Energy Management: Best Practice Approach in a Carbon Constrained World

Abstract

Industry today is facing the perfect storm of Energy. Recently, oil prices have topped the $100.00 per barrel level with no indication that they will be stabilizing anytime soon. This is exacerbated by the political instability in the Middle East and around the world and the increasing demand for oil and related products by global manufacturers and end users especially in the Far East. Since Hurricane Katrina, natural gas prices have been extremely volatile with prices peaking at greater than $16.00 per mmBtu in select markets. Over the last five years natural gas prices have more than tripled putting an extreme burden on energy intensive manufacturing companies. Sustainability issues are being raised as U.S. manufacturers are paying higher prices for natural gas than nearly all their global competitors. Most industry expansion and greenfield projects are shifting to lower cost markets where feedstocks are more competitively priced.

Natural gas prices have moderated significantly since their post-Katrina highs in 2005. However, industry still faces upward pricing pressures relating to increases in demand for natural gas, global competition and impending legislation calling for greenhouse gas reductions. All of which will significantly affect industry and the economy. Industry will continue to be at the mercy of Mother Nature concerning Tropical storms and exceptionally cold winter weather. On the immediate horizon, new restrictive greenhouse gas legislation is being developed. It is highly probable that new legislation addressing greenhouse gas emission standards will be enacted. Experts are calling for the first wave of legislation as early as 2009. Pressures are coming from environmentalists, public opinion and industry, all concerned about global warning. It is not a question if more restrictive greenhouse gas and carbon reduction laws will be passed but when.

This new legislation will be aimed at the power generation suppliers, industrial manufactures and the consumer markets. The primary focus on power generation will directed towards coal fired generation operations. Another initiative currently underway that will impact industry and create a greater sense of urgency in addressing energy conservation practices by industrial manufacturers involves the Department of Energy’s efforts to develop an ISO (International Organization of Standardization) standard for energy efficiency. It is clear without a shadow of a doubt that every effort should be taken now to reduce energy consumption by industrial manufactures. It is realistic to expect however, that during this crisis, the perfect storm of energy, that there is opportunity for industry to prosper. What should industry do?