This article focuses on the fact that even as energy and commodity cost increases, working efficiently has been made a bigger priority than ever for small manufacturers, wherein the power consumption is being scaled back. The share of the United States’ energy supply going to industry has dropped steadily over the past few decades. Returns on energy-saving investments are pretty good, but proposals for making those sorts of investments are often held to an incredibly high standard. The recommendations that are most often adopted, such as reducing the temperature of water used in a process or repairing leaks in lines and valves, pay back the initial investment in a couple of months. While energy costs can be cut significantly—even easily—it is an expense that many managers find easy to overlook. For most manufacturers, the cost of energy accounts for just a small percentage of their overall expenses.
The Bureau of Engraving and Printing in Washington , D.C., isn't a normal work site. For one thing, if you need to carry something from place to place, you must use a clear plastic bag; that way, no one can hide a bundle of freshly printed bills.
The other thing that stands out, as Nasr Alkadi remembers it, is all the armed guards standing around, ready to shoot.
In spite of those quirks, the Bureau is, in the end, just another manufacturing plant (although one that really does have a license to print money). And just like every manufacturing plant one could visit, it had some large inefficiencies in its energy use. That's what Alkadi was there to find out about during his visit in 2000. He was a student at West Virginia University and a member of an Industrial Assessment Center team charged with uncovering ways to eliminate wasted energy from small and medium-size factories.
"The people there were very excited to have us come in and look at what they were doing," said Alkadi, who today is energy manager at a General Motors plant in Wentzville, Mo. "But all the security and all the money made it a stressful environment for us."
Each year, hundreds of students perform such assessments, visiting manufacturers of products as varied as stainless-steel valves and fat-free yogurt. In 2006, the IAC teams looked at 515 manufacturing plants and identified nearly $150 million of potential savings in energy, waste, and production costs. Not every recommendation is acted upon, of course, but by one estimate, the program saves manufacturers about eight times the approximately $4 million in costs that the federal government runs up each year to fund centers at schools around the country.
But even as energy and commodity cost increases have made working efficiently a bigger priority than ever for small manufacturers, the program is being scaled back. This fiscal year, there will be money for some 300 assessments. There is a danger that up coming budgets may reduce the program even further.
The share of the United States' energy supply going to industry has dropped steadily over the past few decades. But that has more to do with the declining role of manufacturing in our economy than with any drives toward efficiency. Still, as business owners look to make themselves competitive in a global marketplace, reducing energy costs would seem an obvious place to start.
But it doesn't always work that way. Part of the reason for this is economic. Returns on energy-saving investments are pretty good, but proposals for making those sorts of investments are often held to an incredibly high standard. The recommendations that are most often adopted, such as reducing the temperature of water used in a process or repairing leaks in lines and valves, pay back the initial investment in a couple months. Conversely, the recommendations that have the largest potential savings- investments such as installing a cogeneration system or supplementing fuel by burning waste-are accepted much less often due to their large initial outlay and a payback period of two to four years.
Another factor is that while energy costs can be cut significantly- even easily-it's an expense that many managers find easy to overlook. For most manufacturers, the cost of energy accounts for just a small percentage of their overall expenses. Because there is more to be gained by trimming wages or capping benefits, managers will target those areas for cuts first, rather than squeeze out savings from energy efficiency.
"It doesn't get the attention it deserves, because for an individual company, you can be ruthless about cutting energy use, but it's still only 2 percent of the pie," said Kelly Kissock, a professor of mechanical engineering at the University of Day ton and the director of the lAC program there. It isn't until you aggregate energy savings across an entire economy that it really makes an impact.
Also, since more decision makers have MBAs than engineering degrees, it may be that maximizing efficiency is seen as too exotic for managers to really "get" on their own. Kissock said he told his students to listen closely to the workers on the factory floor, because those were the people who knew where the real savings could be had. In many ways, it's a question of vision : Managers just aren't in a position to see that there are savings to be gained from energy efficiency.
The lAC energy squad that comes in for an assessment generally involves two professors and a half-dozen students from the center. They meet with managers and workers from the plant and tour the facility, taking special note of the largest energy users-boilers, lighting, heating and cooling systems, and so on.
"The students are employees of the center," said Mike Muller, director of the IAC based at Rutgers University and a leader of the national program. "We can't have them acting like students, with a lot of oversight. I get one day in a plant, so we need to split up into teams to get the whole place covered."
After a thorough examination of the factory and its operations, the team goes home. Within a few weeks, they send back a report detailing changes the managers can make, estimates of how much those changes would cost, and how much money they could expect to save.
