Energy Report 2011

Manufacturers are ramping up efforts to streamline energy use in the face of dramatic hikes in utility prices, according to research carried out for Works Management's 2011 Energy Report. More than 70% of companies used smarter energy policy to offset soaring industrial prices for gas, electricity and oil, the report reveals. A quarter of manufacturers faced increases of over 10% in energy bills over the past year. Firms are fighting back by boosting compressor efficiency, improving plant maintenance and a clampdown on turning off unnecessary lights, according to the report. Manufacturers have also stepped up the range of sustainability programmes. However uptake as a whole remains comparatively low. More companies are operating carbon management strategies and monitoring carbon dioxide (CO2) emissions than ever, the report shows. Yet, green manufacturing remains a minority pursuit. The low carbon agenda appears to be hampered by poor access to information. Respondents rated help around low carbon fuels as generally below par. Another barrier is ongoing uncertainty over the future of the Carbon Reduction Commitment scheme – WM found little major progress with its introduction at site level compared to 10 months ago. However, perhaps the biggest obstacle to a greener future remains old father time. Manufacturers named a lack of it as joint top reason for slow progress with developing low emissions strategies. The survey offers a telling paradox. Manufacturers are throwing the kitchen sink at energy saving because they'll pay the price for staying idle. But the pressure to join the low carbon movement is, for now, more obsequious. Lean businesses running on finite resources have placed it accordingly in the in-tray. Soaring costs spark efficiency drive Energy bills have soared over the past year, with a quarter of manufacturers hit by increases of 10% or more. The number of companies reporting a hike in energy bills has jumped from 29% in our 2009 Energy Report to 52% this year (Our 2010 Energy Report focused on the Carbon Reduction Commitment scheme). The figures broadly concur with official government data. The Department of Energy and Climate Change reports a 20% rise in heavy fuel oil costs and 3% rise in gas prices paid by manufacturers in 2010. Electricity prices did fall marginally in the period, but still registered a staggering 106% increase between 2004 and 2009. Despite these cost pressures, 36% of our respondents had managed to reduce energy bills in the past year. Improving efficiency was the weapon of choice in the war on the kilowatt. Over 70% said savings were down to more efficient energy use at sites. The brightest ideas were all about lighting. Turning off unnecessary lights was the most widespread energy-saving tactic. The switch to motion sensor lighting was another popular energy-saving move. Other priority measures included boosting compressor efficiency, improving plant maintenance and tweaking factory heating. The days of factory roofs clad in solar panels seem a long way off though, with just 6% of respondents expressing interest in switching to renewable energy sources. Away from implementing on-site energy savings, some manufacturers reported they had been able to cut energy bills by renegotiating costs or switching energy suppliers. Nearly seven in 10 companies said they had an official target for energy reduction next year. The bulk quoted goals of 1-9% cuts on existing use. But 30% declared they had no official energy reduction target – a surprising admission given the capricious nature of the utilities market. Carbon-cutting initiatives slowed by workloads More manufacturers are embracing the low carbon agenda, but progress is being buried under heavy workloads.CRC progress stalls Progress with the Carbon Reduction Commitment (CRC) energy efficiency scheme has stalled as the programme now faces an uncertain future. The CRC was billed as a "vital" step to cutting greenhouse gas emissions when it launched last April. Yet 10 months on and the incentive scheme for large organisations to cut CO2 output has delivered only more hot air. The CRC has suffered delays to its full launch, a consultation on simplifying entry criteria and newspaper reports that it could be scrapped entirely. Little wonder WM found no major headway with the scheme since our CRC-themed Energy Report of 2010. The CRC requires qualifying firms to monitor their emissions and purchase allowances for each tonne of carbon they emit. Almost 50% of companies said they measured energy use and 33% recorded CO2 output. The figures were 74% and 38% respectively in our April 2010 research. This year, fewer than 30% said they had a formal process in place for collecting and processing energy data – a slight decline on 2010 levels. And one in 10 was aware of the scheme but had taken no action. The malaise could be explained by changes to the CRC rule book announced in the government's comprehensive spending review last October. Originally, firms who cut emissions were to recoup the dividends from the sales of excess allowances. However, as part of its austerity measures, the government now plans to use cash generated from allowance sales to bolster public finances – has anyone seen a pair of goalposts? Surprisingly only 21% of respondents said the U-turn had dampened their enthusiasm to push on with the scheme. Almost 50% said it was business as usual, with 26% unaware of the changes. The biggest fear for most respondents around CRC was financing the upgrades in plant to achieve efficiency gains. WM will be bringing together energy industry experts and frontline site managers to debate the findings of the research carried out for this Energy Report. See next month's issue for a full report of the event Methodology 105 senior managers and decision-makers from a range of manufacturing sites responded to WM's Energy Report. The sample included representatives of plastics & rubber, general mechanical engineering, electrical engineering, pharmaceuticals and automotive sectors. Respondents came from companies large and small, from those employing more than 500 to those with fewer than 50. industry verdict "Escalating energy costs are one of the hot topics for all businesses in 2011, with rising energy prices presenting a particular challenge to manufacturers' bottom lines. It is also a key factor in the recent rises in inflation and in turn, these inflationary pressures bring further challenges of their own to the whole economy and reduce customer buying power. Manufacturers have the difficult decision to take on whether to pass these price rises on to their customers." Neale Ryan, national network manager, Manufacturing Advisory Service "The results of the survey are not surprising – the regional manufacturers we're working with on a daily basis are certainly feeling the pinch in terms of rising energy costs. The good news is many manufacturing companies are driving activities that support a greener and leaner working environment and have been doing so for some time now. It's clear from the survey results that manufacturers are embracing the inevitable shift towards a low carbon economy." David Caddle, programme manager, MAS South East "At current prices many energy efficiency measures are a great investment, and fuel and energy price rises are making the business case for such measures stronger. Any businesses that aren't already working through a prioritised set of measures to increase efficiency are wasting money. Reducing energy waste is not simply an issue of cutting carbon emissions, but is increasingly a core part of reducing costs and improving overall business performance." Matthew Wynde, senior consultant, Carbon Trust "To know that 78% of businesses are monitoring their energy is encouraging, however that still leaves just under a quarter which are still not. This is a crucial first step on any energy management journey. However, monitoring energy consumption is really only the first step. Organisations need to analyse the data to really show where they can put measures in place to reduce their energy use and to then track performance to demonstrate the value delivered by these interventions." Dave Lewis, head of business energy services at npower "It's pleasing to see many manufacturers increasing their implementation of energy efficiency measures. Another important finding is that more manufacturers are now monitoring their energy use and carbon emissions compared to last year. Accurate and understandable data is the starting point for implementing any energy efficiency strategy. Overall, this report shows an increasing awareness of the role that energy efficiency can play in helping to bring down total production costs. The challenge now is to encourage manufacturers to continue to focus on this area despite continued pressure on budgets." Steve Barker, head of energy efficiency & environmental care, Siemens Industry UK "The trend of rising energy costs echoes feedback from our members. Costs are going up for the majority of manufacturers. That is causing a lot of companies to think hard about energy efficiency. But they're driven more by what it means to their bottom line than what it means in terms of carbon emissions. The low carbon agenda is still a foreign concept to many manufacturers." Roger Salomone, energy adviser, EEF Have your energy costs risen? Have your say email mgosney@findlay.co.uk