Rod Ellsworth of Infor looks at how manufacturers can reduce their energy consumption to meet emissions targets – without undermining growth.
The Emissions Trading System (ETS) begins this year (2012) – a scheme that sets a cap on companies’ emissions by issuing permits to pollute and imposes a penalty if they exceed this. Under the scheme, which runs until 2020, the cap is tightened each year. The EU wants the scheme to achieve its targets of reducing Europe’s emissions by a fifth in 2020 compared with 2005 levels. It covers electricity generation and is focused on the main energy intensive industries – power stations, refineries and offshore, iron and steel, cement and lime, paper, food and beverage, glass, ceramics, engineering and automotive.
In addition to the ETS, the Carbon Reduction Commitment (CRC) scheme, also designed to improve energy efficiency and cutting emissions, is contributing further to energy reduction strategies.
However, both schemes have been the subject of much controversy, with some industries such as shipping, simply rejecting them. Others have expressed fears the extra costs will put them at a disadvantage against rivals outside the EU.
Industries have been totting up the cost of these government initiatives to promote a low carbon economy, the so-called ‘green taxes’, and some say their additional bill will run into the millions.
Energy intensive UK manufacturers in particular, such as those in the chemical or ceramics industries, are seriously considering moving their operations overseas in order to avoid green taxes which they risk facing as part of the new scheme.
The manufacturers’ organisation EEF has said that, ‘UK manufacturers risk a competitive disadvantage if the government does not reconsider its position on renewable energy targets for the next 20 years.’
In fact a survey by EEF found that while manufacturers are taking steps to equip themselves for low carbon manufacturing with 80% of companies having invested in energy efficiency, 75% say the cost of environmental policies has risen and will damage competitiveness. And, 50% of manufacturers believe incentives to invest in energy efficiency and low carbon technologies are better outside the UK.
While it is impossible to know at this stage if, and indeed how, government policy might change in light of these claims, there’s little doubt that effective energy management represents one of the best options manufacturers currently have for making direct and immediate savings, particularly as energy costs are set to rise and rise. However, these savings can only be realised if manufacturers adopt new ways of working, make some potentially tough investment decisions and in some cases, bring in new skills.
The EEF’s ‘Green Growth’ report concluded that while manufacturers are making environmental improvements, confidence in the government’s approach to green growth was not matching. Pointing to figures on energy prices, carbon emissions and carbon efficiency before the recent recession and comparing them to after the recession in the 1990s, the EEF said there appeared to be no relation between the rise and fall of electricity prices and those of carbon emissions and carbon efficiency.
In the eight years before the recent recession, electricity prices rose by 44.4%, carbon emissions fell by 4.4% and carbon efficiency rose by 19.9% yet, in the eight years after the 1990s recession, electricity prices fell by 24.3%, carbon emissions fell by 5.2% and carbon efficiency rose by 27.1%.
However, this relationship between energy prices, carbon emissions and carbon efficiency is being forced to change by unprecedented prices. And while carbon remains a concern across the world, manufacturers need to look at all areas where energy usage and waste can be reduced.
Given that up to 80% of the energy consumed by certain manufacturing systems is wasted or lost, and that at least £16bn worth of wasted energy exists globally, across manufacturers’ operations today, taking a share of this and boosting efficiency and thus profitability in the manufacturing process would seem to be a reasonable place to start offsetting some of the escalating energy costs and ‘green taxes’. Through addressing this wasted energy, substantial costs can be reduced, freeing up investment to focus on business growth and retaining a UK presence.
But how can manufacturers address this wasted energy consumption? Unfortunately, no spreadsheet is capable of capturing and processing the millions of dynamic pieces of data necessary to effectively monitor, measure and analyse the energy consumption and performance of the broad range of machinery, heating, ventilation and air conditioning, and transportation involved in running a manufacturing plant.
However, specialist software can monitor, manage and ultimately save energy at this asset level, in order to work towards emissions targets, without compromising profitability.
Until recently, energy is largely managed in a highly fragmented manner within most organisations. Typically there was no owner of energy, therefore the responsibility and accountability for energy management, causes of waste, and associated activities and programs to mitigate or prevent waste, have been difficult to manage. This gap has led to the convergence of energy and asset management technology.
Advanced asset management systems harness data from a number of sources to assess how efficiently a machine is operating on a continuous 24/7 basis. They show the actual energy being consumed in the course of production, and the units, parts or processes which are consuming disproportionately more energy than they should. Such systems also provide warnings when consumption gets too high and present red flags when maintenance, routine or otherwise, is required.
Sub-meters measure energy consumption at the asset level in order to feed the asset management software, and in some cases smart metering is being applied to equipment at the point of manufacture. This way, microprocessor chips fitted onto assets can provide information on consumption levels, uploading information to asset management software directly.
The level of information and analysis provided by asset management systems can facilitate the action required to remove inefficient processes, parts and machines which are disproportionately energy hungry, and the lifecycle of an asset can often be extended through evaluation of its running costs against efficiency levels. In turn, this reduces wasted energy, ensuring that manufacturers A) only pay for what they actually need and B) excessive energy consumption can be reviewed, and a more well-informed decision on its level of necessity or value can be made.
These kinds of technological advances represent a silver lining for manufacturers in the throes of escalating energy prices and green tax threats. The relative cost of software, and extent to which it can be deployed across industrial practices and processes has never been more cost effective, and the £16bn opportunity to make savings is a compelling place to start.