Last month, we explored the reasons why manufacturing struggles with successfully implementing renewable energy supplies. The bottom line is that it’s hard for management to value the carbon reduction that renewables bring. As long as the majority of management sees this as zero, renewable energy will be nigh on impossible to implement. A less obvious barrier is the sense that renewable energy is experimental, ridiculously expensive and somehow “not serious” enough for a “real-world” factory.
Successful implementation of renewable supplies has a lot to do with how management challenges the operational teams about energy in general and renewables in particular. Goals that address current and future energy use from the standpoints of risk, reliability and environment lead to different results from a traditional project-based approach.
[pullquote]Challenge teams to prepare individual energy plans for each of their significant plants. Typically, these plans should deliver minimum financial returns of 15% under every reasonable future risk; higher than that under the most likely scenarios. The energy plans should cover the anticipated operating life of the site or, at a minimum, the next 15 years.
The benefit of reducing the carbon content should be priced between today’s reality in the United States — zero — to at least $100 per metric ton by 2030. The evolution of energy pricing for gas, electricity and fuel oils should be included in the risk assessment with at least two ranges based on more or less conservative views of the future. These scenarios should include time of day and peak pricing changes, which are increasingly likely as utilities struggle to supply growing peak demands. These plans should encompass energy use and energy supply as part of a seamless whole, ideally improving supply reliability and quality.
Management should make it clear that recommendations meeting the minimum returns with a high reduction in greenhouse gas will be favored over recommendations with the same, or even higher immediate returns but with lower carbon reductions. Management also should explicitly require the team to evaluate the role of the most obvious clean and renewable energy strategies and, if they reject them, to have a clear rationale. As a reminder, these strategies are energy efficiency, heat recovery, cogeneration and renewable supply of heat and electricity.
The stage is now set to integrate multiple energy productivity strategies rationally, dealing not only with today’s realities, but also preparing for the unknown energy and climate legislation risks of the future. Including renewables in your total energy strategy gives it a whole new flavor, and makes it a risk management tool against both high carbon costs and energy price uncertainty.
The risk management value of renewables will vary by plant location. If most electricity is from coal, their value will increase in the scenarios using high carbon emissions costs. States that are setting aggressive mandatory targets on utilities to reduce the carbon content of the electricity will generally value renewable sources more highly through various incentives. States challenged with seasonal peaks or accelerated demand growth will attach a premium to all sources that take pressure off the wider networks. All plans should take into account the needs of both their own plant and the energy infrastructure of the wider neighborhood.
By setting appropriate planning targets, including the possibility of using renewables as a required part of the energy portfolio planning, management has come a long way to making the use of renewables easier. At least two more areas should be addressed with some seriousness to break through the last barriers.
The first is energy management. Many plants lack processes and technology to manage energy as a continuous manufacturing resource. Costs and consumption are rarely monitored in anything like real time. Energy reports are frequently inaccurate, hard to understand, overly technical and weeks or months out of date. In the future, this will change: cost, efficiency and environmental effects of energy use must be managed in near real time. Today, most plants track labor, raw materials, safety and other critical aspects in this way; energy should be no different. Given the operating characteristics of renewable energy sources, incorporating this level of energy management effectively is essential.
Last but not least is expertise. The field of renewable energy is moving fast in terms of politics, technology, reliability and costs. It’s easy to be out of date quickly. It’s also an area where there’s a lot of what can kindly be called overly enthusiastic selling. Teams should be sure they have trusted resources that are current on the state of play beyond as well as within the United States, and are reasonably independent.
One way or another, a rapidly growing percentage of our energy supplies will be from renewables; the sooner manufacturers learn how to incorporate them effectively, the better prepared they will be for new competitive realities.
Peter Garforth is principal of Garforth International LLC, Toledo, Ohio. He can be reached at [email protected].