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Energy Essentials: A guide to carbon and energy management

Energy Essentials: A guide to carbon and energy management

In light of climate change, historically high energy prices, and customer and investor expectations, managing carbon and energy is the new norm for businesses. This guide is for organisations  and individuals who are just starting on this journey, to help you understand the basics and where to find out more. Explore the sections below to get started now.

  • What is energy and carbon management? It is the continuous process of measuring, understanding and optimising energy consumption and greenhouse gas (GHG)The seven direct greenhouse gases under the Kyoto Protocol are: carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), sulphur hexafluoride (SF6), nitrogen trifluoride (NF3). They absorb the infrared radiation emitted by the Earth and cause the surface temperature to rise. emissions within an organisation. The goal is to ensure that energy delivers services such as heat, light or power with optimum efficiency to aid the minimisation of energy use and resultant emissions, overall aiming to improve environmental and sustainable effectiveness.
  • What are the guiding principles for energy and carbon management? There are several principles for managing energy and carbon: concepts like the energy hierarchy, and international standards such as ISO50001 for energy management and ISO 14064 or GHG Protocol for carbon management.

Energy and carbon managements are the continuous processes of measuring, understanding and optimising energy consumption and greenhouse gas (GHG) emissions, primarily carbon dioxide (CO2), respectively within an organisation.

The processes are inherently linked, as GHGs emissions from energy use constitute a significant part of the total emissions for most organisations. Hence, this guide embraces a combined approach and uses a term “energy and carbon management”, highlighting distinctive characteristics of each of the processes when relevant.

Both energy and carbon managements are key components of an even broader environmental Environmental management consist of decisions and actions concerning policy and practice regarding how resources and the environment are appraised protected, allocated, developed, used, rehabilitated, remediated, and restored. Source: I. Petrosillo, R. Aretano, G. Zurlini, Socioecological Systems, in: Encyclopedia of Ecology, Volume 4, 2015, Pages 419-425. and sustainability managementSustainability embraces simultaneously economic, social and environmental objectives and impacts. It involves a very wide range of issues, including food and water availability, resources use and depletion, poverty, economic growth, social cohesion, community engagement, production and consumption, climate change, population growth, and international security. Source: The Energy Hierarchy: Supporting policy making for 'net zero', Institution for Mechanical Engineers..

circle management

Energy and carbon management is a part of an organisation’s response to climate change, energy prices, and security of supply. It involves elements of engineering, business and project managements, accountancy, marketing, psychology and other disciplines. It requires an understanding of how to manage different activities causing GHG emissions and knowledge about advantages and disadvantages of different energy supply sources. Fundamentally, it is about understanding and incorporating energy and carbon data into strategic business decision-making.

role of carbon image

Energy management enables an organisation to improve its energy use systematically, rather than via ad-hoc projects. It should involve all interactions with energy, from procurement and purchasing strategies to equipment upgrades and behavioural changes.

At the heart of energy management is energy efficiency: using less energy to produce the same – or greater – economic output. For many organisations energy efficiency has become the first tool to reduce energy demand and lower business costs.

Importantly, optimising energy use is recognised as the first step to reducing carbon emissions and helping reduce the effect of global climate change. When the energy comes from fossil fuels, successful energy management will directly reduce GHGs emissions.  Small changes can lead to big savings: for example, in 2017, global use of LED lights in place of older technology reduced carbon emissions by 570 million tonnes, nearly 2% of total emissions. Investments in building fabric improvements, efficient heating, ventilation and air conditioning (HVAC) systems or boilers could lead to carbon emission reductions on a similar or even greater scale.

Guiding principles for energy and carbon management

Here are some of the principles and practices which can help organisations fulfil regulatory obligations, observe environmental standards, and meet the expectations of investors:

Energy hierarchy

The main routes to reducing energy demand and GHG emissions can be considered as a hierarchy of measures. First, energy demand reduction and efficiency improvement measures; where possible, switching to low-carbon energy sources such as renewable electricity, hydrogen or nuclear; and lastly where the energy source cannot be made low-carbon, carbon abatement and offsetting.

