Increasingly more executives are citing a desire to decrease energy expenditures within their organizations. North American executives recently surveyed by Johnson Controls, Inc. indicated they expect energy prices to continue to rise, and as such plan to invest in energy efficiency measures to help fight rising costs.

The Johnson Controls Energy Efficiency Indicator research, released in May, identified individuals from a wide range of facilities and locations who were decision-makers for energy management issues within organizations and asked how they were responding to rising energy costs (defined as electricity and natural gas costs).

More than half of respondents said cost-savings are either entirely or somewhat the driver for their decision to invest in energy efficiency measures. (About 35 percent said cost-saving and environmental factors are equal motivators.)

How serious are these buyers in using energy efficiency to help minimize cost? About half the decision-making respondents said they plan to tap both capital and operating budgets for energy efficiency improvements.

Almost 57 percent expect to make energy efficiency improvements using their capital budgets in the next 12 months, spending an average 8 percent of those budgets, while 64 percent anticipate using their operating budgets, allocating 6 percent to energy efficiency improvements, according to the survey results.

Despite the pain of rising energy costs, generally executives are limiting their investments to more conservative energy management solutions, choosing to go with basic measures:

• Seventy (70) percent educated their staff and other facility users on how to be more efficient;
• Sixty-seven (67) percent switched to energy-efficient lighting;
• Sixty (60) percent adjusted HVAC controls;
• Forty-six (46) percent installed lighting sensors; and
• Twenty-eight (28) percent installed energy-saving glass in windows.

Nothing wrong with "basic measures," though. Indeed, by implementing modest energy-saving projects, a business or manufacturing facility can reduce its energy consumption dramatically — and save millions of dollars.

According to the U.S. Department of Energy (DOE), a typical industrial facility can realize savings of up to 25 percent in process heating systems, up to 20 percent in steam systems and as much as 18 percent in motor systems — added up, savings that can reduce a company's natural gas and electric bills and, therefore, directly affect profits.

In the United States alone, commercial buildings consume about 40 percent of natural gas and 60 percent of the country's generated electricity. It comes as little surprise, then, that three-quarters of surveyed executives who have companies that are building or are planning to build new facilities, or are launching retrofits in the next year, consider energy efficiency as a priority in the design of those projects.

As far as anticipated payback periods, about 64 percent of companies have a maximum payback period of between two and five years. "Overall, only 18 percent of those surveyed say their companies would allow a longer payback period today than five years ago," according to the Johnson Controls survey results.

Johnson Controls' responses regarding payback are more optimistic than McKinsey & Company's findings.

The New York Times reported in May:

At a recent conference on energy efficiency and investment strategy, Pedro Haas, an energy expert with the company, said his consulting firm asked people worldwide what payback time they would find acceptable before investing money to save energy. One fourth of them said they would never spend any money to improve energy efficiency; 50 percent said they wanted to earn back the investment in two years or less.

"That means about 75 percent of the public will require economics that are just not there," NYT quoted Haas as having said.

Manufacturers are well aware of the affect of energy conservation on profitability. To quote (again) Plant Services Editor-in-Chief Paul Studebaker:

The rapid rise of energy costs over the past few years … support the widespread conclusion that we're entering an era in which energy productivity (energy cost per unit of production delivered to the customer) will loom ever larger as a factor in the bottom line and global competition.

(Studebaker recently cited three major energy villains in the plant: electrical, boiler and compressor/pump/fan systems. Read here for ways you can "be the hero at your plant and rid your world" of these energy wasters.)

"The energy used by the American industrial sector surpasses the energy consumed by the entire Japanese economy," according to DOE Secretary Samuel Bodman, "meaning the potential for energy savings in this sector alone is tremendous."

Resources

New Research Shows Businesses Investing in Energy Efficiency Measures to Combat Rising Energy Costs
Johnson Controls, Inc., May 17, 2007

Saving Energy Saves Money
U.S. Dept. of Energy

Efficiency, Not Just Alternatives Is Promoted as an Energy Saver
by Matthew L. Wald
The New York Times, May 29, 2007

The three major energy villains keeping your plant from realizing savings
by Paul Studebaker
Plant Services, May 2007

Energy Department to Work with National Association of Manufacturers to Increase Energy Efficiency
U.S. Dept. of Energy, June 12, 2007

Remarks for Energy Secretary Samuel Bodman; Johnson Controls Energy Forum
Energy.gov, June 13, 2007