Reforming Industrial Practice From Pariah to an Energy Star

Efficiency is not merely a private virtue. It is also a hard-nosed business proposition. In the 1960s, Dow Chemical Corporation was widely reviled for its role in producing Agent Orange, which defoliated the environmentally devastated country ofVietnam. In 1984, Dow was involved in the Bhopal tragedy in India. It was an environmental pariah. But by 2006, the $46 billion company, with offices in nearly every country on the planet, was awarded the Galaxy Star of Energy Efficiency, marking the most aggressive energy-efficiency program in the U.S. business world, for its environmentally successful work. Why and how did Dow's leadership obtain a 42 percent savings in energy across their operations between 1990 and 2005?15

The company made changes because it realized that energy efficiency is good business. As John Dearborn, energy business vice president, said, "We recognize that all energy consumers have a role to play in effectively managing the world's precious energy resources, and focusing on energy efficiency is the best near-term action that all of us can take to be part of the solution." This follows Dow's stated position on global warming: "We believe that climate change is one of the most serious issues our society faces today."16 This unambiguous statement led to an unambiguous success in energy efficiency.

The people at Dow did it the old-fashioned way. They set numerical targets and held managers accountable for meeting them, they measured their progress, and they publicized their results. They exceeded their goal of a 20 percent improvement between 1994 and 2005 because they knew their feet would be held to the fire. Now on the Dow Web site, anyone can see the company's goal of another 25 percent improvement by 2015 and a daily tracking report of its progress.17

This company meant business. Energy efficiency was not a public relations statement; it became a fundamental cultural component of the whole enterprise. It has paid off in Dow's relationship with the investor community, witnessed by its being named "Best in Class" by the Carbon Disclosure Project, a coalition of global investors with more than $31 trillion in assets. It has also paid off on the bottom line, with $4 billion in cumulative energy savings over the life of the project.18

Dow's success was based on a whole slew of small improvements, not any one silver bullet. Perhaps its biggest single leap forward was its growth in cogeneration for electricity and heat. At Dow's new Plaque-mine, Louisiana, plant, both electricity and heat are produced by burning natural gas, thereby achieving a 20-40 percent increase in efficiency. No strangers to the concept, one of the nation's first cogeneration plants was designed by the team of Herbert Dow and George Westing-house in the early 1900s. Efficiency often just means adapting techniques we already have to the current setting. Dow has proven that principle with cogeneration.

Large efforts like cogeneration were matched with small ones like using energy-efficient lighting and reducing waste in literally thousands of manufacturing processes. All of these individual actions had a huge cumulative impact, saving 900 trillion Btus of energy, enough to fulfill all the electrical needs for residential users in California for one year.19 That is no small feat.

Why Dow? Its CEO, Andrew Liveris, answers candidly, "The chemical industry is a leader in the efficient use of energy. We have to be, because we use petroleum and natural gas as both a fuel and raw material." Now Dow is staking out a position as a global advocate for change.

"We can do more to leverage our experience in energy efficiency by convincing others that it's a win-win for the environment and the economy," says Liveris.20

Dow's commitment to achieve another 25 percent improvement is a powerful statement that it is not just depending upon the low-hanging fruit of efficiency. In fact, experience suggests that the deeper a business looks, the more efficiency it is able to achieve. "Opportunities in energy efficiency re-grow over time," says Neal Elliott of the American Council for an Energy-Efficient Economy. "In other words, the more you look for energy-efficient opportunities, the more you'll find."21

Multinational companies have the internal resources to make such changes, but small businesses, local governments, and individuals often need help, incentives, and better information. However, opportunities to bring efforts like Dow's to scale for the nation as a whole have been hurt by a reduction in federal efforts. Appropriations for efficiency research were cut 17 percent in 2006. Some programs that could have helped the industry obtain efficiency were cut 30 percent. If we fail to invest in energy efficiency, "We would be leaving a lot of energy on the table," says Peter Molinaro, vice president of Dow.22While business leadership is important, it is no substitute for public investment in research or regulations like efficiency standards that only government can provide.

The impact of scaling back federal leadership on energy efficiency cascades through the economy in both wasted energy and missed business opportunities. Charles Bates is an Alabama engineer who has been perfecting a casting technique that uses 30 percent less energy than traditional techniques, but in 2006 he faced a cutoff of the funds that were helping his technology get off the ground. "We've been making progress by leaps and bounds," he said.23 "It's a great program, and we'd be sorry to see it go," said Bryan Baker of Vulcan Engineering, a company that supplies casting equipment to the auto industry.24 Programs like Public Benefits Funds, which put state money into building retrofits, and Industrial Assessment Centers, which help small businesses find efficiency improvements, are critical to help smaller companies that do not have the assets the Dow Chemicals of the world can employ.

Increasingly, companies are relying on efficiency to cut costs and meet demand. Major firms like DuPont, BP America, and 3M have all been leaders with the Alliance to Save Energy and have success stories to tell. 3M has enjoyed a spectacular 77 percent improvement in efficiency since 1973, in part by replacing 280 conventional electric motors with 50 adjustable-speed drive motors at 3M headquarters.25 Energy efficiency is becoming part of the corporate culture. Society may no longer tolerate the business executive who pooh-poohs energy efficiency

The principle is also becoming interwoven in our professions. For instance, Christine McEntee, president of the American Institute of Architects, has taken a strong stand on efficiency. "To address this, our board of directors approved a resolution promoting high-performance building design with a goal of reaching a 50 percent fossil fuel reduction in buildings by 2010 and carbon-neutral buildings by 2030," she says. When presidents of professional organizations talk about carbon-neutral buildings in twenty-five years, we know progress is on the march. "The fact is, the technology and the tools to bring energy use down are already out there; we just need to do more to educate designers, builders, owners, and the public about how to use those tools," McEntee says.26

She is right about the need for more work in this field. Despite the fact that energy efficiency costs on average $.038 per kilowatt-hour compared to an average $.074 for purchased electricity, utilities still do not concentrate on this effort.27 One statistic in particular stands out: According to Steve Wright of Bonneville Power, utilities spend less annually on efficiency research than the food industry spends on research regarding dog food.28That glaring oversight could change if our federal and state laws would require utilities to adopt what is called "integrated planning" in anticipating new demand, requiring them to look first to efficiency, as many progressive utilities are now doing, rather than focusing only on producing more electricity.

Utilities around the country have discovered that it is much cheaper to "buy" power by funding conservation efforts that free up energy that would otherwise be wasted than to buy additional power to feed into the system or build additional plants. Is it too much to ask, then, that a utility be required to show that it cannot obtain savings through efficiency before it builds new plants? Shouldn't a utility have to explore programs to help its consumers pay for better lighting or pumps before it spends billions on more expensive nuclear or other large-scale generation that takes years to come on line?

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