Energy – A Major Frontier

The manufacturing industry in Australia has had the luxury of reliable supply of primary energy whether it is electricity or natural gas. The recent fires across Australia threatened to disrupt electricity distribution networks as well as some of power generation plants. The power generation and supply has already been under enough strain and it is expected to get worse as we have encounter more adverse weather conditions in the future.

There is an ongoing debate on the effects of green house on global environment and the industry. When we consider that nearly 80% of electricity is generated in Australia through fossil fuels – coal and natural gas, the increasing focus on reduction of carbon emissions and sustainability will only make it harder and more expensive for Australian industry to source its energy needs.

Electricty, Gas, Water & Waste Services Electricity Generation

Source – Australian Bureau of Statistics (4660.0 – Energy Use and Electricity Generation, Australia, 2017-18)
During 2017-18, the Manufacturing industry consumed and spent the most on electricity ($5.4b and 52,461.4 GWh) and natural gas ($2.5b and 341,504,671.1 GJ).
Source - Australian Bureau of Statistics (4660.0 - Energy Use and Electricity Generation, Australia, 2017-18)

For as long manufacturing industry in Australia has considered energy costs as fixed costs of business & previously these costs used to be less volatile due to long term supply contracts. However, in the recent times, there has been greater volatility in energy supply costs which have resulted in higher cost pressures. The energy costs for most manufacturers tend to range between ~ 2 – 4.5% of the cost of sales although they can vary for different industry segments.

It is time for manufacturing Industry in Australia to focus on energy conservation and optimum utilisation of resources. Such is brought about by potential energy supplies unreliability, escalating costs, greenhouse emissions and environmental charges by electricity generation and distribution companies.

The manufacturing industry in Australia in general has quite a strong focus on preventive maintenance across its manufacturing plants in comparison to many other industrialised economies. This in turn creates the perception that plants are operating optimally and there is no wastage of energy across the plant. 

The inference is only partly true since majority of preventive maintenance is aimed at ensuring that the plants operate without any unscheduled break downs. However, the maintenance services may not necessarily focus on the energy efficiency of plant & equipment, particularly utility systems.

The inefficiencies in energy usage can be due to incorrect selection of equipment, aging, process related issues, production practices, narrow maintenance focus or even due to lack of knowledge.

Plant upgrades and replacement of major production equipment can be quite cost prohibitive. However, you should be asking some simple questions in relation to energy consumed within your plant –

There are many more areas to focus on, but this is just a thought starter. Think about it and look around. There may be significant cost reduction opportunities within your business.