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"Providers should take a 'zero-assumptions’ approach to understanding current/future energy needs to enable a strategy for reduction, reporting and improved profitability."

 

DUNCAN MATHESON, PA TRANSPORT EXPERT

Transport providers: improve energy efficiency to enhance profits

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Duncan Matheson

Green Wise Business

26 September 2012

 

Transport providers – whether rail, tram, metro, bus or other modes – are large consumers of power. The 2011 International Energy Agency Report indicated that in 2009, 23 per cent of carbon dioxide emissions from fossil fuels were attributable to the transport sector, second only to electricity and heat generation which represented 41 per cent.

There is currently no greenhouse gas (GHG) reporting in the context of international travel via aviation, rail and sea, but many domestic transport providers, such as Arriva and South West Trains, are already investigating ways to reduce GHG emissions. Some are trialling hybrid vehicles, others so-called green vehicles (including using bio-diesel).

Partly this initiative is in response to pressures on the sector to reduce emissions. It is also in recognition that greater efficiency will positively influence transport organisations’ bottom line. Fuel and power, when used more efficiently, reduces costs that would have otherwise resulted from direct fuel purchase or from carbon taxes.

Quick wins
Substantial 'quick wins’ can also be realised by simple mechanisms to reduce existing energy consumption (and hence GHG emissions). These can have short or almost immediate payback periods and impact positively upon organisations’ bottom line, especially if the CRC Energy Efficiency Scheme taxes are likely to impact the organisation.

With respect to vehicle-fleet operators, proven mechanisms for success can include:

  • educating drivers to reduce engine revs

  • teaching people to accelerate gently

  • maintaining vehicles effectively

  • avoiding short journeys

  • using more efficient routing.

So what can transport providers do to achieve energy saving benefits, and hence increase profitability, in a period of subsidy reductions and consumer anger at above-inflation fare rises?

A 'zero-assumptions' approach
Providers should take a 'zero-assumptions’ approach to understanding current/future energy needs to enable a strategy for reduction, reporting and improved profitability.

There are four potential steps to such a process:

1. Determine energy use/misuse and business plans for the future - Providers need to understand and measure the use of vehicles essential to delivering transport services and to make businesses operate (annual mileage, routing, fuels used). For example, South West Trains have implemented a train-energy management system to gather data and advise on more efficient energy use.

At the same time, they need to look at how buildings, equipment and physical facilities, including storage, consume power throughout the year (thermal efficiency, types of heat, air conditioning, light, PCs and servers, audio visual equipment, in house catering, CCTV, cleaning and maintenance solutions).

Finally, providers should scrutinise business policies, procedures and documented approaches to running the organisation and identify where these can generate behaviours that are counter to good energy use practice.

2. Review asset base and how it could change over time - Providers should reassess existing infrastructure in terms of offices, production and maintenance facilities and how this could change and when (leases, ownership, planned expansion or consolidation). They should also assess the transport and logistics activities that enable the organisation to continue delivering services and related policies and consider communications and IT infrastructure and policies – and whether there are more effective ways of implementing these while delivering business robustness and security. Providers should also look more widely at other tools, facilities and services that support the operation of the organisation on an on-going, regular or intermittent basis

3. Plan options for reducing energy consumption through asset, process and behavioural changes - Transport providers can:

  • relocate, rationalise, refurbish or renew/replace with economic sense

  • evaluate costs, benefits, payback periods and bottom line potential, considering also public incentives and tax rebates

  • create, amend or enhance policies and procedures, linking these to the personal objectives for those responsible for overseeing them

  • seek ideas, involvement and advice from staff as well as establish a programme for education and training in energy efficient measures and processes

  • explore with others in the supply chain about options for reducing energy consumption and ways to reduce costs and complexity

  • ensure that energy savings result in a virtuous outcome for the business, for example by channelling savings into increased shareholder value, further green investments or to leverage other benefits – an x per cent reduction on energy consumption per year for a transport company could mean one new green bus, or release funds for more effective maintenance on others.

4. Implement a strategy to deliver change, measure consumption, report upon reductions and drive out profit – Providers should implement a programme of agreed changes and expenditure on assets and facilities that will deliver financial benefits in the short to medium term whilst simultaneously reducing GHG emissions.

They should also commit plans within the business strategy, not as an aside; appoint a non-executive director (as a minimum) responsible for reducing energy consumption and emissions to the board/management committee, secure staff, customer and supplier support to the programme. In addition, they should install any further capability to facilitate the measurement, monitoring and reporting of progress against specific targets and metrics. They should commit to reflecting, refining, reinforcing and reviewing the successes (and rectifying any failures) and communicate strategy successes to suppliers and customers.

Corporate reputation
Finally, they should consider reporting the results in a way so as to enhance corporate reputation – the UK Government has estimated the cost of this to be around £6 billion to UK businesses over the next decade although the Aldersgate Group claim that it is significantly lower and that the benefits are much higher.

In conclusion, a range of options can help invigorate the process of reducing GHG emissions as an on-going process of increased business efficiency and reduced energy consumption. Many of these can have strong positive impact on profits complemented by opportunities for upbeat publicity messages to markets and customers about green credentials. Fundamentally, these initiatives meet the triple bottom line of people planet, and profit.

 

Duncan Matheson is a transport expert at PA Consulting Group


For more information on PA's energy expertise, contact us now or click here for more information.

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