Accounting: Facility Energy Use


Energy Accounting is the management technique that quantitatively monitors energy consumption, relates consumption to key independent variables such as production and weather, and assesses energy performance or efficiency over time and against relevant benchmarks. The successful practice of energy accounting is predicated on the identification of the right kinds of data to be collected, the use of appropriate statistical methods to correlate consumption to the independent variables, and the reporting of the right information to the right people in the organization. Energy Monitoring and Targeting (M&T) is a technique for energy performance analysis that overcomes possible deficiencies in the traditional performance indices or energy intensity.


Energy Accounting is an essential component of effective energy management, just as financial accounting is essential to organizational management. In order to gain the full benefit of energy management, organizations need to be able to monitor their energy consumption, relate consumption to the independent variables that drive it, compare the energy performance of their plants and buildings to themselves over time and to other similar facilities, and assess the impact of energy saving measures.

This description of energy accounting is intended to (1) provide insight into the basic principles and methods of energy accounting and (2) expand the conventional understanding of energy accounting to include the analysis technique commonly known as Monitoring and Targeting.

Monitoring, recording, and reporting on gross energy consumption are all straightforward. Complications arise, however, when performance indices enter the picture. Indices in the industrial environment referred to collectively as energy intensity relate energy consumption to measures of production, for example GJ/tonne, MBtu/ton, and so on. Performance indices that are relevant to building operations typically relate energy consumption to conditioned floor area. For reasons developed in this article, both indices can be misleading; a more detailed energy performance model yields far greater insight into energy performance and overcomes the potential difficulties that accompany the use of energy intensity values.

This entry offers some working language for energy accounting, identifies the kinds of data that should be collected and analyzed, describes a number of approaches to energy performance assessment, and develops the basic principles and techniques of Monitoring and Targeting as the recommended approach to energy accounting.


Defining Energy Accounting

The adage, “if you don’t measure it, you can’t manage it” clearly applies to energy use. Just as financial accounting is necessary for effective management of an organization, energy accounting is a key element of energy management. Simply put, energy accounting is a system to measure, record, analyze, and report energy consumption and cost on a regular basis.[1]

Energy accounting systems typically consist of three parts: (1) a system to routinely monitor energy consumption and the variables that influence consumption, (2) an energy use record and reporting system, and (3) a performance measure.[2]

The effectiveness of the energy accounting system depends on the rigor with which consumption patterns are analyzed and correlated to independent variables such as production and weather. In many organizations, the energy accounting process is integrated with a statistical analysis methodology often referred to as Monitoring and Targeting. This is addressed in more detail in “Energy Monitoring, Targeting, and Reporting”.

Depending on the goals of the organization, the accounting system may achieve some or all of the following objectives:

1. Track, record, and attribute energy consumption and costs.

2. Verify energy billings and troubleshoot errors.

3. Provide a basis for prioritizing energy capital investments.

4. Provide a basis for energy budgets as part of the overall budgeting process.

5. Identify unaccounted for energy waste.

6. Identify opportunities for performance improvement and evaluate the impact of performance improvement measures.

7. Optimize energy purchase practices.[3]

Energy Accounting and Energy Management

While many definitions of energy management are used, one that captures the essence of this organizational activity is:

The judicious and effective use of energy to maximize profits (minimize costs) and enhance competitive [4] positions.

Energy management is consistent with other dimensions of continuous improvement. Key functions that comprise energy management include:

• Purchase or supply energy at the lowest possible cost.

• Ensure that energy is used at the highest possible efficiency.

• Utilize the most appropriate technology—from a business case perspective—to meet organizational needs.

Energy management is, or should be, an integral part of overall organizational management, and is practised by most of today’s leading organizations in all sectors. Investments in energy management are generally sound, offering attractive returns to plant and building owners.[5] Energy accounting is one of the tools employed, along with a variety of others, including policy and planning, training, communicating, investment appraisal, and operations and maintenance.

Methods of Energy Accounting

The methods employed in energy accounting depend on the nature of the organization’s facilities, e.g., industrial plant or commercial building, and its objectives for the accounting program. In all cases, however, comparison of energy performance over time, and perhaps from site to site or building to building, is a likely element of the analysis.

