New reports: Industry's role in addressing climate change

A new study by the World Wildlife Fund examines the need for US industries to undergo a fundamental transformation to decrease carbon emissions to necessary levels. According to the executive summary:

This report models the ability of low-carbon industries to grow and transform within a market economy. It finds that runaway climate change is almost inevitable without specific action to implement low-carbon re-industrialisation over the next five years. The point of no return is estimated to be 2014.

While WWF focuses on the need for the industrial sector to address climate change before the point of no return, a separate report by the Presidential Climate Action Project gives several important government recommendations for addressing industrial decarbonization.

Efficiency, as expected, plays a huge role in these recommendations. Among the recommendations are the bolstering of two critical DOE programs: Industries of the Future, and Industrial Assessment Centers. ACEEE has been advocating for these programs for many years, and we expect that they will certainly play a key role in addressing climate change in the industrial sector.

DOE Announces $155 Million for Industrial Energy Efficiency

DOE announced today they would be awarding over $155 million for industrial energy efficiency projects and technical assistance. "Many companies already realize that improving efficiency saves money while helping the environment," said DOE Secretary Steven Chu. "These projects will make energy efficiency technologies more widely available, cutting energy use and reducing carbon pollution across the country."

About $146 million was awarded to nine companies implementing energy efficiency projects in plants across the country.

The remaining $9.5 million was awarded to the university-based Industrial Assessment Centers (IAC), state agencies, regional partnerships, and a national technical assistance provider to offer local technical support for the industrial sector. These awards went to 15 IACs, 11 state energy offices/organizations, five regional efficiency partnerships, and one national technical assistance provider.

More detail on the grant selections can can be found here.

This announcement is a very good step for industrial energy efficiency. The bulk of the grant money will go toward the implementation of projects, in accordance with the goals of the stimulus package. Some funds will be retained for more strategic uses such as technical assistance which can beget even more projects down the road.

However, the demand for industrial energy efficiency remains extremely high. DOE has publicly stated that requests for this funding exceeded $10 billion, or nearly 65 times the funds available. The industrial sector continues to be undervalued by policymakers. Despite accounting for one-third of the energy use and 27% of greenhouse gas emissions in the United States (LBNL), the industrial sector has not been receiving appropriate consideration and funding to reflect this importance. As a reference point, industrial energy efficiency was given about 0.02% of stimulus funds, and receives about 4% of DOE Energy Efficiency and Renewable Energy budget.

ACEEE commends today's DOE grant allocation, and hopes that future policies and appropriation will give increased attention to the industrial sector.

Durable goods orders rise 1 percent in September

From the Associated Press:

WASHINGTON — Orders to U.S. factories for big-ticket manufactured goods rose in September as the biggest jump in demand for machinery in 18 months offset weakness in commercial aircraft and autos.

The second advance in three months for durable goods orders is a hopeful sign for the manufacturing sector, which has helped lead the early stages of the fledgling economic recovery. But many economists worry that demand could falter in the months ahead as various government stimulus programs wind down.

The Commerce Department said Wednesday that orders for items expected to last at least three years increased 1 percent last month, matching economists' expectations. Excluding transportation, orders rose 0.9 percent, slightly better than the 0.7 percent that economists had forecast.

A 7.9 percent rise in orders for machinery, the best showing since an 8.5 percent surge in March 2008, led the overall increase.

Orders for non-defense capital goods, considered a good proxy for businesses' investment plans for new equipment, rose 2 percent, the strongest advance since June.

Last month's rise in orders followed a 2.6 percent decline in August and a 4.8 percent surge in July, indicating that any recovery from the recession likely will proceed in fits and starts.

Paul Ashworth, senior U.S. economist at Capital Economics in Toronto, said a large part of the September increase reflected a jump in demand for military equipment rather than strength in the private sector.

"The recovery is still struggling to gain any forward momentum," he wrote in a note to clients.

Demand for transportation equipment rose 1.1 percent after a 9.1 percent plunge in August. Orders for defense aircraft rose 12.5 percent last month, offsetting a 2.1 percent drop in demand for commercial aircraft and a 0.1 percent dip in orders for autos and auto parts.

The auto sector had posted two months of gains, helped by the Cash for Clunkers government sales incentive program. But that program, which offered car buyers up to $4,500 to trade in their old models for new cars, ended in August.

Besides the surge in demand for machinery, orders for primary metals such as steel rose 0.3 percent. Orders for computers and related products increased 0.4 percent in September.

