Energy Management – Why Now? Why Wait!

Posted by Tom Emmrich

Mar 6, 2014 9:00:00 AM

“America's energy boom will continue for decades, and natural gas will replace coal as the largest source of U.S. electricity by 2035, the Department of Energy forecast today.  U.S. production of crude oil will increase through 2016, when it will approach the record set in 1970, before leveling off and then slowly declining after 2020. Natural gas production will grow steadily, jumping 56% from 2012 to 2040, according to an early release of an annual report by DOE's Energy Information Administration.”  [USA Today, December 16, 2013.  “U.S. forecasts natural gas boom through 2040”]

It wasn’t too long ago when the U.S. energy dependence fueled projections of a steady increase in energy prices.  As had happened previously in Europe, this drove U.S. companies and individuals to a new level of sensitivity towards the potential financial impacts of resource usage and efficiency.   In addition, there was an acceleration of focus on responsible consumption based on sheer global scarcity, and the environmental impact of green-house gases and carbon footprints.  Sustainability became a hot topic.stop_light

Now that the immediate price impacts appear less likely, has the urgency disappeared?

Should it? 

For many companies, the importance of beginning a disciplined energy management program has declined in priority.  Even if it’s still on the radar, for many the question asked is:  “Why Now?”

There are 5 main reasons that the real question should be “Why wait?” 

  1. The Global Energy Situation.  We’re pretty good at compartmentalizing things when the pressure is not directly in front of us.  There is a strong element of energy supply and demand that is regional but ultimately it is a global issue, and the global energy situation remains a serious concern.  Two headlines from the end of 2013: 

Britain's Energy Crisis Goes From Bad to Worse; 'People Are Going to Have to Choose Between Keeping Warm and Eating'

“The relentless rise of electric and gas prices in the United Kingdom has provoked a political backlash of epic proportions.  Over the past few weeks, three out of the UK’s six largest energy utilities - SSE, British Gas and nPower - have rolled out plans to raise electric and natural gas prices between 8% and 10% by the end of 2013.” [Forbes, October 23, 2013]

“No End in Sight to the Energy Crisis That Plagues the Philippines”

The rolling power outages still bedevil the country, raising concerns about the sustainability of one of Asia’s fastest-growing economies [Time, August 6, 2013]

We cannot operate under the belief that global energy supply and demand issues will not impact us.  While the U.S. may be entering a short period where we are a net supplier of certain fuels, overall we will experience the same pressures as are felt around the world.  The ability to provide sufficient energy to a burgeoning global economy will continue to put pressure on all consumers.

  1. Water.  Natural resources consist of many elements.  According to the projections cited above, the supply and price situation around oil is expected to turn sooner than natural gas.  But water is at a crisis point today. 

California bans fishing in several rivers in midst of drought

“California state officials announced during the last week of January, 2014, that 17 communities across California, including Cloverdale in Sonoma County and Camp Condor in Kern County, are in danger of running out of water in 60 to 120 days.”  [By Shan Li, LA Times,  January 29, 2014]

The Ogallala Aquifer, the vast underground lake that provides water to much of the Midwest is quickly running dry:

Wells Dry, Fertile Plains Turn to Dust

“Vast stretches of Texas farmland lying over the aquifer no longer support irrigation. In west-central Kansas, up to a fifth of the irrigated farmland along a 100-mile swath of the aquifer has already gone dry. In many other places, there no longer is enough water to supply farmers’ peak needs during Kansas’ scorching summers.

And when the groundwater runs out, it is gone for good. Refilling the aquifer would require hundreds, if not thousands, of years of rains.  This is in many ways a slow-motion crisis — decades in the making.” [ New York Times, Published: May 19, 2013]

Whether it’s water or oil or electricity, do you understand where these resources are used in your business and how this changes over time, in order to identify areas of waste, and opportunities for ‘easy’ efficiency?

  1. Cost Even with prices remaining steady, natural resources represent a cost to your business.  Historically many companies viewed this as a fixed cost. It is not – and the more you understand the variable impact of energy consumption the more you will be able to predict and control your costs.  You cannot improve what you don’t measure.  Simply understanding your total bill (often viewed months later) does not help you identify areas for potential improvement and cost reduction.  And finding about an ‘efficiency event’ hours, days or weeks after it occurs does not help you take the immediate actions to stop waste before it occurs.
  1. Right to Trade.  Increasingly, your ability to demonstrate to your community and to your key customers that you are responsibly tracking energy and water efficiency and that you are at least aware of your environmental footprint will be a “right to trade” issue….a “ticket to admission” within your community and your market.  Compliance will become a significant requirement for companies as is already the case in many non-U.S. geographies.
  1. Competitive Advantage.  American manufacturers already have a huge competitive advantage when it comes to energy costs compared to our competition in Europe and Asia.  With an energy management solution, American manufacturers can capitalize on that advantage, improving their consumption efficiency and maximizing the energy cost gap between us and our foreign competition.

Manufacturing and Energy:  Advantage USA

[American] Manufacturers on average saw a 36% decrease in the natural gas price they paid between 2006 and 2010, from $7.59 to $4.83 per million Btu.  In a recent report, Boston Consulting Group pointed out that by 2015, the U.S. will enjoy a cost advantage of 60% to 70% for natural gas compared to Europe and Japan, and electricity will be 40% to 70% cheaper than its trading partners [By Steve Minter, Industry Week, October 2013]

Furthermore, an energy management solution can help American manufacturers sustain their competitive advantage when energy costs inevitably begin to rise.  And, American manufacturers can deploy their energy management solution to their facilities in Europe and Asia to improve their competitiveness in those regions.

For all these – you cannot wait to instill a culture of responsibility in your company until the next crisis hits.  Be assured, it will come, and by then it will be too late.  As a country, we’re well behind our European counterparts in establishing a base level of energy awareness and environmental ownership.  Awareness and visibility is the first step of the journey.  From that you can build the sensitivity across the company and also begin to identify the hot-spots of energy consumption which require further inspection.  It is then that appropriate and specific initiatives and actions can be developed to drive continuous optimization and improvement – from simple alerts to intricate knowledge capture and automated analytics.

There is a growing list of energy management applications that can be implemented with little or no upfront investment, some with sophisticated functions specific to manufacturing.  That provides a no risk place to start in order to familiarize yourself with your overall landscape and assess the art of the possible moving forward.  If it’s that easy to get in the game, the question is not “Why Now?”, it is “Why Wait?!



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photo credit: Yogendra174 via photopin cc

Topics: Tips and Tricks, Energy, Energy Management

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