A critical challenge when comparison of energy consumption is being carried out is the need to adjust consumption data:

• For changes in weather—heating or cooling degree days—over time or from place to place.

• For varying levels of activity, e.g., production or occupancy.

• For changes in space utilization in the facility, e.g., changes in conditioned floor space in a building.

Ultimately the methods described in “Energy Monitoring, Targeting, and Reporting” provide a rigorous statistical basis for these adjustments, but in many cases, other approaches are employed for performance comparisons. They include:

• Present-to-past comparison, in which energy consumption for a given period, i.e., a specific month, quarter or year, is compared to the same period in a previous or base year. Since there is no attempt to adjust for changes in weather from year to year, this comparison is rough at best, especially when applied to heating and cooling loads.

• Multiple year monthly average, in which the base for comparison is the average consumption of several years for the period in question; again, no adjustment is made for changes in weather, but the assumption is that variation in weather is eliminated as a factor by averaging several years (a flawed assumption if climate change patterns result in a trend in weather rather than random variation).

• Heating/cooling degree day (HDD and CDD) adjustment, in which average temperature and degree-day data are used to adjust heating and cooling energy consumption to a common base for year to year or period to period comparison.

• Correction for changing conditioned floor area, in which it is assumed that energy consumption will increase or decrease proportionately to increased or decreased conditioned area.[6]

• Adjustment for changing production, in which energy intensity (energy consumed per unit of production) is used to scale consumption up or down for comparison. While it is necessary to adjust for production, this approach is not recommended for reasons that are addressed in “Problems with Energy Performance Indicators”.

Energy Accounting Tools

A commonly held view is that significant expenditures in metering, data collection systems, and software applications must be made before energy accounting can be done. However, many organizations have discovered that manual collection of data from existing meters and records, and manual analysis using methods such as those described in “Energy monitoring, Targeting, and Reporting” can yield useful results.

Manual energy accounting can be greatly facilitated with the use of commercial spreadsheet programs to automate the numerous calculations that may be required, such as energy intensity and energy consumption per square foot per HDD. As well, other embedded functions such as graphing, regression, averaging, and others, can be helpful for analysis and presentation of results.

Energy Accounting Software

As the energy accounting system becomes more sophisticated and complex, or in the case of larger or multi-site organizations, commercial energy accounting software packages are available. These packages make it easier to input data, carry out analysis, and generate reports. They also typically incorporate weather and floor area corrections, and may enable the direct download of energy consumption, demand, and cost data from service meters or utility-based web sites.[7]

A number of accounting software packages are available commercially. The following list provides some examples (no effort has been taken to ensure that this list is complete or to verify the functionality of the packages):

• Envision™, a stand-alone hardware and software package for tracking energy use; Energard Corporation, Redmond, WA,

• Faser™, software for tracking, analyzing, and reporting utility bill data; OmniComp Inc., Houston, TX, www.

• Metrix™, an energy accounting system that focuses on energy projects and the savings related to the projects; SRC Systems Inc.

• Utility Manager ™, software that targets the commercial and public sector markets, including school districts and local governments; Illinova Energy Partners, Oak Brook, IL,

• Meter Manager™, a system that combines a utilities supervision function with sub-metering and aggregated metering; Carma Industries, Peterborough, ON,

• Global Mvo Asset Manager™, a multi-purpose software package combining metering and sub-metering technologies with on-site and remote measuring, verification, and operational capabilities; Global Facman Enterprises Inc., 12180 Chemin du Golf, Montreal, QC,


Organizations typically identify cost centers for financial management. For similar reasons, including the assignment of accountability to line managers, energy account centers (EAC) are helpful in organizing for energy accounting.

Energy account centers work by identifying geographically definable areas of management accountability,installing meters on energy utilities, and energy-based utilities (e.g., steam from a central plant, compressed air, etc.) at the point of entry to the EAC department or operating unit, and providing consumption reports as a component of the management information system.[10]

There are constraints and guidelines that apply to the selection of energy account centers that do not apply necessarily to financial cost centers. If possible, selection should be based on the following criteria:

• If sub-metering is required, the potential cost savings from energy reduction justify the cost of installing new metering.

