Wednesday, October 25, 2006

Why Does Industry Resist Energy Management?

Misperceptions surround not only the concept of energy management, but also its anticipated impact on daily job functions. Many corporate leaders genuinely believe that energy use is an uncontrollable cost of doing business, so they focus solely on energy prices. Then there are business leaders who truly believe that their facilities have already eliminated energy waste. This conclusion is often based on bad information, including different understandings of what constitutes “energy efficiency.” Some common misinterpretations include:
• installing a backup generator
• participation in a municipal recycling program
• switching fuels
• purchasing energy at the lowest available price or tariff
• purchasing energy through a non-utility marketer
• cutting back production or services to reduce energy consumption
• adopting renewable fuel sources, such as solar or wind power
• installing dual-fuel capabilities on boilers and other large energy-consuming assets

With misunderstanding comes resistance. Some plant personnel may believe that admitting the need for energy improvements is evidence of their ineffective job performance. Meanwhile, the larger and more complex an organization is, the easier it is for individuals to distort measures of their performance and to hide certain inefficiencies.

The pursuit of industrial energy management encounters some large hurdles. To a certain extent, industry consumes energy through large, fixed assets that operate for years or even decades at a time. This includes equipment such as boilers, furnaces and air compressors. In addition to these assets, most facilities operate complex production systems that employ a wide variety of smaller equipment such as pumps, fans and motors. Compared with the larger assets, these smaller components are more easily replaced. However, the design of the overall system in which they were installed is not as easy to change. Industries typically conduct multi-year planning cycles to organize major facility upgrades and system changes. Planning cycles allow facility managers to avoid frequent disruptions to their production schedules. These cycles take years to conduct and involve a number of considerations, including energy costs. This partially explains why many manufacturers do not respond immediately to proposed energy improvements, even if incentives are involved.

Human nature also plays a role in energy waste. “That’s the way we’ve always done it” is the justification for long-entrenched work habits that become default procedures. Certain habits that save time and effort may be at the expense of excess energy consumption. These practices had little consequence when energy was cheap. However, the trade-offs between time and money change as energy prices escalate. Attempts to change these work habits can cause friction among staff. A manufacturer’s decision to make energy improvements must compete with other priorities. Procurement officers are often compelled to make equipment purchases based on the lowest cost of acquisition, not the total cost of ownership. Production deadlines may force operations personnel to make emergency repairs using whatever equipment is available, as opposed to what is optimal from a total-cost-of-ownership perspective. Energy performance considerations are usually secondary to a plant manager’s need to meet production targets.

Industrial facilities that lack a clear energy cost-control mandate will allow waste to continue. Unfortunately, energy waste is an inexorable drain on earnings. This waste does not wait for people to figure out how to defeat it.

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6 Comments:

At 12:01 PM, Anonymous Anonymous said...

Hi Chris,

Good job with the blog. Saturday mornings are good for catching up on the things that one’s friends in the industry are doing and so I’m enjoying the reading.

Some of your material reminds me of an abstract that I’ve just put together for our next technical paper. Essentially, I’m going to suggest that we (anyone interested or having a stake in energy efficiency in some way) all simply accept the fact that ‘energy efficiency’ can not and will not ever be accepted as a goal on its own. It’s a mistake to do so since that’s not what our customers do – they are in the business of making product whatever it is and doing so in a way that maximizes their profits (and sometimes that goal coincides with energy efficiency and some times it does not). Thus any successful approach must recognize that energy efficiency is not an entity that operates in a vacuum – it’s something that falls out naturally (under the proper encouragement) when other elements that are truly important to the customer are focused upon and optimized. I will of course address this topic from my own familiar territory of fans and pumps. The focus of the paper will be to take a look at what the relationship is between a wide variety of customer driven issues and energy efficiency. Things such as cost of engineering, equipment and installation, maintenance, process reliability, flexibility, control, future process requirements, the equipment problem areas of noise/vibration/mechanical failures and so on will be explored – the challenge will be to make it fit into a 10 page paper.

Anyway, better cut the rambling and get moving along. Take care and it was nice to hear from you.

Vern Martin P.Eng.
FLOWCARE Engineering,
Cambridge, ON, Canada

 
At 10:28 AM, Anonymous Anonymous said...

Hello Chris,

Some good perspectives here on your blog site.

Vern brings up some good points. Most notably that industry is in the business of making a product at the lowest possible cost. Certainly true, however it misses a company's real objective of meeting or exceeding customers needs & expectations. It's not enough to simply spot your product on the store shelf at a price point inline (or a few pennys less) than the competition. You need to establish a brand idenity which the consumer can feel good about. This is where eco-efficiency plays a tangible role.

An example is one of our brands - Ben & Jerrys Ice Cream has for years been identified with social responsibility. It's an expensive brand, but consumers are willing to pay a premium for brands they can feel good about.

Wal*Mart has recently demanded eco-efficieny improvements from it's suppliers. As the worlds leading retailer, you can bet its business partners are taking it seriously.

My point is simply that times are a changing - As a business, you can either hang on to the past, hoping for the best - or embrace the future and get an early jump on your competition.

Management at Unilever gets it. There is much work to be done, but it's an exciting time to be in the field.

Jim Pease
Unilever North Amercia

 
At 10:32 AM, Anonymous Anonymous said...

This comment has been removed by a blog administrator.

 
At 7:56 PM, Blogger Christopher Russell said...

Jim,

Welcome! I appreciate your post. I understand Unilever's strategy for embracing eco-efficiency. Intuitively, you would expect consumer product manufacturers to more readily adopt these principles for marketing purposes. And as you correctly noted, Wal*Mart enforces this discipline on its suppliers, which raises economic expediency of another sort. But consumer products are only the tail-end of a long line of intermediate manufacturing activities. For example, Rohm & Haas may produce the petroleum distillates that Eastman Chemical uses to make granular plastic material that PolyOne purchases by the hopper-car full. It's these primary stages of activity that require massive amounts of energy. Polyone then makes the little plastic containers that hold the personal hygiene products that Unilever makes. None of these companies are household names. So what compels THEM to adopt efficient practices? I'll revisit this subject soon.

 
At 11:44 PM, Anonymous David Jaber said...

They say when you have a hammer, everything looks like nails. I'd try looking at it from the business standpoint, think about their end goal, and what will support that, rather than push a predetermined initiative or approach (e.g. energy efficiency).

Similar to Vern's comment about lowest possible cost--I find clients looking at a range of cost-reduction initiatives (e.g. lean manufacturing)--so waste, energy, water, anything falling under their purview are all vying for investment, and he with the best financial return usually (but not always . . ) wins. Also depends on who's the ultimate decision-maker. It may end with this manager, or go further up the chain where additional investments may come to compete. Assuming your e-efficiency requires investment, you'd fall into the fray

 
At 5:44 PM, Blogger Christopher Russell said...

Dave,

Thanks for joining in! Your comment about energy efficiency being "lost in the fray" of other corporate priorities is certainly true. But this is the consequence of approaching energy improvements as a PROJECT instead of a continuous improvement PROCESS. More on this point soon....

 

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