The energy hierarchy offers an effective approach to guide sustainable energy decision-making. The cheapest and greenest energy is that which we don’t use. Typical energy and carbon management starts by considering energy demand reduction and improving energy efficiency before different types of energy supply are considered. The optimum energy and carbon reduction pathway for each organisation will be different depending on emissions sources, location, and other individual factors.

energy hierarchy

Energy management system: International Standard (ISO) 50001

A framework to support efficient use of energy within an organisation is provided by the International Standard (ISO) 50001. It specifies how to establish, implement, maintain and improve an Energy Management System (EnMS) to holistically and systematically improve an organisation’s energy performance.

The EnMS is based on the ‘Plan-Do-Check-Act’ cycle, the backbone of many management practices:

Aims
Example Activities
Plan
  • To better understand an organisation’s energy use
  • To form a plan based on this information to improve energy performance
  • Conduct an energy review, which will provide past and present energy consumption (data collection)
  • Establish an organisation’s baseline energy use A benchmark against which an entity’s emissions are compared over time. The reporting company’s base-year emission is called baseline. A base year can be the earliest reporting year the company submits a complete emission report or a historical year when the company submits complete data or all subsequent years; it could be a calendar year or a fiscal year.
  • Identify Energy Performance Indicators (EnPIs)The overall performance of a building or site can be expressed as a performance indicator, usually measured as kilograms of carbon dioxide per square metre (kg CO2/m2) per year or separately for fossil fuel and electricity measured in kiloWatt hours per square metre (kWh/m2) per year. The analysis is normally performed on annual data, allowing for comparison with published benchmarks to give an indication of efficiency. Benchmarks are published for different types of buildings, some energy use applications, e.g. office lighting, and some processes.
  • Define targets and objectives
  • Identify opportunities for improving energy performance
Do
  • To implement measures identified in the ‘Plan’ stage
  • Reduce energy use, increase energy efficiency, and reduce energy-related carbon emissions
  • Make changes to processes and behaviours
  • Procure low carbon When the CO2 emissions related to a process or activity are small relative to the amount emitted when fossil fuel are the source of energy. For example, a low-carbon economy is one where a high fraction of the energy used is from renewable or nuclear power. energy services and products
  • Install new energy efficient equipment
  • Develop/use effective internal communication channels to ensure staff engagement
Check
  • To compare actual performance with the targets and objectives
  • Assess the management process to confirm the system is effective
  • Develop a Measurement & Verification (M&V) process, i.e. methods and tools designed to estimate actual energy savings
  • Evaluate performance and provide feedback on the improvements made
  • Test for compliance with legal requirements
  • Post project reviews
  • Report the results to senior management
Act
  • To review the overall performance and the results of EnMS
  • Take all the necessary actions to ensure the system’s effectiveness and adequacy
  • Incorporate lessons learned through a project life cycle as well as into new projects and initiatives

Greenhouse gas reporting: International Standard ISO14064

The international GHGs emissions accounting standard ISO 14064 provides governments, local administrations, businesses, and other organisations with a guidance on how they can account for their emissions, including setting up a system to track, monitor, report and verify their emissions.

Greenhouse Gas (GHG) Protocol

The Greenhouse Gas Protocol Corporate Accounting and Reporting Standard is the internationally recognised guide to accounting for, managing and reporting organisational GHG emissions, as well as identifying emission reduction projects. It establishes important concepts regarding the boundaries and sources of carbon management. Learn more about the categories of emissions in How to collect energy and carbon data.

Science-Based Targets

The Science-Based Targets initiative support organisations committed to reduce emissions in line with the Paris Agreement goals – limiting global warming to well-below 2°C above pre-industrial levels and pursuing efforts to limit warming to 1.5°C. For example, the Energy Institute’s science-based targets are to reduce its emissions by almost 68% by 2030.

Want to know more? More detailed information is available in our online training course, Level 1, Certificate in Energy Management Essentials. To learn more, visit Energy Management Training | Energy Institute

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  • Why do organisations need dedicated energy and carbon management? There are a range of legal, financial, organisational and ethical drivers that motivate organisations to manage their energy use and GHG emissions.

