic level engagement, leads to
tangible and lasting benefits: recurring reduction of energy consumption and costs, optimization

of margins , enhanced social responsibility, and a better understanding of the risks and
opportunities of investing in new (clean/green) technologies
Did you know: The gas and electricity commodity prices paid by European industry are on
average 2 times higher than those paid by their American rivals. Within the EU, Belgium is the
8th biggest energy user in the EU, according to recent reporting by the Belgian National Bank
(NBB). The Belgian manufacturing industry seems to be more energy-intensive than that of its
three main neighbours. In 2016, industrial activity accounted for 19% of the total energy
consumption in Belgium, compared to 9% in Germany and 8% in France. The main reason is that
Belgium is more specialised in branches of activity that tend to have higher fossil fuel needs. But
the second and often underestimated reason is that Belgium is still lagging behind in adopting
technologies that use less energy.
Despite the benefits of having an elaborate energy management strategy most Belgian – and
European – companies are not living up to their potential. We explore the six key success factors
that are holding them back.
1. SECURING EXECUTIVE MANAGEMENT AND CEO BUY-IN, DRIVING ENERGY
RESULTS ACROSS BUSINESS LINES
By far the largest success factor for an
efficient and effective energy strategy is the
explicit support and engagement of the CEO
and Executive Management. The CEO should
appoint a senior person to serve as the
driver of this energy strategy approach.
Depending on the type of firm it can be the
COO (production companies) or the CFO
(more financial companies).
The extent to which the energy strategy is
integrated and uniform across the company
is key to the successful realization, engaging
different business lines throughout the
company. For this reason the senior
executive ‘energy strategy driver’ should
gather a cross-functional team with different
types of roles: operations, procurement, IT,
facilities, finance, legal and sustainability. 1
ASK YOURSELF THE FOLLOWING 4 QUESTIONS TO
KNOW WHETHER YOUR APPROACH TO ENERGY
MANAGEMENT IS ON THE RIGHT PATH TO
SUCCESS
Do you know whether all your processes
are running efficiently – in real time?
Do you know the energy costs of each
single product?
Can you label your products with the
type(s) of energy consumed?
Are you working with professional
analytical tools rather than spreadsheets
to analyse your data and compile reports?
If you have to answer “no” to some of these
questions, continue reading for further insights.
2. DATA AND INSIGHTS: WHAT
DOES ENERGY CURRENTLY MEAN
TO YOUR BUSINESS?
1
https://hbr.org/2017/01/energy-strategy-for-the-c-suite (interesting further reading on this topic)

In most energy intensive companies 2 , energy is among the largest variable costs, constituting
between 3 and up to 10 percent of total operating costs (according to Eurostat data), with some
outliers of up to 30%. At the same time, energy management remains one of the few functions that
is often not monitored and managed carefully. So why do many companies still not prioritize energy
‘data’ management as a corporate theme?
At the basis, many companies lack reliable insights into and analysis of data, be they internal (energy
processes and conversions, production data on batch and product level ) or external (such as energy
market prices).
Whereas some companies lack
good systems for accessing energy
data quickly, others have state of
the art software but do not use
adequate data analytics or are not
able to integrate it with other -
non-energy - data.
Finegrained data analysis is
nonetheless essential. Detailed
insight all the way down to the Figure 1: energy cost per sector (in % of Total Cost) (Source NBB)
level of individual products is
crucial for understanding the structure of energy costs and for optimizing product margins. Analysing
and comparing energy use can reveal operational issues that affect costs and performance.
Benchmarking energy use between similar sites or plants can uncover efficiency opportunities.
Next to low-level analysis, detailed understanding of enterprise-wide energy use is required as well.
This information can help predict how volatility in energy prices and availability will affect overall
operations, profits, and cash flows.
Did you know: Investing in an Energy Management Information System (EMIS) yields energy cost
savings of 5 to 15 percent, which translates into millions of euros annually. At least as important is
the structural increase in energy consumption of 5 to 10% that laggards suffer – by not
implementing a system. The total difference easily amounts to 20 percent and has a substantial
impact on competitiveness.
3. INTEGRATE ENERGY INTO THE COMPANY’S VISION AND DAILY OPERATIONS
Understanding the impact of energy on both day-to-day business as well as on long term strategy is
crucial for business value. What impact does energy use, and the mix of different types of energy,
have on the margin of your products? What are the opportunities for the business of new
technologies and the ongoing energy transition? How does the carbon footprint of the company
compare to that of suppliers and others in the value chain? It his in line with what customers,
investors, and employees expect? How do energy use and management compare with competitors?
2
yearly consumption of minimum 0,1 PJ

