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1 Industrial Electric Productivity: Myths, Barriers & Solutions Stephen Doig, Mathias Bell, and Natalie Mims, Rocky Mountain Institute ABSTRACT There is an enormous gap in the electric productivity of the nation. If the country achieved the normalized industrial electric productivity of the top ten performing states, the U.S. would save 300,000 gigawatt-hours (GWh) each year, over the lifetime of the efficiency measures. This is the equivalent of 8% of all electric retail sales. Increasing industrial electric productivity is a significant near-term opportunity that can reduce electricity costs, carbon dioxide emissions per unit of output, and increase profits. RMI believes that increasing industrial electric productivity is an untapped source of value, and is important to the longevity of industry in the United States. While factors exogenous to industry play a role in shaping electricity productivity, RMI believes it is more important to identify and overcome key and common barriers that constrain business’ ability to economically improve electric efficiency. Using three case studies, we provide details about how diverse industrial companies- high technology, oil and gas, and food production and distribution—have recognized and captured large efficiency opportunities despite these barriers. Finally, society, as well as industry, must re-think how industrial energy efficiency is valued, and what the appropriate incentives should be. There are a number of policies that can aid industrial companies in overcoming barriers to increased efficiency, such as access to low cost financing, and education on holistic design address energy efficiency opportunities. Electric productivity and energy efficiency RMI’s analysis has found that the national average electric productivity is approximately $3.80 GDP/kWh, while the average of the leading ten states is $6.10 GDP/kWh (RMI 2009).1 Closing this gap will save over 1.2 million GWh, or approximately 30 percent of national electricity use. This is the equivalent of over 60 percent of coal-fired generation output in the U.S. The focus of the overall electric productivity research was whether the gap can be closed through aggressive use of energy efficiency, while maintaining a 2.5 percent annual growth in GDP. (One way to increase productivity is to focus on efficiency to achieve more throughput for the same unit of energy.) The analysis indicates that all sectors – residential, commercial and industrial can achieve significant electricity savings and that the U.S. can close the electric productivity gap. In this paper we investigate reasons for the productivity gap in the industrial sector and actions needed close it. While we believe there are a myriad of potential factors that could help close the gap, our analysis, and more than 25 years of experience, suggest that there are compelling reasons to believe that industry, itself, is best placed to drive improved electric productivity by overcoming longstanding barriers to improved efficiency. In the remainder of this paper we: • Size the industrial electric productivity gap and show that improvement in a few key areas could yield significant efficiency results; • Suggest that differences across states, such as electricity price, incentives and industrial mix may account for part of the gap, but likely only play an enabling role in why the gap exists; • Summarize our experience on the root cause barriers to better industrial electrical efficiency; • Provide case studies based on our work in several industrial sectors that reinforce the need to tackle efficiency barriers by revamping the way that industries design and build new facilities and processes or retrofit existing facilities; • Summarize the implications and actions needed for both industry leadership and policy makers in order to rapidly and economically close the gap.
For more information on RMI’s electric productivity report, please see the full-length report and interactive electric productivity website available at: www.ert.rmi.org
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