An effective energy and carbon management strategy requires commitment and action from an organisation’s senior leadership. For many organisations, formalising the process can represent a significant cultural change; employees on any level in organisation hierarchy might not appreciate the scale of wasted energy, or the financial and environmental implications of energy use.

It is, therefore, important for an energy and carbon manager to develop a strong and persuasive business case which will help an organisation’s senior leaders understand the importance of energy and carbon management and how it can support business resilience against volatile energy prices, among other benefits.

It should be based on the following business drivers:

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Regulatory compliance and reporting:

One of the key priorities of an energy and carbon manager is to ensure that all relevant laws, regulations and industry-specific standards are complied with. Some organisations are subject to international, national or other energy policies and regulations. For example, in the UK these might include the Energy Savings Opportunity Scheme (ESOS) or Streamlined Energy and Carbon Reporting (SECR), Building Regulations (especially Part L), Global net zero commitments or national energy efficiency performance standards and/or energy labels.

As governments continue to introduce legislation and regulations to address climate change, early adoption of energy and carbon management can mitigate against future climate-related risks and take advantage of related business opportunities. Unless an organisation is obliged under specific legislation, the public disclosure of energy use or carbon footprint is usually optional. However, there are tangible business benefits to be gained from disclosure and public reporting, such as improved customer trust or boosted competitive advantage.

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Cost saving:

The rise of energy prices, and their increasing volatility, may significantly impact a company’s financial position. Another critical role for an energy and carbon manager is to buy energy effectively and use it efficiently. This can minimise an organisation’s exposure to energy cost-related risks and control utility bills.

The Carbon Trust has estimated that most organisations can save 20% on their energy bills by managing use and investing in cost-effective energy efficiency measures. 5-10% can still be saved if they limit their programmes to low/no cost measures, such as staff awareness training, changing habits or simple automation.

Additionally, reducing emissions can limit operational costs. Some companies capitalise on emissions by putting an internal price on carbon. It places a monetary value on GHGs emissions, which they can then factor into investment decisions and business operations. The use of internal carbon pricing is to achieve one or more of three key objectives: driving low-carbon investment, improving energy efficiency, and changing internal behaviour in an organisation. According to CDP (formerly the Carbon Disclosure Project), as of 2020 more than 2,000 companies worldwide are either using or planning to use an internal carbon price.

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Improved property value:

Numerous studies show that compared to typical buildings, energy efficient buildings demonstrate higher asset value (sale prices from 1% to 31% higher ), higher rent (rental premiums 3% to 16% higher) and higher occupancy rate (occupancy levels up to 10% higher).

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Boosted reputation:

A strong energy and carbon management system could be one of the best ways to incorporate ESG (environmental, social, governance) factors into an organisation’s strategy. As ESG increasingly influences capital expenditure and operations, a system that manages energy use and emissions reduction demonstrates good practice to both customers and shareholders. It can benefit the wider reputation of an organisation, raise its profile, and help the organisation gain a competitive advantage in the market.

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Involving people:

An energy efficient and carbon concerned organisational culture can help enhance an organisation’s reputation not only in the eyes of customers and stakeholders, but also its employees. Staff engagement is an important task for energy and carbon managers. Behavioural change among employees is a key way to achieve an organisation’s sustainability targets. It may also increase employees’ work satisfaction and attract new talent.  

By identifying energy-ineffective practices and equipment, and adjusting accordingly, an organisation can also improve non-energy aspects of its operations, such as productivity levels, health and safety, and equipment performance. For instance, a review of office building lighting can reduce energy consumption whilst also improving light quality. This leads to better working conditions, which can increase employee productivity.

Want to know more? More detailed information is available in our online training course, Level 1, Certificate in Energy Management Essentials. To learn more, visit Energy Management Training | Energy Institute

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  • Organisational boundaries and scopes of emissions define what data should be included when managing an organisation’s energy and GHG emissions.
  • Calculating a carbon footprint involves multiplying a documented emission factor with the activity data for the emission source.