Companies nowadays are expected to have a clear (and communicated!) vision on the role of energy
in their business operations and strategy with clear goals and set priorities. In addition, this vision
needs to be matched by a set of concrete targets, with processes and resources in place to monitor
progress.
These ‘core ingredients’ for energy management are not only demanded by external stakeholders,
but are equally needed to align the internal departments to set responsibilities, achieve goals and
inspire employees in the efforts needed to implement the energy strategy.
Did you know: 90% of the companies our people have worked with, are still separating their
energy sourcing/procuring department from the energy optimisation/operations teams. This
shows that integration is not straightforward at all in most large organisations. It also means
many businesses miss out on important opportunities to drive down costs and optimize value
from integrated energy management.
4. ANTICIPATING THE FUTURE: ENERGY-RELATED TRANSPARENCY AND
DISCLOSURE
Sooner rather than later, disclosure and transparency on energy usage will become mandatory.
Reporting data not only on energy use but also on environmental impact has already become a
major part of energy management and this trend is not about to reverse.
It is not only government obligations that are at work here. Suppliers will have to provide a detailed
energy accounting and proof of an adequate sustainable energy strategy. Customers take into
account cost and quality, but also review the energy and carbon footprint of a product or service.
Step by step, energy transparency is becoming a key part of non-financial reporting and of corporate
social responsibility (CSR) efforts. Energy-related data and analysis take the centre stage. This has
direct impact on internal processes, requiring every team to collect information and contribute to
the overall picture. Many companies tend to see disclosing data on energy use and environmental
impact as a burden. This is this not only short-sighted but also a waste of opportunities. Today’s
markets expect – and often reward - proactive action on energy transparency.
Even straightforward data collection and analysis yields remarkable results. First of all it is an
important asset in increasingly competitive markets. Suppliers that can document their sustainability
can differentiate themselves and appeal to ever more discerning customers. Secondly outside
investors respond positively to increased transparency as they are under pressure to green their
portfolios. Last, but definitely not least, it is a powerful tool for risk management. Security of supply,
rising costs and climate change are all posing fresh threats to the core business of many companies –
and are not well understood. Finegrained data and insights help shed light on them.
Disclosure is becoming ever more important, as it is driven by a growing body of compliance
standards. Some of them are the result of new Government legislation (EU, national), whereas
others are voluntary (See box below).

Did you know: CDP, formerly the Carbon Disclosure Project, runs a global disclosure system that
enables companies, cities, states and regions to measure and manage their environmental
impacts. (www.cdp.net)
Did you know: The number of guarantees of origin is growing. The classical ones certify energy
originated from solar or wind. They have been complemented by green gas and, in the future,
maybe green nuclear.
Disclosure, transparency and future-proof energy strategies are the main reasons why Condugo
developed the Energy Hub software platform. It provides comprehensive data collection and
analysis as a basis for scenario planning and strategy development initiatives.
5. SHIFT TOWARDS NEW TECHNOLOGIES AND GREEN ENERGY
The energy transition has unleashed a tidal wave of innovation and technological development in
the energy sector – and this is only the beginning. The cost of renewable energy has gone down so
dramatically that the entire landscape has changed and long established business models have been
made obsolete.
Sticking to the old model of supply – a contract with a supplier and a monthly invoice – is the worst
possible option. It is costly, precludes benefits from actively producing and brings exposure to
unexpected supply shocks. Firms ought to incorporate renewables and new energy technologies into
their overall energy strategies. Investing in these technologies can be done through new models (e.g.
Power Purchase Agreements) that are not only financially attractive but also reduce risks to business
continuity. In addition they offer a flexible way to stay abreast of (future) regulation. Finally investing
in clean energy production strengthens the brand image and differentiation we mentioned earlier.
Legislation is anyhow favouring investments in renewables.
The UN Climate Change Conferences (and the commitments made by the EU at the Paris COP21
conference in 2015 3 ) paved the way. National Governments are increasingly developing energyrelated
legislation to incentivize business to take action. For example, the EU’s targets for 2030
include: a binding renewable energy target of at least 32% and an energy efficiency target of at
least 32.5% - with a possible upward revision in 2023. For the electricity market, it confirms the 2030
interconnection target of 15%, following on from the 10% target for 2020 4 . Currently, the EU is in
the process of updating its energy policy framework, but - under the EU Energy Efficiency Directive -
EU Member States are already drawing up national plans.
Be aware, though, that the list of potentially interesting technologies is long: state of the art energy
management systems, wind turbines, photovoltaic panels, biofuels, fuel cells, advanced batteries,
LED lighting, advanced meters, capturing waste, hydrogen and the use of alternative fuels from
many sources (solid waste, plant oils, waste gas from steel mills), alternative-fuel vehicles (from
electrics and hybrids to trucks running on propane, natural gas, or bio methane), smart grid, on-site
power-generation technologies, etc. Investments should therefore be made wisely based on a solid
understanding of both the production/business characteristics and the energy technologies (and
costs) involved.
3
https://ec.europa.eu/clima/policies/international/negotiations/paris_en
4
Consult the EU energy related plans on the European Commission website:
https://ec.europa.eu/energy/en/topics/energy-strategy-and-energy-union/clean-energy-all-europeans

