U.S. industrial energy use poised for efficiency upgrade: report
Economic and market indicators suggest that many types of U.S. manufacturing are poised for a new period of major capacity investments as existing capacity approaches full use. At the same time, global trends are encouraging a shift to domestic production for domestic consumption. A new report by the American Council for an Energy Efficient Economy (ACEEE), Trends in Industrial Investment Decision Making, suggests that these pending investments represent a shift in the U.S. — an opportunity to make significant energy efficiency investments.
September 19, 2008 By Newswire
"This period of capacity investment represents a once-in-a-generation opportunity to lock in energy efficiency in our domestic manufacturing base," said ACEEE’s Associate Director for Research Dr. Neal Elliott, the report’s lead author. "Industrial energy efficiency programs are positioned to exploit a rare opportunity to change energy use patterns for years to come, but they must begin engaging with their industrial customers now."
Energy efficiency investments in the industrial sector are made differently from those in the commercial and residential sectors. Retrofit opportunities are much more limited in the industrial sector and project cycles can be substantially longer to coordinate with overall refit cycles. But efficiency savings in the industrial sector can be large and very cost-effective if they are implemented as part of a normal capital investment cycle.
"It is critical that energy efficiency programs understand how industrial investment decisions are made," said Anna Chittum, an Industrial Research Associate at ACEEE who contributed to the report. "Industry makes all capital investment decisions in cycles that vary by industry, and multiple external market factors affect these decisions. Energy efficiency program managers need to make their recommendations as part of that cycle to be effective in achieving energy savings for industrial customers."
The report reviews industrial investment decision making and presents insights into recent market trends. The report addresses several important questions:
- How should energy efficiency programs be responding in the near term?
- What investment trends are likely to emerge over the next 3-5 years?
- How can programs position themselves for future opportunities?
- What are reasonable energy savings expectations in the near and longer term?
"Federal Reserve data suggests that manufacturing is approaching historically high levels of capacity utilization while productivity growth is slowing. This suggests many industries are nearing a point at which they will need to make new investments," said Vanessa McKinney, Economic Analysis Research Assistant and a co-author of the report. "These signs point to the industrial sector experiencing a new capital investment cycle in the near future."
These economic trends, combined with increases in the cost of marine freight and recent declines in the dollar relative to other currencies, make domestic production even more attractive. This trend is currently most notable in the steel industry.
Trends in Industrial Investment Decision Making can be downloaded for free at www.aceee.org.
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