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Mar 12, 2012

Gathering Low-Hanging Fruit is Not Enough to Green Industry


Originally published at GreenBiz.com on February 27 as the fourth of a five-part series by RMI professionals on how to put into practice the ideas of Reinventing Fire: Bold Business Solutions for a New Energy Era. Part five will be reposted on rmi.org’s Outlet on Friday.

America's industrial sector generates more than 40 percent of the country's gross domestic product and employs almost 20 million people in refineries, paper mills, chemical plants, smelters and countless other facilities. This mighty engine consumed one-quarter of all U.S. energy in 2010—91 percent of which came from fossil fuels—in many diverse segments, in a dizzying array of complex processes.

If we are to move off of fossil fuels, U.S. industry must lead with investment and innovation. This is not only possible, but critical to capturing durable competitive advantage, according to Rocky Mountain Institute's Reinventing Fire — a blueprint to a 2050 U.S. economy powered by efficiency and renewable sources of energy.

Eliminating the use of fossil fuels will result in a healthier environment by reducing toxic air and water pollution while stabilizing CO2 emissions at levels that avoid the most damaging impacts of climate change. In addition to improving the environment and stabilizing the climate, Reinventing Fire is also an enormous business opportunity.

Firms that lead this transition will benefit from reduced operating costs, improved profits and product quality, reduced fuel price volatility and supply risks, the creation of new markets and a competitive edge at home and abroad. While the work is not easy, one key technique can help industry make fast strides: energy management systems.

To capture energy savings in industry, it is not enough to merely gather up low-hanging fruit either when capital is available or cost-cutting is required. Leading firms are attaining dramatic results by pushing far past that opportunistic paradigm, establishing a continuous improvement mindset to monitor and manage their energy use in good times and bad.

For example, Frito-Lay cut its electricity energy intensity by 25 percent, natural gas intensity by 33 percent and water by 41 percent from 1999 to 2008. These energy savings investments not only brought a financial benefit, with an IRR of 25 percent and $55 million added to the bottom line, but they also reduce risk. These investments have even generated marketing benefits, especially as consumers get more savvy about where their products come from and how they are made. The installation of solar thermal power at Frito-Lay's Modesto, Calif., plant enabled the use of the tagline "Sun Chips are now made from the sun."

The key to Frito-Lay's success was not some breakthrough manufacturing innovation, but simple, fundamental business strategies applied to energy use. The energy management strategy could be implemented in a number of ways, but all methods can be boiled down into a simple "plan, do, check, act" structure. To execute effectively, several key elements must be in place:

  • A measurement and reporting structure will accurately assess energy use at the scale required, whether that be the plant, process or equipment level, and will clearly report that use in consistent terms that management can track across different facilities.
  • The right organizational structure must align stakeholders from the boardroom to the shop floor. Creating cross-functional teams tasked with saving energy can help a production manager see how energy-saving projects could boost productivity and not add risk, or help a maintenance manager understand how a steam leak harms the bottom line.
  • Leadership must set bold goals and provide necessary resources. The goals should be aggressive to unlock innovation. If it is already clear how to achieve them, the goals are probably not strong enough. Energy performance should be a component of employees' performance reviews both to reward good work and create a culture of shared responsibility. Capital should be dedicated to efficiency projects—perhaps each year's savings can be reallocated to create a self-sustaining funding source—so they don't compete with fundamentally different types of projects.

The fundamental steps used within an energy management system also happen to be the tenets of good management in general. It is not surprising, then, that instituting an energy management structure would have spillover benefits into product quality, productivity, innovation, risk reduction, brand health and human capital value. The firms best known for their energy management accomplishments—Dow Chemical, Toyota, Nucor, Pepsi Co.— also happen to be leaders in their market segments.

While the implementation details of an energy management plan might look very different at a Dow Chemical, where energy is 16 percent of costs, than it would at Pepsi where it is 2.5 percent, all industries and firms can benefit from applying an energy management system.

Each plan must be tailored to the unique culture and operating requirements of each company, but plenty of resources can help customize your own structure. The EPA's ENERGY STAR program has a set of guidelines. The DOE's Superior Energy Performance (SEP) program provides resources and pilot programs to plants across the country. The SEP program has also supported the development of the international ISO 50001 energy management standard released in June 2011.

