Saving Energy in the Supply Chain

IMG_2316smog in Nanjing.JPG

How much energy can we save through efficiency?

This question has been addressed in dozens of national or international-level energy studies since before 1980. Some well-known examples of studies that quantify the efficiency potential are those by the National Academy of Sciences, the American Physical Society, and McKinsey & Company. I listed some 45 good examples of such potentials studies in Invisible Energy. These studies all find that efficiency is the largest and cheapest resource available.

But it's even better than this:

A new study that I presented last week shows there are large new opportunities that have never appeared in efficiency potentials studies before. These opportunities reside in the supply chain for industry--the energy used to manufacture the parts and supplies that go into the production of a good. This applies to every single good in the market, both those sold to consumers and those sold to other production facilities. For example, while auto manufacturing consumes a lot of energy, and provides large opportunities for efficiency, even greater savings can be found in the manufacture of the auto parts that suppliers sell to the car manufacturers assembling them into a final product.

The savings for these suppliers--and for that matter for the industries that sell to these suppliers--already appear in studies of efficiency, but their likelihood being implemented by these smaller companies is considered to be relatively low: smaller companies are harder to reach with energy efficiency programs.

In addition, the paper identifies two different ways that new technical potentials can add to what is already known.

This means that the potential for energy savings in the industrial sector worldwide is much larger than any study to date has found. As a result, meeting aggressive climate pollution reduction goals is much easier than we thought, because there are additional ways of generating savings.

Where are the savings?

Savings from the supply chain can be obtained in three ways. The first is when a company decides to reduce its carbon footprint not only by cutting energy use inside the organization but also by helping its suppliers to reduce their own energy consumption. Two other papers presented with mine discuss companies that are already doing this.

In addition, further energy savings can be achieved if a company--or even a consumer--can learn the energy impact of a particular product. This can make a big difference: constructing a building using steel framing or wood framing or concrete could have very different energy impacts in the manufacturing sector, as steel, wood, and concrete are all very energy-intensive materials. And an NRDC analysis from 2012 showed that the energy used to construct a house is almost as large as the energy used for its utilities over 50 years. So if we can save, say, 15 percent of the energy used to construct a home, this is about like saving an additional 15 percent of the energy use of the home itself.

Figure 1: Building construction in China accounts for 20 percent of its industrial energy use, and likely the smog that obscures this picture

































Photos © 2015 David B. Goldstein

The energy impact of consumer choices can also be large in the food sector. How many of you have seen the product Fiji water? This water is actually bottled in Fiji and then shipped halfway around the world to U.S. consumers. Does this use a lot of energy?

The answer is: we don't know. Perhaps the producer started selling it in America because Fiji, which is a tourist destination, receives a lot of products to supply the tourism industry by ship, and the ships deadhead back to the United States. If they opt to take on ballast in the form of bottles of drinking water, it would have no transportation energy cost at all.

Or perhaps the water is shipped using one-way vessels that weren't already headed to America. We don't know, and we can never find out, for most products at the grocery store, if they aren't labeled for supply chain energy use.

Another example is imported fresh fruits. California ships blueberries to Chile during the northern summer and imports them from that country during the southern summer. Does this generate a lot of carbon pollution? As consumers, we don't know.

Figure 2. At a farmers' market. Does it matter if the peppers are local?






















NRDC worked with Congress to develop a voluntary labeling system that EPA would have administered, but it died in 2009 as part of the Waxman-Markey climate change bill that passed the House but was rejected by the Senate.

If we had such system, consumers and businesses could more easily choose products to minimize energy and climate impacts, producing additional energy savings that have never been considered in climate pollution reduction studies.

Finally, an agency or even a large company can enable changes in a system or infrastructure that reduce energy use in ways that individual small companies never could do by themselves. I provided two examples in my research paper. First is Wal-Mart's decision to specify that milk be produced and packaged in airtight containers such that it didn't need refrigeration until the buyer opened the bottle. This not only saves refrigeration energy in their own stores, but also eliminates the need for refrigerated storage at the dairy, at any warehouses used along the delivery path, and in the truck taking the milk containers from farm to store. Neither the truck fleet owners nor the dairies could have garnered these savings on their own.

The second example is a Metropolitan Planning Organization's (MPO) policy decision to encourage integrated transportation and land use planning to reduce the need to drive cars, as all of the major MPOs in California are now doing, as are several in other states. This reduces the energy needed to construct roads, parking, and motor vehicles, and also reduces the length of pipes and wires needed for utility service (because smart growth development is compact rather than sprawling). The difference this can make is large, because the materials used for auto and utility infrastructure are very energy intensive. Concrete, in particular, is even more carbon intensive, because most cement production processes emit lots of carbon pollution directly into the air..

Figure 3: a low-carbon urban infrastructure





























A serious smart growth agenda could reduce greenhouse gas emissions due to less need for parking by about 100 million metric tonnes of carbon equivalent (MMTCE) per year by 2050, equivalent to increasing the savings of gasoline in the smart growth scenario from about 50 percent to the equivalent of 60 percent when you count parking construction savings. Looking at this another way, the United States must reach a carbon emissions cap of about 1000 MMTCE overall in 2050 to meet global climate stabilization goals, and finding another 100 MMTCE that we didn't know we had available could be really important.

In conclusion...


The paper concludes that consideration of supply chain energy increases the "wedge" of feasible efficiency savings by:

  • Overcoming barriers to implementing known efficiency measures as a result of customer assistance in setting and meeting efficiency goals, or of setting specifications that apply to the whole supply chain, such as requiring milk that stays fresh without refrigeration. This increases the expected savings in energy (without affecting the technical potential for savings).
  • Offering the potential to substitute components that require less energy to make for higher energy ones, based on the knowledge of supply chain impacts.
    • This opens up more competition on who can supply low energy components.
  • Designing large-scale systems or infrastructures such as cities, the Internet, and related data provision, and electronic devices based on feasible reductions in societal energy use that are not visible in efficiency potentials studies.