The popular saying that ‘you can’t manage what you don’t measure’ is particularly appropriate for overseeing energy consumption and GHGs   emissions in an organisation. Accurate, trusted and transparent data is the fundamental basis for effective energy and carbon management. An organisation can only make smart decisions about energy procurement, improve efficiency of buildings, processes and equipment, detect avoidable energy waste or cut their emissions if they know how they use energy and how much direct and indirect GHG emissions are produced.

What data to include? Determining boundaries and scopes of coverage

Before starting to collect energy and carbon data, it is crucial to define the organisational and operational boundaries for such data collection, i.e., what should be included and what can be excluded. When setting the organisational boundaries, either an equity share approach or control approach, the latter defined in either financial or operational terms, could be followed.

Equity share approach

Typically, covering the ownership percentage of energy use and emissions from all the aspects of an organisation that are owned by it (irrespective of whether they are operated or financed by the organisation).

Control approach

Operational control

Covering energy use and emissions from all the aspects of an organisation that fall under its operational control.

Financial control

Covering energy use and emissions from all the aspects of an organisation that fall under its financial control. Usually, this boundary includes fewer GHG emissions than the operational boundary.

Unless an organisation has a very complex structure, the operational control approach is recommended to determine the boundaries. If the company has many subsidiaries, joint ventures or leased assets, then establishing the boundaries may be more complicated, and following either the financial control, or the equity approach may be more appropriate.

Once the organisational boundary is defined, then the scope can be determined, specifying the emission sources that will be included in calculating the organisation’s carbon footprint.

The Greenhouse Gas Protocol defines three scopes of emissions:

Scope and source of emissions
Examples
Data collection methods

Scope 1: Directly produced by the organisation or from sources owned by the organisation

Emissions produced though the combustion of fossil fuels for heating or industrial applications, or emissions produced by the organisation’s owned or leased vehicles

Involves calculating emissions based on purchased quantities of fuel such as natural gas

Scope 2: Indirect emissions from electricity consumption, steam, other sources of energy which are purchased

Heated or chilled water from a district scheme, or emissions from electricity purchased from the grid

Involves calculating emissions based on metered electricity consumption (or other sources of energy such as steam, heated or chilled water etc.)

Scope 3: Other indirect emissions from operational activities

Employee commuting, business travel, third-party distribution and logistics, production of purchased goods, waste disposal, emissions from the use of sold products and outsourced activities by customers

Involves calculating emissions based on a wide range of different activity data such as passenger miles for public transport or tonnes of organic waste to landfill

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Collecting carbon and energy data

Once the boundaries and scope of energy and carbon to be measured are determined, the process of collecting that data can begin. Careful validation during the data collection is essential as it will allow an energy and carbon manager to effectively carry out all the other relevant practices.

Energy consumption and emissions data should be collected from utility meters, automatic metering, vehicle fleet fuel records, invoices, including bills for purchased good or employees’ business trips and other sources as applicable.

Additionally, data on the relevant variables that may drive energy consumption should be also reviewed, for example weatherExternal temperature is the dominant influence on the consumption of energy for space heating and cooling. External temperature data can be converted into “degree day” values, which provide a measure of how cold or hot the external temperature was in a given place over a particular period such as a week or month. Most up-to-date regional average monthly and annual degree-day (and cooling degree day) values are available free of charge from various internet sources including Heating & Cooling Degree Days – Free Worldwide Data Calculation or production throughput.

During collection and input of the data, checks should be made to confirm the accuracy, completeness and quality of the data.

Data analysis

Data analysis should, among other things, enable an energy and carbon manager to:

  • Establish current energy consumption and emissions positions
  • Identify trends in energy consumptions and emissions production
  • Compare current energy consumption and emissions production with historical data and benchmarks
  • Compare current energy consumption and emissions production against set targets, that should be challenging but realistic and achievable
  • Detect avoidable energy waste
  • Measure the effectiveness of energy efficiency projects
  • Identify areas for further investigation and action prompted by unexpected patterns of consumption
  • Set future targets
  • Plan future actions to reduce energy consumption and emissions

Calculating carbon footprint

A carbon footprint is the amount of carbon dioxide (CO2) or carbon dioxide equivalent (CO2-eq) emissions associated with an activity.  It is typically measured over a 12-month period. When choosing the period for measurement, it is best to take into account organisational reporting cycles, which can be used to set the timeframe.

