Using Key Performance Indicators to Manage Energy Costs

Abstract

Modern management systems rely heavily on information technology to set goals, track performance and communicate results. Energy management approaches (such as those offered by the US Department of Energy and Natural Resources Canada) and measurement and verification protocols (such as IPMVP 2001) often highlight the importance an information system has in maximizing results. The increasing adoption of energy information systems has led, however, to an interesting paradox: while it is now cost-effective to collect much more data than ever before, many energy managers find themselves drowning in the volume of data generated. Business information systems faced a similar challenge a decade ago, and it is now common practice to use Key Performance Indicators (KPIs) to summarize volumes of data into a few critical “nuggets” of actionable information. These KPIs provide both the metrics that will be used to determine the success of a business plan as well as the timely information managers need to track performance and make adjustments to ensure success. A similar approach can be used in the practice of energy management, where KPIs can be designed to measure the success of key elements in an energy management plan and provide energy managers with the timely “nuggets” of information they need to ensure success. This paper describes how to define and use KPIs to track the performance and measure the success of an energy management plan. A framework is provided to assist in selecting measurable goals from an energy management plan and determine the raw data and processing required to generate the associated KPIs.