Hedging Your Bets

Dec. 21, 2004
Conservation plans that protect during crisis pay cost-cutting dividends year-round.

Sometimes even the little things matter. That's what three California manufacturers -- Lockheed Martin Space Systems Co. Missiles & Space Operations, Smurfit-Stone Container Corp. and Grundfos Pumps Manufacturing -- discovered when they responded to the state's power crisis last summer by implementing effective energy-saving solutions. The companies' experiences also show that having an energy management system in place and reacting aggressively to energy instability pays off in more ways than one. The energy conservation plans they implemented -- many of which involved no cash outlay -- not only kept plants humming during the crisis, but also continue to reduce costs to this day and serve as a hedge against a future crisis. Though the California crisis has since eased, risks of energy shortages remain for manufacturers in California and other regions of the United States. "There is still a lot of volatility," warns Joseph Romm, founder and executive director of the Center for Energy and Climate Solutions, Annandale, Va. "It's not going to go away. The possibility of price spikes remain, especially in the summer. Our summers keep getting hotter." In Sunnyvale, Calif., Lockheed Martin Space Systems Co. Missiles & Space Operations' energy management approach emphasizes education and power consumption reductions. The division of Bethesda, Md.-based Lockheed Martin Corp. has facilities in three California locations: Sunnyvale, Palo Alto and Milpitas. It manufactures satellites for military, commercial and civil customers and employs about 7,000 people in the San Francisco Bay area. Rich Robertson, manager of Bay area facilities, technical maintenance and energy, says the company has had an energy management program in place since 1976. When the last energy crisis hit in June 2000, and after its Palo Alto plant was temporarily shut down because of it, the company bolstered its conservation efforts. Programs focus on work-area lighting systems, computers and monitors, and facility heating and air conditioning systems. Motion sensors control most of the plants' lighting systems, and temperatures within the plants are kept no higher than 68 degrees in cooler months and no lower than 78 degrees in warmer months. Jeffrey K. Harris, president and general manager at the company, initiated a "Chunker" program to encourage company vice presidents to trim energy consumption. Each was assigned a portion, or "chunk" of the company's total 6.5 million square feet of facilities, and given a goal of a 20% reduction in energy consumption for that portion. Harris distributed Chunky candy bars to the executives to encourage them to have fun with the program. Additional steps that led to savings included monthly energy committee meetings and a publicity effort within the company that featured Kill-a-Watt, a cartoon character. Last year was a successful one for Lockheed Martin Space Systems Missiles & Space Operations' conservation efforts. "We avoided spending about $5 million in energy costs for 2001," Robertson says. "We had months when we were conserving up to 20%. I think what surprised everyone was the amount of conservation going on." The company also saved $98,000 through the 20/20 rebate program in 2001. The state-sponsored program, which ran from July through October 2001, gave a 20% credit to companies each month that they reduced power consumption by 20% compared with the prior year. From the power crisis, Lockheed Martin Space Systems Missiles & Space Operations learned that employees need to be reminded to save energy. The company also learned not to lock in rates with energy service providers during extreme price swings. When prices recently returned to more reasonable levels, it still had to pay the higher rates. "We never again would negotiate a contract for longer than a year," Robertson says. Chicago-based Smurfit-Stone Container Corp., which has 28 California facilities, eased its way through the power crunch by initiating several energy-saving programs. The company's California plants manufacture products including corrugated containers, multiwall bags, folding cartons, and tubes and cores used in construction. Cutting costs is important to the company whose manufacturing processes require more energy to produce a ton of paper than it takes a steel manufacturer to make a ton of steel. Chuck Walton, plant manager at Smurfit-Stone's folding carton plant in Irvine, Calif., says energy-efficient lighting was installed throughout that facility. Production also was timed to dodge energy peak periods. Additional efforts included an energy audit and brainstorming sessions with key hourly and salaried employees. Two of Smurfit-Stone's California plants produce their own electricity through cogeneration. One of those plants uses that power; the other sells it to a state utility company. California law disallows the company from powering one plant with the electricity generated from another if the plants are not on the same piece of property. Ron Dictor, energy program manager in Smurfit-Stone's Chicago-based Corporate Procurement Department, says one important lesson the company learned from the energy crisis was to look outside its utility companies for power. "Several facilities . . . are now having their power provided by an energy service provider," Dictor says. "This has given us price relief but does not assure us that we'll be supplied in the event of another shortage." By combining team initiatives with a formalized environmental management system, Grundfos Pumps Manufacturing cut annual energy consumption by 28% in 2001. The Fresno, Calif., maker of centrifugal water pumps was well prepared for the energy crisis after receiving ISO 14001 certification in the fall of 1999. Teams at the 270-employee facility then set a three-year, 10% energy reduction goal. "When the situation changed in late 2000, it became apparent that 3% a year would not do much," says Bill May, production manager at the Fresno plant. To save energy, Grundfos employees did everything from unplugging the ice machine to changing their work schedules. The company also replaced metal halide lighting in the factory with more efficient fluorescent fixtures. Because the new fluorescent lights emit less heat, less energy is needed to cool the building. To minimize production during peak power periods, Grundfos employees worked 4:30 a.m. to 1 p.m. shifts from May through October. Those hours were implemented again this summer. May attributes much of the plant's success to its 15 voluntary process improvement teams. The "Reduce the Juice" energy conservation team recently won the California Team Excellence Award sponsored by the California Council for Excellence. "It really helps when you have all of your employees involved," May says. "One lesson we learned is that you can [save more energy] than you think you can. Don't sell yourself short."

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