Energy Management Strategies

Industrial Energy Management: A Critique of Prevailing Wisdom

The pinch of today’s high energy costs prompts many manufacturers to investigate energy management options more thoroughly. Some strategies focus on price control, some pursue capital investment projects and others seek savings through changes in procedure and behavior. It is possible to combine all of these strategies. The Alliance to Save Energy’s research has identified the range of typical energy management strategies practiced by industry today. These strategies are as follows:

What financial results can a company expect from energy management? Industry surveys indicate that the average plant can reduce its energy consumption by 10 to 20 percent, and a lot of that is from procedural and behavioral changes. The cost of sustaining an energy management program (operations and maintenance costs only, omitting capital expense) is around 1 to 2 percent of total energy expenditures.

Energy management usually provides savings from a number of sources: (1) reduced fuel use; (2) reconciliation of errors in utility bills; (3) using consumption information to negotiate better fuel purchase contracts; and (4) reduced waste of raw materials, attributable to the enhanced precision of energy use. In addition to savings, many manufacturers enjoy the additional revenue generated from current assets when energy waste is captured and redirected back into process activities.

Energy Management Strategy Descriptions:

• Do nothing: Ignore energy improvement. Just pay the bill on time. Operations are business as usual or “that’s the way we’ve always done it.” The result is essentially “crisis management,” in that energy solutions are undertaken in emergency situations without proper consideration of the true costs and long-term impacts. This strategy is pursued by companies that (1) do not understand that energy management is a strategy for boosting productivity and creating value, or (2) have management in such turmoil that energy management cannot be sufficiently supported, or (3) are extremely profitable and don’t consider energy costs to be a problem. Pros: Manufacturers don’t have to change behavior or put any time or money into energy management. Cons: Savings are forfeited. Income is increasingly lost to uncontrolled waste. Return to top.
• Price shopping: Switch fuels, shop for lowest fuel prices. Make no effort to upgrade or improve equipment. Make no effort to add energy-smart behavior to standard operating procedures. Companies take this approach because they “don’t have time” or “don’t have the money” to pursue improvement projects. It is also preferred by companies that truly believe that fuel price is the only variable in controlling energy expense. Pros: Management doesn’t have to bother plant staff with behavioral changes or create any more work in the form of data collection and analysis. Cons: Lack of energy consumption knowledge exposes the manufacturer to a variety of energy market risks. The origin of waste is unknown, as are the opportunities to boost savings and productivity. Exposure to energy market volatility and emissions and safety compliance risks remains. Return to top.
• Occasional low-cost, non-capital projects: Make a one-time effort to tune up current equipment, fix leaks, clean heat exchangers, etc. Avoid capital investments. Revert to business-as-usual behavior after one-time projects are completed. Companies that do this are insufficiently organized to initiate procedural changes or make non-process asset investments. They cannot assign roles and accountabilities for pursuing ongoing energy management. Pros: Very little money is spent when just pursuing quick, easy projects. Cons: Savings are modest and temporary because facilities don’t develop procedures for sustaining and replicating improvements. Familiar energy problems begin to reappear. Energy bills begin to creep back up. Return to top.
• Capital projects: Acquire big-ticket assets that bring strategic cost savings. But beyond that, daily procedures and behavior are business as usual. This strategy is adopted by companies that believe that advanced hardware is the only way to obtain real, measurable savings. Similarly, they believe that operational and behavioral savings are “weak” and not measurable. Such companies may also lack the ability or willingness to perform energy monitoring, benchmarking, remediation and replication as a part of day-to-day work. However, they have the fiscal flexibility to acquire strategic assets that boost productivity and energy savings. Pros: Obtain fair to good savings without having to change behavior or organize a lot of people. The risk of such investments is reduced if sustained by appropriate maintenance and skilled staff. Cons: Forfeit savings attributable to sustained procedural and behavioral efforts. Also, payback from the new assets may be at risk if not complemented by the appropriate maintenance, procedures and skilled staff. Return to top.
• Sustained energy management: Merge energy management with standard operating procedures. Diagnose improvement opportunities and pursue these in stages. Procedures and performance metrics drive improvement cycles over time. Manufacturers with corporate commitment to continuous improvement can pursue this strategy. They have well-established engineering and internal communications protocols and an energy program that engages staff with roles and accountabilities. They encourage cooperation among departments. Pros: Maximize savings and capacity utilization. Increased knowledge of in-plant energy use is a hedge against operating risks. Greater use of operating metrics will also improve productivity and scrap rates while reducing idle resource costs. Cons: Companies need to recognize that there may be need for up front investment in staff resources and training, new expertise, better cross-functional management and the time of senior managers. Return to top.