In-House vs. Outsourced Energy Manager: Which is Right for Your Business?
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Key Takeaway: With Malaysia's
EECA 2024 now in full swing, appointing a Registered Energy Manager (REM) is a
legal must for many businesses. This crucial decision – whether to hire an
in-house REM or engage an outsourced expert – has significant implications for
your budget, operational control, and the effectiveness of your energy-saving
efforts. Understanding In-House vs. Outsourced Energy Manager: Which is Right
for Your Business? is key to making a strategic choice that optimizes both
compliance and long-term energy efficiency.
Problem: Malaysia's new Energy
Efficiency and Conservation Act (EECA) 2024 requires many businesses to appoint
a Registered Energy Manager (REM), leaving many wondering: should we hire
someone new, train an existing staff member, or bring in an external expert?
Agitate: Making the wrong
choice can lead to hidden costs, inefficient energy management, or even
non-compliance penalties. It's not just about finding anyone; it's about
finding the right solution that fits your company's unique needs and
goals.
Solve: This guide dives deep
into In-House vs. Outsourced Energy Manager: Which is Right for Your Business?
We'll break down the pros and cons of each option, helping you weigh the costs,
benefits, and practical considerations to make an informed decision for your
company's energy future.
Summary
The Energy Efficiency and
Conservation Act (EECA) 2024 mandates that "Energy Consumers"
(businesses using ≥21,600 GJ/year) and "Persons in Charge of
Buildings" (office buildings with ≥8,000 sqm GFA) appoint a
Registered Energy Manager (REM). This crucial role can be filled by either an
in-house employee (new hire or trained existing staff) or an outsourced
professional/firm (Energy Service Company - ESCO). The choice involves weighing
factors like cost (salary/benefits vs. retainer/project fees), access to specialized
expertise, level of direct control, long-term commitment, and the speed of
implementation. The EECA allows both internal and external REMs, with specific
limitations on how many clients an external REM can serve and the duration of
the initial external contract (up to 3 years). Understanding In-House vs.
Outsourced Energy Manager: Which is Right for Your Business? is vital for
effective compliance and energy savings.
1. Why Your Business
Needs an Energy Manager Now (Thanks, EECA 2024!)
If your business uses a lot of
energy, or if you manage a large office building, you've probably heard about
the new Energy Efficiency and Conservation Act (EECA) 2024. This law, which
officially began on January 1, 2025, is a big step for Malaysia towards using
energy more wisely and reducing our carbon footprint.
One of the most important parts of this new law is the requirement for certain businesses to appoint a Registered Energy Manager (REM).
Who needs a REM?
- Energy Consumers: If your industrial or
commercial business uses 21,600 Gigajoules (GJ) or more of energy each
year (that's roughly RM2.4 million in electricity bills or RM1 million in
natural gas bills annually).
- Persons in Charge of Buildings: If you
manage an office building with a Gross Floor Area (GFA) of 8,000 square
meters or more.
The Energy Commission (EC)
will notify companies that fall under these categories. Once notified, you have
a set time to appoint your REM.
What does a REM do? A
Registered Energy Manager is a vital person for your company's energy journey.
Their main jobs include:
- Collecting and Analyzing Data: They gather
all the information about how much energy your company uses, identifying
patterns and waste.
- Developing an Energy Management System
(EnMS): They help create a structured plan (like ISO 50001) to
continuously monitor, control, and improve your energy use.
- Monitoring EnMS Implementation: They keep
an eye on how well the energy management system is working and suggest
improvements.
- Preparing EE&C Reports: They put
together the annual Energy Efficiency & Conservation reports that you
need to submit to the Energy Commission, making sure all the information
is accurate.
- Proposing Energy Saving Measures: They
work with the findings from energy audits (done by a Registered Energy
Auditor, REA) to suggest ways your company can save energy and money.
So, the question is not if
you need an energy manager, but In-House vs. Outsourced Energy Manager: Which
is Right for Your Business? Let's look at the two main options.
2. Understanding the
"In-House" Energy Manager Model
An "in-house" energy
manager means that the person responsible for energy management is a direct
employee of your company. This could be someone you hire specifically for this
role, or an existing employee who gets the necessary training and certification
to become a Registered Energy Manager (REM).
Let's explore the good and bad
sides of having an in-house energy manager.
Pros of an In-House Energy
Manager:
- Deep Company Knowledge:
- An in-house REM will become very familiar
with your company's operations, its unique culture, specific equipment,
and how different departments work together.
- This deep understanding helps them find
energy-saving opportunities that an outsider might miss, as they know the
"ins and outs" of your daily business.
- Full-Time Focus:
- Their main job, or even their only job,
is to manage your company's energy. This means they are dedicated 100% to
your energy goals.
- They won't be splitting their time
between your company and other clients, which ensures your energy
efficiency projects get constant attention.
