Friday, November 24, 2006

Budget Bonus for Energy Managers?

This time of year finds many energy managers busy assembling next year's budget. Manufacturing managers are focusing on two components for energy. They are (1) consumption, which reflects energy required per unit of output times some targeted production volume, and (2) a desired price for energy purchases that can be approximated through contracts (hedges) for energy purchases. Lesser informed budget analysts are simply taking the sum total of 2006 energy expenditures and budgeting the same amount (plus five percent, maybe) for next year.

Two Thousand Six has been a strange year for energy prices. After a dramatic price spike in the wake of last year's hurricane season, we've seen a relative dip in energy prices, especially natural gas. How long prices will stay at this level is anyone's guess. Weather and geopolitical events have notoriously unpredictable impacts on energy markets. It would be folly to assume that today's energy prices are destined to prevail throughout the coming year.

Many companies are seeing an energy budget surplus through 2006, thanks to the soft energy markets that prevailed through the latter part of this year. They now have an opportunity to invest that surplus in facility improvements that will reduce future energy costs. An energy assessment (audit) is an excellent investment that yields a blueprint for such improvements. Combustion tune-ups, steam and compressed air leak repair, insulation, and heat recovery from combustion gasses and steam condensate are a few of the simple but valuable examples. Free, unbiased technical guidance describing these opportunities can be found at the U.S. Department of Energy's BestPractices website.



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