6. ENGAGE KEY STAKEHOLDERS
Companies are no isolated islands. They obviously need to cooperate with governments, customers,
suppliers, investors, and employees as part of their energy strategies.
Such collaboration will, first of all, enhance the commitment of all stakeholders and increase the
(positive) social impact of companies on society.
Secondly - and most importantly – it is this kind of engagement that will be driving sales to
customers that are working on their own climate impact.
Finally, partnering with governments and peers can open up funding or collaboration opportunities
for innovative energy management investments. This in turn makes it easier to achieve goals on
energy reduction, CO2 emissions and carbon footprint. 5
Did you know: Funding opportunities provided by the European Commission in the field of
energy are on the rise, such as the ‘Horizon 2020 Energy Efficiency Calls’ (EUR 212 million for 2018
and 2019) allowing inter alia for funding to implement energy audits and enhance energy
management.
Did you know: The Belgian/Flemish Government provides numerous funding channels for
projects in the field of energy, both for technological advances and business model innovation.
Condugo, as an example, has received two innovation grants for its energy management
platform. The first one focused on modelling techniques for complex energy processes. The second
one on predicting energy use in batch processes.
CONCLUSION: WHY MOST COMPANIES ARE STILL LACKING A COMPREHENSIVE
ENERGY STRATEGY
If there is so much value to unlock and protect with an energy strategy and enhanced energy
management processes, why are so few companies taking a proactive approach?
For most firms, the lack of good data and adequate systems has made it challenging to manage
energy strategically across the enterprise. And without centralized ownership of energy strategy, it is
difficult to capitalize on opportunities. The good news is that tools – specifically for complex industry
– are finally available, data is easier to capture, and robust modelling techniques have emerged that
allow companies to understand and address their gaps.
The biggest hurdle that remains, however, is the perception that energy is either just a cost to be
managed or that managing it strategically is prohibitively expensive. This article has provided
extensive arguments to the contrary.
As a final thought, the ongoing energy transition is actually stacking the deck in favour of those firms
that adopt an integrated and proactive strategy. Energy will become business as usual - and
therefore only firms with top-level commitment, empowered teams, clear energy-strategy
governance, and those which make clean energy a central part of their corporate story will survive.
5
https://ec.europa.eu/easme/en/horizon-2020-energy-efficiency/212-million-energy-efficiency-2018-
and-2019

CONDUGO – YOUR PARTNER IN ENERGY MANAGEMENT
Condugo assists energy-intensive industrial companies in developing and implementing their energy
strategy. Our work is always grounded in energy-related data and analytics.
Condugo offers system audits to companies struggling with data, data analytics and different
capturing systems. The audits are supported by a team of highly-qualified and experienced
professionals in energy management, brings together three domains of expertise: technical
competences on energy-production, trading, and use; data analytics, software development and
implementation; and energy policy and project management.
Next to the audits Condugo offers the Energy Hub software. Aimed at complex process industries it
enables data management as described in this article. Different use-cases are available to illustrate
successful implementation and use of the software in a corporate context.
If you are interested in exchanging viewpoints or discussing potential
collaboration, feel free to have a look at our website
(http://www.condugo.com) or send me an email:
(xavier.demoor@condugo.com).
The issues and insights are the result of industry insights, numerous visits and assignments with our
clients.