New Metrics

Total Energy Resource Productivity:
Math Not Myth

Open the news in the US and you hear two conflicting messages: “We are on our way to becoming energy independent using fossil fuel” and “The biggest challenge we face is getting off fossil fuel.” The inconvenient truth is that we don’t know how to quantify our dependence on fossil fuel nor do we have a metric for Energy Productivity and Environmental Performance.

By Ory Zik | Published 11 years ago | About a 5 minute read

To see this, run a simple experiment. “You are what you measure,” so ask yourself what metric your company is using to measure its Energy Productivity and Environmental Performance. Who uses and understands this metric? You will find that when it comes to sustainability, the corporate world is data rich and information poor. Information is presented to the C-suite in beautiful dashboards but offers minimal intelligence. This is largely due to three problems:

First, existing environmental metrics, specifically carbon, do not appeal to executives. Corporations might report their emissions as part of a global society ….but using it as the sole measurement for Energy Resource Productivity and Environmental Performance does not appeal to the main stream executive community. They can’t control for it nor can anybody quantitatively express the short/long term risk presented by it. Anything an individual corporation does to mitigate emission is irrelevant to their direct risk in the end. It is a “tragedy of the commons” type of problem. We need additional systems that measure environmental performance in such a way that an organization can use them to affect their own destiny and control more directly for it. We need Key Performance Indicators (KPIs) with benchmarks, targets and financial rewards that allow corporations to manage, compare and improve. Emission reporting is a methodology designed by scientist to analyze our impact on climate change…it was never designed for corporations to measure the direct and controllable risks posed through irresponsible environmental performance.

Second, direct consumption measurements such as kWh, therms, kgals, btu's, etc. are difficult to use strategically because they are not directly comparable. As an example, assume that you are considering (a) a solar panel for your home, (b) an electric vehicle, (c) a high efficiency water heater, (d) a composting area in your yard and (e) retrofitting your entire home with low flow fixtures. Which project has the greatest environmental impact? It is difficult to determine because each project effects different resources measured in kWh of electricity, gallons of gasoline, therms of natural gas, pounds of waste and gallons of water. The same applies in the corporate world. These measures are not relevant or intuitive to the C-Suite and cannot serve as performance indicators by themselves. Management needs a simple, accurate, and actionable approach to manage Energy Productivity and Environmental Performance across the enterprise for all resources. Key enterprise performance indicators include revenue, earnings per share, headcount, customer satisfaction, etc. But there is no key indicator for energy related resources.

So how can we devise a system that (1) is relevant and actionable for corporations, (2) unifying across resource domains and (3) comprehensive to account for the true and total cost of resources?

At Energy Points, we use energy to solve this problem. Corporations are interested in understanding their true energy productivity and likewise their energy dependence, which they can control for and use as a KPI. Energy is unifying and can be used as the common denominator to compare all resources. Finally, using energy we can adjust for things like regional context, scarcity and emissions to provide a system that is relevant, actionable and accurate.

Our methodology is built on the following principles: First, an Energy Point is a unit of primary energy. Measuring at the source allows us to capture the entire complex Energy Productivity network. Second, we capture externalities such as carbon emissions and water over withdrawal through algorithms that allow us to quantify those externalities as energy. Third, we include life cycle assessment information in a way that not only allows us to calculate operational (direct) energy, but also embodied (indirect) energy. This enables us to quantify and compare ‘green’ activities such as renewable energy and recycling. For example, in our system LEED rating categories across sites, energy, atmosphere, materials, resources and water are quantified and compared for their actual energy benefits. Fourth, we have built a detailed database of billions of data points, allowing us to calculate the efficiency of every resource in any location and time.

This means that given the corporation’s consumption data, we create intelligence by calculating the supply side primary energy consumption. Furthermore, to make the system intuitive to non-experts, we measure in simple understandable units: Energy Points. An Energy Point is equivalent to a gallon of gasoline.

This allows corporations to manage their Energy Resource Productivity with simplicity using math not myth.