Businesses search for ways to conserve energy

Industry uses more than one-third of all the energy used in the United States. Natural gas and petroleum supply most of that energy industry, with electricity coming in a distant third, according to the U.S. Department of Energy's Office of Energy Efficiency and Renewable Energy.

Today the challenge

"The first reactions of business 25 years ago would have just been to pass along the higher energy prices to consumers " says Richard Moody, regional economist for PNC Bank." In our economy today, they simply don't have that latitude. In the absence of being able to raise prices of your final goods and services, you have to cut in other areas."

Some companies can absorb the energy increases by reducing profit margins, decreasing pay raises and postponing hiring new employees. If that is not possible then to remain competitive, businesses must still find other ways to offset the impact of high energy prices.

"Most businesses are doing the traditional patterns of becoming more energy efficient, looking at transportation costs and what options they have in terms of heating," says John Silvia, chief economist for Wachovia Bank. "I think the combination of the mix in energy versus other costs in business will continue to change and force changes in business. They cut back other areas that they can control in terms of cost. One of them is employment."

Other options include moving operations to less expensive energy areas and changing the time of day that people work. For companies reliant on trucks, ways include routing transportation differently to effectively bring in raw materials and ship finished products.

"It's mainly looking at where it becomes most cost effective to ship from our different manufacturing locations;' says Chuck O'Hara, public relations director for Procter & Gamble, Mehoophany. "We will look at where we get the best advantage from a logistics standpoint. It provides us the ability to deliver a valued product to the consumer."

In addition to transportation, adjusting production processes can also save money.

"We have some capability to fuel-switch in some of our processes between both oil and gas and, therefore, we will use the one that is the most cost-effective at a particular time," says O'Hara.

For companies that rely heavily on oil, such as those in the plastics industry, working smarter becomes a necessity.

"The older vintage of molds have plastic runners that end tip getting recycled," says Charles "Hank" White, director of the Plastics Manufacturing Center at Pennsylvania College of Technology, Williamsport. "Certainly, any waste creates loss. When we make processes more efficient, we are just doing things that eliminate waste in the process and the need for recycling and those sort of things."

The center also plans to work smart by capitalizing on the industry's high-volume demand.

"One of the things we have been looking at is ways to do more conglomerate buying or buying where you would put a number of small companies together," says White." If your volume isn't huge, you have a tendency to pay more. So one of the hedges may be against that is conglomerate or consortium buying."

That philosophy also works into the transportation realm.

"If your volume is sufficient, if you use rail cars, that does seem like an oil- or energy-saving technique because rail cars can come into sidings and can be transported to local plants as opposed to the trucking industry shipping everything in small quantity," says White.

While short-term adjustments can help to offset the high cost of oil, companies should consider long-term solutions to increase energy efficiency and reduce consumption.

The Pennsylvania Department of Environmental Protection's Office of Energy and Technology can help businesses find ways to address energy issues.

"We come up with suggestions on how to either improve the environmental management systems, reduce energy use or refine energy use," says Mark Carmon, community relations coordinator for DEP's Northeast Regional Office, Wilkes-Barre. DEP works with small and large companies to perform energy reviews in areas focusing on electrical usage, heating and air conditioning systems, water consumption and energy used as part of a company's manufacturing or production process.

"We look for ways to improve the maintenance and fine-tuning of the heating unit or the production equipment," says Carmon. "You want to make sure it's operating property, making sure that is as efficient as possible and is maintained as well as can be. Perhaps it's something as simple as cleaning duct work or installing insulation."

DEP also suggests the use of alternative energies when possible. In the long run, seeking alternative energy solutions and improving energy efficiency remains the key to controlling costs.

As the price of oil and gas rise, the price of electricity follows. Performing an electrical energy audit can save businesses from 10 to 40 percent by promoting efficiency.

"There are so many things, proper lighting, motor controls, current imbalances, boilers that are inefficient, air conditioning inefficiencies, almost anything in the running load of a commercial or industrial business can definitely be made more efficient," says Bob Granger, president of IMC Northeast, an energy consultant firm based in Afton, N.Y. "Sometimes you can take inefficient things that are there and for a very reasonable fix, save 20 to 40 percent." For example, testing and correcting motor imbalances can improve efficiency and use less energy.

Changing incandescent bulbs to state-of-the-art compact fluorescent lighting can provide more light and use less energy while generating a speedy return on the investment.

"We went into a warehouse recently that had standard, accepted technology," says Granger. "We took their $52,000 electric bill and lowered it to $18,000 a year and gave them more light."

Other adjustments reflect what homeowners do. Installing a properly sized tankless water heater can save on hot water costs. Installing a timer on an electric hot water heater can take advantage of night rates offered by some utility companies and save up to 50 percent.

A variety of opportunities exist to offset the rising costs of energy, and savvy business owners must take the time to act to remain competitive.