Energy management is an underappreciated asset in most TMT organizations. Very few organizations have implemented holistic corporate energy strategies that leverage energy-derived intelligence and energy management capabilities to enable smart operations.
From Energy Management to Operational Transformation: A Roadmap for the TMT Industry
By David Young and Barrett Levenson
Energy management is an underappreciated asset in most TMT organizations. Very few organizations have implemented holistic corporate energy strategies that leverage energy-derived intelligence and energy management capabilities to enable smart operations. Piecemeal approaches to energy management face limitations in scalability, intelligence, and integration. A holistic and coordinated approach is required. In this whitepaper we describe the necessary components of a holistic energy strategy that aims to driver operational improvement far beyond energy cost reduction.
Rising Importance of Energy Management in TMT
Even as top-line revenue growth slows industry-wide, service providers face continuing escalation in demand for bandwidth, IT, and cloud services. Satisfying customers is more energy intensive than ever, raising the importance of effective energy management.
- Energy is a material cost in the TMT sector: accounting for an estimated 1-2% of total revenue for network operators across North America and Europe, rising to as high as 10% for pure-play datacenter operators.
- Scope 2 greenhouse gas (GHG) emissions – those emissions related to the purchase of electricity – account for roughly 75% of total GHG corporate emissions in the TMT sector.
- Compounding the rising levels of energy consumption are the rising prices of energy, such that even with consumption reduction initiatives underway most network operators have experienced a 3-7% rise in annual energy spend each year, outpacing revenue growth over the past three years.
- Constraints on energy supply in many geographies slow the construction of new data center capacity, further compelling operators to manage scarce energy resources.
Taking an even broader view, the days of focusing on financial statements as the sole measure of business performance are waning. Companies are increasingly concerned about their environmental and social impacts, and sustainability is no longer viewed as an added cost of doing business, but as a way to reduce overall impact and increase societal benefit, adding to the triple bottom line (3BL). As slowing revenue growth across TMT is compelling service providers to increase their focus on cost management, operators such as Cox Enterprises and Bell Canada are setting ambitious carbon reduction targets and signaling their focus on energy. Industry initiatives are also evidence of this trend, as exemplified by the Society for Cable Telecommunications Engineers (SCTE) and its “Energy 2020” program. In wireless, the GSMA is supporting an operator benchmarking study similarly geared toward improving energy efficiency.
Limited TMT Adoption
Despite the many reasons for TMT players to invest in energy management, the implementation of effective, holistic programs has been limited. Cartesian’s survey of sustainability programs shows that across the TMT industry, adoption of energy-related initiatives trails other types of sustainability initiatives (see Figure 1).
Given that GHG emissions are dominated by electricity purchase in the TMT sector, we would expect a focus on energy-related initiatives to drive environmental sustainability programs, but this is not the case. This industry-wide trend deserves an explanation…
Figure 1: Sustainability Initiative Adoption – TMT Sector
TMT Challenges in Managing Energy
The need for TMT players to manage energy effectively, and the challenges of doing so, are hardly new. From our experience and research, we find that three factors present particular challenges on the path to effective energy management: scalability, intelligence, and integration.
The challenge of scaling energy management and efficiency programs is significant. Corporate disclosures reveal a large number of small-scale pilots and trials, but few corporate-wide and holistic initiatives. There are multiple reasons:
- Most TMT players have diverse and complex operations, resulting in portfolios of varying site types: offices, data centers, network sites, unmanned sites, call centers, retail, and many multi-purpose sites. Each site type has different production and non-production energy needs, plus varying operating parameters.
- Even for a specific site type, there are differences in age, installed assets, building envelope technologies, etc. Therefore, each site has a different level of operating efficiency and potential for improvement.
- Varying geographies and weather compound the challenge of standardizing policies and conducting effective benchmarking.
- Fragmented energy procurement markets mean that utility rate structures, tariffs, and incentives vary significantly across the site portfolio. In the US, where fragmentation is particularly high, this can mean hundreds of different energy suppliers for a nationwide network.
- Facility costs and reporting requirements can also vary, as dictated by separate local, state, and country authorities.
These factors make it difficult for most TMT players to scale energy management policies and initiatives across their real-estate portfolios effectively.
The challenge of extracting intelligence from energy data starts with the need to aggregate utility bills on a corporate-wide basis. The large number of sites and different energy providers can make this a significant undertaking. Next, obtaining sub-site and asset-level data on energy consumption is difficult because the availability of sub-metering is highly variable within facilities and organizations. Metering of mechanical loads is often lacking, even in sophisticated data center environments. Additionally, making sense of energy consumption data across disparate sites, assets, and geographies, is complex. Added to this is the challenge of baselining performance where rapid changes in demand, operating conditions, and weather can obscure the impact of energy efficiency measures.
Integration is a twofold challenge: 1) within the building itself, between the disparate energy-consuming assets and the systems that manage them, and 2) in broader corporate operations, between the energy program, often managed by the facilities team, and other groups and processes (e.g., service delivery).
Within the building, the operation of disparate systems – HVAC, lighting, production, security, etc. – is too often siloed. There is limited feedback between each system and the building’s environmental conditions. Separate monitoring systems are maintained, and control decisions are rarely optimized on a site basis. These shortcomings often still apply to facilities with advanced Building Management Systems (BMS), since these systems often lack sufficient data inputs, data archives, and data analytics capability to decipher the value of the data generated.
