Peter garforth expo 06


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  • Avoided generation = 30% in buildings for next 20 years
  • Peter Garforth
  • A business that is truly global with plants and sales offices all over the world. For tonight's opening session, reception and dinner we invited all of the Toledo based employees to attend this session - to refresh old friendships and make new acquaintances. We are also honored to have Glen Hiner, our Chairman & CEO with us tonight and he has agreed to be with us for several parts of the meeting. We have 95 participants from NA - welcome to our American friends and thank you for the kind reception that you gave me 18 month. Welcome to new colleagues from LA, strong contingent from Brazil. Great to have you here. Guten Abend, liebe Kollegen vom Alten Kontinent & Middle East Welcome to Andrew and Ivan from OC South Africa And very kind welcome to our new friends from India, Hongkong, China, Singapore, Japan. I am very happy to have you all here.
  • Peter garforth expo 06

    1. 1. Energy Productivity “A Competitive Prerequisite” Peter Garforth Principal - Garforth International llc
    2. 2. Global Cost of Energy Approximately 13% of Global GDP What we pay for Gas, Electricity, Petrol.... Energy we use Energy we waste $ 5.0 Trillions
    3. 3. Global Energy - New Realities <ul><li>Highest energy prices in history </li></ul><ul><ul><li>Sustained upward pressure and volatility </li></ul></ul><ul><li>Dependence on imports </li></ul><ul><ul><li>USA - Oil (65%) and natural gas (1.5%) </li></ul></ul><ul><ul><li>EU – more than 50% of all energy </li></ul></ul><ul><li>China & India - major new energy customers </li></ul><ul><li>High USA energy intensity </li></ul><ul><ul><li>Nearly twice European Union </li></ul></ul><ul><li>Radically different climate change policies </li></ul><ul><ul><li>EU, US, China, India… – different policy paths… </li></ul></ul>Fundamental difference from past
    4. 4. Energy Productivity Differences Opportunity for best practice sharing *Various US/EU Sources – 2004 Estimates Energy prices globalizing 261 69 100 Energy / GDP Energy / Capita Energy Total GDP Population Region 13 246 94 1910 RoW 50 65 95 130 EU-15 100 100 100 100 USA
    5. 5. Energy use in USA 26 % of Global Demand <ul><li>Industry </li></ul><ul><li>Homes & Buildings </li></ul><ul><li>Transportation </li></ul><ul><ul><li>Most energy lost in range of inefficiencies </li></ul></ul><ul><ul><ul><li>Generation, transmission distribution of electricity </li></ul></ul></ul><ul><ul><ul><li>Industrial processes, buildings, vehicles…&c </li></ul></ul></ul><ul><ul><li>Only 5% to 15% used productively </li></ul></ul>Pay for a 100 and get 10! *Indicative ratio of US average to global best practice (1.4 : 1) 25% (2.0 : 1) 40% (1.2 : 1) 35%
    6. 6. China Industrializes Sources: BP Statistical Review of World Energy June 2004 EIA International Energy Outlook 2004 Projection based on IMF 5% GDP Growth Rate EU-15 USA
    7. 7. Climate Change <ul><li>Evidence that human activity affecting climate </li></ul><ul><li>Coal, oil,& gas create most greenhouse gases </li></ul><ul><li>Dialog to cut GHG Emissions - Rio de Janeiro Conference in 1992 </li></ul><ul><li>CO2 levels highest level in 650,000 years </li></ul><ul><li>Temperature rise 1.5 and 6 deg C forecast </li></ul><ul><li>Climate changes may be abrupt </li></ul>Major impacts on energy policy
    8. 8. Greenhouse Gas Levels * John Houghton – UK Met Office et al 160,000 yrs* of ice core data Today 2100 BaU Lowest possible 2100 Today??
    9. 9. Climate Change Quandary <ul><li>Most countries plan to reduce greenhouse gases </li></ul><ul><li>Kyoto Protocol in 1999 agreed limits </li></ul><ul><li>Treaty in force – February 2005 </li></ul><ul><li>Carbon reduction trading has started </li></ul><ul><ul><li>Europe ~ $28 per Metric Ton </li></ul></ul><ul><ul><li>Chicago at ~ $ 1 per Metric Ton </li></ul></ul><ul><ul><li>Other markets at $5 -$15 per Metric Ton </li></ul></ul><ul><li>US, India, China… have voluntary programmes </li></ul><ul><li>Regulations expected in some US States </li></ul>How to value GHG Reduction Investments?
