New and Expanded Manufacturing Plants: Capturing Energy Efficiency from the Start

While most of the opportunities to improve energy efficiency in U.S. manufacturing are in the existing industrial base of approximately 200,000 plants (EIA, MECS, 2006), designing and operating both new plants and significant expansions to existing plants so that they prioritize energy efficiency could avoid significant amounts of energy use.

New Industrial Plant Construction/Expansion: What are the Drivers?

Recently, several announcements and analyses point to the possibility that the United States is set to experience a spurt of new manufacturing plant construction or expansions at existing plants. According to a report by the Boston Consulting Group, some U.S. manufacturers are likely to move production back to the U.S. as labor and energy costs in certain Asian countries increase to the point where it is more economical to manufacture in the U.S. The report estimates that this reshoring process could add 2-3 million jobs and $80-$120 billion to the U.S. economy during the next decade. Recent investments by U.S. companies like General Electric and NCR Corporation are indicative of this possible trend. 

Another, and potentially more significant driver, is the long-term availability of relatively inexpensive natural gas, which is an important feedstock in the chemicals industry and is needed for ethylene-based plastics and other products. According to ICIS, announcements by firms in the chemicals industry to build and expand new chemical plants, including ethane crackers, in the U.S. over the next 5 to 10 years, could result in a significant increase in ethylene production capacity. Additionally, manufacturers in the industrial supply chains that make ethylene-based finished products will likely locate new plants close to the raw material source (ethylene), leading to new jobs and opportunities for energy-efficient plant design and operation.

Opportunities for Energy-Efficient Investments

Currently, manufacturers that are considering expanding operations in the U.S. have limited manufacturer-specific options for integrating energy efficiency into the design of new or expanded plants. One company, Volkswagen USA, achieved the LEED Platinum level for industry in their new Chattanooga, TN, assembly plant. Another, and potentially more impactful possibility, is for manufacturers to initiate conformance with ISO 50001 during new plant construction so that an energy efficiency policy, energy manager and team are in place at the start of the plant’s operation. ISO 50001 can enable continuous improvement and provide the context for new, high efficiency equipment and upgrades. In fact, new or expanded plants seeking to conform to ISO 50001 can respond to the procurement requirements in ISO 50001 by installing higher efficiency and higher performance equipment. As an example, Volkswagen USA’s Chattanooga, TN, plant is also ISO 50001 certified.

However, getting procurement managers to opt for higher efficiency/performance equipment can be hard if differences in first costs are significant. A recent report by the American Council for an Energy-Efficient Economy discusses the procurement challenges and opportunities for integrating energy efficiency in industrial capital investment. In particular, the report shows the need for   plant managers to engage with financial decision-makers who determine the capital improvement strategy of the company. By including a lifecycle approach in their interaction with the financial decision-makers, plant-level personnel can increase the odds of getting funding for higher efficiency equipment when significant capital improvements are undertaken.

As manufacturing companies decide to build new plants or expand existing ones in the U.S. energy efficiency can give such companies an additional competitive advantage.

Alliance Industrial Intern Evan Perkins was a major contributor to this article.