At a corporate level, many organizations have struggled to integrate outputs from their energy programs into broader business operations. By and large, energy data exists within a discrete silo, often only scrutinized by Facilities Management and Finance. With the notable exception of data center providers, we have few instances in working with our clients where energy data is broadly shared and leveraged.
The Path to a Corporate Energy Strategy
Cartesian believes that a holistic approach to energy management is required to maximize benefits and overcome the challenges of scalability, intelligence, and integration. We define a holistic program as including all of the elements in Figure 2: 1) energy bill tracking, 2) procurement optimization, 3) point energy efficiency solutions, 4) advanced analytics, and 5) business process integration. Past experience has shown the limitations of a piecemeal approach that involves only a subset of these elements.
As organizations progress through the 5 stages shown in Figure 2, benefits are additive. We depict these stages as a progression since organizations commonly follow this path as they increase their focus on energy management. Importantly, the final stage (“transformation”) represents a pivot, where the focus is no longer on energy per se, but rather on the upstream impact of energy on overall operations.
Figure 2: Energy Transformation Plan
Stage 1: Tracking
In the first stage, organizations begin to track energy spend on a corporate-wide basis. This can require the collection of hundreds, even thousands of bills from as many different suppliers. The implementation of centralized bill validation, bill management and bill payment practices is common. Through this process, organizations obtain their first unified view of energy consumption and spending. Within the TMT sector, this often leads to greater focus on energy strategies, given the magnitude and trending of energy spending.
Stage 2: Sourcing
Additive to stage 1, organizations rationalize and optimize their sourcing of energy. This can involve onsite generation and procurement of energy from renewable sources (e.g., solar, wind). Companies may also use competitive suppliers, brokers, buying pools and trading desks in order to reduce rates and manage pricing fluctuations. As part of these procurement strategies, organizations commonly work to maximize energy rebates and participation in utility demand response programs. With these programs, companies have their first tools for reducing energy spending and carbon emissions. Accordingly, many will work to engage customers and employees with public disclosures of GHG emissions.
Stage 3: Scaling
Additive to stages 1and 2, organizations evaluate and scale point energy efficiency solutions for a single aspect of facilities operation (e.g., lighting, HVAC). Initially, these point solutions are implemented in strategic locations and at small scale – headquarters, flagship sites, new builds – in order to prove their feasibility and impact. Organizations build on the success of pilots to develop internal business cases and corporate support required to scale implementation. Once broadly deployed, these point solutions drive observable corporate-level reductions on energy consumption and spend.
Stage 4: Optimization
Additive to stages 1-3, organizations employ analytics to drive cross-system optimization – orchestrating all key building systems, including HVAC, lighting, production, etc. These organizations leverage real-time data from multiple sources in order to continuously commission multiple building systems. Gains in energy efficiency and intelligence are additive to those delivered by advanced BMS and BAS. Organizations can leverage data on site conditions and asset performance to improve facilities operations, implementing preventative maintenance programs and “what if” scenario modeling, for example. These analytics capabilities are highly complementary to other investments in energy management – point solutions, procurement optimization, energy bill tracking.
Stage 5: Transformation
At this stage, and additive to stages 1-4, organizations leverage investments in energy to make their operations and businesses smarter. Data on site-level and asset-level energy consumption is integrated into a variety of corporate systems and processes, such as trouble ticketing, capacity planning, and revenue assurance. Operational KPIs are developed to supplement traditional energy KPIs (PUE, kWh, CO2). The focus shifts from energy management to business transformation.
Stage 4, which incorporates advanced analytics into the energy management program, deserves special attention. Analytics can provide the critical linkage between otherwise isolated activities – allowing each activity to be measured, modeled, and optimized relative to others. Without analytics capabilities, it is difficult to drive scale, extract intelligence, or facilitate integration. The use of analytics to drive energy efficiency is aligned with a similar trend in building operations. Over the past decades, building operations have benefited from increased data and data analytics. Starting from isolated building controls (temperature, lighting, etc.), the first major advance in data was driven by Building Management Systems. Further advances were driven by software that aggregates data across facilities portfolios. The next phase in this progression is to enable the “Internet of Buildings,” whereby all assets and systems within a facility are monitored, analyzed, and optimized in real time.
Most TMT players are at an early stage in the evolution of their energy strategies. This is despite the increasingly compelling rationale for careful planning and investment for energy management. Those who have started along this path understand the challenges – scaling these programs, extracting meaningful intelligence, and ensuring integration within building operations and beyond. Overcoming these challenges requires a holistic approach, including robust analytics that link assets, systems and processes. By adopting a holistic approach, TMT players gain the ability not only to control their energy spend, but also to drive broader operational benefit.
 Cartesian Sustainability Research – based on public Corporate Social Responsibility Reports and Annual Reports, 2012-Present. Survey included 23 TMT companies from North America and Europe
 Carbon Disclosure Project (CDP)
 Cartesian Sustainability Research
Higginbotham, Stacey. “Constrained Power Grids Zap Sales” (July 15, 2009; accessed September 9, 2014).
 Lawler III, Edward. Sustainability: It should be about more than the bottom line. Forbes (March 15, 2012; accessed August 14, 2014).
 Cartesian Sustainability Research
 Cartesian Smart Building Market Research – Vendor Service Offerings, White Papers, and Industry Analysts/Experts Reports