The recommendations can be as simple as changing light bulbs, but they often go to the heart of how a factory is operated. A valve manufacturer in Arkansas made a recommended change to its inventory control, eliminating some old stock in the process, and saved over a million dollars on a $15,000 investment.
The Industrial Assessment Center program was started in 1977 (under the name Energy Analysis and Diagnostic Center, or EADC) in response to the Carter-era energy crises. The plan was ambitious. Squads of trained efficiency experts would fan out across the country and find ways to trim the fat from the energy budget of small and midsize companies. Up to that point, energy use across every sector of the economy had been profligate, the consequence of ready access to cheap fuels.
One of the valuable aspects of the program is that its recommendations are publicly available via a database maintained by Rutgers University in New Brunswick, N.J. There, some 100,000 recommendations from more than 13,000 assessments are catalogued according to date, location, type of facility, and other factors.
Deep in the database, you can find a Florida maker of X-ray scanners with an annual electricity bill of more than $250,000 that was told it could save more than $65,000 a year through steps as simple as cleaning its roof to reduce heating from the sun and using higher-efficiency lighting. A maker of steel-cast products in Connecticut learned that by recycling air for heating and cooling, it could save more than $67,000 in natural gas.
Another important part of IAC assessments is that they are, for want of a better term, vendor neutral. Too often, Kissock said, when a manufacturer calls in a specialist to look at a boiler or HVAC system, the company is steered toward upgrading to a new, though more efficient system. An IAC team, however, is more inclined to find ways to make the existing boiler or HV AC system work more efficiently.
For many students in the program, it may be their first contact with manufacturing. For some, that's exhilarating, but some of the facilities-especially food processing plants, which are common clients-may be shocking to college kids accustomed to the academic world.
"Every site is unique, but you can see some really rough jobs," said Marcus Wilcox, an alumnus of the program who is now president of Cascade Energy Engineering in Walla Walla, Wash. "One person had the job of taking a sheep's head and impaling it on a spike and removing the meat from it. A friend of mine was on that visit, and I remember her eyes were as big as dinner plates. I'm pretty sure she was a vegetarian going in, but it was a strong reaffirmation."
Many of the 100 to 200 students who graduate each year from an IAC program go on to work in the energy field, often, as Wilcox did, for an efficiency consultant. Michaela Martin, an engineer at Oak Ridge National Laboratory in Tennessee, said that compared to a typical college graduate who might need 18 months to get up to speed, "Businesses report that IAC graduates are ready on day one."
LESS IS LESS
Given the assistance that the IAC program has given small and midsize manufacturers, some find it odd that the program has been subject to a steady string of budget cuts. From a level of more than 700 a year through the 1990s, the number of assessments has been cut in recent years due to funding restrictions. According to data compiled by Martin, it's estimated to be down to around 315 this year. What's more, the number of students graduating from the centers has dropped from 132 in 2006 to about 100 this year.
One problem the program has faced is that it was folded into a larger initiative at the Department of Energy called Save Energy Now. This initiative brought together a couple of formerly independent programs, including one called Energy Expert that sent professional consultants to large factories. Compared to the top-line results that can be had from an assessment at an auto assembly plant or an aluminum smelter, the Industrial Assessment Centers tend to be overshadowed.
The Bush administration's budget request for the next fiscal year for the DOE's Office of Energy Efficiency and Renewable Energy-the parent agency of the IAC program-is 27 percent lower than what it received in 2008. Other programs in that office, including one that supports residential weatherization, are set to be cut entirely.
The budget for the IAC program, at first blush, doesn't look so bad: The request for $4.1 million in fiscal 2009 is roughly similar to that of the previous few years. But this comes after what was supposed to be a one-time 37.5 percent cut in FY 2006. According to Neal Elliott, industry program director at the American Council for an Energy-Efficient Economy, a Washington-based nonprofit organization, the centers had been promised that full funding would be restored; it has remained at the reduced level ever since.
"This level of funding compromises the integrity of the program," Elliott said. "The program can limp by like this for a couple of years, but eventually, they'll have to reduce the number of centers."
Indeed, it's not certain that the program will survive in the long term-some budget hawks target it as "corporate welfare," while others suggest that in an era of globalized trade, manufacturing is not a part of the American economy that deserves support.
But Rutgers' Muller said that getting out to industrial sites was an invaluable part of engineering education, something that couldn't easily be replaced.
"When you do an assessment, you put yourself on the line. When you tell someone they should try something, it'll save them money, and when you call back a year later and you hear how it's changed their entire operation-there's a kick to that," Muller said.