    10. 10. Management Perceptions <ul><li>50% “Energy is a predominantly operational issue” </li></ul><ul><li>37% “Energy is a purely operational issue” </li></ul><ul><li>12% “Energy is a strategic business issue” </li></ul><ul><ul><li>Only 17% have a single Energy Executive </li></ul></ul><ul><ul><ul><li>Most report in operations or EH&S </li></ul></ul></ul><ul><ul><li>40% report “in some way” on energy </li></ul></ul><ul><ul><ul><li>Usually incidentally and non-numerically </li></ul></ul></ul><ul><ul><li>30% claim to have an energy policy </li></ul></ul><ul><ul><ul><li>Most as part of environmental statements </li></ul></ul></ul><ul><ul><li>Few have coherent climate change strategy </li></ul></ul>*Strategic Energy Management-The State of the Debate– The Conference Board 2004 Opportunity to gain competitive edge
    11. 11. Electricity Chain Growing demand for natural gas! Industry 30% of total Wasted Heat Source: US DoE EIA Coal Gas Nuclear Renewable Conversion Losses
    12. 12. From Fuel to Application <ul><li>Rigid market structures – engrained thinking </li></ul><ul><li>Overwhelms efficiency and new technology </li></ul><ul><li>High-assets / low returns </li></ul>Time to rethink? Application Process Distribution Conversion Fuel
    13. 13. Coal in Cold Beer Transmission loss ~ 3 Distribution loss ~ 3 Heat ~ 70 Conversion loss ~ 15 Is there better deal? Coal = 100 Cold Beer = 9
    14. 14. From Application to Fuel <ul><li>Change the questions </li></ul><ul><ul><li>“ How much energy do I need for the application?” </li></ul></ul><ul><ul><li>“ Will renewable energy or cogeneration be a good choice?” </li></ul></ul><ul><ul><li>“ How can I team with the grid to make win-wins?” </li></ul></ul><ul><ul><li>“ What are optimum investments in efficiency and supply?” </li></ul></ul><ul><li>Change the outcomes </li></ul><ul><ul><li>Improved energy productivity </li></ul></ul><ul><ul><li>Reduced GHG and other emissions </li></ul></ul><ul><ul><li>Invest in efficiency, renewable and new technology </li></ul></ul><ul><ul><li>Enhanced competitiveness </li></ul></ul>Different questions – different answers Application Process Distribution Conversion Fuel
    15. 15. Owens Corning's Experience 1999 to 2003 to…..
    16. 16. Help others save energy <ul><li>$US 5Bn global sales </li></ul><ul><ul><li>19,000 employees </li></ul></ul><ul><ul><li>Building Materials </li></ul></ul><ul><ul><li>Composite Systems </li></ul></ul><ul><li>Reduce energy use </li></ul><ul><ul><li>Insulation, vehicle weight... </li></ul></ul><ul><li>Energy costs </li></ul><ul><ul><li>$US 260Million in 1999 </li></ul></ul><ul><ul><li>5% of sales </li></ul></ul><ul><ul><li>80% of profits </li></ul></ul>How well did they do?
    17. 17. 1999 Declared New Game Energy Mission: Possible 20% Energy Cost Reduction Way energy used in processes Improved Procurement Energy Technology Energy Efficiency $260 Millions
    18. 18. First Reactions….. <ul><li>“ It’s not a high priority…” </li></ul><ul><li>“ Our energy buyers have got the best deals…” </li></ul><ul><li>“ Our engineering is 100% perfect… here’s reams of data to prove it…” </li></ul><ul><li>“ It’s been OK for 50 years ..why change?…” </li></ul><ul><li>“ We can’t have strangers touch the process…” </li></ul><ul><li>“ You’re in marketing….” </li></ul><ul><li>“ The leadership isn’t serious…” </li></ul><ul><li>“ Someone tries this about every five years…” </li></ul><ul><li>“ We know what’s needed…but “they’” reject investment </li></ul>This too shall pass !!!