- Immediate Availability:
- They are physically on-site (or easily
reachable within the company) to respond quickly to energy-related
issues, answer questions, or seize new energy-saving opportunities as
they come up.
- This quick response can be very helpful
for urgent matters or when needing to gather information on the spot.
- Company Loyalty & Retention:
- An employee who feels valued and sees a
clear career path in energy management is likely to stay with your
company for a long time.
- This builds valuable, long-term expertise
within your organization, which can lead to continuous improvements and
innovation in energy use.
- Direct Control:
- You, as the company owner or management,
have direct control over their priorities and tasks. You can quickly
change focus based on your company's evolving needs or urgent projects.
- This allows for better alignment with
your overall business strategy.
- Enhanced Security and Confidentiality:
- As a direct employee, they are already
bound by your company's privacy and confidentiality policies. This can
reduce concerns about sensitive operational data being shared outside the
company.
Cons of an In-House Energy
Manager:
- High Upfront & Ongoing Cost:
- Hiring a new employee means paying a
salary, benefits (like EPF, SOCSO, health insurance, leave), and
potential bonuses.
- You also need to budget for their
training to become a Registered Energy Manager (REM), continuous
professional development, and any software or tools they need. This can
easily exceed RM80,000 per year, excluding recruitment and setup costs.
- Limited External Expertise:
- Even the best in-house REM might not have
been exposed to a wide range of different industries, technologies, or
unique energy-saving solutions that an external consultant, who works
with many clients, would have.
- They might miss out on the latest global
best practices unless actively seeking external training and networking.
- Training & Certification Burden:
- If you're training an existing employee,
you'll need to invest time and money in their REM certification (which
involves courses and exams) and potentially backfill their original role
during training.
- Keeping them updated with the latest
regulations and technologies will be an ongoing cost.
- Resource Constraints:
- If the in-house REM is the only energy
expert in your company, they might become overwhelmed, especially if
there are many energy-saving projects or if they have other
responsibilities.
- They may also lack the specific
specialized skills (e.g., in complex engineering, financial analysis for
large projects) that a team of external consultants could offer.
- Risk of Turnover:
- If your in-house REM leaves the company,
you lose all that accumulated knowledge and expertise. You'll then face
the cost and time of finding and training a new person, potentially
disrupting your energy management efforts and compliance timeline.
Deciding In-House vs.
Outsourced Energy Manager: Which is Right for Your Business? means carefully
weighing these factors against your company's resources and long-term vision.
3. Understanding the
"Outsourced" Energy Manager Model
An "outsourced"
energy manager means your company hires an external expert or a specialized
firm, often called an Energy Service Company (ESCO) or an energy consulting
company, to provide the Registered Energy Manager (REM) services on a contract
basis. They are not direct employees but service providers.
The EECA 2024 allows for
external REM appointments, but with a few rules: an external REM can serve up
to eight different energy consumers, and an initial appointment for an
outsourced REM can't exceed three years from the date you receive the EC
notice.
Let's look at the advantages
and disadvantages of this approach.
Pros of an Outsourced Energy
Manager:
- Access to Broad Expertise:
- Outsourced firms often have a team of
Registered Energy Managers and other specialists (like engineers,
financial analysts, project managers) with diverse experience across many
industries and technologies.
- This means you get access to a wider
range of knowledge and solutions, from simple efficiency upgrades to
complex system overhauls. They bring best practices learned from other
clients.
- Cost-Effective (Often):
- Instead of a fixed salary, benefits, and
training costs, you pay for services as needed, typically through a
retainer or project-based fees. This can be more flexible and might lead
to lower overall costs, especially for smaller companies or those just starting
their energy management journey.
- You avoid the administrative burden of
hiring, payroll, and HR management.
- Faster Implementation:
- Outsourced REMs and ESCOs are usually
ready to hit the ground running. They already have the necessary
certifications, tools, and established processes.
- This can be very helpful if you're facing
tight deadlines for EECA 2024 compliance after receiving your EC notice.
- Objectivity & Fresh Perspective:
- An external expert can look at your
operations with fresh eyes, without being influenced by internal politics
or existing company habits.
- They can often identify inefficiencies or
opportunities that internal teams, too close to the daily operations,
might overlook.
- Flexibility & Scalability:
- You can easily adjust the level of
service based on your company's needs. If you have a big project, you can
scale up. If things are quiet, you can scale down.
- This offers great flexibility compared to
the fixed costs of an in-house employee.
- Pre-Certified Professionals:
- You don't need to worry about training
someone or ensuring they pass the REM certification exams. The outsourced
firm provides professionals who are already certified and experienced.
Cons of an Outsourced Energy
Manager:
- Less Company-Specific Knowledge
(Initially):
- An external team will need time to learn
your specific operations, equipment, and company culture. This
"ramp-up" period might mean initial delays or a less intuitive
understanding of your needs compared to an internal person.