Like 9001 for quality and 14001 for environmental management, ISO 50001 will provide independent verification of energy management practices that can be communicated to customers, suppliers, governments and the public.

The drumbeat of plant closings and outsourcing might create the impression that U.S. industry, facing low-cost overseas competition and ever-tightening regulation, is doomed to an eventual extinction. But this sector still accounts for 40 percent of U.S. GDP and employs 20 million people.

It is true that production of many lower-value products have moved to low-wage countries, but this recent past is not destined to be our future. Industry thrives in places such as Germany and Japan with high wages, high energy costs and strict environmental standards. It can continue to thrive in the U.S., too, particularly if we are able leverage one of our country's greatest assets: innovation.

Aggressively deploying energy management structures can harness this innovation to save energy and costs — and help industry become more productive, make better products, become a better neighbor and create jobs.


Showing 1-3 of 3 comments

March 14, 2012

Unfortunately, the only sure way to "eliminating the use of fossil fuels" in industry is to shut-down primary and secondary materials processing plant facilities.

The photo which accompanies the article shows a heated slab of steel under-going processing in a rolling mill. The slab was heated in a "fossil fuel" fired re-heating furnace to the temperature (2400 F to 2800 F) indicated by its color as a first step to reducing its thickness and increasing its length. The mill is powered by electricity generated in a coal-fired thermal plant. While the photo is a an interesting illustration of the application of fossil fuel based energy to a useful societal purpose, it has next to nothing to do with the body of the article or the example mentioned (Frito-Lay's food processing).

The primary reduction of metallic oxide to elemental metal is energy intensive. In primary steel processing it requires the use of carbon-based substances which most commonly today are coals and coal-derived cokes. Elimination of coal and coke in steel processing in the United States would require elimination of the primary iron and steel processing facilities.

In the case of secondary steel processing and re-processing (e.g., mini-mill production of rod and bar products from scrap steel), the principal input is electricity generated by fossil-fuel fired thermal generating plants. Since elimination of fossil fuels entails elimination of these generating plants, and since the locales in which the principal steel plants are located lack sufficient solar or wind resources to compensate, these plants must also be shut-down.

In essence, the goal of eliminating fossil fuel use implies the elimination of most if not all US heavy industry - chemical and metallurgical - with a concomittant hit to US GNP, say 20% to 30% (short of the 40% mentioned in the article as industry's contribution), and a coincident loss of employment and government revenues.

Management processes, the article's focus, will not compensate for such losses. Indeed, those management processes will themselves be candidates for elimination.

RMI needs to step back and re-think its mission. Eliminating fossil fuel use is a Quixotic goal -- useful only for What-if thinking and tinkering at the margins. Improving efficiency is laudable, but it will not eliminate fossil fuel use.


August 1, 2012

Where do you calculate that the Energy Sector of the US constitutes 40% of GDP?

I went to the US Census Bureau’s site at: http://www.census.gov/prod/2011pubs/12statab/income.pdf . There, I calculated from Table 670 on Page 437, that the Energy Sector constitutes about 4.4% of US GDP (including the utilities’ sector).

I can inform you from personal and professional experience that the world will not be SAVED by the GREEN ENVIRONMENTALISTS—especially if you cannot DO THE MATH!

You people are literally killing every opportunity to: 1) convert to safe electricity and, 2) concurrently destroying the plethora of toxic chemicals in the environment. I suggest you read about the Teesside Incinerator in the UK where electricity is generated from rubbish—safely and without air pollution! And we need to do the same with our landfills—every single one of them!

See http://en.wikipedia.org/wiki/Teesside_EfW_plant to learn more about the successful generation of electricity at this waste incineration facility, which is more cost-effective than solar power—and without the air pollution!

Incineration is the solution to safe energy creation, the solution to pollution, and secures jobs for anyone who wishes to transfer jobs from the fossil fuels sectors.


November 27, 2012

brea, heat for steel is provided by electricity, but not all of that is coal, and it could come from many sources, like simple parabolic mirrors. We're not stuck with fossil fuels, and sticking with them is foolish when zero fuel options are available.
godiva, even high energy incinerators are polluting, where wind, solar pv, solar thermal, solar concentrators, and ground heat pumps are not, why bother with large scale incinerators when zero fuel is easier?

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