    19. 19. Multi-pronged approach.. <ul><li>Senior management sponsorship </li></ul><ul><li>Corporate Energy Leader </li></ul><ul><li>Clear goals </li></ul><ul><li>Employee engagement </li></ul><ul><ul><li>Plant leadership goals </li></ul></ul><ul><ul><li>Plant energy teams </li></ul></ul><ul><li>Revitalized energy procurement </li></ul><ul><ul><li>Consolidated demand </li></ul></ul><ul><ul><li>Teamed with experts </li></ul></ul><ul><li>Formed energy efficiency capital / skill pool </li></ul><ul><li>New production technology </li></ul><ul><li>Recognition – Rewards - Consequences </li></ul>Consistent long-term senior commitment
    20. 20. Keep Scorecards Simple CEO’s Monthly Energy Report
    21. 21. ..and have some fun! Visualizing efficiency in Indian plant
    22. 22. “Cool Company” Award Declared energy to be manageable cost
    23. 23. Results After Four Years <ul><li>Energy cost from $260M to $220M / year </li></ul><ul><li>Total capital invested – less than $20M </li></ul><ul><li>Increased production 18% </li></ul><ul><li>Absorbed 10% energy price increases </li></ul><ul><li>Energy productivity gain of $80M </li></ul><ul><li>Improved employee energy awareness </li></ul><ul><li>Substantial emissions reduction </li></ul><ul><li>Champion energy plants also had highest quality, waste, safety…. </li></ul>$80M Productivity…more to go!
    24. 24. Sources of Gains Improved Procurement Low Cost/No Cost Employee Teams Capital Projects (Externally Driven) Capital Projects (Employee Driven) Total $80M The Game Continues….. Average Return ~ 22%
    25. 25. The game continues.. <ul><li>Ruthless pursuit of energy productivity </li></ul><ul><li>“ Plant-of-the Future” Pilots </li></ul><ul><ul><li>Raise energy productivity another 30% </li></ul></ul><ul><ul><li>Explore all options </li></ul></ul><ul><ul><li>Efficiency, renewable, cogeneration </li></ul></ul><ul><ul><li>Green incentives etc. </li></ul></ul><ul><li>Manage Greenhouse Gas worldwide </li></ul><ul><ul><li>System wide spotlight on productivity </li></ul></ul><ul><ul><li>Potential new cash-flows from carbon credits </li></ul></ul><ul><li>Team with Suppliers and Customers </li></ul><ul><ul><li>Manage energy productivity along the value chain </li></ul></ul><ul><ul><li>Avoid costs and discounts </li></ul></ul>Energy Productivity = Normal Process
    26. 26. Other Experiences
    27. 27. BASF - Total Resource View Courtesy of BASF AG
    28. 28. BASF Results <ul><li>Results 1990-2004 </li></ul><ul><ul><li>Market leader </li></ul></ul><ul><ul><li>37% energy productivity gain </li></ul></ul><ul><ul><li>Heat strategy avoided 3.4 Million MT Oil equiv/yr </li></ul></ul><ul><ul><li>34% CO2 emissions reductions </li></ul></ul><ul><li>Goals & Management model </li></ul><ul><ul><li>Senior sponsorship </li></ul></ul><ul><ul><li>Systematic integrated long term approach </li></ul></ul><ul><li>Features </li></ul><ul><ul><li>Energy management with normal process tools </li></ul></ul><ul><ul><li>Global data base – data back to the 70’s </li></ul></ul><ul><ul><li>Heat and electricity deeply integrated – no waste heat! </li></ul></ul>“ Maximize efficiency through Verbund…”
    29. 29. Toyota’s View of the Corporation Production Sub-Committee (1 of 3) Courtesy of Toyota Ltd
    30. 30. Toyota Results <ul><li>Results </li></ul><ul><ul><li>Most profitable global car company </li></ul></ul><ul><ul><li>24% energy productivity gain 1990 to 2003 </li></ul></ul><ul><ul><li>49% GHG productivity gain 1990 to 2003 </li></ul></ul><ul><li>Goals & Management model </li></ul><ul><ul><li>Senior sponsorship </li></ul></ul><ul><ul><li>Year on year targets – integrated approach </li></ul></ul><ul><ul><li>Cradle to Grave: Car Design – Manufacturing - Lifetime </li></ul></ul><ul><li>Features </li></ul><ul><ul><li>Annual reports from 1999 – data from 1990 </li></ul></ul><ul><ul><li>Suppliers’ energy included </li></ul></ul><ul><ul><li>Regular “Energy Treasure Hunts” </li></ul></ul>“ Alleviate impact of automobiles…”
    31. 31. Unilever – Global Management Energy (GJ) /Tonne Carbon-dioxide (kg) /Tonne Total Energy (MGJ) Total Carbon-dioxide (MMT) Unilever is committed to meeting the needs of customers and consumers in an environmentally sound and sustainable manner, through continuous improvements in environmental performance in all our activities.
