Manufacturing in the United States is wrestling with the challenges of transformation. Michigan, faced with the deep restructuring of automotive, is pinning its hopes on refocusing its formidable manufacturing expertise to build America’s green energy economy. Despite having the highest unemployment in the country, the passion, professionalism and depth of manufacturing skills might just make this transformation possible. Michigan isn’t alone in seeing so-called green employment as key to revival. Are these visions of green manufacturing realistic?
Grand Rapids, in western Michigan, recently hosted its first Energy Summit aimed at informing and engaging local industry. More than 250 people signed up, exceeding the organizers’ expectations, to listen, discuss and learn during a packed day. At this meeting, I was reminded how important it is to stay anchored in energy basics to keep the sheer enormity of the opportunity in focus.
Appropriately, this session started with a reminder from ACEEE that efficiency remains the cheapest, cleanest energy supply strategy. In case after case, modest investments produced realizable long-term returns, with a national potential measured in hundreds of billions of dollars. This has been understood for decades; why do we find it so hard to move from understanding to practice.
Also included was a reminder of some basics for evaluating energy-efficiency investments. The vast majority of these are still being assessed using only simple payback, arguably one of the dumbest approaches. This not only takes no account of future volatility and risks in energy and emissions pricing, it also fails to make clear the true costs of not making the investments. If simple analyses that annualize the investments, savings, risks and avoided downsides were used, a vastly greater number of energy-efficiency investments would be seen for the “no-brainers” they are.
On the business front, the gap in energy productivity between the United States and Europe was presented for what it is: a major opportunity and a major competitive risk. Whichever way we view it, we need to be reminded constantly that this gap is measured in hundreds of billions of dollars every year. Closing it will require a wide range of services and products vast in scale, scope and ingenuity. It also will need an honest and open dialogue of the technical, legislative, institutional and market reasons for differences.
A senior staff member of the Governor’s office discussed the harsh reality of the current estimates around climate change. Human-induced climate change is proceeding faster than originally thought. It’s putting greater urgency on international negotiations and increasing the probability of tougher U.S. legislation. It was easy to believe this in a heat wave with the temperature at historic highs in Grand Rapids on the same day. A growing percentage of business and the public are pushing for effective action on climate change. This is the basis of the optimism in states like Michigan that a new market for their manufacturing skills and assets will open up world-wide.
The meeting had the courage to address the growing paradox around climate change and energy productivity. Effective stimuli for a thriving market in green solutions would be high and volatile energy prices; increased penalties for greenhouse gas emissions; and greater global competition for scarce energy resources. Combined, this puts a premium on energy efficiency, heat recovery, combined heat and power, renewable energy sources and smart, efficient energy grids. It will accelerate the transformation of the transportation industry with low-emissions vehicles and community investment in mass transit. In short, these pressures will fill the factories in Michigan.
On the flip side, these same drivers will be disruptive and tough for manufacturers to manage. To remain competitive, they will need to be consumers of the same green solutions. Given these two faces, should a state like Michigan be pushing for tough legislation that accelerates market transformation, or phased, softer legislation that might be kinder to the short-term challenges of manufacturing? This is complex question, but it reminds one to be careful what you wish for.
A small country like Denmark has had some of the toughest energy and environmental pressures for a sustained period of time. Rather than killing home-grown industry, this has given rise to global giants like Danfoss, Vestas and Rockwool. It’s the home to the European Environmental Agency, and recently Copenhagen was named the second most livable city in the world. These are hardly the signs of a dying economy. We should consider examples like these as we struggle with the challenge of building a green economy in the midst of a recession.
It was invigorating to see the enthusiasm and pride on display in Grand Rapids. It was a timely reminder that the green economy is really nothing more than understanding the basic energy and climate opportunity and getting on with serving it.
Peter Garforth is principal of Garforth International LLC, Toledo, Ohio. He can be reached at email@example.com.