May 2008 Edition

plant strategies

Slashing energy costs

Strategies from CNC Software, GE Fanuc, TRW, 3M, and DuPont demonstrate how efficiency, alternative sources can add to bottom line

By Peter B. Alpern, Associate Editor

Riverdale Mills cultivated a name in innovation by building a better lobster trap. For centuries, lobster traps had been made of wood, which rots quickly in the salt water off New England. Jim Knott took a different approach by devising more durable traps from metal wire dipped in plastic.

His vision, first born more than 40 years ago, has grown into a 90-percent stronghold on the industry and grosses just under $20 million a year. But Knott’s greatest innovation — perhaps even more intriguing — lies far beyond seafood or wiring.

Riverdale Mills generates its own electricity — an invaluable advantage for a company with only 100 employees. A combination of natural gas-fired generators and a hydropower turbine allows Riverdale Mills to run its machinery for a fraction of what it would cost for power from utility companies.

As the price for energy inches skyward, commercial and industrial sectors are being forced to find innovative methods to save on costs. Some manufacturers, such as Riverdale Mills, are investing heavily to create self-sufficiency. Other companies have found simply tweaking their production processes can result in significant savings.

One way or another, a new era seems to be bearing down on the industrial sector and companies are having to change.

"You’d better bite the bullet while you can or you’ll get eaten alive," says Knott.

The growing threat

It wasn’t so long ago that the price of energy mirrored that of another vital resource: steel. For over 20 years, manufacturers indulged in a plentiful market in which steel hovered between 15 to 17 cents per pound.

Those days are over. Today, steel costs closer to 44 cents a pound. Zinc, another valuable metal, has quadrupled in price.

Expensive oil and metal — coupled with the subprime mortgage crash, shaky credit markets, Wall Street turbulence, tensions with Iran and a feeble dollar — have many fearing inflation and the threat of an extended recession in the United States.

"It puts us in a position in having to make some uncomfortable choices," says Gary Novak, health, safety and environmental manager at TRW Automotive. "But it’s a reality and everybody’s got to deal with it."

According to Steve Schultz, corporate energy manager at 3M, the cost of energy to run its facilities rose between 70 to 80 percent over the last five years. In the past 14 months alone, the price for crude oil skyrocketed from $60 per barrel to over $100.

Companies are now accepting the current and long-term trend for oil, natural gas and coal prices and taking measures to invest in energy efficiency to help fight rising costs and optimize power.

"The energy used by the American industrial sector surpasses the energy consumed by the entire Japanese economy," says Department of Energy Secretary Samuel Bodman, "meaning, the potential for energy savings in this sector alone is tremendous."

Educating and organizing

Industry uses more than one-third of the energy consumed in the United States — a staggering total made all the more powerful by estimates from the U.S. Department of Energy that manufacturers are capable of saving between 20 to 30 percent of energy consumed by making simple procedural adjustments.

Half the challenge of being able to cut energy costs lies in identifying the problem, says 3M’s Schultz, citing organization as the single greatest energy-saving tool.

"If a company’s going to determine if they are making improvements or not, it might be a good idea to start by establishing metrics within the manufacturing plant of how much energy was used and how much product was shipped out on a particular month or year," he says. "The emphasis really doesn’t have to be on hardware — it should be on people. We recommend activities to make people aware of the opportunities to use less energy."

Auditing oneself often reveals a number of low- or no-cost adjustments that pay dividends immediately. A good example, says Schultz, is shutting off steam mains that serve abandoned process lines.

Brian Weber, Lean promotions officer at TRW’s Fenton and Fowlerville facilities in Michigan, estimates that each facility consumes roughly $1.5 million a year in electricity.

"One of the easiest things we considered was which of our equipment are we running that we don’t have to," says Weber. "Some of our assembly lines have 30 or 40 [machines] going at once and we start shutting some of those down if we don’t need them. You’re just trying to be practical and cost-efficient."

Taking bold steps

Whether the motivation is for positive publicity or the incentive of saving millions of dollars, some of the largest, most powerful corporations in the world are discovering that becoming greener benefits the bottom line.

ExxonMobil pumped in over $1 billion in cogeneration projects between 2004-05, drawing off the simultaneous production of electricity and steam using natural gas. According to several studies, cogenerated power is nearly twice as efficient as traditional methods of producing steam and power separately.

ExxonMobil has 98 such facilities around the world and has reported reducing its global CO₂ emissions by more than 10.5 million metric tons annually — the equivalent of taking 2 million cars off the road in the United States.

DuPont Titanium Technologies, one of the world’s largest manufacturers of titanium dioxide, cut its energy consumption per pound of product by nearly 30 percent — saving an estimated $100 million since 2001.

DuPont invested aggressively in replacing aging electric motors with new, more efficient models, while upgrading plant rooms with new hardware and software. Many of DuPont’s plants implement technology for energy recovery and reuse, such as salvaging heat energy from steam.

