Study Examines Strategies for Industrial Energy Efficiency Programs

Study Examines Strategies for Industrial Energy Efficiency Programs

Gita Subramony for Zondits, April 24, 2014

The history of manufacturing in the USA is closely tied to our social, urban, and economic history. Manufacturing provided non-agricultural jobs and opportunities for Americans throughout the 19th and 20th centuries. Factory jobs allowed for increased urbanization as workers moved from farms into cities. Additionally, wages provided by these types of jobs helped raise the standard of living for many families. Manufacturing in the 20th century allowed the USA to operate as a dominant world economic and political power.

The late 20th century saw shifts in the US economy away from manufacturing towards an information- and service-based economy. As the cost of manufacturing increased and as cheaper labor markets opened in other countries, the USA’s industrial sector diminished from its heights earlier in the 20th century. The great recession of the early 21st century threw a spotlight on recent changes in America’s industrial sector. The Bureau of Labor Statistics put out a report showing that this sector declined sharply from 2007 to 2009 with losses of 2 million employees; manufacturing was particularly vulnerable to the effects of the economic downturn.

Despite these losses, the USA still remains the world’s largest producer of goods. According to the National Association of Manufacturers, the industrial sector contributed $2.03 trillion to the economy in 2012 and currently offers around 17.4 million jobs to Americans.

In addition, the industrial sector still remains a prime energy user in the USA, responsible for around one-third of the country’s total energy consumption. Energy efficiency program designers and implementers are actively engaging these businesses in reducing their energy use. A recent report by the State & Local Energy Efficiency Action Network provides a detailed overview on why energy efficiency is important for this sector and what strategies are in place to assist industrial facilities with their energy efficiency needs.

Industrial facilities that pursue energy efficiency are able to realize cost savings by reducing their operating expenditures as well as a host of other benefits, including carbon emissions reduction, decreased water use, and greater energy supply reliability. Additionally, state regulators have incentives to pursue industrial efficiency since these types of programs have lower costs per kilowatt hour (kWh) saved than more general energy efficiency programs . The report indicates that industrial programs on average spend $0.030 per kWh saved, which is nearly one cent less than the aggregate average cost per kWh for energy efficiency programs. The report also shows that industrial-focused energy efficiency programs can result in greater energy savings than if manufacturers pursue energy efficiency projects on their own. Industrial energy efficiency programs are able to reduce payback periods for energy-saving projects, as well as provide comprehensive support for navigating program offerings and for long-term energy planning.

The report identifies key strategies that industrial energy efficiency programs use to engage these facilities, including: demonstrating program value proposition clearly, developing long-term relationships with industrial facilities, using both custom and prescriptive incentives, offering a user-friendly and streamlined application process, and assisting businesses with medium- and long-term goals. The report also investigates what’s on the horizon for industrial energy efficiency programs in the future. These program updates might include increased focus on strategic energy management programs for manufacturers and greater incentives for whole-building performance.

The prevalence and growth of energy efficiency programs for the industrial sector highlights the importance of reduced energy consumption for manufacturers. Realizing cost savings through efficiency projects will help these businesses survive and grow in a time when manufacturing in the USA is particularly vulnerable. In addition, these programs target large energy users for achieving the nation’s environmental and energy savings goals.