Monday, January 15, 2007

The Hunters and Farmers of Energy Savings

“Companies approach energy management with one of two basic strategies,” a colleague of mine once said. “One is that of the hunter, and the other, the farmer.” That comment has stuck with me for a long time, and now it’s time to blog about it.

Imagine living on the frontier before the advent of supermarkets, convenience stores, and restaurants. Frontiersmen had to be self-sufficient in providing not only daily sustenance, but (if times were good) some surplus commodities for the market. The same opportunities await manufacturers that proactively manage their energy resources — or in other words, “hunting and farming” wealth in their own facilities.

The farmer stakes out a fixed territory and produces value by systematically sowing, tending, and harvesting valuable crops. The farmer’s discipline of daily chores, patiently applied year after year, allow him to reap wealth from his acreage. Aside from some weather-related risk, the farmer can look forward to a predictable yield of commodities. The farmer may produce only one or two crop varieties per season, but the volume is enough not only to feed the farmer’s family, but also to sell for cash income.

The hunter roams freely about the land in search of game. His task is opportunistic—relying on chance and skill to secure a small volume of meat and pelts. The hunter works hard for his bounty, but the goods return a much higher price per unit of mass than do the farmer’s. The hunter’s effort returns value very quickly, but the hunter shoulders a sizeable risk of failure for his time commitment. It is not unusual for a team of hunters to pool their talents when stalking their game.

So we would expect the frontier head-of-household to put some effort into both hunting AND farming, balancing his time wisely between the two tasks in a way that reflected the risks and rewards inherent in each activity. A clever individual could ensure the harvest of staple grains for his family with a surplus to generate cash. At the same time, the effort applied to hunting would bring meat for the dinner table as well as pelts that might bring in some extra income.

Now, let’s apply this thinking to industrial energy management.

Energy is to the factory as fertile land is to the farmer. Through the distribution of electricity, steam, and compressed air, energy can potentially “fertilize” every square foot of space. This energy can either be harnessed to make products, or it can dissipate through waste. Remember that in either case, the plant pays for that energy.

The “farmer,” in today’s factory, harvests value from existing plant assets. He ensures that leaks and losses from steam, air, water, and other distribution systems are minimized. Operating benchmarks indicate the optimal level of energy consumption per unit of production, while periodic data snap-shots indicate when systems stray from those benchmarks. Like the farmer who methodically plows each row of land, the industrial energy manager monitors each layer of energy utilization data. He develops a protocol for reacting to anomalies in the data. The industrial energy “farmer” needs to know the cost-benefit of taking remedial action. Benchmarks and operating data are his ledger—they are crucial for establishing guidelines for taking action. They are also evidence of the value he has saved. In other words, documentation of energy flows will demonstrate the total value saved (and the revenue it will generate) as well as the value of avoided waste.

The modern industrial analog to the “hunter” is the plant engineer who seeks singular pieces of technology, strategically chosen to improve operating effectiveness. Through consultation and research, the plant engineer scopes out new and improved applications that pay for themselves through the savings and extra productivity that they provide. He lobbies his corporate directors in the capital budgeting process. There’s an elevated risk-reward aspect with the selection of strategic projects, but the successful engineer is skilled at both technical analysis and in presenting his proposal to corporate officers, to explain “what’s in it for them.” It is not unusual for the engineer to pool efforts with others who can help to secure his “game.” In this instance, the engineer’s allies are the technical assistance teams located at universities, professional societies, utilities, and consulting firms.

Industrial plant managers today are on the frontier of a challenging future. We know from history that frontiersmen survived by diversifying their modes of livelihood, and by teaming their skills and efforts with others. While some manufacturers will falter, others will thrive, especially if they harvest their resources wisely. Energy is the “fertilizer” of industry. Information is the ploughshare. Truly competitive manufacturers will enlist both farmers and hunters to reap value from their energy use.



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