Buyers target energy bills

Susan Avery -- Purchasing, 12/8/2005

Editor's Note: This is the second installment in our special coverage of "green" purchasing. Buyers in virtually all industries are turning toward environmentally friendly products and processes both for the savings opportunities they present and the advantages they bring to efforts to cleaning up the environment. In the November 17 issue, we reported on "green" buying efforts in the electronics, logistics and office-products markets. We followed that with coverage of other markets on our website. You'll find more on this topic at www.purchasing.com.

Rising electricity rates have the attention of MRO buyers. In the past few months, electricity rates have soared, according to PURCHASING's Energy Flash Report. Electricity rates to industrial customers rose 0.28¢ from 5.27¢/kilowatt hour in October 2004 to 5.55¢ in October 2005, and it doesn't look like prices are coming down soon.

At the same time, MRO buyers are learning more about a new energy law and its impact on the electric motors they purchase. President George W. Bush signed the Energy Policy Act of 2005 in August. Of particular interest to MRO buyers, the law mandates the Federal government purchase NEMA (National Electrical Manufacturers Association) premium-efficiency electric motors. The new NEMA standard raises the bar on energy efficiency and covers many more motor types and sizes (up to 500 HP) than energy efficient electric motors regulated by the 1992 Energy Policy Act. Some manufacturers are already producing motors that meet the new standards; others are not. The law also allows for rebates of a percentage of the purchase price of the new energy-efficient motors from the utility to the customer.

The U. S. Department of Energy estimates that the NEMA Premium Efficiency motor program could save more than 5,800 gigawatt hours of electricity and prevent the release of nearly 80 million metric tons of carbon into the atmosphere over the next 10 years. This is the equivalent of keeping 16 million cars off the road.

Distributors can help MRO buyers figure all this out by conducting an energy audit of the electric motors running in their plant facilities and using the data to develop a plan to replace those that are not energy efficient. They also provide buyers with training and other educational tools on products that meet the new NEMA standard.

(At the first sign of rising electricity rates, most MRO buyers may be tempted to replace lighting fixtures, but distributors point out motors use much more energy—up to two thirds of the electricity consumed by a plant facility. Motors and drives also are a big dollar investment and provide greater opportunity for savings.)

"If operational costs are a concern, it's the distributor's role to let customers know there are substantial opportunities for reducing energy in the plant," says Steve Countryman, regional manager, Applied Industrial Technologies. "If there's interest and a commitment to the process, we follow up with a survey that includes an energy audit of the motors running in the plant."

An energy audit involves visual inspection of motors and drives and the ways they are transmitting horsepower in the plant. The distributor maps out the plant's current state as well as a future state using more efficient products. Results of an audit show costs of changes and benefits gained from making them. Changes may include stopping a steam leak or replacing motors or drives.

Applied Industrial Technologies also offers customers one-day training sessions on ways for plants to be more energy efficient. The sessions cover the distributor's energy audit and provide information on energy-efficient motors and drives.

From his experience, Countryman says that many plants are running older electric motors. "These motors tend to be large horsepower, high-energy-use motors. Although replacing the motors can be costly up front, the payback and efficiency gain is very quick, sometimes in as soon as six months, depending on the plant's location and the kilowatt charge per hour," he says.

Still, looking at kilowatt hours per month alone may not appropriately measure efficiencies gained, says Countryman. "It's critical that we help customers measure gains in efficiency because sometimes a plant that reduces energy in one area may use it in another area, redeploying the energy asset if you will."

Motion Industries is working with Baldor Electric to provide energy audits and vital information on energy-efficient motors to the distributor's customers.

Bob Summerlin is executive vice president of sales and marketing at Motion Industries, Birmingham, Ala. From his experience, most purchasing professionals routinely look for ways to operate their businesses more competitively than in the previous year. "Under this umbrella statement, priorities are shifting," he says. "For obvious reasons, energy is now the focal point." He adds that buyers recognize they are going to have to better manage for higher energy costs for some time into the future.

As Summerlin sees it, distribution's role is to help customers communicate within their organizations, recognize opportunities and provide better tools to achieve mandates established by the new energy law. One of the tools Motion Industries provides its customers is an Asset Repair and Tracking (ART) program.

ART is an online software tool to track repairs of a customer's assets and related warranties. "Tracking repairs of an asset such as an electric motor is important because repairs made over its life diminish its efficiency," says Summerlin.

Randy Breaux, vice president of marketing, Baldor Electric, Ft. Smith, Ark., says that an audit is successful if with the results a buyer can control energy cost, maintain it at the current level or reduce the rate of increase. Baldor is one manufacturer that already produces energy efficient motors that meet the new NEMA standard. In the past year, Baldor has seen sales of its Premium Efficiency motors such as its Super-E model increase by more than 24%. At the same time, sales of standard motors for the manufacturer rose 16%.

"Reducing consumption of electricity by motors reduces operating costs significantly," says Breaux, pointing out that a utility bill for a typical industrial plant is based upon the peak power demand of the facility. The utility company bases its rate structure on the amount of energy a plant consumes at peak times. This means that a plant running at nonpeak times still pays peak rates. "The bottom line is that we are trying to reduce peak demand so customers' rates would be less," he says.

The annual cost of running a standard motor three shifts a day consuming electricity at a rate of 10¢/kilowatt hour is $71,000. "If the motor has been repaired a few times, the cost can be as high as $90,000," says Breaux. "Running an energy-efficient motor instead brings the cost down to $68,500. The price of an energy-efficient motor is $500. The payback is quick."

Motion Industries and Baldor offer training on energy audits and use of premium efficiency motors, including its Baldor Energy Savings Tool software. Baldor has also published white papers authored by its engineers on the topic.

Kaman Industrial Technologies, Windsor, Conn., works with its customers to ensure that their plants are energy efficient in a number of ways. Among them are a motor management program and a documented cost-savings program.

Both of these programs are in place at Eastman Kodak in Rochester, N.Y., and are helping to reduce costs related to energy use by electric motors, says Bob Steele, total motor program coordinator for Eastman Kodak which has a strong environmental policy. "It's to everyone's interest, from a business and environmental perspective, to use energy efficient motors," he says.

Eastman Kodak has been purchasing electrical mechanical devices such as motors from Kaman for many years. The distributor has two representatives on an internal cross-functional committee that addresses issues surrounding the devices, including product application and energy efficiency. Its personnel also have participated in kaizen events at Eastman Kodak, helping to identify inefficient electric motors in its plants.

Kaman's motor management program has three pillars, says Ted Clayton, strategic initiatives manager. The first suggests buyers purchase motors that meet the NEMA premium standard. The second helps customers decide whether to repair a motor that's down. The third recommends best practices for the repair if the customer chooses to go that route.