More than 300 Kentucky manufacturing and related industry professionals gathered in Louisville in late April to discuss the shifting energy industry and steps they can take to control rising energy costs.
What they heard from the governor, legislators, utilities and energy-industry professionals was this: The time is now to analyze where and how manufacturers use energy so they can implement energy-efficiency strategies that put them in the best possible position for a vastly different energy future.
Kentucky has enjoyed electricity prices among the lowest in the nation. Thus, manufacturers traditionally have not carefully managed and controlled their energy consumption. As a result, Kentucky's energy use per industrial customer is the third-highest in the nation, 427 percent above the national average, according to the U.S. Department of Energy.
Deregulation, emerging Environmental Protection Agency regulations and rising industrial electricity rates are forcing manufacturers to look more closely at how they consume energy, according to speakers at the Kentucky Association of Manufacturers Energy Conference 2011. Industrial electricity rates in Kentucky have already risen 43 percent over the past five years, according to economic agencies, and some predict they will double over the next decade.
And the EPA is quite serious about rules it proposed in March to cut emissions from coal-burning power plants, rules that are estimated to cost industry $2.8 billion. Attempts by both houses of Congress in early April failed to block the EPA's authority to issue these regulations; the first public hearings are scheduled for May 24-26. The cost of these regulations will be felt acutely in Kentucky, which relies on coal to generate more than 90 percent of its electricity.
Moreover, America's energy grid is stressed by peak demand; major infrastructure overhaul is inevitable. That means more energy price increases.
The good news is that measures to reduce energy consumption, from the factory floor to the administrative offices, can make a real difference in the bottom line. A 2007 report prepared for the governor's office by the University of Louisville and the American Council for an Energy Efficient Economy found minimally aggressive measures can save Kentucky industry an estimated $1.7 billion. More aggressive measures could save more than 26 percent, or $2.9 billion, by 2017.
The minimally aggressive measures include installing pumps, sensors and usage controls; insulating pipes; compressed air management, and optimizing motor systems. More aggressive measures include installing energy information systems that enable monitoring and immediate adjustment of energy usage, and revamping of HVAC systems.
Much of the cost of these measures can be paid for with future energy savings. Pat Appelman of Fort Knox told conference attendees that the bulk of the measures put it in place on the 109,000-acre Army base required little or no up-front cost, and many of them began realizing savings in the first year.
Fort Knox has reduced its energy consumption by 36 percent since 1990 and is now setting the standard for energy efficiency among Army installations across the country.
To get started on energy efficiency, manufacturers must:
■ Get an energy audit to help measure and understand how much, and when, energy is used. That in itself can result in savings as manufacturers begin paying attention to what uses the most energy and comparing that to their rate structure. An audit also will suggest various equipment retrofits and operational adjustments, the amount of energy savings they will achieve and the projected payback period.
■ Engage top leadership and make it accountable for improvements to help usher in the workplace culture change. For example, Ingersoll Rand began with an education program for leadership and a "Treasure Hunt" strategy that employed volunteers to make behavioral changes that others could imitate. The company then completed some easy-to-implement projects. This set the stage for a culture of buy-in for future improvements.
■ Install highly visible measurement systems, such as information screens showing energy usage on the plant floor and in break rooms, or including them as screensavers on company computers. AGC Automotive installed a large dashboard showing "key performance indicators" for employees to see every time they enter the plant. Not only has the information helped improve performance, it also has been useful in demonstrating to potential customers the company's quality-control and cost-reduction strategies.
Through success stories such as these, it has become clear that ongoing improvements in energy efficiency are no longer just an optimistic goal; they have become an urgent necessity for Kentucky manufacturers to remain competitive.