Reprinted with permission from RSM McGladrey Advantage
Anyone who owns a mid-sized business is aware that energy costs are rising, and is most likely looking hard for energy savings.
In a survey last fall by the U.S. National Association of Manufacturers (NAM) and the Alliance to Save Energy, 30 percent of respondents said energy conservation initiatives were critical to their business plans. One-third said they were launching major capital projects to cut energy costs, and a quarter said they were at least working on inexpensive, one-time remedies for high energy bills.
The bottom-line threat to American businesses continues to grow with climbing energy prices. Some 65 percent of U.S. companies say rising energy prices pose a possible barrier to their company's growth over the next 12 months, according to a recent industry survey. By U.S. Department of Energy estimates, industrial use accounts for about a third of energy consumed in the United States. Therefore, even the slightest amount of belt-tightening could lead to huge savings.
Starting with an Energy Benchmark
The NAM-Alliance study recommends all manufacturers begin conservation efforts with energy audits of their facilities. Industry surveys indicate the average facility can reduce its energy consumption by 10 to 20 percent. At least 30 percent of industry's overall energy-savings potential is attainable without capital expense, through changes to procedures and behavior. The NAM-Alliance study suggests that companies can administer energy management the same way as financial management: by establishing goals, understanding available solutions, maintaining regular upgrades over time, and tracking and reinvesting savings.
Companies concerned about the cost or hassle of performing energy audits have an attractive option. The U.S. Department of Energy's Office of Energy Efficiency and Renewable Energy maintains a network of Industrial Assessment Centers (IACs) that help small to mid-sized manufacturers identify opportunities to improve productivity, reduce waste and save energy. Teams of engineering faculty and students from 26 participating universities across the country perform these comprehensive industrial assessments free of charge. To date, changes based on recommendations from IAC audits have saved participating manufacturers an average of $55,000 annually.
"We begin the process by looking at 12 months of electricity, natural gas, water and sewer bills, and any expenditure for wastes," said Gregory M. Maxwell, director of the IAC at Iowa State University. "Once on site, the typical audit involves bringing our team into a facility for a full day of observations and interviews. We are able to match each manufacturing operation against best practices and the IAC database to provide anywhere from five to 20 areas of possible savings. I think one of the strengths of the assessments we conduct is our ability to provide companies with the costs and benefits of change, contrasted with the costs of maintaining the status quo."
The IAC maintains a database of hundreds of completed assessments, broken down by manufacturing type and industry, detailing the specific recommendations, the cost of acting on those recommendations and projected savings.
"Our teams just perform the assessment," Maxwell said. "Whether the company actually acts on our findings is ultimately up to them. Either way, these assessments raise the awareness of the manufacturer involved, getting them thinking about how they might improve their operations in the future."
In order to qualify for an IAC audit, companies must have gross annual sales of $100 million or less, annual energy costs ranging from $100,000 to $2.5 million, fewer than 500 employees, and no in-house energy expertise.
Using New Technologies to Save and Grow
Employing new, more efficient manufacturing processes can bolster company goals for business growth. Research shows trendsetting companies improve their business performance through better stewardship of energy and other resources. Energy innovation also can boost the competitiveness of manufacturers seeking to develop tomorrow's market opportunities.
However, certain energy-efficient technologies face developmental hurdles because of innovation costs and the industry's investment priorities. One program, led by the U.S. Department of Energy's Industrial Technologies Program, partners with industry to mutually identify, sponsor and develop new technologies. A recent U.S. Department of Energy study summarized the current energy-saving opportunities of emerging technologies at 5.2 quadrillion Btu — 21 percent of the primary energy the manufacturing sector consumes. These savings equal almost $19 billion for manufacturers, based on 2004 energy prices and consumption volumes.
Changing Attitudes on Energy Help Conservation
The economical use of industrial energy represents a vital opportunity for U.S. manufacturers to improve financial performance in a competitive international marketplace. Simply changing the way manufacturing employees think about energy use can go a long way to generating real cost savings. The NAM-Alliance study found a lack of energy-use awareness, incorrect perceptions and conflicting priorities often result in the loss of manufacturing earnings. Improving staff training, business practices and management techniques can bring big increases in energy efficiency. According to the study, many U.S. manufacturers also find investment in innovative technologies can achieve substantial additional benefits not only to the financial bottom line, but to corporate image and community relations, too.
Last modified May 24 2007 12:12 PM
