Taking the longer view
We’ve heard the wry comment, “When you’re up to your neck in alligators, sometimes you forget that your mission was to drain the swamp.” Aside from the general inadvisability of destroying wetlands, the comment reminds us that often short term needs can distract us from laudable long term goals such as working harmoniously, conserving natural resources, or offering lasting value to customers. Certainly this challenge is one faced by industrial process and energy managers. The effects of prudent long-term energy management sometimes create conflict with short term bottom-line targets.
Energy Improvements a Hard Sell?
In these pages from time to time we have discussed significant opportunities for major energy savings with simple paybacks of three, five or seven years. We know from experience that these steps are sometimes difficult to accept or sell if they will negatively affect immediate profitability. A recent presenter at a Technology & Market Assessment Forum sponsored by the Energy Solutions Center discussed this challenge, and provided perspectives on where the future may lie. Russ Chapman from Firebridge, Inc., an Ontario-based combustion engineering firm, gave some views on the topic.
Chapman noted the value proposition for the broad concept of sustainable industries – those that can thrive long-term by balancing the needs of people (both employees and customers), the environment and the business. This challenge is both acute and obvious in decisions involving energy. A decision not to adopt energy-conserving equipment and processes might lead to a better short-term bottom line, but likely will lead to a longer-term lack of competitiveness, thus adversely affecting customers and employees, while adding to the excessive depletion of resources, and environmental damages.
Paybacks are Possible
Chapman gave as an example Dow Chemical, which has reported that by investing less than $2 billion to improve its resource efficiency since 1994, it has accumulated savings of over $9.8 billion by reducing waste of bothwater and energy in its manufacturing processes. By this process and by integrating other environmental, safety and health-related goals into its processes, it has maintained global competitiveness and has surpassed Kyoto Protocol greenhouse gas emission targets.
The presentation stressed the influence of appropriate energy resource decisions on industrial corporation risk management, and on reducing exposure to any effects from emerging environmental regulation. As an example he cited mining giant BHP Billiton, which managed its exposure to future regulations by proactively reducing its emissions.
Chapman suggests that a strong case can be made for taking the longer view. Financing instruments are available that repay the cost of energy improvements with savings. Once the project is amortized – perhaps three to five years – the savings drop to the bottom line. He also stresses that greenhouse gas emission restrictions will likely make these improvements inevitable, so why not begin to capture the savings today?
Further, he feels that savings in site productivity, product quality and workplace safety often accompany these facility improvements. Correctly selected, and innovatively financed, needed energy improvements can even begin showing on the bottom line immediately. Taking the longer view can also mean taking the smarter view.