What Does Singer Steve Earle Have to Do with Taking Action on Energy Efficiency?
Read on for answers to this, as well as strategies for energy conservation and cost avoidance in manufacturing.
“…nothing can be said to be certain, except death and taxes.”
When Ben Franklin wrote this phrase borrowed from Daniel Defoe and later twisted by the affable, tax-avoiding musician, Steve Earle, none of them were thinking of you, sitting in front of your electricity bill, scratching your head and wondering on the unpleasant inevitability of it all.
But like death and taxes, that bill is coming and there’s nothing you can do about it. Or can you?
Anyone who has ever pored over their electricity bill in an attempt to find clues as to how to save money has learned that they simply don’t contain the type of data you need to get a clear understanding of your usage in a meaningful way. It’s frustrating. You need energy, so you use it, pay for it and move on. Until the next bill arrives and the head scratching begins again. Getting a handle on your energy consumption so that you can reduce and save is easier than you think.
According to the Ontario Energy Board, the price for TOU (Time of Use) electricity during on-peak times has nearly doubled since 2010, from 9.9 cents per kWh to 18 cents per kWh in 2016. This is a good example of how energy prices have steadily increased. Though most manufacturers don’t pay TOU rates, they are still affected by energy price increases which have made energy a cost that can no longer be ignored.
“The first piece of advice we give to manufacturers—and the simplest one—is to get access to your hourly consumption. Get familiar with your consumption profile and compare that to your production profile.”
There are strategies for energy conservation and cost avoidance in manufacturing, and our Chris Loughren talks about them in his interview in the eZine, Energy Cost Control, published by CanadianManufacturer.com. In the article, “Taking action on Energy Efficiency,” Chris talks about how “Energy is a whole new world of opportunity that’s been opened up by advancements in technology and product development.”
The first step is to figure out your electricity consumption and the main business drivers of that consumption. This information is your starting point. “The first piece of advice we give to manufacturers—and the simplest one—is to get access to your hourly consumption,” says Loughren. “Get familiar with your consumption profile and compare that to your production profile. Then the next step is to define your kilowatt hours per part produced.” Armed with this data, you can then compare energy consumption against the production process and identify opportunities to save.
“Getting that information will let you trend that over time. You can see that say in January you produced 1,000 parts and it cost 5 kilowatt hours per part, but in March the cost was 7 kilowatt hours per part,” Loughren explains. Therein lies the opportunity—if you can standardize production processes at 5 kilowatt hours per part all year, that’s a 20 per cent savings.
“I think one cultural mindset some people have is that they tend not to even look at [energy] as an opportunity, to see if they can use energy more efficiently. They just throw their hands up and say ‘energy is energy, all we can do is pay the bill and we can’t change our production’ in order to save money,” Loughren says.
But through continuous improvement there are enormous opportunities to save. And companies that are practicing continuous improvement and lean process methodology are already on their way. Loughren says to think of the law of diminishing returns – if you’ve been conducting continuous improvement for the last 5-10 years, you’ve been focusing on labour, value stream, inventory control or quality. But you’ve likely not been focusing on energy. With that in mind, where are you going to get the bigger return? Are you going to get it from the processes you’ve been leaning down and perfecting for years, or from a process that has been allowed to get flabby?
Energy is full of opportunities that have been opened up by advancements in technology and the development of energy management systems like the Bruce Power Saver. And the opportunity for savings can be substantial, especially if you look at it from the revenue equivalence perspective. Margins in manufacturing tend to be low, and it’s not unusual for products to have a 5% profit margin. At those margins, if you can reduce your energy cost by $100,000, that’s equal to making a $2 million sale.
Energy is full of opportunities that have been opened up by advancements in technology and the development of energy management systems like the Bruce Power Saver.
“In a tough economy, where we have low growth, how do you increase your revenue component by $2 million?” asks Loughren. “It’s tough…. and in order to generate that $2 million, how much is that going to cost from a sales and marketing perspective — it’s not costless. So considering that, where is your biggest opportunity? Making an addition $2 million in revenue or cutting costs by $100,000?”
The point is that it’s easier to reduce your energy consumption by 10%, (given that manufacturers in general are wasting potentially 30% of their total consumption), than trying to increase your topline by $2 million.
The best and likely simplest opportunity for a manufacturer to discover ways to save energy is to look at usage when their plant isn’t operating or when the building is empty.
“That’s the lowest hanging fruit of the lowest hanging fruit, so obviously you want to get the non-operating consumption down to as close to zero as reasonably possible,” he says.
Monitor non-operating consumption and record your baseline number. For this example, we’ll use 250 kW. Take a cue from Steve Earle’s song, “I ain’t ever satisfied,” and make it your goal to keep that number near 250 kW. If it moves significantly higher, you’ve spotted an anomaly. Identifying and addressing these anomalies can result in considerable and immediate savings.
Sounds great, but why bother when it’s all just like death and taxes?
Two words: Mandatory Reporting. Although mandatory energy reporting is unlikely to impact exclusively industrial facilities, mixed-use buildings like warehouses, industrial malls and truck terminals will be on the hook.
Loughren says, “So if you have a manufacturing facility and you have a warehouse attached to it, then it may be [included].”
Although the rules haven’t been clarified yet, the regulations come out soon, in Q3 of 2016. Once reporting requirements are implemented, manufacturers might find them useful to provide a competitive edge, as they’ll help demonstrate to customers and prospects how the business has prioritized lean and energy efficient operations, making you a low cost operator.
Although manufacturers won’t be required to do mandatory energy reporting, C02 reporting is likely to become mandatory, and it already is for large manufactures. The existing threshold right now is 25,000 tonnes of emissions, but the Ontario government plans on lowering that to 10,000 tonnes per year, and that threshold will likely continue to come down, impacting more and more manufacturers.
Good old Steve Earle may have used the death and taxes quote to justify a little dodging. Maybe he said he would pay them when he’s dead. I don’t know. But I do know that the energy consumption and emissions rules for manufacturers are changing, and it’s a good idea for Ontario’s small and medium-sized manufacturers to get a handle on their energy consumption. They’ll likely find opportunities to save money in the bargain.
To read the full article, download the eZine.