INDIANAPOLIS – A new study detailing how the use of smart utility meters can improve energy efficiency in manufacturing finds that the willingness of managers to make use of the technology is a key driver in reducing energy consumption and related costs. The research serves as a proof-of-concept for using event system theory, which has historically been used to understand the impact of unexpected phenomena and the practical effects of planned business actions – such as adopting new technologies.
“We wanted to see how effective smart utility meters are at reducing energy consumption in the manufacturing sector and which factors of the implementation approach might play a role there,” said Patrick Flynn, the lead author and assistant professor of human resources at North Carolina State University’s Poole College of Management. Smart utility meters provide manufacturing managers real-time data on power consumption, which they can use to make strategic, informed decisions about how to operate more effectively and sustainably.
“And the industry utilizes event system theory, which helps us understand the ripple effects of large, unexpected events like the COVID-19 pandemic or a stock market crash,” Flynn says. “But we know there are a lot of proactive events in the business community where companies make changes intentionally. We wanted to see if we could adapt event system theory to help us more fully understand the knock-on effects of these proactive events.”
The paper, “From Intent to Impact: A Proactive Event Approach for Amplifying Sustainability Across Time,” is published in the Journal of Management. The paper was co-authored by Amrou Awaysheh of Indiana University Kelley School of Business Indianapolis; Paul Bliese of the University of South Carolina; and Barbara Flynn of Fundação Getulio Vargas and professor emeritus at the Indiana University Kelley School of Business Indianapolis.
To address both questions, the researchers analyzed data from 87 facilities owned by Fortune 500 companies that adopted an energy management system to include smart utility meters. The collected data included power consumption for each factory in the year before the smart utility meters were installed and for the year after the smart meter installation was finalized. The researchers also recorded when the smart meter installation occurred, how long it took for the installation to be finalized and how often factory managers retrieved data from the smart utility meters.
“This project is the result of 15 years of my work with our industry partner. Collaborating with industry partners really helps us address relevant issues and work together to come up with practical and relevant solutions, and help drive public policy,” says study co-author Awaysheh, OneAmerica Foundation Endowed Chair and associate professor of operations and supply chain management at Indiana University Kelley School of Business Indianapolis.
Awaysheh stressed that the initial findings suggest the smart utility meters are a success. “On average, energy consumption dropped by 7.46% across all the factories which corresponded to the companies saving more than $41 million per year in energy costs. The Department of Energy wants to increase investments in these kinds of systems to help reach our Net Zero goals. Thus, when companies see that there is a financial benefit to investments in these types of systems, they are more likely to implement.”
The study, however, showed significant variability from factory to factory and three variables associated with those differences.
“Factories that received the smart meters earlier also saw greater energy reductions,” says Patrick Flynn. “We found the longer the installation process took, the more likely the factory was to have increased energy efficiency. And there was tremendous variation here, with some installations taking place in one month, while others took more than a year. Our hypothesis is factories that experienced longer installation times were more likely to feel a greater sense of ownership of the smart meters and their potential.”
The research also helps to demonstrate the viability of these types of sustainability investments, says Awaysheh. “Policy makers around the globe want to increase investments in these kinds of systems to help reach net zero goals. Thus, when companies see there is a financial benefit to investments in these types of systems, they are more likely to do so,” he said.
The study also lays the groundwork for business researchers to go one step further.
“We now have a new blueprint for how we can use event system theory to improve our understanding of any intentional change that a business makes, whether that’s installing a smart utility meter or adopting new human resources software,” Flynn says.
“Not only can the event system theory help us understand the impacts that a proactive change had, it also helps us understand the impacts that a proactive change will have,” Flynn says. “And that means our research has greater potential for developing approaches that can help businesses thrive.”
Leave a Reply