In an Executive Order issued by the White House earlier today, the President committed to pursuing industrial energy efficiency as a means to achieve many significant benefits for America’s industrial and manufacturing sector: lower energy costs for industry and improved global competitiveness, more jobs in manufacturing, construction, operations and maintenance, and other fields across the sector, less pollution, and improved grid reliability and security. NRDC fully supports the Executive Order, which would formalize and expand existing close interagency coordination, and catalyze activities at the state and federal levels, and among utilities, industrial companies and the non-governmental sector, in order to accelerate greater investment in industrial energy efficiency and Combined Heat and Power (CHP).
The U.S. industrial and manufacturing sector is a cornerstone of our nation’s economy—it not only provides millions of good-paying jobs but also produces high-quality goods that account for approximately 60 percent of total U.S. exports. The industrial sector is one of the largest energy-using sectors too; it consumes more than 30 percent of all energy in the U.S. Helping our industries to better control and reduce their energy costs is critical to ensuring the sector’s long-term competitiveness. Fortunately, there’s ample opportunity to do so.
According to a 2009 McKinsey report, there are numerous cost-effective investments in the industrial sector that can reduce this energy use by about 20 percent through 2020. Investments totaling a little over $100 billion in the industrial sector can harness energy savings almost five times that. As President Obama stated in his 2012 State of the Union address, one of the easiest ways “to save money is to waste less energy,” and that our country should “help manufacturers eliminate energy waste in their factories and give business incentives to upgrade their buildings.” Industrial energy efficiency offers many other benefits too (discussed below).
However, the report, on which NRDC provided some input, acknowledged that significant and persistent barriers exist, which need to be addressed at multiple levels through a comprehensive and innovative approach.
The White House Executive Order is a great first step towards exactly that – it appreciates the importance of industrial energy efficiency, sets significant goals and throws its policy support behind achieving them, and provides a structured framework within which existing and new government, private sector and non-governmental initiatives can be coordinated to unlock the energy-efficiency potential.
The Executive Order stresses the key benefits of industrial energy efficiency:
- Improving U.S. manufacturing competitiveness: Industrial energy efficiency saves money by making processes more efficient and installing cutting-edge energy-efficient equipment. This can save at least $100 billion (and perhaps almost $500 billion according the McKinsey report). These enormous cost savings can make American-made products more cost-competitive and gain share in the global marketplace. Also, products become cheaper so consumers save.
Leading US-based companies such as 3M, Dow Chemical, ArcelorMittal, General Motors, Ford, Boeing, Colgate-Palmolive, Pepsi, Merck and a number of others have achieved significant, ongoing energy use reductions worth many millions of dollars.
- Creating jobs now through investments upgrading our manufacturing facilities: Tapping industrial energy efficiency requires an in-depth understanding of the industrial facility, regular monitoring of its processes, and deep engineering experience and skill to install and operate equipment. This provides the basis for the creation of countless skilled, long-term and high-paying jobs. Energy cost savings also help to keep existing jobs and potentially create new ones at these facilities.
The Executive Order’s focus on installing 40 gigawatts of CHP, a readily available energy efficiency technology, immediately over the next decade can create those jobs right away. Other investments will continue to create and maintain job growth.
- Lowering emissions significantly: Energy generation typically burns fossil fuels and releases hundreds of millions of tons of carbon dioxide pollution and large quantities of other pollutants that harm our health and environment. Harnessing industrial energy efficiency will reduce this pollution and associated health risks, including asthma and heart disease. According to the McKinsey report, more than 300 million tons of carbon dioxide (equivalents) can be abated from the industrial sector. In particular, CHP is a very efficient generation resource that has reduced emissions.
- Offering a low-cost approach to new electricity generation capacity to meet current and future demand: Energy efficiency can be more than twice as cheap on average as other generation resources like coal plants: as cheap as 2.5 cents per kWh, according to a Navigant study. So, it makes sound economic sense to invest in the cheapest source first, especially when there is bountiful potential to do so. What’s more, these savings accrue not just to the industrial sector, but to residential and commercial sectors as well – so everyone benefits.
- Enhancing grid security: Investments in industrial energy efficiency including CHP, reduce the demand for energy, which in turn reduces grid congestion and enhances grid reliability and security. It also minimizes the need for capital to be applied towards costly electricity generation and transmission assets, which can consequently be deployed towards other essential infrastructure and services.
There is no one-size-fits-all solution to industrial energy efficiency, as the Executive Order recognizes. This is precisely why various stakeholders across the country – federal agencies, state governments, industrial companies, utilities, and non-governmental entities – need to coordinate their activities to accelerate investment in industrial energy efficiency and CHP. The Executive Order formalizes such coordination by directing certain executive departments and agencies including the Departments of Energy, Commerce, and Agriculture, the Environmental Protection Agency, the National Economic Council, the Domestic Policy Council, the Council on Environmental Quality, and the Office of Science and Technology Policy to:
- Harmonize their policies pertaining to industrial energy efficiency;
- Use existing federal authorities, programs, and policies to support investment in industrial energy efficiency and CHP;
- Convene national and regional stakeholders to identify, develop, and encourage the adoption of investment models and State best practice policies to overcome various barriers to the deployment of industrial energy efficiency and CHP;
- Provide technical assistance to States, utilities and manufacturers to encourage investment in industrial energy efficiency and CHP;
- Provide incentives for the deployment of CHP and other types of clean energy, such as supportive policies that account for and ascribe value to the emissions reduction benefits of CHP and energy efficiency; and
- Make available public data and information on the benefits of investing in industrial energy efficiency and CHP.
The Executive Order is an important building block to unlock the potential of energy efficiency improvements in our industrial and manufacturing sector, using existing tools and resources we have at our disposal. It also sends a compelling signal that Congress and the Administration should be doing all they can to support our industry to reduce energy costs, create jobs, and cut harmful pollution. Congress has several bipartisan bills before it: Sens. Shaheen’s and Portman’s Energy Savings and Industrial Competitiveness Act of 2012 (S. 1000), Reps. Bass’ and Matheson’s Smart Energy Act of 2012 (H.R. 4017) and Sen. Bingaman’s Expanding Industrial Energy and Water Efficiency Incentives Act of 2012 co-sponsored by Sens. Feinstein, Merkley, Shaheen, and Snowe (S.3352), which are currently being held up by partisan gridlock. Our legislators should be working in unison to support our industrial and manufacturing sector and pass these bills. This Order is a good cue for them to follow.
NRDC fully supports President Obama’s Executive Order, and our support is shared by a broad range of stakeholders including environmental groups, energy efficiency advocates, labor unions, industry trade associations like US Clean Heat & Power Association (USCHPA) and American Gas Association (AGA), and others. NRDC looks forward to working with various agencies and the private sector to realize the energy-efficiency potential in the industrial sector.