Why over 70% of energy efficiency projects fail

Out Performers completed a detailed study of 117 different energy efficiency projects, implemented by other companies at large industrial sites.
The results highlight why it is important to have an experienced and independent contractor involved in every step of the process.

Failures to maximise potential in the 117 projects were caused by four common factors:

  • 42% were supplier driven – the supplier understandably installed one of their own products, but our measurement and verification proved that it was not ideally suited to the job. In some cases new equipment was not necessary at all and in others a different product would have given better ROI.
  • 64% had not established a baseline – without knowing what their pre-project performance was, it was impossible to prove that the project had been a success.
  • 73% were based on a flawed business case – they were undertaken for the wrong reasons. For example, basing a decision on the purchase price of new equipment while ignoring the change in operating costs can result in poor ROI over the lifetime of the project. Similarly, accepting “free” lighting upgrades can cost huge amounts if the supplied lights are not adequate and have to be replaced again. Even worse, we have seen instances where “free” lighting did not meet safety standards, failed and caused major damage to the factory.
  • 79% had no post-project verification – as when there is no baseline, it is impossible to prove that a project has succeeded if you don’t measure again and compare. Companies who had failed to post-measure had also missed out on significant cash returns from various energy efficiency programs.

Here are a few examples:

  • “A Lighting supplier turned up with a new type of induction lamp and said we could cut our lighting energy by 60%.”
But did they save the 60% after the lights were installed? Were the energy savings verified? Was there a less risky option that could have saved more than 60%? Will light levels be maintained? Will maintenance costs go up? Are the lights approved by the relevant authorities so that energy efficiency credits can be created from the energy saved?

  • A plant upgraded its lighting with a new type of energy-efficiency light but over 70% of these new lights failed within six months of implementation, requiring the plant to start from scratch.
Is the supplier still in business? Did the company get a bankable guarantee on product and energy savings? Was a lifecycle cost analysis done? Was the performance of the lights verified after installation? Were the energy savings verified, or did they hand over all their energy efficiency credits without knowing how much income this represented?

  • A plant manager needed a new air compressor and took up his supplier’s offer to provide an energy efficiency study for free.
This was easier for the plant manager than getting approval to spend some consulting dollars on an independent study. However, after receiving the supplier’s study, the plant manager realised it was impossible to put any competitive tension into the supplier’s price as the supplier knew there was only one option being considered. He had no idea if there was a more energy efficient option available from another supplier.

  • Given a choice between the $400,000 air compressor and the $500,000 air compressor, a company chose the $400,000 compressor, without realising it had a 20% higher energy use.
This meant the cheaper compressor will cost the plant an additional $311,000 over its ten-year lifecycle, rather than saving them $100,000. Many energy studies don’t consider full lifecycle costs. A good example is compressed air, where ten-year lifecycle costs are 12% capex, 12% maintenance, and 76% energy.

  • Is the solution a new compressor?

Out Performers has found that in around 15-20% of situations the plant is already operating at best practice and spending any amount of capital is not going to improve the energy efficiency.

To ensure your next energy efficiency project does not fail, talk with Out Performers first. To arrange an obligation-free discussion of your plans, contact us.