Analysts expect that the overall economy, as measured by the gross domestic product, grew at an annual rate of 3.3 percent in the July-September quarter after contracting for a record four straight quarters. The third-quarter GDP report is due out Thursday.

If businesses are encouraged by the early signs of recovery, they could start hiring back the millions of workers who were laid off during the recession, providing an important boost to consumer spending. But many employers appear reluctant to hire back those workers until there are more signs of a rebound.

Caterpillar Inc. announced Monday that about 2,500 laid-off workers will be permanently cut from the company. They were among more than 22,000 employees laid off earlier this year as the world's largest maker of mining and construction equipment scaled back production due to weaker demand. Caterpillar last week said it was seeing encouraging signs that a recovery was under way, even as it reported a 53 percent decline in third-quarter earnings.

Also this month, Texas Instruments Inc. reported third-quarter profits and sales that were slightly above expectations. The company also said its largest division, which makes analog chips used in digital music players and other gadgets, enjoyed 20 percent growth for the second straight quarter.

Barriers to energy efficiency investments and energy management in the industrial sector

The industrial energy efficiency team at ACEEE has put together a brief synopsis of the Barriers to energy efficiency investments and energy management in the industrial sector [PDF]. With the current economic recession being the primary obstacle to industrial energy efficiency investments, ACEEE looks ahead to the American economy's recovery, but acknowledges that the current economic climate is the best time to make the necessary policy changes to encourage efficiency investments. The four greatest challenges that stymie such investments include:

1. The need for new technologies, products, and processes;
2. Access to industry-specific expertise, assessments, and training for workers;
3. Availability of a trained and capable workforce; and
4. Access to useful capital to make needed investments.

Several policy initiatives, which are discussed briefly in the paper, could help to address these limiting factors, including legislation currently on the table in the US Senate. In particular, components of the American Clean Energy Leadership Act of 2009 would help to address some of the fundamental obstacles to industrial energy efficiency.

It is ACEEE's hope that these provisions will be incorporated into a comprehensive energy/climate bill, one with more robust energy efficiency provisions across all economic sectors. (See Climate Bill Must Be Strengthened to Spur Investment in Energy Efficiency to Save Consumers $Billions, Create Millions of New Jobs, Support Robust Economy.)

Manufacturers Worse Off Under Kerry-Boxer Climate Bill Emissions Allocation Scheme

On Friday, October 23rd, the EPA released its scoring of the Clean Energy Jobs and American Power Act (S. 1733), also referred to as the Kerry-Boxer Climate Bill. The EPA found that the costs of Kerry-Boxer do not differ greatly from the Waxman-Markey climate bill. Both bills are expected to cost around $100 per household. However, this analysis does not fully account for energy efficiency provisions, which ACEEE estimates could save as much as $36 billion by 2030.

On the same day, Senator Boxer released the Chairman's Mark of the Kerry-Boxer bill. This version filled in some of the major sections left out of the original bill. One of the most anticipated sections was the greenhouse gas emissions allocations. The percentage allocations for "energy-intensive, trade-exposed" (EITE) industries are almost the same as the House-passed Waxman-Markey bill, except the Senate bill allocates slightly more allowances in the early years (4% instead of 2% in 2012 and 2013). However, there are about 1% fewer allocations in the Senate bill because it has a slightly stricter emissions cap. Much more importantly, about 20% of lifetime allowances are set aside for other purposes before the rest of the allocations are divvied up. Even though EITE industries receive more allowances in the first two years, the Senate bill will result in about 15% less allowances than the House bill. The Senate bill gives about 6% of all allowances over the life of the bill to EITE industries, while the House bill gives about 8%.

Both the Waxman-Markey and the Kerry-Boxer bills compel the program administrator to determine eligible facilities based on the following criteria: Any manufacturing facility that has either an Energy Intensity or a Greenhouse Gas Intensity of at least 5% AND has a Trade Intensity of at least 15% is eligible. Additionally, any facility has an Energy Intensity or a Greenhouse Gas Intensity of at least 20% is also eligible. It should be noted that only about 1.3% of US manufacturing facilities would be directly affected by a carbon cap.

Definitions:
- Energy Intensity: $energy / $shipments;
- Greenhous Gas Intensity: (20 * Tonnes-CO2e) / $shipments;
- Trade Instensity: ($imports + $exports) / ($imports + $shipments) of the sector;

However, there are still issues with administrability, particularly data collection, that have yet to be properly addressed. In many cases, data for each industry (at the six digit NAICS code level) is not readily available, and current estimates often use surveys such as the Manufacturing Energy Consumption Survey, which are not designed to provide information with the precision required.

