Building the business case for investment in energy solutions

Introductions

Ben Higgins, Director - Ignite Energy

Rob Deverson, Business Development Director - Ignite Energy

James Kokiet, Energy & Sustainability Manager - Pets At Home

About Ignite..

• Focus on helping large, multi-sited energy users manage energy across the whole spectrum of use, including: • Procurement/brokerage • Bill management and validation • Finance and management reporting • Smart metering • Energy reduction projects

• Customer focussed – tailoring the solution to the individual

business requirements.

• Technology and solution independent, with expertise of the broader market.

• Consistent delivery of tangible savings for every customer

Who we work with.. •Major clients include:

•Clients with international activities include: • WH Smith, SSP & New Look

Building the business case for energy projects

It’s easy – isn’t it?

• Why would an organisation not want to invest in something that saves them money and reduces their impact on the environment?!?

• There are many potential areas where good projects can fail to win investment approval.

• All of these need to be considered and worked through in order for a project to get investment and go-ahead.

• Even a great project in an engaged business takes months of hard work and diligence to move from concept to deployment.

The Basics…

Typically we go through the following process: • Initial engagement and data gathering • Data analysis and understanding how the business works • Site evaluation and surveys • Solution development – service and project (although this

session focusses on the project side) • Trialling and Proof of Concept • Refining solution and assumptions • Consensus building and winning approval for rollout

Throughout all of this we are engaging with different stakeholders across a business. Next – a few key lessons we have learned..

Importance of data analysis

New Malden

Stockport

Croydon

Brentford

Andover Folkestone

Peterborough

Oxford

Biggleswade

Hull

0

100000

200000

300000

400000

500000

600000

0 5000 10000 15000 20000 25000 30000

Sto

re A

nn

ual

En

ergy

Usa

ge -

kW

h

Store Size - Square Feet

Store Electricity Usage v Store Size

Breakdown of overall load

14.09%

1.56%

5.65%

25.28% 47.26%

0.44%

11.08%

Example site - Daily Load Breakdown

Aquatics Reptiles Groom Room Lighting AC Signage V4P

Breakdown of store daily load

0

2

4

6

8

10

12

14

16

18

20

22

00

:20

:00

00

:50

:00

01

:20

:00

01

:50

:00

02

:20

:00

02

:50

:00

03

:20

:00

03

:50

:00

04

:20

:00

04

:50

:00

05

:20

:00

05

:50

:00

06

:20

:00

06

:50

:00

07

:20

:00

07

:50

:00

08

:20

:00

08

:50

:00

09

:20

:00

09

:50

:00

10

:20

:00

10

:50

:00

11

:20

:00

11

:50

:00

12

:20

:00

12

:50

:00

13

:20

:00

13

:50

:00

14

:20

:00

14

:50

:00

15

:20

:00

15

:50

:00

16

:20

:00

16

:50

:00

17

:20

:00

17

:50

:00

18

:20

:00

18

:50

:00

19

:20

:00

19

:50

:00

20

:20

:00

20

:50

:00

21

:20

:00

21

:50

:00

22

:20

:00

22

:50

:00

23

:20

:00

23

:50

:00

Ener

gy U

se P

er H

alf

Ho

ur

Aquatics Reptiles Groom Room Lighting AC Signage V4P Other

Stakeholders

Understanding and engaging with all stakeholders is key. They may not be the decision-maker but will likely be consulted as part of the decision - having them behind a project is key. They can include:

• Senior Management – decision making

• Operations/trading – impact / benefit to the core business

• Property/Estates – impact on site environment and maintenance. Long term cost of maintaining solution

• Finance – need to understand how the return on investment will be achieved and how it will be proven.

• Procurement/Legal – to verify that the project and supply arrangements make commercial sense and represent good value in the marketplace.

Finance

For a project to gain and maintain credibility, the benefits must be clear and recognised across the business. Many early stage projects have come unstuck because the benefits aren’t clear to all. It helps if…

• Finance can help you understand how the business views investments such as energy projects – payback criteria, financial rules, discount rate for NPV etc

• There is constant engagement with finance colleagues to help them understand and ultimately support the business case. They are the ones that feed into budgets and financial planning

• The savings from the project are built into the company energy budget – it sets an expectation.

• Savings are recognised when they are made via the monthly charge and accrual in the profit and loss (P&L) accounts in the business, rather than lost in the noise of bills coming in months later

Example savings reporting; actual v budgeted

£-

£5,000

£10,000

£15,000

£20,000

£25,000

£30,000

£35,000

£40,000

22 23 24 25 26 27 28 29 30 31

In-y

ear

ener

gy c

ost

sav

ings

del

iver

ed

Financial week

Project - In-Year Savings Progress

Cumulative Budgeted Savings Cumulative Projected Savings Actual Savings to date

Example of weekly management reporting

Process and competition

• Companies do not have bottomless reserves of capital to invest. There is usually a medium to long term plan for investment, and this has often been communicated to investors privately and publically, limiting flexibility.

