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Utilizing utilities.

"How Utilities Can Revitalize Industry" (Diane De Vaul and Charles Bartsch, Issues, Spring 1993) was thoughtful and thought-provoking, and will contribute to the public policy discussion concerning the role utilities can play to assist their industrial customers to improve productivity and efficiency.

The Department of Energy believes that new technologies can bring more services to more people, save money, protect the environment, and secure energy resources for the future. The department can be, with utilities and consumers, an agent of change and implementation.

The federal government can also play a key role by enabling the national laboratories to participate more in the process. The National Competitiveness Technology Transfer Act of 1989 provides specific authority for technology transfer and technology assistance. Using such authority, a pilot program with the state of Tennessee was begun in 1991, which combines the technical pool of knowledge at the Oak Ridge National Laboratory with the existing extension services available through the University of Tennessee and the state. This program provides a mechanism to utilize existing technologies to help small manufacturers with incremental improvements in their processes. Approximately 110 companies have taken advantage of the program, which provides energy use assessments and solutions, among other things. Current projections by state personnel indicate that approximately 150 to 200 projects per year will be undertaken.

Two key reasons for the success of this technology activity are streamlined procedures and low cost. Generally, the companies requesting assistance are concerned with technical problems that are pressing today, rather than with developing new products that could take months and years. Also, they do not have large sums of money to hire consultants or invest in major research and development efforts. This program allows them to talk to experts in a particular field who have state-of-the-art equipment to back up their work and is accomplished with little or no paperwork on the part of the client company. The costs are limited to the value of their own time meeting with technologists or providing samples and running tests on their equipment.

In addition, the Department of Energy has entered into more than 400 cooperative R&D agreements to encourage the transfer of technologies from the national labs to the private sector and is involved in many other forms of partnership and industry support as well. The Clinton administration and Congress are exploring new opportunities to build partnerships between government and industry and are committed to overcoming barriers inhibiting such partnerships.

The Department of Energy, along with Vice President Gore, strongly believes in the concept of utility-industry-government partnerships, but it could be argued that the strongest proponents of this approach are those who would benefit the most from it--the American people.

HAZEL R. O'LEARY Secretary of Energy Washington, D.C.

In the article "How Utilities Can Revitalize Industry," Diane De Vaul and Charles Bartsch highlight a key role utilities could play in revitalizing the nation's industrial sector. This role is one of partner and facilitator to enhance industrial competitiveness by providing efficiency, productivity, and waste minimization information and investment incentives.

In the past, most utilities have paid very little attention to their small- and medium-size industrial customers. However, these firms have been the major contributors to job creation and economic growth. To have a real impact on national productivity improvement, utilities must expand their activities to reach out to all customers, large and small.

De Vaul and Bartsch identify the number-one barrier preventing utilities from taking the lead in restoring the economic health of their industrial base: the narrow focus of regulatory commissions on demand-side management (DSM). Typically, commissions define DSM activities as conservation, or the reduction in energy consumption. This narrow focus on energy efficiency, although appropriate in the residential and commercial sector where the issue is often simple equipment efficiency, is not appropriate in the industrial sector. In the industrial sector, the issue is overall process efficiency regardless of energy consumption. Fortunately, energy efficiency and environmental benefits often go hand-in-hand with productivity improvements.

Current policies of regulatory commissions have resulted in utilities promoting generic equipment such as high-efficiency lighting and motors. For most manufacturing firms, the impact of such equipment is small; electricity costs account for less than 3 percent of manufacturing costs in over 90 percent of manufacturing industries. Thus, conservation programs rarely influence productivity or even gain the serious attention of plant managers or owners. In contrast, process changes resulting in productivity improvements can have a much more dramatic influence on energy consumption--as illustrated by the 37 percent cut in unit production costs of socks that is described by De Vaul and Bartsch.

For utilities to truly serve their industrial customers, there must be a recognition by regulators of the fundamental differences in utility program design and operation required to achieve process-oriented productivity improvements. Utilities and regulators must work together to formulate new guidelines and rules governing these new programs. The characteristics of today's DSM programs, with their emphasis on generic energy efficiency equipment and the micromanagement of the design of programs, will not work in the industrial sector. The industrial sector is too varied and complex.

I agree wholeheartedly with De Vaul and Bartsch that utilities need to aggressively offer industrial productivity assistance programs. Many firms need the assistance, and utilities--being physically connected as well as trusted by their customers--are in a unique position to facilitate such assistance.

THOMAS G. BYRER President Tech Resources, Inc. Columbus, Ohio

I agreed most points made in "How Utilities Can Revitalize Industry." I was surprised, however, when the article's last paragraph mistakenly credited another utility for the work my company has been doing to help Minnesota's taconite industry improve its efficiency and productivity.

To clarify, Minnesota Power, headquartered in Duluth, is the electric utility serving northeast Minnesota's Mesabi Iron Range, which provides the bulk of the nation's iron ore pellets. We supply firm power to five taconite producers, and we are working ever more closely with them to ensure their survival in the face of complex domestic and global economic forces.

Last year, teams of engineers from our company began a series of in-depth energy audits at the plants of our largest customers--the five taconite production facilities and three paper mills. Such audits identify cost-effective measures to improve energy efficiency and increase productivity.

To implement promising measures, we offer engineering services and monetary grants. Through a newly formed subsidiary, Synertec, we are willing to build, finance, and even own major capital improvement projects, selling their use to the customers through leaseback or other arrangements.

Our "partnering" approach to dealing with large industrial customers extends to rate improvements such as a newly proposed interruptible rate. The rate should save them money on their power bills while giving us continued assurance that they will be around to buy electricity from us for years to come.

ALLEN D. HARMON Group Vice President, Electrical Utility Operations Minnesota Power Duluth, Minnesota
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Title Annotation:response to Diane De Vaul and Charles Bartsch, Issues, Spr 1993
Author:O'Leary, Hazel R.; Byrer, Thomas G.; Harmon, Allen D.
Publication:Issues in Science and Technology
Date:Jun 22, 1993
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