One of the most intensely consumed resources in the manufacturing sector is energy. From airplanes to Zagnut bars, it takes a lot of power to make the stuff that consumers use. But a new analysis by the Alliance for Industrial Efficiency found that energy efficiency is top of mind for many corporations.
According to the study, “Committed to Savings: Major U.S. Manufacturers Set Public Goals for Energy Efficiency,” 43 percent of the largest manufacturers in the United States have established robust public targets to reduce their energy use. In addition, 79 percent have set ambitious public goals to reduce their greenhouse gas emissions, with a strong overlap of companies pursuing both strategies.
The public declarations can be just as important for these companies as the efficiency gains. “By adopting goals to increase energy efficiency and making those goals public, companies demonstrate a commitment to controlling costs and reducing climate risk. These goals and commitments are of increasing interest to investors,” said Kristina Friedman, vice president at Calvert Research and Management.
The Alliance examined 160 of the nation’s largest companies with a combined 2,100 manufacturing facilities in the United States, including 107 facilities in Illinois. The analysis encompasses a wide range of industries from aerospace and defense to food, beverages and tobacco as well as those in healthcare, household products, apparel, chemicals, technology and automotive sectors.
“We discovered that instituting energy efficiency targets helps manufacturers save money, improve performance and increase competitiveness,” said Jennifer Kefer, executive director of the Alliance. “Setting public targets also signals to shareholders and funders that companies are good actors and worthy investments.”
The companies that are pursuing these public energy efficiency targets are located nationwide, but the heaviest concentrations are in Texas and California, followed by Ohio, Illinois, North Carolina, Georgia, Michigan, Indiana, Pennsylvania and Virginia—states with large industrial sectors in the Midwest, Northeast and Southeast.
One such company is ArcelorMittal, the world’s largest steel producer. Based in Luxemburg but with an American base of operations in Chicago, the company produces 15 million tons of raw steel every year in the U.S. alone. Since steel manufacturing is both a highly competitive and energy-intensive business, ArcelorMittal looked for ways to save energy to set it apart and protect its bottom line.
“If you are going to survive in a very competitive industry, you need to control your costs, and energy is one of those costs you can control,” said Larry Fabina, manager of continuous improvement at ArcelorMittal.
Since 2006, ArcelorMittal has saved more than $257 million annually on energy costs through a wide range of efficiency measures, including installing variable speed drives, energy monitoring systems, LED lighting and combined heat and power systems. Last year, the company completed 36 energy-saving projects with a combined annual savings of $17 million.
One measure the company is taking to reduce costs is the installation of a new power system at its Burns Harbor facility in northwest Indiana. The multi-year capital investment project is designed to use fuel from coke ovens and blast furnaces (used to create liquid iron) to generate steam. The steam is then used to power the plant’s operations, and to generate supplemental electricity for the facility. Once completed, the power station is expected to provide 75 percent of the Lake Michigan-adjacent plant’s power requirements and save the company $60 million per year.
Many of ArcelorMittal’s energy-saving projects were funded in part through federal grants and utility programs. According to Fabina, these programs and incentives help make these projects possible by reducing the upfront costs and helping the firm meet its payback thresholds sooner.
There are other concerns aside from keeping the ledger black. For example, before the company installed variable speed drives at one of its facilities, it was replacing at least three motors and fans every year to the tune of $200,000 annually. When equipment went down, operations were delayed, causing further expenses as well as mandating repairs that are often difficult and potentially dangerous to the workers. Now, with variable speed drives installed, they haven’t had to replace a motor or fan in years.
“Energy efficiency projects do a lot more than just save money. They have a ripple effect of benefits,” Fabina said. “At the end of the day, investing in energy efficiency reduces downtime, saves money, reduces delays, makes equipment run longer and even improves worker safety.”
According to a 2015 Department of Energy report to Congress, among the barriers to industrial end-use energy efficiency are “opt-outs”—provisions that weaken utility industrial efficiency programs by creating special exemptions for large energy users. Utilities also create obstacles by imposing prohibitive standby rates on companies that use combined heat and power and waste heat to power systems. Ultimately, companies that do not set energy efficiency targets because of these barriers lose out on big savings and risk falling behind the competition.
The Alliance’s analysis suggests a number of practices and policies that states and utilities should consider in order to aid manufacturers in reaching their efficiency goals. For example, helping firms meet their ambitious climate and energy targets by supporting state energy efficiency resource standards, financial incentives for energy efficiency and decoupling policy.
Removing barriers to industrial energy efficiency such as industrial opt-outs and burdensome standby rates will further incentivize manufacturers to adopt energy-saving practices. Finally, states and utilities can foster dialogues with large customers to ensure that industrial energy efficiency programs meet participants’ needs.
“State governments should help manufacturers become more energy efficient,” said Kefer. “When companies reduce their energy use, it makes them more competitive, creates job opportunities, and lowers utility bills for all consumers.”