Industry often views energy as an operational cost, with energy savings perceived as secondary benefits of other investments rather than as a central value-generating proposition. Still, industrial energy efficiency measures can deliver considerable benefits in addition to energy cost savings. These benefits include enhancing competitiveness and profitability, reduced resource use and pollution, improved production and product quality and improving the working environment – all while reducing operational and maintenance costs. All of these contribute to improved productivity and value creation for the company.
Industry accounts for one-third of the global final energy demand. The impacts of industrial energy efficiency measures are routinely calculated – but only in terms of energy demand reduction and sometimes in greenhouse gas reduction. Understanding the wider range of benefits of energy efficiency and seeing it more as a targeted aim rather than just a by-product of something else, could lead to larger positive outcomes in society. Increased uptake by industry could generate more public funding for energy efficient policies – especially if it is shown that industrial energy efficiency policies contribute to wider policy objectives such as environmental protection and economic development.
Energy efficiency in industry is particularly complex – many processes involve multiple steps and have different energy needs along the process chain. Traditional tools used to assess the financial impacts of energy efficiency tend to focus on the short term results, using simple payback time or rate of return. Taking the multiple benefits into consideration, the payback time can be up to 4 times faster than it usually appears using these traditional calculation methods.
Since industrial operations are based generally on capitalism, investments must have some sort of return. In a capitalist world, the expected return has to be made for each investment, whether it is a new plant or a new hardware purchase. In the same way energy efficiency investments should be seen as investments that must deliver a return. ABB has practically never encountered an instance when the use of energy efficient drives and motors would have caused additional costs. The expected annual profit resulting from this type of investment is a much clearer measure of energy efficiency for financial advantages than a focus on the payback.
It is often claimed that energy efficiency is not part of core business and of limited strategic importance. Energy efficiency measures are frequently perceived as minimally to moderately strategic, and this does not encourage companies to invest in them. It is certainly true that companies usually prioritise investments that contribute to improving their bottom line.
Despite huge investments in renewable energy, many millions of tons of fossil fuels are burned each year to generate electricity. From the gathering of these energy sources to their eventual consumption, we create unnecessary amounts of carbon dioxide that contribute to global warming because of inefficient energy use.
Our best hope of combating climate change and reducing a significant amount of emissions is therefore to use energy more efficiently. Estimates suggest energy efficiency improvements could deliver half the cuts in emissions needed to slow global warming over the next 25 years. By using energy efficient solutions these resources will also last longer and money will be saved. The variations in energy efficiency across the world give a sense of what can be achieved with today’s technologies. The most efficient economies generate almost 16 times more GDP with the same amount of energy than the least efficient.
Applying the multiple benefits approach to energy efficiency policy enables a fuller understanding of the potential offered by energy efficiency. It is a shift away from the traditional view of simply delivering energy demand reductions and it recognizes energy efficiency’s important role in delivering tangible social and economic improvements.
Communicating the value of energy efficiency is a key challenge. Among non-energy experts, energy is rarely seen as a commodity or a service in its usual sense. Shifting the focus from energy efficiency as a good in its own right to talking about what improved energy efficiency actually delivers can help stakeholders to grasp its impact and value.
To truly deliver the multiple benefits of energy efficiency I cannot overemphasize the importance of working in close cooperation with our customers. This enables us to leverage our knowledge of ABB technology together with the customers’ intimate knowledge of their own processes. This cooperation enables ‘best practice’ in terms of discovery and achieving the optimum impact.
In the best case, all of a customer's motors will be in the highest efficiency class and controlled by variable speed drives. But new investments are often expensive. It is better to achieve small savings over a long operating time than great savings and a short operating time. For example, there may be the possibility to achieve large savings in one motor, but if its annual operating time is low then so are the savings we can realize. On the other hand, if we target a motor that is in constant use, even if the savings in energy are low they will have a much greater cumulative effect.
In many cases, energy saving has been the driver for investment. But in retrospect, we have found that the benefits achieved due to the investment have actually been far more important. For example, manufacturers in different industries have been able to optimize their consumption of raw materials, improve working conditions and enhance reliability and throughput times. There is though still a significant challenge in assessing these benefits to demonstrate what can be achieved before investing in energy efficiency.