Editorial: Energy efficiency merits increasing attention
October 02, 2007
by Morton Sosland
Even as energy prices create very real cost pressures for food manufacturers, responsible managements also have to be aware that global developments threaten an even more worrying situation within the not too distant future. Most chilling in this regard is the warning emanating from the International Energy Agency, which serves as an adviser on global energy trends to 26 member countries. "Oil looks extremely tight in five years’ time," the I.E.A. has declared. It went on to cite further "prospects of even tighter natural gas markets at the turn of the decade." The I.E.A. based its dire forecasts on data showing oil and gas production declining faster than had been expected in mature producing regions, while consumption growth has accelerated, primarily as the result of a much stronger economic expansion in developing countries. The result is expanding reliance on oil supplies from the Organization of Petroleum Exporting Countries, just as OPEC output itself is gaining only 1% per year, which is less than half of the annual demand gain.
In its broadest terms, this prospect for mounting tightness in oil and natural gas exerts a dual impact on food processors. The impact that probably has received the greatest attention is the rapid expansion of ethanol output using grain as feedstock. This rising demand for grain to make ethanol is often characterized as a revolution of the sort rarely experienced in a mature industry. Many also see its effect on food as an unintended consequence.
But the second aspect of the tight global energy situation — finding a way to bring soaring costs under control — merits equal consideration by every sector of the food industry. This is so even though food processing is ranked among the lowest energy-intensive users across all industries. When it comes to units of energy used per "output" in most food manufacturing or processing plants, requirements are low compared to energy-intensive sectors like steel, chemicals and aluminum. Most ironically is the likelihood that ethanol manufacture is the most energy-intensive operation within the entire grain processing field.
Food manufacturers, like other business leaders, already have given great attention to ways of achieving fuel savings in all aspects of transportation. Energy use in over-the-road vehicles, as well as in other transportation modes, is easily measured, and it is here that numerous steps have been taken to reduce fuel usage and thus costs. Within the aggregate of global energy use, transportation accounts for slightly more than 15%; when it comes to petroleum, it very nearly accounts for half of use. Fuel efficiencies in transportation have been identified and implemented by many food companies.
Recent studies by McKinsey & Co. have pointed the way to achieving savings by boosting energy productivity in industrial processing. McKinsey cited two major thrusts promising efficiency that have applicability to food manufacturing. These are the recovery of heat generated in running production machinery to be used in other processes and optimization of motor-driven systems, which are the principal processing units in many food plants. Employing the best-practice energy-efficient technologies in construction and equipping of new factories has been identified as the surest way to capture energy saving benefits.
Putting energy efficiency into a plant being newly constructed is much less expensive than modifying an existing plant. That is so even with oil prices at present high levels. If the forecasts of the I.E.A. about growing tightness and rising prices are realized, then it’s possible that even low energy-intensive industries like food manufacturing may find it desirable to consider building new plants to achieve the competitive advantage promised by energy-efficient processing.