Corporate Energy Management: Goal-Oriented

Aug. 15, 2012
Business is setting ambitious energy targets, with an eye toward the bottom line and brand image.

Construction of a $75 million biomass co-generation project got under way in late 2011 at the Hartsville, S.C., manufacturing complex of Sonoco (IW 500/214). The system, which will be fueled by wood waste, aims to reduce both energy costs and emissions at that site’s paper mill operations, resulting in annual operating savings of some $14 million while generating 16 megawatts of electricity and steam, the company estimates.

That’s a route more companies are taking or considering, according to a new Deloitte report. Not co-generation, necessarily, but some sort of on-site energy generation. Thirty-five percent of companies surveyed in the “resources 2012” study report generating some of their own electricity supply through renewable energy sources or co-generation. Another 17% report having plans for future on-site generation.

Those numbers are big leaps from the previous year’s survey, when 21% and 6%, respectively, reported generating on-site energy or having plans to do so in the future.

The numbers are also evidence of the growing emphasis business is placing on corporate energy management. In fact, not setting specific energy management goals around electricity, natural gas and natural resources puts a company in a distinct minority. Fully 90% of survey respondents have, and with good reason: They view energy management as essential from a financial perspective (85%) as well as an image perspective (81%).

Their goals are ambitious. In Deloitte’s 2011 study, companies had targeted reductions of 23% to 24% over a three- to four-year period across electricity, natural gas, carbon footprint and transport fleet. In 2012 they claim to have achieved close to 60% of their goals, although they lagged their targeted timelines.

The Funding Challenge

Obtaining the necessary capital to pursue energy-management goals is the No. 1 barrier to achieving those goals, the report showed. When it comes to allocating monies to energy management, company data look like this:

  • 51% of companies allocated a pool of funds for energy efficiency programs in 2012. The average spending on such programs was 14% of total capital budget.
  • 61% of companies have specific payback-period requirements. It averages nearly four years.
  • 57% have internal rates-of-return hurdles to meet. The hurdle averages 21%.

“Ironically, sustained low natural gas prices may be making it more challenging to reach cost-reduction targets,” says Marlene Motyka, Deloitte’s U.S. alternative energy leader.

Read the companion story, "Three Steps to Improved Reliability."
About the Author

Jill Jusko

Bio: Jill Jusko is executive editor for IndustryWeek. She has been writing about manufacturing operations leadership for more than 20 years. Her coverage spotlights companies that are in pursuit of world-class results in quality, productivity, cost and other benchmarks by implementing the latest continuous improvement and lean/Six-Sigma strategies. Jill also coordinates IndustryWeek’s Best Plants Awards Program, which annually salutes the leading manufacturing facilities in North America.

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