Surfing the Energy Boom

30 January 2014


What’s Your Problem?


The National Institute for Standards and Technology (NIST), part of the U.S. Department of Commerce, administers the Manufacturing Extension Partnership (MEP) program. Since local MEPs are, in essence, contractors, NIST conducts surveys of MEP clients nationwide. These surveys are used to quantify the benefits smaller manufacturer clients receive and to determine areas of concern to those manufacturers.


One part of the survey form asks MEP clients to identify the three most pressing challenges they currently face.[1] This graph compares responses in 2013 with responses from the 2009 survey:[2]

MEP Survey Results

 

As you can see, 71% identified Continuous Improvement as one of their three most important challenges. “Continuous Improvement” implies an interest in reducing costs and increasing throughput, now and in the future. The next four most cited challenges all emphasize preparation for future growth.


Energy utilization efficiency improvement offers significant opportunities for continuous improvement and for anticipating future growth. And here is the really good news: the Feds are predicting that U.S. manufacturing is about to experience a period of substantial growth!


Annual Energy Outlook 2014


The Annual Energy Outlook (AEO) is published by the U.S. Energy Information Administration, part of the Department of Energy.[3] The AEO includes projections for energy consumption in manufacturing. Manufacturing figures are segmented into energy intensive (refining, food, paper, bulk chemicals, glass, cement & lime, iron & steel, and aluminum) and non-energy intensive (all other manufacturing).


The AEO anticipates substantial growth in both sectors in the years to 2025, then continuing at lower growth rates from 2026 – 2040. This growth is attributed to an energy cost competitive advantage from the availability of “fracked” natural gas. Remarkably, the AEO projects that the non-energy intensive sector will grow faster than the energy intensive sector. Since the great majority of smaller manufacturers are in the non-energy intensive sector, and since projections for a decade is about as far ahead as I can take seriously, this post focuses on non – energy intensive manufacturing in the years to 2025.

Manufacturing Energy Consumption

As you can see from the graph labeled Energy Consumption in Non-Energy Intensive Manufacturing, non-energy intensive manufacturing is projected to increase by $1.5T (that’s right, $T, Trillions of 2005 U.S. dollars) between 2012 and 2025. During the same period, energy consumption is projected to increase by 0.7 QBTU (a QBTU — one quadrillion BTUs — is a heck of a lot of energy, roughly 1% of all the energy generated in the U.S. in a year).


So, shipments in constant dollars are projected to increase faster than the energy used to manufacture the incremental product. Accordingly, energy intensity (energy consumed per unit shipped) drops by over 20%. The projected improvement in energy intensity corresponds to saving over a full QBTU (and whatever it costs to produce, transmit, deliver and consume a full QBTU of energy).


How is this going to happen? Manufacturers are going to improve their energy intensity (or energy utilization efficiency), on average, by 2.1% per year. Some of them are going to do much better than that — they are going to surf this boom.


More Good News


First, shipments are projected to increase by $1.5T (~ 86%) over the years until 2025. Over the same period, energy intensity is projected to improve by an amount which corresponds with the total cost of about 1% of all the energy produced in this country. To participate in the $1.5T, manufacturers are going to have to produce profitable products that people want to buy. To participate in the energy savings bonanza, manufacturers have to continuously improve energy intensity.


An energy intensity improvement of 2.1% annually isn’t real difficult. Many firms have done much better than that, and they continue to do so without spending money in excess of their idea of a reasonable return.


When thinking about energy intensity, think well beyond plant and processes. Include:


>> Product design — Design products to require less energy in their production.


>> Equipment upgrade — Equipment suppliers are making drastic improvements in the energy efficiency of their products.


>> Maintenance — Systematically maintained equipment wastes less energy.


>> Packaging — Save energy in materials handling.


>> Transport — Shorter distances, lighter products and packaging, more energy efficient carriers.


>> Carbon pricing — You don’t have to believe in climate change to recognize that there is a real chance that those who do believe in climate change will impose a price on CO2 emissions. This might be a cap and trade scheme, a carbon tax or some other means. Any way you cut it, those with lower energy intensity will pay less.


What to Do?


>> Conduct an Energy Efficiency Audit. See Still a No Brainer, this blog.[4]


>> Establish a relationship with your local MEP engineer.


>> Talk with equipment suppliers about energy efficiency. Take in an industry trade show, especially if it has been some years since you did so.


>> Talk with your electrical utility representative about your power bill, about energy utilization efficiency and about alternative energy sources. You may be surprised.


>> To start right now, download two free Energy Star publications for small and medium sized manufacturers.[5]


Chuck - Asstrian AlpsThoughtful comments and experience reports are always appreciated.


…  Chuck Harrington
(Chuck@JeraSustainableDevelopment.com)


P.S
: Contact me when your organization is serious about pursuing Sustainability … CH


This blog and associated website (
www.JeraSustainableDevelopment.com) are intended as a resource for smaller manufacturers in the pursuit of Sustainability. While editorial focus is on smaller manufacturers, all interested readers are welcome. New blog posts are published on Wednesday evenings.



[1] Detailed information on the survey and its results are available at: http://www.nist.gov/mep/upload/MEP-Measuring-Results-Mar13-v2.pdf

 

[2] The graph is taken from K. Voytek, Painting by the Numbers, MEP Blog, 14 January 2014: http://nistmep.blogs.govdelivery.com/painting-numbers/?utm_source=rss&utm_medium=rss&utm_campaign=painting-numbers. Voytek’s blog post relies on the MEP survey and results publication op. cit.

 

[3] The 2014 Annual Energy Outlook, Early Release is available for free download at: http://www.eia.gov/forecasts/aeo/er/pdf/0383er(2014).pdf. The graph entitled Energy Consumption in Non-Energy Intensive Manufacturing is constructed from this document. For those who like tables better than graphs, here are the key figures: