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Is wasting energy a top priority at your business?
May 23, 2017 - Would your company hire a second plant manager with a 12-month annual vacation contract? What about this... Would your company invest in an energy project with zero return?
May 24, 2017 By Anatoli Naoumov
When a company decides to delay an energy cost reduction project (wait, nobody makes such decisions… do they?), sophisticated managers of the 21st Century usually proclaim that an “energy cost reduction project is a low priority for us at the moment”.
So, top priority projects are implemented.
At many companies, the top priority project is to pay for energy that creates no value.
Paying for energy that does not add value to the final product is, effectively, an investment with zero return. “Energy cost reduction is a low priority” effectively means “wasting energy is a top priority”.
With so many companies doing it year after year, it must be a top priority.
Let’s consider a mid-sized manufacturing plant with a $1 million electricity budget. Like any manufacturing operation, the plant is busy every day with production, safety, sanitation, stoppages, scrap, maintenance, audits, new products, new machines, costs, budgets… you know the drill.
The last thing any plant manager needs is a new project. Hence, “Energy projects are low priority”.
In manufacturing, only about 60% of procured energy ends up in the final product. The rest is wasted one way or another. Half of this energy waste can be eliminated through projects with profitability higher than that of the core business. With no action, this plant effectively invests $200,000 annually into creating no value.
Alternatively, such a plant could outsource “energy work” and realize value through lower costs, higher quality and employee engagement.
Pay for energy cost reduction or keep paying for using more energy; either way, it’s the same result on this year’s P&L, but not on the next year’s… when money invested in cost reduction will generate return, while money spent on wasted energy will continue to create nothing of value.
A managing partner at GreenQ Partners, Anatoli Naoumov, MBA, MSc, CMVP, has been involved in various areas of business analysis and development for over 15 years for companies in Canada, The Netherlands and Russia. He has been certified as measurement and verification professional (CMVP) by The Association of Energy Engineers (AEE) and The Efficiency Valuation Organization (EVO). He can be reached at anaoumov@greenq.ca .
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