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Energy costs are an unavoidable business expense, but there are ways to  minimize them, often without changing a single component or purchasing any special equipment. For 25 years, Modular Process Control (MPC) has been helping businesses improve the bottom line by reducing their energy bills. Michael S. Pappas, Vice President of MPC, talked with e-FFICIENCY NEWS about his company’s role in providing organizations with focused, corporate-wide energy management expertise.
e-FFICIENCY NEWS: Why should top managers in industry pay attention to energy efficiency… in other words, what’s in it for them?
Michael Pappas: The person ultimately responsible for the numbers is the top manager. In a manufacturing environment, energy is a major expense. Top managers are being evaluated and compensated on performance, and today’s high and volatile energy costs directly threaten the financial performance of their operations.
e-FFICIENCY NEWS: Why are many industrial facilities in Japan and Europe more energy-efficient than many in America?
Michael Pappas: Historically, energy has been more costly in Japan and Europe than in the U.S. We’re now crying about $2 gasoline, but in Europe it’s been $4-5 for decades. Now that we have $6-plus natural gas, all of a sudden that’s on the radar screen, too. Why wasn’t energy-efficiency important in the good old days of $1.90 gas? It was still an expense then. That has always been somewhat of a mystery to us. Plants that used to spend $5-10 million for natural gas are now spending $15-30 million. Hey, $5-10 million is still a big number. It’s now getting attention. Better late than never.
e-FFICIENCY NEWS: Manufacturers enter a long-term partnership with MPC to accomplish significant energy cost savings. Please explain that relationship—how long, how is it structured, how does the manufacturer benefit?
Michael Pappas: I was told once that I have two eyes, two ears, and one mouth, and I should use them in that proportion – wise advice! MPC did the same. We examined how the vast majority of consultancies have failed the client, and designed our business model around:
1. Satisfying the client;
2. Ensuring the client’s long-term success, and;
3. Taking the financial risk away from the decision-making process.
It’s funny how casual comments become the hallmark of one’s strategy. Two such comments did it for us. Once a plant manager said to me, “I can manage anything, but what I can’t do is get “anything” from nothing, ground zero, to up-and-running and manageable.” Another said, “When we had Fred the Consultant on-site, we were saving lots of money, but six months after Fred left we were doing things the same old way we did them before Fred got here in the first place”. What MPC does is built around those two comments.
We focus on energy specifically, and everything related to it in a plant. Many companies manage energy “by committee,” but nothing gets done, because of a full plate of daily responsibilities and several other committees, not to mention they don’t know where to start. We “cheat” because we don’t have the distractions, and we bring a tremendous amount of experience and just focus on the energy. In a concise amount of time, usually 6-8 months, we will give the client a fully-developed energy management system. We train people to use this system for day-to-day energy evaluation and decision-making. Overall, our relationship with the client lasts 28 months past the completion of the project.
We have found that our ability to stay with the plant over two complete budgeting periods, allows us to assist the plant with adjustments to the energy management system in response to ever-changing production issues. After all, we want to give the plant an appropriate “send-off” into going it alone. We can have people practicing energy management daily instead of trying to define and create it for the umpteenth time. That’s satisfying the client.
If you ask why we do it this way, consider your doctor for a minute. When your doctor got out of medical school, did he get unleashed onto the public? NO! He knew medicine academically, but not practically. He entered a residency of between 3 and 7 years, according to his specialty, and essentially had his brain re-hardwired. He was trained in a consistent protocol, and had people behind him covering mistakes, giving advice, and helping him to become consistent with his performance. MPC does the same.
After the system is built and up-and-running, we turn to our retainer staff to work with the energy coordinator, who we have trained as selected from plant staff, on a daily basis as the management system is operated and practiced. If something falls out of bed, we work to put it back. As the plant goes forward, then, the energy management system ensures that energy-saving procedures are not lost when the plant’s equipment, processes, and production requirements change. We observed, and indeed were told, that big bucks were paid to consultants and real, palpable savings could not be found.
In response we developed a performance-based compensation system where we do our work at our cost. The baselines that measure savings are approved by the plant before becoming official, and we are paid on actual results. Plants will not pay MPC for any accounting period that is not first completed. That is truly removing the financial risk from the client.
Some companies prefer to pay us in the traditional way due to having had a bad experience with others. That’s too bad, because we have never failed to develop baseline models of historical plant performance that the plant could rely on.
e-FFICIENCY NEWS: Some plant managers may hesitate to enlist services like yours, because doing so implicitly suggests that they’ve not been “doing their job.” How do you defuse that concern?
Michael Pappas: It’s not always easy, because some don’t focus on solving the problem, they worry about the politics. We are on the side of the plant managers – just look at conditions they have to operate with!
Plants and the equipment within them have all aged at different rates, processes have changed, people have come and gone, and there are continuous waves of personnel cutbacks. It’s like running a marathon every day with a chair tied on one’s back.
In addition, they’ve never been exposed to our approach. American industry traditionally approaches problems as a “project.” These projects often fail to provide their promised financial results because of insufficient development information. We average 4-12 percent in electric and 15-25 percent in steam and gas savings by improving maintenance integrity, operational procedures, and operators’ behavior.
How can someone expect “project” hardware to deliver its full savings potential if its results are handicapped by a lack of complementary skills and information? I say don’t beat yourself up for not passing the final if you haven’t taken the course. Often a plant manager goes to a conference and gets a good idea. Here we just bring the good idea to him.
e-FFICIENCY NEWS: What are the risks involved in pursuing energy management? How about the risks of NOT managing energy?
Michael Pappas: I can’t think of any risks. Energy is the third largest cost center for many plants, and for some the second. If it is not actively managed on a daily basis, precious dollars are being wasted. And I’m not talking about observing what is being used but actually managing usage every 10 minutes in every sub-part of the plant every day. It’s funny that when the corporate ivory tower orders the plant manager to cut heads, he does it, and the mere exercise hurts, because you’re dealing with people’s lives. But the same corporate officers don’t understand that they can cut as much cost—or more—through energy savings.
The days of sub-$2.00 natural gas are forever gone. Now we’re talking about fighting for a plant’s mere existence, what with the 1-2 punch of foreign cheap labor and unstable energy prices. Those that do not manage both the demand-side, as we do, and the supply-side, have an unprecedented opportunity for failure in today’s environment. And this goes for all cost centers, not just energy.
e-FFICIENCY NEWS: Energy efficiency is a misunderstood concept. What does it take for people in industry to realize what it means, and what it offers?
Michael Pappas: As I’ve said, energy management is not an engineering issue, it’s a management issue! The plant does not need re-engineering, it needs to have everyone practicing the same management techniques. We do not tell a plant how to make its products – we think it knows. But consider that every plant on the planet only uses five things – gas, electric, air, water, and steam. Every plant is cooking something different, but all plants use the same stuff. We’re managing those five things (plus of course the occasional nitrogen or coal or whatever – don’t get picky!).
Energy is a cost center. Only when you consider the entire plant as a single organism, and build a single, coordinated system to manage that cost center will you be successful. It means a lot, because the bigger bucks are spent on capital equipment and new processes.
With those higher stakes, our management system can provide information that could be the difference between a successful project and a missed payback hurdle. Good people get beaten up all the time over missed payback hurdles. MPC provides a win-win for all concerned, and isn’t that a more pleasant outcome?
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