"It all adds up, one motor and one valve at a time, day after day," says DuPont’s Vice President and General Manger Rick Olson.

That DuPont targeted electric motors directly is significant. According to General Electric Fanuc Automation, electric motor equipment accounts for 64 percent of the electricity consumed in the United States industrial sector. All told, those systems consume 290 billion kWh per year — nearly 21 percent of annual machinery operating costs.

One of the more recent advances companies have tried to make is installing adjustable speed drives for motors with a variable load. In years past, air handling and pumping systems were designed with motors that ran at constant speeds and were controlled with a differential pressure bypass valve. Beyond the cost of energy, the system was largely inefficient, says 3M’s Schultz. With adjustable speed drives, the user controls the speed of the motor and therefore the volume of material pumped in, providing significant energy savings.

"If you can reduce the speed of a motor by 50 percent, it’ll use only 1/8 of the energy that it was using at full speed," Schultz says.

Tapping new sources

When CNC Software released Mastercam 24 years ago, it became one of the most widely-used CAM program suites on the market. But CNC’s margin for profit has increased recently as a result of unconventional thinking and bold investments.

When CNC moved into its headquarters to Tolland, CT, in 1989, company President Mark Summers requested geothermal heat pump systems be installed. Instead of using a conventional boiler and air conditioner to heat or cool CNC’s offices, a geothermal system transfers the more moderate temperatures stored beneath the Earth’s outer crust and blows it through the office vents.

The system saved CNC approximately 33 percent on costs than standard cooling methods as recently as five years ago. But with the continued spike in energy prices, Summers estimates his savings will only continue to soar into the future. He has recently installed a large-scale commercial solar panel that will further diminish CNC’s reliance on purchasing electricity.

The problem companies face, says Summers, is coming to terms with the upfront cost — knowing savings might not be felt for years down the road.

"It’s a staggering upfront investment, but there’s a much bigger picture than getting the return," he says. "The humanitarian side should be what’s driving this thing. Unfortunately, what drives business is money. Everybody is talking about the cost of gas like it’s a bad thing. But what it’s going to do is get us thinking and acting quicker because it’s hurting us in the pocket book. It makes you think creatively."

Which is one of the principal reasons why Riverdale Mills has been so successful in its wire-mesh industry.

Back in 1979, the company’s founder and president, Knott, found himself in a legal dispute with a local electric company over who should cover the costs associated with channeling power to his Northbridge mill building. Exasperated by the process, Knott resolved to make his company self-reliant. Knott restored a 1901 hydropower turbine and its civil works at a cost of $130,000, saving him an average of $100,000 a year. He has since built an exhaust system onto his diesel-powered generators, transforming the heat given off from the engines into more energy, using cogeneration.

"If you keep your costs down, you can offer lower prices," says Knott.

Looking toward the horizon

DuPont’s sustainability manager, Eddie Johnson, has a favorite anecdote: for years, DuPont has offered customers free energy surveys of their facilities to identify opportunities to reduce energy consumption.

Until recently, the program had only received tepid interest.

"But suddenly with oil at $110 a barrel and gas at more than $10 a cubic foot, there’s interest — even if only to reduce the electrical bill for lighting," says Johnson. "Before, the perception was that the savings were trivial. People are suddenly interested because it’s real money now."

Predictions vary as to how much of energy expended today can truly be saved. Pedro Haas, an energy expert at McKinsey & Co., suggests that the growth rate of worldwide energy consumption could be cut by more than a half over the next 15 years simply through more aggressive energy efficiency efforts.

The federal government has also taken some steps to promote energy efficiency and conservation. The likelihood of a federal tax on carbon emissions is rising, and some in Congress have called for higher taxes on oil and gas companies to fund investments in cleaner, more renewable energies.

In 2007, Congress voted to increase Corporate Average Fuel Economy Standards to 35 mpg average fuel efficiency for fleets of passenger cars and light trucks. The increase was the first change since a 1975 law mandated 27.5 mpg. The Environmental Protection Agency’s Energy Star program, which promotes energy-efficient products such as refrigerators and residential heating systems, has expanded significantly since it was initiated in 1992.

Ultimately, how companies adjust to these rising costs and shorter supplies — and how deftly they handle the malestrom of a changing landscape — will determine their viability.

"For the last 100 years, we’ve been spoiled by how cheap energy was," says CNC Software’s Summers. "But now I think we’re just beginning to see what we, as an industry, are going to have to do to function. We’re running out of cheap energy and we have to get a lot more creative and efficient with how we use it."

3M
CNC Software
DuPont Titanium Technologies
Exxon Mobil
GE Fanuc Automation
McKinsey & Company
Riverdale Mills
TRW Automotive

What do you think?
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