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					Industrial Technology Associates




                 Why Is An Energy
                   Conservation
                       And
              Cost Reduction Program
                     Needed?
                                       ITA
Industrial Technology Associates




               Why Is An Energy Conservation And
               Cost Reduction Program Needed?
          •    What’s On The Table?
          •    What Is Energy Conservation?
          •    Where Does Industry’s Energy Go?
          •    When Do Companies Conserve Energy?
          •    Why Don’t We-Consistently?
          •    Why Should We?
          •    Why Is Cost Reduction Program Needed?
          •    What Is Required To See Results?

                                                       ITA
Industrial Technology Associates




                                    How Much?
          • Quad (short for Quadrillion = 1,000,000,000,000,000 Btus)
                – It would be impossible to count to such a number even if you counted
                  by 1,000s for every second of your life until you were 100 years old.
                – Equivalent to 44,000,000 metric tons of coal,
                – Or 172,000,000 barrels of oil.
          • One quad is enough to serve all annual energy needs for about
            3,000,000 people.
          • Many medium-sized states like Colorado and Arizona consume a
            total of one quad of energy per year, which is roughly 1/10th the
            annual energy consumption in Texas.
          • World primary energy production in 2004 was 446 Quads.
          • Total U.S. energy consumption is roughly 100 quads per year. (80
            quads – 1990)
                – Or $260 Billion per year



                                                                                          ITA
Industrial Technology Associates




                                   U. S. Energy Consumption
                                        By Sector - 2003

                                                         Industrial
                                               Trans.
   Total Energy (2003) =                        27%      = 32.4 quads
                                                           33%
   98.4 Quadrillion btu


                                                Resid.
                                                 22%     Comm.
                                                          18%

     Source:
     U.S (DOE-EIA, 2004)
                                                                    ITA
Industrial Technology Associates




                     Where Does Industry’s Energy Go?




                                                        ITA
Industrial Technology Associates




                                   ITA
Industrial Technology Associates




                                   Fact: $41.6 Billion
          • ~18 quadrillion Btu applied to heat & power;
            ~40% or 7.2 quads, are lost
          • ~5.2 quads of wasted energy for industrial heat
            & power is economically recoverable
          • 5.2 quads @ $8/MMBtu =
                $41.6 Billion potential annual savings to U. S. process
                  industries through reduced energy waste

                                            SOURCE: U.S. DOE
                                   http://www.eere.energy.gov/industry


                                                                          ITA
Industrial Technology Associates




                                      What is Energy
                                      Conservation?

        • …the practice of decreasing the quantity of energy used while
          achieving a similar outcome of end use.
        • …may result in increase of financial capital, environmental value,
          national security, personal security, and human comfort.
        • …direct consumers of energy may want to conserve energy in order to
          reduce energy costs and promote economic, political and
          environmental sustainability.
        • Industrial and commercial users may want to increase efficiency and
          thus maximize profit.
        • By reducing emissions, energy conservation is an important part of
          lessening climate change.
        • Energy conservation is often the most economical solution to energy
          shortages, and is a more environmentally benign alternative to
          increased energy production.
                                                                            ITA
Industrial Technology Associates




                                   When Do Companies
                                    Conserve Energy?




                                                       ITA
Industrial Technology Associates




                     Why Companies Are NOT
                       Conserving Energy
          • Do not view it as important (enough)
                –   Not our “core” business.
                –   Energy waste is transparent.
                –   Energy costs may be a small percentage of overall costs.
                –   Consider it a burden or distraction.
                –   Involved in other higher-profile efforts.
          •    Failure to realize potential energy savings in past
          •    Lack of qualified technical staff
          •    Ingrained Standard Operating Procedures
          •    Organizational Complexities
          •    Think solution is development of new energy sources

                                                                               ITA
Industrial Technology Associates




                     Why Companies Are NOT
                     Conserving Energy (con’t)
          • Feel that the situation is under control.
                – Internal resistance.
          • Too much focus on price shopping.
                – Valid and important activity, but
                       • Price-shopping = short term.
                       • Energy conservation = long term.
          •    Extremely difficult to get capital for infrastructure.
          •    Can’t or won’t change behaviors and procedures
          •    Consider it the “government’s or power company’s job”
          •    NO LONG TERM PLAN!


                                                                        ITA
Industrial Technology Associates




                   Why Should Companies Have an
                     Energy Conservation Program?
                   It directly impacts the bottom line.
      •    Threat to U.S. competitiveness / world impact
      •    $$$ - 10% reduction in energy usage no / low-capital projects related to facility energy
           audits. (U.S. DOE)
      •    Energy price volatility hedge
      •    Cannot successfully pass on increased energy costs to customer (ABP, reduced margin)
      •    Increased revenue potential (reliability, stability, productivity)
      •    Reduced emissions (increased regulatory compliance)
      •    Prevents distortion of financial decisions (product pricing, taxes, production mix,
           compensation & bonuses, capital investment allocations)
      •    Savings of this magnitude may allow a struggling facility to remain operational.
             –   Keep jobs in area. (RIF)
             –   Keeps customers in area.
             –   Concentrates efforts company wide.
             –   Develops / Maintains accountability.
      •    Challenges your people “NOT to do it the same old way it’s always been done”
           ITS OUR JOB!              OUR RESPONSIBILITY!          We CAN make a difference!
                                                                                                      ITA
Industrial Technology Associates




                Financial Effect of Savings in
               Terms of Production Capacity
          Example (Alliance to Save Energy)
          • Product price = $100
          • Operating profit margin = 10%
          • Net annual energy savings = $20,000
                                                                    Incremental
                                   $20,000    = $200,000            Revenue
                                                                    Equivalent
                                     0.1
                                          For this company,
                                    saving $20,000 is the same as
                                       selling 2000 more units.

                                                                                  ITA
Industrial Technology Associates




              Why Is Cost Reduction Part Needed?

          • Financial: Wasted energy =
                – input that you pay for and don’t use
                – a cost that can’t pass through to the customer
                – $1 of energy waste is $1 less operating income
          • Economic: Energy waste is like value-added tax
            on each stage of production
          • Operational: Energy that is not applied to work
            is expended…
                – to the atmosphere (money up in smoke), or
                – as heat of friction that destroys plant equipment
                  (creates additional expenses)

                                                                      ITA
Industrial Technology Associates




                       What Is Required To
                     Improve Energy Efficiency?




                                                  ITA
Industrial Technology Associates




                                   Q&A




                                         ITA