Managing Industrial Energy Costs in Real Time

Energy costs have become a business variable that must be measured and controlled by manufacturers as part of a holistic approach to the problem, says IOM’s Peter Martin.

Peter Martin, Vice President, Business Value Improvement, Invensys Operations Management
Peter Martin, Vice President, Business Value Improvement, Invensys Operations Management

Today’s economic realities are driving a new concentration on energy management and cost savings at many manufacturing companies. But those companies that focus only on controlling energy consumption without considering the variable, real-time cost of that energy are missing the mark.

That’s one message from Peter Martin, vice president, business value improvement, for Invensys Operations Management (IOM,, the Plano, Texas-based automation supplier. Martin sat down with Automation World for a discussion on energy management during the recent OpsManage user conference sponsored by IOM in Anaheim, Calif. And while IOM introduced a new corporate energy management product at the Nov. 3-5, 2009, event, Martin’s thoughts on the topic may have application for manufacturers no matter which vendors’ energy management systems they are using.

A trend that may have gone unnoticed by some during recent years is the transition of many industrial business variables from highly transactional to real-time variables, says Martin. Energy costs are a prime example. Five to 10 years ago, industrial companies were typically able sign contracts with their energy suppliers to lock in the cost of energy for a six- to 12-month contract period. But with the opening up of the power grid system, those kinds of contracts have gone away, Martin notes. Today, it is not unusual for a company’s cost of energy to change frequently, says Martin, citing the example of one Arizona copper manufacturer whose energy costs change typically about 48 times per day.

Cost measurement

With such a rapidly changing business variable, Martin advocates the application of control theory to the problem. And the first thing needed for a “business process control system with energy,” he notes, is to be able to measure the cost. “Most of the industrial operations we see today do not measure the cost of energy in real time. They measure consumption, but they don’t measure cost,” Martin says.

Once real-time energy costs are known, then steps to control those costs can be taken, such as minimizing the use of high energy-intensive equipment at times when energy costs are highest. “If you’re not controlling both consumption, and cost, in real time, you really have no energy management program at all,” Martin declares.

Energy suppliers are aware of the problem faced by their industrial customers, and they know that some of their biggest customers are looking at co-generation and other solutions that could move them away from utility-generated energy. “So they’re trying to solve the problem every bit as much as the consumer is,” Martin observes. “What we’ve found is that if you can actually link in with the producer of the energy, they can provide you with the information as it changes, very often.”

In some cases, by communicating and working together with their utilities, industrial companies can not only manage their own energy costs more effectively, but also enable production efficiencies on the utility side, Martin points out. More efficient energy management by manufacturing customers might reduce the need for utilities to turn on high-cost peaking power plants, for example.

Sustainable savings

For industrial companies, the results of such link-ups can be significant. Martin cites one case in which IOM worked with Sasol (the South African Coal, Oil and Gas Corp.) to set up a business intelligence system around energy that enabled operators, managers and superintendents to see, second-by-second, the impact of their behaviors on energy costs. Results were mixed during the first month after the system was installed, because users were learning, Martin says. But by the second month, he adds, the results were notable.

“What we found was that just with that one change, just with empowering their people with the information to make the right decisions in the right time frame, they were able to drive a quarter of a million dollars to the bottom line every month,” Martin relates. “And it’s been sustained over time.”

Energy costs have now become a key business variable that can be controlled in real time, Martin says. “And when you think of it, that’s the heritage of our industry. We’re a controls industry,” he notes. “We apply controls to the process; why not apply controls to the business?”

Companies must not forget, however, that plants exist to create production value, which must remain the primary business metric, Martin adds. “You need to balance production value, energy cost and material cost within the constraints of safe operation and the environment,” says Martin.

He warns that companies that appoint “energy czars” to focus only on energy can risk tilting too far in the wrong direction. “You need to control energy within the holistic context of the business,” Martin observes. “Five years ago, that may have been difficult to do. But today, it’s very feasible.”

To hear the complete podcast interview on energy management with IOM Vice President Peter Martin, please visit:

Invensys Operations Management

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