Wednesday, October 31, 2007

Embedded & Lifecycle Energy Costs

A major energy challenge is to identify manufacturers’ embedded energy costs. Managers at each stage of manufacture may overlook energy waste because “energy is only two, three or five percent” of production costs. But the prices of final products must absorb these layers of energy inputs. For example, the direct energy cost for assembling an appliance might be only a few dollars—and a very small fraction of its retail cost. But in the big picture, there was energy consumed in mining the appliance’s iron ore, copper, and bauxite; in metal treating; in rubber and glass manufacture; in powerhouse fuels for the facilities that make plastics, paints and dyes; and in energy feedstocks, which are energy commodities consumed directly as product ingredients. Any waste of energy in the manufacture of these intermediates, disguised in the cost of inputs, eats up profit margins at every step. In effect, consumers are “taxed” for any waste committed at all stages of the manufacturing process. This is true for appliances, consumer electronics, toys, processed food and many more goods.

A product’s energy lifecycle describes its total energy impact, including all stages of its manufacture through the end of its operating life and includes its eventual disposal. Historically, if industry had any interest in energy consumption, it ended when products were finished and shipped. Today, however, because consumers are increasingly concerned with the energy consumed by their appliances, cars and homes, manufacturers should be, too. And at the end of a product’s useful life, its disposal must respond to growing concerns about environmental impacts.

The lifecycle energy concept outlines the opportunities to create superior product value—beginning with the elimination of energy waste in manufacturing, and continuing through energy efficiency benefits conveyed to the consumer. Innovative technologies tie together all the stages of the energy lifecycle. Industry’s opportunity is to harness the same innovation that goes into its products and apply it to their energy use.

Manufacturers can partner with their suppliers to map their energy intensity to strategically squeeze out avoidable costs. Technology research and development (R&D) is crucial, but so is parallel development of human skills to manage energy use by large organizations. Companies are always partnering to achieve economies in distribution and inventory, so why not in energy management? The information technology exists, and it can be done.



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