PS: What is your sense of how strategic the thinking is right now around energy in industry? Are organizations asking the right questions?
PG: Let’s start with the good news. If you look at the three big energy-consuming sectors of the world, over the last 20-30 years on almost any tracking index, industry worldwide has outperformed transportation and the built environment (homes, buildings, and some non-industrial processes) in improving energy efficiency.
Just as a quick reminder, energy causes 70% of the anthropomorphic, or human-induced, climate change effect; so energy is the heavy hitter, along with land use and some specific manufacturing processes.
So that’s the good news, and that also says there’s a lot of DNA already in the industrial sector too that can be harnessed and pulled together to create that next big step, which is to go from where we are to where we are self-declaring where we want to be, which is something in the range of net-zero emissions, which essentially says eliminate all fossil fuel use one way or the other. There’s a lot of good practice built up over the years to help us get there.
The less good news is going from where we are today to that net-zero in something well under a single generation is going to require deep rethinking of the energy infrastructure of corporations. That’s going to require game plans, which are not the usual operational ones with “we’ll do it if we can manage it but manufacturing always has the first priority” or similar pressures. We’re going to have to bake our net-zero goal into the decision-making at all levels, be it as simple as retooling a production line up to deciding on the location of a new factory or whether to close an existing factory.
In other words, we now need a very robust roadmap, which must have a horizon at least as long as your target. So if your target says 2035 net zero, then that’s the minimum for your horizon. If it says 2050 net zero, same thing. So, at a minimum, align your goals and your plans, and that’s not a new thought, it’s just a rational normal process.
Then the next thing; you cannot write a 30-year operational plan. You don’t know all the variances that will come up. You don’t know the policy changes. You don’t know the market shocks. You don’t know the outcomes of current situations like Ukraine. You don’t know technology cost. So there’s lots and lots of variables.
The roadmap not only has to be very disciplined in terms of what goals it’s trying to achieve, but it also has to be very flexible in its governance, its decision-making process, its capital allocation process to make sure it can absorb technical policy cost market shifts, which are completely unpredictable if you’re looking at more than, let’s be honest, a few weeks. That is the paradox, that we need a game plan that’s robust, bounded, and goal driven, but it’s also flexible, not only in its content but in its governance, to allow changes to be absorbed without losing track of the goal.
PS: Operations teams have the access to the kind of data that would be involved to build these plans, right? And it’s not that onerous to build a plan.
PG: It’s not. If you take the average corporation, the biggest variables of course are always, what’s going to be the market volume, and the production volumes of any given plant. We’ve got other obvious variances that you see as the drivers of the energy performance of a corporation. The analytical planning aspect of it is not as onerous as you would think, especially given that industry has usually pretty good tracking data.
But if you look at it in terms of creating a successful roadmap, the governance discipline, key will be the allocation of authority to allow business managers, utility managers inside plants, facility managers, production line managers, real estate managers within the corporation to make coherent decisions that all contribute to that big game roadmap.
This story originally appeared in the May 2022 issue of Plant Services. Subscribe to Plant Services here.
