Commercial, Demand Management, Energy Efficiency, Regulation  -  September 22, 2017 - By David Tuft

California's SEM program open for business

With a new mandate to double energy efficiency savings by 2030, California utilities are about to roll out a new $4 million industrial energy efficiency program to incentivize Strategic Energy Management, or SEM, in 2018.

First employed in 2005, SEM represents a paradigm shift for how companies approach energy use. And with its adoption by the state with the sixth largest economy — if it were its own nation — SEM is ready for the big leagues.

SEM takes a holistic approach to energy, focusing on risk mitigation, not just the cost of electricity supply. It requires the establishment of a long-term energy saving goal and integrates energy management into existing business practices that feature continuous improvement. Because SEM requires engagement from the executive suite to the shop floor, it represents an opportunity to shift corporate culture toward positive, self-perpetuating greenhouse gas emission reductions.

In the U.S., SEM has been extensively piloted and improved upon, especially in the Pacific Northwest. A recent evaluation of Bonneville Power Administration's industrial program from 2010 to 2014 showed an average energy savings of 4.1% from a sample of 32 facilities that adopted its energy management system. Another study conducted by CLEAResult across three utility programs consisting of 124 industrial participants found first-year electricity savings of 4.8% on average.

Early adopters of SEM gave rise to a set of "minimum elements" established in 2014 by the Consortium For Energy Efficiency that codified best practices. That, in turn, led to the development of the California Industrial SEM Guide in early 2017 that major California electric and gas utilities will use to organize their programs.

In addition to continuous improvement and executive and employee engagement, other basic characteristics of SEM include:

1. Use of data analytics to normalize energy use controlling for factors such as production changes and weather.
2. Appointing an internal "energy champion" and working with a 3rd party "energy coach" either 1:1 for large enterprises, or in a cohort with other small- or mid-sized companies.
3. All savings opportunities are on the table including O&M changes, small equipment improvements and large capital expenditures.

And while utility incentives are helpful, SEM is a best practice that should be standard operating procedure for any enterprise that wishes to remain competitive in today’s global economy. Companies that have participated in DOE's Superior Energy Performance, or SEP program demonstrate the value of adopting a robust management approach with participating facilities achieving 11% average annual energy savings. Four large manufacturing companies (3M, Cummins, Nissan and Schneider Electric) adopted SEP enterprisewide and each achieved an annual average of $600,000 savings in energy costs.

And it's not just energy cost savings. Equipment optimized for energy efficiency lasts longer. Companies that make reducing energy waste a priority will align themselves with the values of Millennials, making it easier to attract and retain new talent into the workforce. And long-term investors that connect corporate social responsibility to company performance will reward companies that can demonstrate mitigation of climate and regulatory risk through SEM.

And environmentalists are also getting into the game. NRDC energy efficiency expert David Goldstein identifies 7 quads of energy savings from SEM by 2030 that holds us to a 1.5-degree rise in global temperatures.

To capitalize on this opportunity, energy managers should:

• Check with your local utility for SEM programs and join a cohort if it's right for your businesss
• Partner with your local trade association or regional energy efficiency organization to advocate for utility-sponsored SEM programs for C&I customers.
• For large companies, enroll in DOE's SEP program or adopt its ISO 50001-ready tool to begin a management program at your company.

With SEM poised for rapid adoption, American manufacturing can truly be great again by increasing its energy productivity and becoming more competitive. 

David Tuft recently launched 2030 Solutions, a consultancy that promotes corporate emission reduction opportunities. He is the former program director and lead business engagement strategist at Energy Foundation where he led cross program initiatives to advance U.S. clean energy and climate policy. David is a serial coalition manager, building bridges between disparate groups with an interest in growing economic opportunity while reducing climate-changing emissions. He has forged partnerships with large corporations buying renewable power, clean energy trade associations, conservative and faith groups and environmental NGOs. David’s background includes issue advocacy and electoral campaigns. Prior to the Energy Foundation, David was responsible for climate education and outreach at two major environmental NGOs. 

Correction: Column was amended Sept. 27 to correct the year that "minimum elements" were established by the Consortium For Energy Efficiency to codify best practices.

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