In recent years, energy prices can only be categorized as volatile, and that volatility is having a major impact on manufacturing profits.
Industry accounts for 24 percent of all energy usage annually in the United States, making it the largest business sector. With oil prices quadrupling, propane rising and natural gas going through ups and downs, selection of the right fuels is critical, as is energy efficiency. Some improvements have been seen – between 2001 and 2010, energy use dropped 17 percent.
Further gains are possible if barriers to increased efficiency can be addressed, the U.S. Department of Energy (DOE) asserts. According to the DOE’s report to Congress in June 2015, over the next 10 years, companies could further reduce use by 15 percent to 32 percent, impacting the country’s total by 6 percent to 12 percent.
Three main areas for improvement, associated barriers and roadblocks, and recommendations were detailed in the report.
Industrial end-use efficiency – Industrial end-use efficiency refers to the installation of energy-efficient motors, boilers, lights and machinery. Process modernization and performance are also included in this category, as is waste heat recovery. By making these investments, companies decrease energy use since their operations will simply require less fuel to maintain certain levels of production.
Industrial demand response – Through demand management programs, companies can shift electricity usage to off-peak programs, which cost less and reduce overall demand on energy systems.
Industrial combined heat and power – Co-generation is an up-and-coming technology that either generates electricity from waste heat or uses electricity to generate useful heat. In some cases, the waste heat is fed to another collocated operation. The aim is to reduce waste and minimize environmental impacts of excess heat released into the atmosphere.
The report categorizes barriers into three areas: economic and financial, regulatory, and informational. Identifying obstacles may help government agencies, local governments, energy vendors and companies understand how manufacturing can be supported in moving towards greater energy efficiency.
Economic and financial barriers – The chief barrier is the ability of companies to make capital investments that support energy efficiency or co-generation projects. The benefits must outweigh the costs or the business case will fail. Energy-efficiency improvements also compete with other company needs, and if there isn’t a significant correlation with increased revenues or profits, other options take priority. In addition, cost and availability of capital is a concern.
The report suggests that alternative financing mechanisms can help companies take advantage of efficiency upgrades. These include on-bill financing, which theoretically reduces the financial impact of purchase through the offset of cost savings provided by the new equipment. Incentives and new depreciation rules are being proposed to help spur co-generation investments.
Regarding demand response programs, lack of clear financial benefit is often a barrier because switching production use of power has a cost and may not be convenient to the company or its employees. Financial incentives may not be sufficient to incentivize use of these programs. Texas has successfully combated this problem by providing real-time electricity cost information to cement manufacturers, which are high-energy users.
Regulatory issues – Regarding regulatory issues, the report recognizes there is often a disconnect between the goals of utilities and industry. For example, utilities see lost revenue if companies implement major energy-efficiency projects. In addition, permitting complexity can deter businesses from implementing these projects. Aligning utility and company incentives can create a mutually beneficial approach to efficiency.
The DOE suggested that energy efficiency be included at the utility and state level as part of resource planning. At the company level, plant planning can include energy management systems that meet national and international standards of excellence.
Informational – As with any developing field with rapid technological changes and improvements, disseminating information is critical. Companies are often unaware of their options regarding energy usage. Short pay-back periods, incentives, financing alternatives and exponential improvements in energy requirements are all factors that can sway investment in energy-efficient equipment and processes.
The DOE report’s systematic approach to identifying efficiency opportunities and obstacles offers options for manufacturers to perform profitably and optimally while reducing energy consumption. – Elizabeth Penney