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 Rising energy prices are a concern for every manufacturing plant in Houston and across the globe. Managers are being forced to look for energy savings through two major tactics—reducing energy consumption and/or adopting better energy purchasing strategies and switching energy sources.
As early as a 2005 survey of manufacturers, 98% of those surveyed said that energy prices have already impacted their business. As the table below shows, that impact is a substantial amount of money.
Impact of Rising Energy Prices on Profits in Five Key Manufacturing Industries
2000-2003
(Billions of dollars, relative to 1999 baseline)
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Fabricated Metal Products
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Machinery
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Electrical Equipment
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Motor Vehicles
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Chemicals
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2000
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-0.7
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-0.4
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-0.2
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-0.7
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-2.6
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2001
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-0.8
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-0.4
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-0.2
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-0.8
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-3.1
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2002
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-0.5
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-0.2
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-0.1
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-0.5
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-1.7
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2003
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-1
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-0.5
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-0.3
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-1
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-4.1
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Source: National Association of Manufacturers, "The Profit Squeeze for US Manufacturers" October 2005
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Plant managers can take the first tactic, to reduce energy consumption, in two basic areas: the manufacturing process and facilities/ buildings. However, many managers remain skeptical of modifying their manufacturing processes purely in the interests of reducing energy consumption. No one wants to sacrifice productivity and quality to take savings that may give questionable bottom-line results. So, the dual pressures to reduce energy consumption, while not disturbing output, have forced managers into a difficult position: “Reduce your energy costs” and “Keep producing at a high ROI.”
The other tactic for realizing energy savings, adopting best practices for energy purchasing strategies and utilizing information technologies to inform better decisions, requires no compromise in the manufacturing process. However, the energy markets and the technologies available in the market, due to complexity, require some expertise in order to manage the risks and opportunities available. As a result, many companies are opting for the services of energy consultants who have the expertise to deal with all the complexities of energy markets and available technologies.
I talked with Richard L. Zdunkewicz, Director of Sales of LEGACY Energy Management Solutions, a full-service energy advisory firm, headquartered in Houston, about what types of solutions are available. LEGACY provides its clients with energy markets information, energy risk management services, energy procurement services, energy information management solutions and strategic energy planning services.
Mr. Zdunkewicz tells me that to “truly provide the most value to clients a consultant must understand their unique energy issues in the context of their businesses and their operations. There is not a ‘one size that fits all’ solution.”
LEGACY has assisted many clients in identifying multiple energy price and contract solutions and determining the resulting risk exposures across numerous scenarios. Specifically, LEGACY can:
- Integrate historical and ongoing load data to create an accurate depiction of the load profile at the meter, plant and enterprise levels
- Assess risk tolerance, budget goals and constraints
- Model energy usage variations across company's facilities
- Simulate forward energy market prices using state-of-the-art technologies
- Work with management to define existing usage and commodity price risks and develop an appropriate risk management strategy and execution plan
- Provide ongoing risk simulations and energy related earnings at risk analyses to help the company "manage" its energy portfolio
- Utilize an experienced legal team with a unique focus on end-use client needs
- Suggest technologies that will assist the management and operational team in better understanding and managing their loads
- Develop strategies to realize financial benefits from load curtailment to the extent such strategies are compatible with the operating strategy of the company
The current energy crisis is just one more in a series of challenges that have recently befallen, not only Houston but American, manufacturers, particularly our many small manufacturing companies. These companies already face rising costs in many area, particularly health care, pensions, and regulatory requirements, as well as new competition because of new import laws allowing duty free imports from competitors – all which deplete key resources and profits from their operations. On top of these challenges, energy’s rising cost affects manufacturers’ human, capital, and raw materials. If an energy consultant might be one answer for your company, click here for more information about LEGACY Energy Management Solutions. |