• Energy consumption can be measured.

• Ownership of the energy account center can be established. The center might be a production department, a single meter, an aggregate of several meters, or other possibilities.

• An activity variable is identifiable. In the industrial sector, the variable may be production associated with a production unit that is established as an energy account center, whereas in certain building sectors, the variable may be occupancy rates (more about this in “Energy Monitoring, Targeting, and Reporting”).

• There is a linkage between the account center and the organizational structure. Accountability can be assigned to an appropriate manager, and reporting can be integrated fully in the management information system.[11]


Tabulation of Data

Energy consumption data is available from accounting records. Utility and fuel supplier invoices contain valuable information about consumption that can be tabulated. For various reasons, fuel and electricity consumption data must be treated separately.

For electricity, the following data should be collected and tabulated: billing month, number of days in the billing period, demand, and energy. From these data, a number of derived factors should be determined and tabulated, including daily energy, energy cost as a percentage of the total, demand cost as a percentage of the total, total cost, blended or average cost per kWh, and load factor as defined by Eq. 1:

Load factor (%)


For fuels, data should be recorded in physically measurable units (cubic feet, gallons, etc.) rather than dollars that can fluctuate over time (e.g., via utility rate changes, product price changes). Where two different energy sources feed thermal energy data into the same system, it may be necessary to convert them to a common unit. In a spreadsheet program, units can be converted as needed after the quantities are entered in their original units.

In addition to energy use data, data on the factors that influence energy usage are collected and tabulated, including production quantities, outside air temperature, time the facility is occupied, and so on.

Calculation of Energy Performance Indicators

A key component of energy accounting is the determination of energy performance indicators that enable comparison of energy efficiency over time, from site to site, and against appropriate benchmarks. A number of indicators are commonly used to relate consumption to measures of activity, weather factors, and facility size, for example Btu/unit of production, Btu/degree day, Btu/ft2, or combinations of these. Others that may be useful include Btu/sales dollar, energy spend/sales or profit or value added, Btu/direct labor cost.[12]

Several of these indicators find common use in specific sectors, as indicated in the following paragraphs.

Energy Utilization Index

The energy utilization index (EUI) is used in the building sector, usually based on annual energy consumption related to conditioned floor space. The basic factor in Btu/ft2, kWh/m2, or some other appropriate unit is normalized by adjusting for operating hours, weather, etc. for energy type, or for energy use (i.e., heat, lighting, air conditioning, etc.).

Normalized Performance Indicator

The basic performance factor or EUI in Btu/ft2, kWh/m2, or some other appropriate unit is normalized by adjusting for operating hours, weather, etc. for energy type, or for energy use (i.e., heat, lighting, air conditioning, etc.). The normalized performance indicator (NPI) is used for comparison of buildings of similar type.

Specific Energy Consumption

This indicator is an energy intensity used in industry to relate consumption to production, expressed, for example, as MBtu/ton, GJ/unit, or other appropriate units. While commonly used, there is a real danger that these indicators can be misleading. Variation in the specific energy consumption (SEC) may be due to economies of scale, production problems, weather, or other factors that are not related to energy management. As well, it is important to consider the fixed and variable components of energy consumption, as discussed in “Problems with Energy Performance Indicators”.

Energy Balance

Just as financial accounting involves the reconciliation of revenues and expenses, so energy accounting can (and should) reconcile energy inputs and outputs. Secure in the First Law of Thermodynamics, the principle that all energy can be accounted for, since it cannot be created or destroyed, enables the energy manager to balance inputs and outputs.

Inputs are relatively easily calculated on the basis of purchased energy, although energy exchanges between the facility and the environment may also need to be included, such as air infiltration/exfiltration in buildings, solar gain, and so on. Methods exist for calculating these.

Outputs or end-uses require an energy load inventory— for both electrical and thermal loads. While time-consuming, the preparation of a load inventory involves:

• The counting and tabulation of electrical devices in the facility, including their nameplate or measured demand and energy consumption and times of operation.

