Andrew Liveris, the CEO of Dow Chemical, has written a remarkable – and remarkably readable – new book on manufacturing in America and the world. Make It in America makes a strong case for a national energy policy and for a national manufacturing policy in the United States, then offers credible suggestions for how those policies might be constructed. Liveris’ suggestions stem from Dow Chemical’s experiences as a global manufacturing firm that consumes, globally, about as much crude oil and equivalents as does Australia.
The heart of the book is Chapter 4, which Liveris titles “Energy Drives the World”. I will focus on that:
Liveris points out that the world’s population is expected to increase from today’s 6.6 billion to over 8.0 billion in the next 25 years. At the same time, an increasing percentage of the world’s population is rising from poverty to more affluent, more energy intensive lifestyles. So the global demand for energy continues to increase, as the cost of discovering and producing more fossil fuels continues to increase, and as global concern about environmental harm from burning fossil fuels continues to increase.
In the U.S., industry accounts for over 20% of all energy consumed. As a manufacturer, it really doesn’t matter whether or not you believe that greenhouse gas emissions are causing a global environmental catastrophe. However, as a manufacturer, you must be concerned with the rising cost of energy, and about the uncertainties in supply.
From all of this, Liveris sees two primary opportunities for manufacturers:
(1) Energy Efficiency
Since 1994, Dow has saved 1,700 trillion BTUs, equivalent to 13.6 billion gallons of gasoline. In doing so, Dow reduced carbon emissions by 90 million metric tons, equivalent to taking nearly every car in America off the road for a month. And Dow saved $9 billion in doing so. But wait – there’s more! Energy efficiency improvements are measured in energy consumption units, like BTUs or kilowatt hours. And the price of each energy unit keeps going up, so each kilowatt hour of saved is worth even more money tomorrow than it is today.
Conclusion: All manufacturers must establish and systematically pursue aggressive energy efficiency improvement programs. There is a lot of new technology becoming available that will help you be quite successful.
(2) Renewable Energy
An increasing fraction of the global energy supply has to come from non – combustion methods, such as solar and wind power. Such power uses no fuel, so the variable cost of production is both low and predictable. Political and environmental risks are greatly reduced. The potential rewards for firms that can contribute to solving the technical problems of producing renewable energy at scale are really big.
Liveris offers two examples, new Dow projects in Michigan. First, Dow is betting big on advanced battery technology. An 800,000 square foot battery production facility capable of supplying advanced batteries for 60,000 vehicles a year is under construction. Liveris thinks that the market for advanced batteries will grow from today’s $200 million to more than $25 billion by 2015. Second, Dow is now producing roofing shingles for houses. These shingles have solar cells built into the shingle, so your roof becomes your home power source. Liveris sees the solar shingle market in the U.S. at $5 billion today, with potential to $50 billion, given continued incentives for home owners.
Conclusion: There are such huge opportunities in renewable that even conservative companies like Dow are involved. The two projects just mentioned will result in 3,000 new manufacturing jobs on the hurry-up. The dollars and the jobs mentioned reflect only the immediate Dow facilities. Of course, there will be supply and distribution chains adding value and creating jobs along the way.
There is a lot more in Liveris’ book than I’ve mentioned here. If you are involved in manufacturing, buy the book and read the book.
And let me know what you think.