Accelerating Investment in Industrial Energy Efficiency

As the GOP convention was winding down in Tampa and the preparations were in full swing for the DNC to meet in North Carolina, the President issued another Executive Order on August 30, 2012, Accelerating Investment in Industrial Energy Efficiency.

The timing is important since nobody on the GOP side is paying attention; the MSM is preoccupied with criticizing Republican attendees and praising the upcoming DNC event. The release of this executive order days before the national Democrat convention and before the final relay of the presidential election points in the direction of a President who wants to claim, in the last leg of the race, that he is going to create those manufacturing jobs he failed to create so far and protect nature, the pet issue of the environmental left, his most ardent supporters. The executive order addresses the fact that the” industrial sector accounts for over 30 percent of all energy consumed in the United States.” Manufacturing should use energy more efficiently through combined heat and power (CHP). “Instead of burning fuel in an onsite boiler to produce thermal energy and also purchasing electricity from the grid, a manufacturing facility can use a CHP system to provide both types of energy in one energy efficient step. Accelerating these investments in our Nation’s factories can improve the competitiveness of United States manufacturing, lower energy costs, free up future capital for businesses to invest, reduce air pollution, and create jobs.”

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The President directs federal interagency coordination with States to “convene national and regional stakeholders to identify, develop, and encourage the adoption of investment models and State best practice policies for industrial energy efficiency and CHP.” The Departments of Energy, Commerce, and Agriculture, the EPA, the National Economic Council, the Domestic Policy Council, the Council on Environmental Quality, and the Office of Science and Technology will:

1. Coordinate and strongly encourage a national goal of 40 gigawatts of new, cost effective industrial CHP in the U.S. by 2020
2. Convene stakeholders in industrial efficiency and CHP
3. Encourage investment in industrial efficiency and CHP by
   • Assistance to States for potential emission reduction benefits of CHP when developing State Implementation Plans (SIPs) to “achieve national ambient air quality standards”
   • “Providing incentives for the deployment of CHP and other types of clean energy, such as set asides under emissions allowance trading program state implementation plans, grants, and loans.”
   • Output based compliance options in power and industrial sector regulations
   • Expand Better Buildings, Better Plants program at the Department of Energy, seeking to” reduce energy intensity by 25 percent over 10 years”

Agencies must consult with the Federal Energy Regulatory Commission in order to accelerate investment in industrial energy efficiency and CHP. According to Dr. David Sponseller, since the Arab oil embargo of 1973, industrial executives have been working to cut energy costs as much as possible without compromising the manufacturing process. “The remaining opportunities for energy saving are so dispersed and fragmented that it would essentially be more trouble than it is worth to achieve the energy saving sought, and to do so in a way that would satisfy the EPA and other environmentalists.” The “low hanging fruit,” the easy, less-expensive, and manageable energy savings have already been made and further savings would be more trouble. A good analogy would be, “hanging” an inefficient mini power plant on every industrial process that uses a significant amount of energy. This would turn out to be a fiasco not unlike Chairman Mao ordering the installation of inefficient mini blast furnaces in people’s back yards all over China during the Great Leap Forward. In metallurgy, a huge consumer of energy, savings were attained in refining, steelmaking, melting, and heat-treating by the use of larger, more-efficiently insulated furnaces, and simpler heat-treating procedures. Utilities use higher temperature and pressure systems to produce more kilowatt-hours from fossil fuels. Utilities “have already built many combined cycle plants that maximize the energy recovery sought by the CHP method.” Although more energy could be saved, “every industry has already achieved major reductions in energy consumption, at the urging of the U.S Department of Energy.” From the economic stand point, any capital investment to a manufacturing plant to comply with the CHP and clean energy requirements would have to be sunk over time and part of the cost passed on to the consumer. The federal government should not insinuate itself into the business management of the American industry. “I am from the government and I am here to help you” is a cliché, but it fits like a glove. The EPA is a classic example of an entity that chokes American business and increases the use of energy needlessly. For example, billions of barrels of crude have been wasted by EPA forcing engineers to recycle some of the exhaust gases back through the engine, thus reducing its efficiency. “The lower compression ratios required to meet the stringent emissions requirements on autos have lowered the miles per gallon of cars significantly.” The constant reduction of emissions requirements is not necessary since engines are now small and efficient. The low sulfur limits on diesel wastes so much crude oil in refining, that it nearly doubles the price at the pump. Power plants consume more energy in order to meet absurd limits on smokestack emissions. The army of agencies, national and regional stakeholders, state groups, industry groups would have to plan, monitor, and coordinate in order to achieve the planned energy savings. It would be a distraction to managers and engineers, preoccupied with running their companies. Analyzing every stage of the production process, equipment, fertilizer, petrochemicals, oil-refining, electricity generation, manufacturing industry for potential energy savings would be counterproductive. Additional spending to satisfy bureaucrats and environmentalists would reduce the overall industrial efficiency. Government regulation would stifle industries in general and small businesses in particular, costing billions of dollars a year. This executive order would work well in a centralized economy where everything is micromanaged by the “omniscient” and often bumbling state. There is a reason why 40 percent of manufacturing plants were closed in the former East Germany when East Germany became part of West Germany again. The industrial base was very weak. Factories were centrally planned and managed by the Communist Party and were very inefficient, seldom turning a profit, constantly subsidized by the state. The author wishes to thank Dr. David Sponseller, President of OMNI Metals Laboratory, Inc. in Ann Arbor, Michigan, for his professional insight and contribution to this article.