- Potential for Less Dedicated Time:
- While they are experts, outsourced REMs
often serve multiple clients. This means they might not be able to offer
the same level of constant, on-site presence as a dedicated in-house
employee.
- Their focus might be on meeting contract
milestones rather than being deeply embedded in your daily operations.
- Less Immediate Availability:
- You might not get immediate on-site
response for urgent issues, as their time needs to be scheduled across
different clients.
- Dependency on External Provider:
- You become reliant on the external firm's
performance and stability. If they face internal issues or go out of
business, it could disrupt your energy management efforts.
- Potential for Misalignment:
- Clear communication and well-defined
contracts (Service Level Agreements, SLAs) are crucial. Without them,
there's a risk that their priorities might not perfectly align with your
company's specific long-term goals.
- Confidentiality Concerns:
- While professional firms will have robust
confidentiality agreements (NDAs), some companies might still feel less
comfortable sharing sensitive operational data with external parties.
This needs careful consideration and strong legal agreements.
When deciding In-House vs.
Outsourced Energy Manager: Which is Right for Your Business?, it's crucial to
weigh these trade-offs against your company's size, complexity, and strategic
direction.
4. Key Factors to
Consider When Making Your Decision
The choice between an in-house
or outsourced energy manager isn't one-size-fits-all. Here are the key factors
your business should consider to determine In-House vs. Outsourced Energy
Manager: Which is Right for Your Business?:
- Your Company's Energy Consumption &
Complexity:
- High Consumption / Complex Operations
(e.g., large factory with unique processes): A dedicated in-house REM
might be more beneficial due to the need for deep, continuous
understanding of highly specific and changing energy needs. However, an
outsourced firm with specialized industrial process expertise could also
be valuable.
- Lower Consumption (still above EECA
threshold) / Simpler Operations (e.g., a large office building): An
outsourced REM might be more cost-effective as the full-time commitment
of an in-house manager may not be justified.
- Budget & Cost Structure:
- Fixed vs. Variable Costs: Do you prefer
the predictable fixed costs of a salary (with benefits) or the more
flexible, project-based or retainer fees of an outsourced service?
- Upfront Investment: Can you afford the
initial investment in training an existing employee or recruiting a new
one, plus their ongoing salary? Or do you prefer lower upfront costs by
using an already certified external professional?
- Existing Internal Expertise &
Resources:
- Do you have an existing employee with a
strong technical background (e.g., engineering, facilities management)
who is keen to learn and become certified as a REM? This can reduce
recruitment costs and leverage existing company knowledge.
- Does your company have the internal
capacity (HR, IT support, management time) to manage and support an
in-house energy manager effectively?
- Timeline for EECA 2024 Compliance:
- If you've just received your EC notice
and need a REM quickly (within 3 months), an already certified outsourced
REM can get you compliant faster.
- If you have more lead time and a
long-term strategy to build internal capabilities, training an in-house
REM might be feasible.
- Long-Term Energy Goals:
- Pure Compliance: If your main goal is
just to meet EECA 2024 requirements, an outsourced REM might be a
straightforward, cost-efficient path.
- Deep Energy Transformation &
Innovation: If you aim for continuous, deep energy savings, integration
of new technologies, and a strong sustainability drive, an in-house REM
deeply embedded in your strategy, or a strong hybrid model, might be more
effective.
- Need for Objectivity vs. Deep Integration:
- An outsourced REM offers an objective,
fresh perspective, which can be great for identifying hidden
inefficiencies.
- An in-house REM offers deep integration
into daily operations and company culture, which can be better for
driving behavioral change and long-term, sustained efforts.
- Risk Tolerance & Control:
- How much control do you want over the
energy management process? An in-house manager gives you maximum control.
- How do you manage the risk of employee
turnover (for in-house) versus reliance on an external vendor (for
outsourced)?
By carefully considering these
points, your company can make an informed decision about In-House vs.
Outsourced Energy Manager: Which is Right for Your Business?
5. Hybrid Models:
Getting the Best of Both Worlds?
Sometimes, the best answer to
In-House vs. Outsourced Energy Manager: Which is Right for Your Business? isn't
a simple "either/or" but a "both." Many companies find
success with a hybrid approach, combining the strengths of in-house dedication
with external expertise.
Here are a few ways a hybrid
model can work:
- Internal Champion + External Support:
- What it is: You train an existing
employee (or hire a junior one) to become your Registered Energy Manager
(REM) and serve as the main internal point person.
- How it works: This in-house REM will
manage the daily energy data collection, monitor the Energy Management
System (EnMS), and prepare routine reports. For more specialized tasks,
like detailed energy audits (which must be done by a Registered Energy
Auditor, REA, who can be internal or external), complex engineering
studies, or the implementation of large-scale energy projects, you bring
in external energy consultants or ESCOs.
