Energy Outlook for Smaller Manufacturers

Annual Energy Outlook 2015

The Energy Information Administration, a component of the U.S. government, publishes an Annual Energy Outlook. The AEO compiles data on energy production and consumption in this country, and then projects corresponding figures for the future. This year’s edition, AEO 2015, projects as far as 2040. [1]

AEO 2015’s projections are centered on a Reference Case. “Reference Case” is essentially a “business as usual” case, which extrapolates the past and present while considering changes that are already locked in. “Locked in” changes include projected population growth, GDP growth and effects of laws already in place. For example, Reference Case projections for gasoline consumption in 2025 consider how many vehicles will be on the roads in 2025 and the age distribution of those vehicles. Compliance with the CAFE fuel consumption mandates is assumed, since CAFE is existing law. The Reference Case does not consider legislation that is not yet law, nor does it anticipate technological innovations.

Here are some figures and projections from the AEO 2015 of particular relevance to smaller manufacturers:

Projected Growth for Manufacturers

AEO 2015 Fig 2The chart labeled “Figure 2” projects average annual industrial output growth rates for the period 2013 to 2040. Almost all smaller manufacturing firms fall within the “Nonenergy- intensive manufacturing” subsector – the second group of three bars on the chart — which are the best of the four subsectors presented. As you can see, the Reference Case projects an annual growth rate of about 2.4%, with a high of about 3.2% and a low of around 1.7%, depending on the overall growth rate of the U.S. economy.

Energy Utilization Efficiency

For most smaller manufacturers, direct energy consumption means electricity and, perhaps, natural gas or other fuel for process and facilities heating. AEO 2015 Fig 19However, most firms also consume substantial amounts of energy indirectly – transportation and raw materials come quickly to mind. So, energy utilization efficiency matters well beyond your electric bill.

The chart labeled “Figure 19” projects continuation of a strong trend toward improving energy utilization efficiency within the U.S. economy. As you can see, energy consumption per dollar of GDP is projected to reduce by nearly half by 2040. Energy utilization efficiency means energy not used and not paid for. It also means that CO2 emissions to the environment per dollar of GDP decrease in lock step. For free.

Transportation

AEO 2015 Fig 10The chart labeled “Figure 10” projects energy consumption for transportation. Energy consumption for the fleet of light-duty vehicles expected to be on the road in 2040 is projected to be substantially less than that of the corresponding fleet on the road in 2013. The energy consumed by heavy-duty vehicles and by air transport is projected to be rather sharply higher. Since your firm likely ships and receives materials and supplies by truck or (groan) by air, this difference matters. There are a lot of interesting things being done to improve energy utilization efficiency in these transportation sectors. Since you pay the freight – one way or another – it does matter.

Energy Autonomy

Operating in the globalized 21st century requires a remarkably broad scope of management attention, even from small manufacturers. It is not enough to work in your business. Managers today have to keep one eye on the entire world.

Capture - AEO 2015 - Fig 20 Total Energy Production vs ConsumptionThat’s why the chart labeled “Figure 20” is, in my mind, perhaps the best economic news in the entire AEO 2015. For the last four decades, U.S. foreign policy has been driven by access to imported energy. The costs due to energy supply interruptions, the costs of international cartel pricing and the military costs of assuring access to foreign fuels have all been simply enormous. Closing the gap between U.S. energy production and consumption provides control over those costs and allows the U.S. to redirect foreign and domestic policy in more fruitful directions. It also makes life easier for American manufacturers.


Chuck - VancouverThoughtful comments and experience reports are always appreciated.

…  Chuck Harrington (Chuck@JeraSustainableDevelopment.com)

 

P.S: Contact me when your organization is serious about prospering in the globalized 21st century … 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 weekly.


[1] The 154 page Annual Energy Outlook 2015 is available for free download at www.eia.gov. AEO 2015 is worth reading.