• The measurement or calculation of all thermal loads, such as burners in boilers and furnaces, steam or hot water flow, ventilation air flow, fluids to drain, heat loss and heat gain through the facility envelope, and so on.

• The calculation of total consumption based on the electrical and thermal inventories.

• Finding either the electrical load or thermal load for systems with varying loads is not always easy. Actual measurements or simulations may be needed to find loads of motors, HVAC, and boiler systems.

Total energy consumed should balance with total energy purchased within reasonable limits of error. If that is not the case, an unaccounted for loss may be awaiting discovery.


An important element of Energy Accounting is the determination of the functional relationships between consumption and the independent variables that drive consumption. While often viewed as an issue separate from energy accounting, Energy Monitoring, Targeting and Reporting (MT&R) is an analysis technique that yields these functional relationships. As noted below, it is also a technique that provides a sound basis for energy budgeting, which is clearly part of the accounting process.

Working Definitions

By definition, MT&R is the activity that uses information on energy consumption as a basis for control and managing consumption downward. The three component activities are distinct yet inter-related:

• Monitoring is the regular collection of information on energy use. Its purpose is to establish a basis of management control, to determine when and why energy consumption is deviating from an established pattern, and to serve as a basis for taking management action where necessary. Monitoring is essentially aimed at preserving an established pattern.

• Targeting is the identification of levels of energy consumption, which are desirable as a management objective to work toward.

• Reporting involves putting the management information generated from the Monitoring process in a form that enables ongoing control of energy use, the achievement of reduction targets, and the verification of savings.

Monitoring and Targeting have elements in common, and they share much of the same information. As a rule, however, Monitoring comes before Targeting, because without Monitoring, you cannot know precisely where you are starting from or decide if a target has been achieved. The Reporting phase not only supports management control, but also provides for accountability in the relationship between performance and targets.

Energy Monitoring, Targeting and Reporting is consistent with other continuous improvement techniques applied in organizations, and should be viewed as an ongoing, cyclical process.

Energy Monitoring

There are two essential steps in energy Monitoring; they are:

1. The determination of a functional relationship between consumption and the independent variables that drive consumption (or what can be termed an energy performance model), typically production in the manufacturing environment, weather and occupancy in the buildings sector, or combinations of these and other variables.

2. The comparison of actual consumption to that predicted by the energy performance model.

The Energy Performance Model

Various methods of developing an energy performance model are used. Often linear regression produces a useful model relating consumption to production in manufacturing, or consumption to degree-days in buildings. In other instances, multi-variant regression on both production and degree-days or other combinations of variables is required to generate a useful model.

Energy used in production processes typically heats, cools, changes the state of, or moves material. While it is impossible to generalize, as industrial processes are both complex and widely varied, a theoretical assessment of specific processes gives reason to expect that energy plotted against production will produce a straight line of the general form:

y = mx + c (2)

where c, the intercept (and zero production energy consumption), and m, the slope, are empirical coefficients, characteristic of the system being analyzed.

In the case of heating and cooling loads in buildings, a theoretical relationship between energy and degree-days typically takes the form of Eq. 3:

H = (UA + CPNV) X degree—days + c (3)


• H is the heat added to or removed from the building per unit of time.

• U is the heat transfer coefficient of the building envelope, taking into account its components such as glazing, interior wall finish, insulation, exterior wall, etc.

• A is the external area of the building envelope.

• Cp is the specific heat of air.

• N is the number of air changes per unit of time.

• V is the volume of the building being ventilated.

U, A, Cp, N, and V are all characteristic constants of the building. Eq. 3 is the equation of a straight line when H is plotted against degree-days, having a slope = (UA + C-pNV) and an intercept on the y-axis = c. This constant c is the ‘no load’ energy consumed, no matter the weather conditions, by such things as office equipment, the losses from the boiler, lighting, and people.

Fig. 1 illustrates a performance model obtained from a consumption-production regression. In this case, the energy consumed in MMBtu is equal to 2.0078 times the production in pounds plus a constant 64,966 MMBtu (the intercept of the regression line) for a baseline period that is considered to represent consistent performance. It is important to recognize that total consumption typically consists of at least these two components:

• A variable, production-dependent load.