The most common method for calculating the amount of GHGs emitted from a certain source is by multiplying a documented conversion factor States how many kg of CO2/CO2e gas is emitted for every kWh of fuel combusted. Different fuels have different emission factors; those with high carbon content will have a higher emission factor than those with a low carbon content. Hence, coal has a higher emission factor than natural gas, known also as an emission factor, with the activity data This is data related to the activity that is causing the emission of a greenhouse gas. The data is usually derived from utility invoices and receipts. For example, if calculating the Scope 1 emission for a natural gas heating boiler the activity data will be kWh of gas; if calculating the Scope 3 emission for airline travel, the activity data would be flight distance kilometres for the emission source, measured in units. Such activity data could include fuel consumption from combustion (direct emissions), electricity consumption from purchased electricity (indirect emissions) or flight type and distance for air travel (indirect emissions). Consideration must be taken to ensure the units for the activity data and the emission factor are the same as this avoids an error commonly found in carbon footprint calculations.

GHG emissions (kgCO2e) = Activity Data (units) x Conversion Factors (kgCO2e / unit)

For example, GHG emissions for 500 kWh of electricity billed in the UK, based on the government-issued GHG conversion factors for 2022 would be:

Activity data (500 kWh) x Conversion factor (0.19338 kgCO2e/kWh) = 96.69kg CO2e

To compile the total carbon footprint, all emissions should be added up within their respective scope (totals for Scopes 1, 2 and 3 ).

It is important to use a consistent method to ensure an accurate result, particularly if several people will be working on collecting and interpreting the data. The GHG Protocol site provides several tools to calculate emissions in specific industry sectors such as oil and gas, aluminium, cement and a guide for small office-based organisations. The benefit of using these tools is that they have been subject to review by many companies and experts and therefore, they should represent the current best practice.

Want to know more? More detailed information is available in our online training course, Level 1, Certificate in Energy Management Essentials. To learn more, visit Energy Management Training | Energy Institute

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Glossary

Activity data: this is data related to the activity that is causing the emission of a greenhouse gas. The data is usually derived from utility invoices and receipts. For example, if calculating the Scope 1 emission for a natural gas heating boiler the activity data will be kWh of gas; if calculating the Scope 3 emission for airline travel, the activity data would be flight distance kilometres.

Baseline energy use: a benchmark against which an entity’s emissions are compared over time. The reporting company’s base-year emission is called baseline. A base year can be the earliest reporting year the company submits a complete emission report or a historical year when the company submits complete data or all subsequent years; it could be a calendar year or a fiscal year.

Carbon footprint: the amount of carbon dioxide (CO2) or carbon dioxide equivalent (CO2-eq) emissions associated with an activity, and, if ongoing, per year. For example, the average carbon footprint of a UK household has been estimated as 26t Co2-eq/y. Of that about a third is a direct emission, e.g., space heating, driving, and hot water, and two-third indirect or embedded emissions, e.g., those arising in the production and shipping of household goods. Some estimates of carbon footprint omit embedded emissions. (Oxford Dictionary of Energy Science)

Carbon management: measuring and managing greenhouse gas (GHG) emissions within an organisation and extending the reduction of emissions across a supply chain (Carbon management: a step by step guide - Paia Consulting)

Conversion/emission factor: it states how many kg of CO2/CO2e gas is emitted for every kWh of fuel combusted. Different fuels have different emission factors; those with high carbon content will have a higher emission factor than those with a low carbon content. Hence, coal has a higher emission factor than natural gas.

Energy efficiency: the use of the minimum amount of energy while maintaining a desired level of economic activity or service; the amount of useful output achiever per unit of energy input. The IEA has suggested that energy efficiency should be thought of as the “first fuel” considered for economic development and emissions reduction.

