This is the first of a series of articles on the topic of energy management. The series will cover a number of topics regarding energy management and including energy in various business processes. I hope that these articles stimulate discussion about the potentials involved in the management of energy in your company. But first a little bit of background.
Energy: Then and Now
Once upon a time, to quote Gottfried Leibniz (1710), it was “the best of all possible worlds”, everything was fine, energy was plentiful & cheap, and life was good. No one had heard of an oil crisis, supply exceeded demand, and very few people were concerned with the environment.
Times have changed: the first oil crisis was in 1973, the second in 1979; rationing, production & marketing controls were established to try to resolve these crises. In the US, a national speed limit of 55 MPH was established to reduce the consumption of gas. Yet oil did not exceed the price of $34 US/Barrel. The price for crude oil in Sept. 2008 was $101 USD/Barrel and some people think that the price will eventually reach $187 /Barrel (William Patalon III – Money Morning – 3/27/2008)..
In 2000, California went though its own energy crisis, this time it was electricity that was in short supply. Through a combination of deregulation, excessive demand, capacity in the wrong area, the end result was electrical brownouts, blackouts and high prices.
Make up of Green House Gasses; The Hadley Center For Climate Change
The largest growth in Green House Gas emissions between 1970 and 2004 has come from the Energy Supply Sector (+145%), the second largest direct emissions from transport which was 120% during this period.
- (Source: IPCC, 2007: Summary for Policymakers. In: Climate Change 2007: Mitigation. Contribution of Working Group III to the Fourth Assessment Report of the Intergovernmental Panel on Climate Change (B. Metz, O.R. Davidson, P.R. Bosch, R. Dave, L.A. Meyer (eds) Cambridge University Press)).
At the same time people have become more concerned about the environment and the impact of green house gases. As a result many jurisdictions have enacted regulations dealing with the reduction of Green House Gases and Carbon. Some of these include::
• California Executive Order S-3-05
– By 2010, reduce green house gas emissions to 2000 levels
– By 2020, reduce green house gas emissions to 1990 levels
– By 2050, reduce green house gas emissions to 80 % below 1990 levels
• City of Rotterdam
– Committed to reduce CO2 emissions by 50% in 2025 compared to1990 levels
• New York City plans to reduce carbon emissions by 30% by 2030
• Ontario, Canada plans to reduce emissions to 6% below 1990 levels by 2014
• EU has a common target to reduce emissions by 8% of 1990 levels
Even China, whose booming growth has made the country the fourth largest economy & the second-largest energy consumer in the world, is interested in Energy Management. The government has vowed to cut energy intensity, a measure of the energy used per unit of output, by 20 percent, and pollution by 10 percent, by 2010.
Source: Energy Information Administration – U.S. Government
Market trends suggest that the demand for energy resources will increase dramatically over the next 25 years: the global demand for all energy sources is forecast to grow by 57%, the U.S. demand for all types of energy is expected to increase by 31%. By 2030, it is expected that 56% of the world’s energy use will be in Asia.
Currently, 50% of U.S. electrical generation relies on coal, a fossil fuel; while 85% of U.S. greenhouse gas emissions result from energy-consuming activities supported by fossil fuels.
- Sources: Annual Energy Outlook (DOE/EIA-0383(2007)), International Energy Outlook 2007 (DOE/EIA-0484(2007), Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990-2005 (April 2007) (EPA 430-R-07-002)
It will be a while, if ever, before significant additional energy supplies can be developed, which would increase the supply of energy and lower the costs.
If energy prices continue to rise dramatically due to increased demand and constrained supply, business impacts could include:
- Reduced profits as a result of high operating costs.
- Decline of sales of energy-using products or energy intensive products.
- Disruptions in supply chains as suppliers are unable to meet cost obligations or are unable to stay in business
If we are to remain competitive, it is necessary to reduce the demand side of the energy equation. To do this we have to invest in technologies or programs to reduce the cost and consumption of energy. There are a number of areas that should be addressed when looking at energy efficiency / reduction on a holistic basis: amongst these are:
- Energy used for manufacturing
- Energy in product / process design
- Energy used in office buildings
- Energy used in the supply chain
Each of these topic areas will be discussed in future blogs.
Even in light of the current economic meltdown and oil falling below $56 U.S. (Nov. 13 2008), do you believe that energy efficiency is important?
Is your company implementing programs around energy?