• A constant, production-independent load.

Similar models can be produced for buildings, in which case degree-days rather than production may be the independent variable.

In addition to providing a basis for the reduction of energy waste, the energy performance model also provides the means of determining the energy budget for a projected level of industrial activity or projected weather conditions in a future period.

Cumulative Sum

The comparison of actual and theoretical or predicted energy consumption uses is called cumulative sum of differences (CUSUM) analysis. In CUSUM analysis, a cumulative sum of the differences between the theoretical energy consumption calculated from the energy performance model and the actual consumption is calculated (J2 [theoretical — actual]). A time series plot of CUSUM values is illustrated in Fig. 2.

The CUSUM graph yields the following kinds of information:

• Changes in slope represent changes in energy performance.

Regression analysis of baseline for food processing plant energy consumption.

Fig. 1 Regression analysis of baseline for food processing plant energy consumption.

• A downward (negative) slope represents consumption less than that predicted by the energy performance model, and vice versa.

• Cumulative energy savings or losses (in comparison to the energy performance model or baseline) at any point are equal to the ordinate of the point in question on the CUSUM curve.


Based on the information derived from energy Monitoring, it is possible to set reduction targets in the form of energy performance models that:

• Represent best historical performance.

• Incorporate specified reductions to the fixed and variable components of total load.

• Eliminate periods of poor performance to establish a basis for future performance.

• Are defined by other similar criteria.

Cumulative sum (CUSUM) graph for food processing plant.

Fig. 2 Cumulative sum (CUSUM) graph for food processing plant.

Problems with Energy Performance Indicators

Especially in the industrial sector, energy performance is often expressed in terms of an energy intensity indicator, as discussed in “Energy Monitoing”. The energy performance model resulting from Monitoring analysis makes it evident that there are serious limitations to energy intensity indicators in providing an accurate measure of performance, as Fig. 3 illustrates.

As illustrated, it is possible to look at a performance point (1) in terms of its energy intensity, represented by the solid line, or as a point on the true energy performance model line represented as a dashed line. Points above the energy intensity line by definition have higher energy intensity values, and vice versa. Similarly, points above the energy performance model line represent worse energy efficiency, while points below represent improved energy efficiency.

If production were changed such that the performance point moved from (1) to (2), it would appear that energy intensity has decreased, that is, improved; however, quite the opposite is true when the real performance model is considered. Conversely, a decrease in production that changed the performance point from (1) to (3) would appear to worsen performance when indicated by the energy intensity, whereas, again, quite the opposite is true.[16]

It follows that the only reliable indicator of performance is that derived from the energy performance model; the simple, and widely used, energy intensity value must be viewed with real caution.


Reporting within a Monitoring and Targeting system has a number of functions:

• To create motivation for energy saving actions.

• To report regularly on performance.

• To monitor overall utility costs.

• To monitor cost savings.

Within most organizations, the need for the type of information generated by a Monitoring and Targeting system varies with level and responsibility. Typically, as the need moves from the operational level in the plant to the senior management level, the requirement for detail diminishes, as does the frequency of Reporting. Operations staff need energy control information to stimulate specific energy savings actions. Senior managers need summary information with which to guide the organization’s energy management effort. One report for all will not result in actions being undertaken and decisions being made.[17]


Successful organizations include energy management in their management information systems. At the very least, they track consumption, identify and respond to trends, base energy purchase strategies on detailed knowledge of their consumption patterns, and determine performance indices for comparison to their own facilities over time and benchmarks for other similar facilities.

Since the commonly used energy performance indices tend to be energy intensities (i.e., consumption per unit of production, consumption per unit of floor space, consumption cost as a fraction of total product cost, and others) their usefulness in driving performance improvement may be limited.

Energy Monitoring and Targeting is an approach to performance assessment that provides a basis for managing energy consumption downwards. It is based on the determination of an energy performance model that takes into account the fixed and variable components of total consumption. Energy Monitoring and Targeting can, and should, be the basis for effective energy accounting.

The problem with energy intensity.

Fig. 3 The problem with energy intensity.

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