New Report Identifies Best Program Strategies for Realizing Energy Efficiency in Industry

WASHINGTON, D.C. (October 8, 2009) - A new report by the American Council for an Energy-Efficient Economy (ACEEE) highlights successful program strategies to realize the large potential energy savings in the industrial sector. Released today, Industrial Energy Efficiency Programs: Identifying Today's Leaders and Tomorrow's Needs finds that industrial sector energy savings have remained untapped by many existing publicly funded energy efficiency programs. Energy efficiency in the industrial sector represents a low-cost resource compared with other sectors, but running successful programs for this sector requires different approaches than are traditionally used in other sectors. The new report identifies leading industrial programs and successful program strategies, and suggests directions for programs looking to start or expand offerings to realize the energy efficiency savings in this sector.

The report reviewed over 30 industry-focused energy efficiency programs in the United States and Canada, and offers new insights into current trends in today's industrial energy efficiency programs. It also discusses emerging challenges that such programs will have to address in the near future. These challenges reflect the industrial sector's complexity where many efficiency opportunities are site-specific. The report finds that successful industrial efficiency programs build relationships with their industrial customers and provide flexible program offerings to meet these challenges.

"This report is timely because of the important role of the industrial sector to contribute to energy efficiency savings and greenhouse gas emission reductions," said Anna Chittum, lead author of the report and associate with ACEEE's Industrial Program. "As more states, as well as the federal government, set more aggressive energy savings targets, we need the significant savings available from the industrial sector to achieve these goals and keep costs down for everyone."

Industrial energy efficiency programs have existed for decades across the U.S. and Canada. But these programs have not historically maximized savings opportunities and many publicly funded programs have not invested time and resources to develop programs to effectively serve this sector.

"To achieve the energy savings required by the substantial energy savings goals out there, we have to learn how to make today's industrial energy efficiency programs as effective as possible," said Dr. Neal Elliott, ACEEE's Associate Director for Research and a co-author of the report. "Improving these industrial programs is our best opportunity for achieving significant energy savings in the industrial sector."

One important trend the report notes is the emergence of "self-direct" industrial programs, in which large industrials have the opportunity to utilize public benefits funds-which would otherwise support industrial efficiency programs-to make these investments in their own facilities. In these situations, the facilities themselves are responsible for meeting savings targets stipulated by the program administrator. The report finds that the few well-designed self-direct programs actually behave similarly to mature customized incentive programs. Both well-designed "self-direct" programs and mature customized incentive programs deliver large and low-cost energy efficiency savings.

The report also lays out important lessons learned about industrial programs generally for those looking to establish new industrial energy efficiency programs. "So many utility and public benefit programs are looking to achieve more savings from their industrial customers," said Nate Kaufman, a co-author of the report and research staff with ACEEE's Industrial Program. "This report shows that there is still plenty of room for improvement. Industrial programs can look to the leading programs to learn how to make their programs better."

Industrial Energy Efficiency Programs: Identifying Today's Leaders and Tomorrow's Needs is available for free download or a hard copy can be purchased online for $25 plus $5 postage and handling from ACEEE Publications, 529 14th St, N.W., Suite 600, Washington, D.C. 20045, phone: 202-507-4000.

Solicitation for Grant Applications to Develop CHP Projects in Pennsylvania

From the EPA CHP Partnership:

The EPA CHP Partnership is informing its Partners of an important funding opportunity. The Pennsylvania Department of Environmental Protection has issued grant solicitations designed for the purchase and installation of renewable energy and energy efficiency equipment, including CHP. The grant program is called Pennsylvania Green Energy Works.

Applications are due by 4:00 P.M. EDT on October 9, 2009.

A collective total of up to $52 million will be available under four Pennsylvania Green Energy Works solicitations with $11 million allocated for CHP. All funding for this program is Federal funding appropriated by The American Recovery and Reinvestment Act of 2009.

Projects must comply with the following in order to be funded:

• All projects must be physically located in Pennsylvania.
  
• The project must result in the creation or retention of part-time or full-time temporary or permanent jobs.
  
• The application must contain letters supporting the financial commitment for at least 25 percent of the cost of the project. These letters of commitment must be from both the applicant and any outside sources of funding, including clear documentation of amounts from each source. Monies "applied for" from other sources may not be included. Other DEP program funds cannot be used to comply with the project match.

For more information on the solicitation, including eligible projects, instructions for how to apply, and application evaluation considerations, visit the Pennsylvania Green Energy Works CHP Solicitation.