Energy management: it is the continuous process of measuring, understanding and optimizing energy consumption within an organization.

Energy management system (EnMS): it is a set of policies and procedures integrated and put into practice to track, analyse, and plan for energy usage.  It uses the Plan-Do-Check-Act management method of continual process improvement.

Energy Performance Indicators (EnPIs): the overall performance of a building or site can be expressed as a performance indicator, usually measured as kilograms of carbon dioxide per square metre (kg CO2/m2) per year or separately for fossil fuel and electricity measured in kilowatt hours per square metre (kWh/m2) per year. The analysis is normally performed on annual data, allowing for comparison with published benchmarks to give an indication of efficiency. Benchmarks are published for different types of buildings, some energy use applications, e.g. office lighting, and some processes.

Environmental management: it consists of decisions and actions concerning policy and practice regarding how resources and the environment are appraised protected, allocated, developed, used, rehabilitated, remediated, and restored. (Source: I. Petrosillo, R. Aretano, G. Zurlini, Socioecological Systems, in: Encyclopedia of Ecology, Volume 4, 2015, Pages 419-425)

Equity share approach: typically, covering the ownership percentage of energy use and emissions from all the aspects of an organisation that are owned by it (irrespective of whether they are operated or financed by the organisation).

ESG (environmental, social, governance) factors: a set of standards for company’s behaviour used by socially conscious investor to screen potential investments. Environmental criteria consider how a company safeguards the environment, including corporate policies addressing climate change. Social criteria examine how it manages relationships with employees, suppliers, customers, and the communities where it operates. Governance deals with a company’s leadership, executive pay, audits, internal controls, and shareholder rights. (Source: Investopedia)

Financial control approach: covering energy use and emissions from all the aspects of an organisation that fall under its financial control. Usually, this boundary includes fewer GHG emissions than the operational boundary.

Greenhouse gases (GHG): naturally occurring greenhouse gases include water vapour, carbon dioxide (CO2), ozone (O3), methane (CH4) and nitrous oxide (N2O). They absorb the infrared radiation emitted by the Earth and cause the surface temperature to rise.

GHG emissions: it states how many kg of CO2/CO2e gas is emitted for every kWh of fuel combusted. Different fuels have different emission factors; those with high carbon content will have a higher emission factor than those with a low carbon content. Hence, coal has a higher emission factor than natural gas.

Low-carbon: when the CO2 emissions related to a process or activity are small relative to the amount emitted when fossil fuel are the source of energy. For example, a low-carbon economy is one where a high fraction of the energy used is from renewable or nuclear power.

Measurement and verification (M&V): the process of quantifying savings delivered though an energy saving action or measure; enables savings to be properly evaluated.

Monitoring and targeting (M&T): the process of establishing the existing pattern of energy use and its key drivers and variables, and the identification of the desirable level of energy use.

Operational control approach: covering energy use and emissions from all the aspects of an organisation that fall under its operational control.

Scopes of emissions: under the GHG Protocol, the sources of GHG emissions are broken down into three scopes: Scope 1 accounting for direct sources of emissions such as fuel consumption, company vehicle or fugitive emissions, Scope 2 accounting for indirect sources of emission such as purchased or acquired electricity, steam, heat and cooling and Scope 3 accounting for indirect sources of emission such as purchased goods and services, transportation and distribution, and use of sold products.

Sustainability management: it embraces simultaneously economic, social and environmental objectives and impacts. It involves a very wide range of issues, including food and water availability, resources use and depletion, poverty, economic growth, social cohesion, community engagement, production and consumption, climate change, population growth, and international security. (Source: The Energy Hierarchy: Supporting policy making for 'net zero', Institution for Mechanical Engineers).

The Paris Agreement goals: the outcome of the Conference of Parties twenty-first meeting in Paris (COP21 Paris) in December 2015, in which nations reaffirmed the goal of limiting global warming to well-below 2°C above pre-industrial levels and pursuing efforts to limit warming to 1.5°C.


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