    32. 32. Unilever – Local Results <ul><li>Canada - $4 M / year </li></ul><ul><li>USA - $30M / year </li></ul><ul><li>Italy – 3,000 truck trips/year </li></ul><ul><li>UK – 1,000 truck trips </li></ul><ul><li>…… </li></ul>
    33. 33. Energy Productivity Impact <ul><li>“ Only 2.7% product cost reduction” </li></ul><ul><li>“ Only 2.2% operating cost reduction” </li></ul><ul><li>“ Only 2% of sales” </li></ul>What would 20% energy productivity gain mean? ..or 20 % increase in net profits 6 Net Profit 2 Taxes and Interest 8 Operating Profit 5 G & A 2 R&D 10 Marketing & Sales 25 Gross Margin 10 Energy 30 Labour 35 Materials 100 Sales
    34. 34. What is Real Energy Cost? Fertilizer Agro Machines Irrigation Transport Processing Transport <ul><li>Major energy costs in materials </li></ul><ul><li>Opportunities to team in value chain </li></ul>
    35. 35. Effective Energy Management <ul><li>High level sponsorship </li></ul><ul><li>Strategic competitive issue </li></ul><ul><li>Energy Leadership </li></ul><ul><li>Clear energy strategy </li></ul><ul><li>Goals and accountability </li></ul><ul><li>Measure and communicate </li></ul><ul><li>Clear climate change strategy </li></ul><ul><li>Common metrics </li></ul><ul><li>Bar constantly raised </li></ul><ul><li>20% -30% productivity advantage </li></ul>The Story Doesn’t Change
    36. 36. Copyright Clinton International LLC Energy is a manageable cost… not an act of God!
    37. 37. Winners manage it effectively!
    38. 38. Thank You !
    39. 39. Contact Information Peter Garforth Garforth International llc 2121 Boshart Way Toledo, Ohio 43606, USA Tel: +1 419 578 9613 Fax: +1 419 578 6861 Mobile: +1 419 320 0664 Email:
    40. 40. Peter Garforth <ul><li>Strategic energy productivity advisor: </li></ul><ul><ul><li>Corning Inc, California Energy Commission, Owens Corning, US Energy Star Industries, US Department of Energy, MVV AG … </li></ul></ul><ul><li>Senior corporate management </li></ul><ul><ul><li>VP Strategy–Owens Corning– Ohio / Landis & Gyr – Switzerland </li></ul></ul><ul><ul><li>Director – Honeywell – Brussels, Tehran, Netherlands & USA </li></ul></ul><ul><li>Advocate for the rational use of energy </li></ul><ul><ul><li>Founder “European Business Council for Sustainable Energy Future” </li></ul></ul><ul><ul><li>Former Chair “International Institute for Energy Conservation” </li></ul></ul><ul><ul><li>Co-Chair of International Committee of Alliance to Save Energy </li></ul></ul><ul><li>Energy business experience in Europe and USA </li></ul><ul><ul><li>Industrial, residential and commercial energy productivity services </li></ul></ul><ul><li>Lecturer at Purdue University </li></ul><ul><ul><li>“ Economic & Business Aspects of Energy – A Global View” </li></ul></ul>
    41. 41. Energy – The ability to do work <ul><li>You can’t win! </li></ul><ul><ul><li>“ Energy can be neither created not destroyed” </li></ul></ul><ul><li>You can’t break even! </li></ul><ul><ul><li>“ Quality of energy is irreversibly degraded” </li></ul></ul><ul><li>You can’t get out of the game! </li></ul><ul><ul><li>“ Absolute zero is unattainable” </li></ul></ul>*As paraphrased by CP Snow 1905-1980