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Energy Efficiency

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.


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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.


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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:


  1. Energy used for manufacturing
  2. Energy  in product / process design
  3. Energy used in office buildings
  4. 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?

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  • Hello John, I read your blog on Energy Management with great interest.  One statistic you quoted was that “Energy Supply” is the greatest generator of GHG.  I suggest that we think about where the demand growth for energy is coming from.   Indeed, transportation demand of energy has grown. The other two that have grown significantly in the past 20 years are commercial and residential.   Industrial demand for energy (and GHG emissions) has been flat for the past 20 years or so.  I think this paints a little different picture of how we should be focusing to address energy demand and GHG.  Industrial has advanced its efficiency….autos and buildings to a much less extent.
    • Supplying energy to both automotive (logistics),& buildings (commercial, residential, & industrial)all contributes to to GHG. We know from experience that in a industrial company the act of manufacturing generally consumes much more energy than the buildings do. While there are saving in the operation of the buildings (and we shoulf not forget them) they pale beside the possible savings in the industrial area.  In loigistics (auto) there are savings to be had in more efficient transportation equipment & route planning. Again the focus areas are dependant upon the industry you are in.

      One of the challenges in manageing he total GHG will be carrying the information along the total supply chain through multiple vendors, manufacturers, & transport companies all along making the “best: decision regarding GHG impact.

      I agree that industrial energy consumption is relatively flat (it still consumes 31% of energy)In part because of the amount of effort that has been expended & contiues to be expended in reduction. It is just that the quantities in manufacturing are so large that a small efficiceny gain amounts to large savings. In buildings a lot of small changes would have to put inplace across many companies to achieve the same effect. Less than 20% of all office buildings have been upgraded to energy efficient technologies (which would result in cost saving as much as 50%). But a lot of buildings would have to be retro fited to match energy reduction in industry.