It’s no secret that in order to thrive in South Africa, businesses need to have a comprehensive energy strategy in place. Not only do the significant increases in electricity tariffs continue to put strain on profit margins, but the harsh reality is also that Eskom will not be able to meet the country’s energy demand for the foreseeable future. Making sure that a company’s energy needs are met, and costs are kept low, is however a technical endeavour, and without the right approach, businesses are at risk of wasting both time and money on ineffective strategies.
This is according to Tygue Theron, Head of Business Development at Energy Partners Intelligence – a division of Energy Partners and part of the PSG group of companies – who explains that while effectively cutting a business’s energy spend and carbon emissions is highly technical, it is still achievable for any business. “We have seen quite a few businesses in South Africa that have implemented extremely successful strategies by making use of the right expertise and solutions. However, we’ve also seen strategies fail.”
A comprehensive energy strategy for any business, is more than simply finding ways of reducing excessive electricity use. In addition to improving energy efficiency, it is an action plan to manage costs, secure the best sources of energy supply and address any risks that may leave the business without power at crucial times.
Perhaps one of the biggest mistakes that many companies make, according to Theron, is to act on too little data. “We see this with large corporations in many more cases than you might think. They collect data from one or two of their sites, tailor an energy solution for those facilities, and roll out the same strategy across their entire operation. We’ve also seen companies rely on the usage data collected during the COVID-19 lockdown to inform future strategies. In cases like these, the business often does not appreciate that each site has unique requirements, and the company falls for the mistaken impression that they will get more out of a solution than they ultimately do.”
Along with that, Theron cautions that the chosen energy service provider can either make or break the whole strategy. “Something that we see fairly often is service providers reaching out to clients with lucrative shared savings models. Typically, the service provider will pay for the capital portion of the project themselves and recover finances by invoicing fees to the client based on calculated savings for a period of time. After a set period, the infrastructure will be handed over to the client.”
However, he explains that when a client signs up for a shared savings model, they are essentially giving a large portion of their own energy and carbon savings opportunity to the service provider instead of owning the full savings potential. “A conflict of interest could also easily result where the service provider overstates their own savings calculations to invoice larger amounts. This can end up with the client paying more for energy than they originally were. If a client is going to sign up for shared savings initiatives, it is recommended to hire a neutral party to verify savings calculations and protect the client from inflated costs. In short – if a contract seems too good to be true, it probably is.”
Theron says that companies also run the risk of failing should they not have effective processes and measurable goals in place. “We have seen companies begin to make positive strides in their energy use, but not accurately reporting on progress and results can ultimately cause a loss of investor confidence, which can put a damper on future projects.”
Measurement, Management and Reporting
With this in mind, he imparts that businesses who have successful strategies in place all follow the same three crucial steps. The first and most important of these is measurement. “The primary way in which any energy strategy is judged, is how much you accomplish compared to day one. In addition to that, every other component of an energy strategy relies on your ability to accurately measure and assess current energy usage, and monitor progress in real time. As a rule of thumb, I would say that robust assessment can only be conducted with at least 12 months’ worth of data.”
He adds that Energy Partners uses various technologies to measure the energy performance of its client businesses before any strategy is put into motion. “Depending on the needs of the business, we monitor everything from power consumption to the energy usage patterns of staff, to water use. We actively produce massive datasets during this part of any project that we can later use to inform the solutions that we implement.”
From there, management is the next vital step. “The data that the business has at its disposal will enable it to manage every part of its energy strategy. For our clients, we’ve found that technologies which remove the human element as much as possible, are effective in this step. This involves deploying solutions like IOT-enabled devices to remotely control systems and processes, and AI solutions to actively control fluctuations in energy usage. In short, ensure that any active energy strategy is managed well and in real time.”
Lastly, Theron emphasises the importance of accurate reporting. “Being able to report on energy usage statistics and progress is a vital part of moving forward. It is crucial – not only for carbon reporting – but also to identify opportunities for further improvement.”
He adds that outsourcing an energy strategy is the best measure to take in ensuring a company achieves the best results. “One of the reasons that many companies don’t attempt large projects to overhaul their organisation’s energy usage, is mainly due to lack of available resources or adequate skills. For large companies, it is mostly due to shortage of skills, for smaller companies it may be access to skills as well as lack of capital to fund a project.”
In either case, Theron notes that making use of a dedicated service provider is often the best way to ensure that the right skills are present and that your strategy is indeed justifiable from a capital standpoint.
“A good energy strategy is all about mitigating risks and providing the necessary protection for the business. All in all, it is about turning the challenges around operating in a setting like South Africa into opportunities to thrive,” Theron concludes.