- Benefits: This model gives you the deep
internal knowledge and continuous presence of an in-house REM while
providing access to specialized, diverse expertise for specific needs
without the full-time cost. It's often very cost-effective.
- Remote Outsourced REM + On-site
Coordinator:
- What it is: You appoint an external
Registered Energy Manager (REM) or firm to handle the statutory
compliance (reports, EnMS oversight). Simultaneously, you designate an
existing internal staff member (e.g., a facilities manager or operations
engineer) to act as an on-site energy coordinator.
- How it works: The external REM provides
the technical guidance and handles official submissions. The internal
coordinator helps gather data, implements smaller energy-saving measures,
acts as the eyes and ears on the ground, and communicates regularly with
the outsourced REM.
- Benefits: This ensures compliance through
external expertise while maintaining a physical presence and ongoing
engagement within your facility. It's especially useful for companies
with multiple sites where one external REM might oversee several locations,
each with an internal coordinator.
- Project-Based Outsourcing:
- What it is: You keep your core energy
management in-house (or manage it minimally) but outsource specific,
complex energy projects.
- How it works: For instance, you might
bring in an ESCO to implement a major HVAC upgrade, install solar panels,
or manage a waste heat recovery project. These projects are often
performance-based, meaning the ESCO's payment is linked to the energy
savings achieved.
- Benefits: This allows you to tackle
large, capital-intensive energy efficiency projects without building
extensive internal teams for temporary needs. It leverages specialized
contractors who guarantee savings.
A hybrid approach offers
flexibility and can be tailored to your company's specific strengths,
weaknesses, and evolving needs, potentially providing the ideal answer to
In-House vs. Outsourced Energy Manager: Which is Right for Your Business?
6. The Malaysian
Context: What to Look For
When making your decision
regarding In-House vs. Outsourced Energy Manager: Which is Right for Your
Business? in Malaysia, there are some local factors to keep in mind:
- Availability of Certified REMs and REAs:
- The pool of registered energy
managers (REMs) and registered energy auditors (REAs) in Malaysia
is growing but still specialized. It might be challenging to find an
immediately available, experienced in-house REM.
- However, many reputable ESCOs and
consulting firms already employ a team of certified professionals, making
the outsourced option a faster path to compliance.
- Understanding of Local Regulations (EECA
2024):
- Ensure that any outsourced REM or firm
has a deep understanding of the specific requirements, guidelines, and
deadlines set by the Energy Commission (EC) under EECA 2024. This is
crucial for avoiding compliance issues.
- Reputation and Track Record of
ESCOs/Consultants:
- If you opt for an outsourced solution,
research potential providers thoroughly. Look for companies with a proven
track record in Malaysia, good client testimonials, and a strong
understanding of your industry. The Energy Commission also provides a
list of Registered ESCOs on its website.
- Leveraging Government Incentives:
- Energy Audit Conditional Grant (EACG
2.0): This grant, offered by SEDA Malaysia, can help companies (both
industrial and commercial) cover the costs of conducting an energy audit,
which is a necessary step for EECA compliance and identifying
energy-saving opportunities. Note that you usually need to appoint an
EC-registered ESCO to carry out the audit under this grant. This can
offset some of the initial costs of bringing in external expertise.
- Green Investment Tax Allowance (GITA): If
your energy manager recommends investments in green technology (like
solar PV, high-efficiency equipment), your company might be eligible for
GITA, which provides tax benefits. Your energy manager (in-house or outsourced)
should be aware of these incentives and help you leverage them.
By considering these
Malaysian-specific aspects, you can refine your decision on In-House vs.
Outsourced Energy Manager: Which is Right for Your Business? and choose a path
that is not only compliant but also strategically advantageous for your
operations.
In conclusion, the decision
between an in-house and an outsourced Registered Energy Manager is a strategic
one for Malaysian businesses affected by the EECA 2024. Each model offers
distinct advantages and disadvantages related to cost, control, expertise, and
long-term commitment. While an in-house REM provides deep, dedicated knowledge
and immediate availability, an outsourced professional offers broad expertise,
cost flexibility, and quicker implementation. Many companies find a hybrid
approach, combining internal champions with external specialists, offers the
best balance. The key is to carefully assess your company's unique energy
consumption, existing resources, budget, and long-term energy goals, while also
leveraging local incentives like the Energy Audit Conditional Grant. Making the
right choice ensures not only compliance but also unlocks significant energy
savings and enhances your company's sustainability.
Still weighing your options
for In-House vs. Outsourced Energy Manager: Which is Right for Your Business?
or need assistance with your EECA 2024 compliance? Don't navigate these
complexities alone. Our team of certified energy experts is here to help you
assess your needs, explore the best solutions, and guide you every step of the
way. WhatsApp or call us today at 0133006384 for a no-obligation consultation!
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