Thursday, January 25, 2007

Defining Energy Efficiency: Engineer vs. Plant Manager

A provocative article recently claimed that “energy efficiency alone has not resulted in an absolute reduction in energy use.” The rationale: “increased efficiency tends to decrease energy use per kilogram of product produced… efficiency and increased production go hand in hand, thus the increased production would offset gains in efficiency.”

I’m scratching my head over this one. What does this say about the value of energy efficiency? I invite your comments here on the blog.

Given the quote above, at least one mechanical engineer defines “energy efficiency” as increasing production output from a constant volume of energy inputs. Let’s say my manufacturing facility increases output while my energy consumption remains flat. Assume all other expenses have risen proportionally with output. I have reduced energy consumption per unit of output. I have therefore reduced my expenses and raised my profit margin, both on a per-unit basis. In addition, I have improved my return on assets and earnings per share. Is it my goal to reduce absolute energy consumption? If so, then I have failed. But if my goal was to improve my facility’s financial performance and competitiveness, I was successful.

Just because energy efficiency gives me the potential for expanded production, it doesn’t mean that that the market is ready to accept my extra output. My production may be driven by batch orders. But it’s still my job to meet my production targets with the best possible operating margin. Reducing energy waste contributes directly to my profitability.

Even if I can expand my production through the engineer’s concept of energy efficiency, can I assume that 100 percent of my energy consumption is performing useful work? My facility can lose energy in a myriad of ways: inefficient combustion, steam and compressed air leaks, and motor drives left running when there’s no material in production. According to the U.S. Department of Energy, the average manufacturer can lose 10 to 20 percent of its energy inputs to such insidious waste. I can install the latest, most efficient technology in the world, but I'm still wasting money if I let it run unnecessarily. If my goal is to optimize the economic performance of my facility, “energy efficiency” becomes a tool at my disposal. In other words, “energy efficiency” ensures that my energy dollars don’t literally dissipate into thin air.



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