• Your project is therefore competing against all the other calls on investment. It might look attractive, but that’s a relative concept.

• Getting in early and raising project profile are important so as not to miss the boat.

• ..as is understanding the process that the project will need to go through for approval. A sponsor can help with both.

• External finance can help, but it’s not a magic bullet

Case Study

Project “Aether”

Project Aether Overview

• Project Aether involves a wholesale change to LED lighting and installation of Building Energy Management Systems “BEMS” into 420+ Pets at Home stores

• This is going to result in an energy reduction of 35-40% across the estate, and be fully deployed by end of Q2 2016. Around 200 stores have been deployed to date, from a start in mid August.

• It went from concept and pilot to rollout approval in under 12 months.

• It is Pets at Home’s biggest ever single capex project

• How did we overcome some of the challenges in developing and achieving approval for the business case?

Timeline

Early 2015

• Pilots started to be considered

• Ignite Energy engaged

Summer-15

• Pilots of LED and BEMS, capex for further pilots

• Site surveys and data analysis

Autumn-15

• ESOS report process

• Building on data from pilots, credible business

Winter-15

• ESOS report presented to CFO with project as centerpiece

• Exec committee engaged, capex process underway

Spring-16

• Commercial framework put in place

• Capex approved and contract placed

Typical store before installation..

0

2

4

6

8

10

12

14

16

18

20

22

00

:20

:00

00

:50

:00

01

:20

:00

01

:50

:00

02

:20

:00

02

:50

:00

03

:20

:00

03

:50

:00

04

:20

:00

04

:50

:00

05

:20

:00

05

:50

:00

06

:20

:00

06

:50

:00

07

:20

:00

07

:50

:00

08

:20

:00

08

:50

:00

09

:20

:00

09

:50

:00

10

:20

:00

10

:50

:00

11

:20

:00

11

:50

:00

12

:20

:00

12

:50

:00

13

:20

:00

13

:50

:00

14

:20

:00

14

:50

:00

15

:20

:00

15

:50

:00

16

:20

:00

16

:50

:00

17

:20

:00

17

:50

:00

18

:20

:00

18

:50

:00

19

:20

:00

19

:50

:00

20

:20

:00

20

:50

:00

21

:20

:00

21

:50

:00

22

:20

:00

22

:50

:00

23

:20

:00

23

:50

:00

Ener

gy U

se P

er H

alf

Ho

ur

Aquatics Reptiles Groom Room Lighting AC Signage V4P Other

Typical store after installation..

0.00

2.00

4.00

6.00

8.00

10.00

12.00

14.00

16.00

18.00

20.00

00

:00

00

:30

01

:00

01

:30

02

:00

02

:30

03

:00

03

:30

04

:00

04

:30

05

:00

05

:30

06

:00

06

:30

07

:00

07

:30

08

:00

08

:30

09

:00

09

:30

10

:00

10

:30

11

:00

11

:30

12

:00

12

:30

13

:00

13

:30

14

:00

14

:30

15

:00

15

:30

16

:00

16

:30

17

:00

17

:30

18

:00

18

:30

19

:00

19

:30

20

:00

20

:30

21

:00

21

:30

22

:00

22

:30

23

:00

23

:30

Ener

gy U

sage

per

Hal

f H

ou

r

Aquatics Reptiles Groomers Lighting AC/Fans Signage Other

Typical before/after installation comparison..

What did the business case look like?

• The initial business case was based on audits from a sample of stores, early pilots that provided demonstration of the results that could be achieved, and early stage deployment assumptions. Getting to this point did not incur any cost to Pets at Home.

• A revised business case used asset data from 20% of stores as a sample to provide a good degree of certainty, and assumptions from further work, as well as a better understanding of how the project would be deployed.

• Before approval, all supplier selections were made, and the Executive committee approved the type of lighting and control scheme via store visits to ensure the impact would be a positive one for the business.

Who did we work with?

• Project has been conceived, proposed and now being delivered by James and Ignite. The project owners at Pets at Home includes both energy and operational expertise, and reports regularly to a steering group including an Executive project sponsor.

• Senior Management – engaged as part of ESOS process; fed into investment planning to provide scope for the project, made ultimate decision on investment. Having engagement at this level several months before approval allowed it to be considered alongside other candidates for invesment.

• Operations/trading – the project is helping to enhance Pet Welfare by monitoring temperatures in sensitive areas. It gives retail operations more flexibility to change trading hours, and the stores improved, more consistent lighting.

Who did we work with?

• Property/Estates – the BMS provides information to aid in maintenance issue diagnosis, and the new equipment is covered by a comprehensive warranty, providing a maintenance saving.

• Finance – worked with finance all the way to: • Build savings into budget projections,

• Update on performance and

• Make sure savings are recognised month by month by using actual data to drive store charges

• Procurement/Legal – worked together on a market evaluation which resulted in the best solution, and cost savings v project budget, allowing more stores to be delivered.

Thank–you and Questions