Fuel’s Paradise

0

California’s 2001 energy crisis made clear to Chad Bentley, manager of Trojan Battery Co. in Santa Fe Springs, that his company had to operate more efficiently. The total cost of doing business in California was creating problems, and energy price increases were adding to the load.


It took hundreds of thousands of dollars and years to put the plans in place, Bentley said, but his energy-saving measures are keeping today’s energy price pinch from becoming a full-blown crisis for his business.


In fact, he expects to save $1 million in energy costs by the end of this year, a 25 percent decrease in overall energy expenditures.


It’s a familiar story for California businesses. They’re faced with the country’s most stringent emissions guidelines and some of the highest energy bills. High cost and regulations are forcing manufacturers to take heed of how much they’re using and at what time of day.


Utilities are also feeling the squeeze with power demands getting higher every summer. They’ve begun to offer more rebates to manufacturers to buy more efficient equipment and save on their energy bills, and take pressure off the over-stretched grid.


For example, Southern California Edison Co.’s rebate program budget nearly doubled for 2006 through 2008 from its 2005 level, to about $230 million per year. The rebate increases are expected to prevent the necessity of three new generation plants in the state and are expected to have the net effect of taking 650,000 cars off the road.


Although the California Energy Commission hasn’t released efficiency data later than 2000, the California Economic Development Corp. reports that productivity rose 20 percent between 2002 and 2004, while manufacturing employment dropped. In the U.S. as a whole, productivity is down and employment up sharply during the same period, according to the Bureau of Labor Statistics.


Bentley’s business would have been particularly vulnerable to higher prices of natural gas, petroleum and lead. Trojan makes about 1.8 million batteries every year in its Santa Fe Springs headquarters, and Bentley said the rising costs of lead and petroleum have substantially increased the company’s manufacturing costs. The company also has endured a 30 percent rise in the price of natural gas this year.


“The cost of lead is going up too fast for us to pass it on to the consumer,” Bentley said. Trojan, like many other manufacturers, recently added a delivery surcharge to its wholesale customers because of skyrocketing gasoline costs. His company has hedged on plastic resin futures, anticipating petroleum costs to go up, but the contracts will expire soon and then he expects costs to skyrocket.


For all the buffeting by energy costs, it looks like 2006 will still be a tough year for Trojan but much better than it would have been. The firm’s energy efficiency projects which include $150,000 spent to improve lighting and $300,000 to streamline ventilation are expected to pay for themselves, when coupled with SoCal Edison rebates, in less than one year. The utility put up $112,000 for the ventilation.



Saving grace


The deregulation of the energy market and the subsequent regulation has forced California to lead the way on conservation.


“Because we’ve had issues we’ve had to deal with, both energy de-regulation and the energy crisis, we’ve been on the cutting edge in a lot of ways,” said Jack Keyser, chief economist with the Economic Development Corp.


We’d already been besting other industrialized states. Among manufacturing states between 1991 and 2000, California’s greenhouse gas emissions per capita an indicator of energy usage remained at about 11 metric tons per capita, according to the Bureau of Economic Analysis and the California Energy Commission. Other industrialized states, including Michigan, Pennsylvania, Michigan and Texas, ranged from 17 to 38 metric tons per capita. All of them showed an increase over the period while California showed a slight decrease.


“The rest of the nation has a very strange view of California and Los Angeles,” Keyser said. “They think we all work in the industry, drive our Hummers to work and do lot of air-kissing. The reality is that L.A. County is the largest manufacturing center in the U.S. and it produces an amazing array of things and we’re doing it pretty efficiently.”


Keyser sees room for improvement.


“I sense a lot of small manufacturers out there don’t know these utilities have incentives and if you haven’t looked into it you have to do it immediately because it’s going to drop some money to your bottom line,” he said.



Feat of clay


Chief Executive Yoshi Suzuki says his firm, Maruhachi Ceramics of America Inc., began thinking about increasing fuel efficiency about seven years ago. That’s when energy starting making up as much as 30 percent of the cost of manufacturing his firm’s clay roofing tiles.


His company spent $70,000 per month in natural gas in 2001 and today, despite inflation and price increases, the bills are now about $50,000. The company has increased productivity 30 percent using the same amount of gas, he said.


Suzuki was guided by the California Manufacturing Technology Center, which uses Japanese efficiency techniques and a team approach to streamline manufacturing.


Suzuki overhauled his kiln in 2003 for $700,000. He improved efficiency 30 percent and made up his cost in two years. The tile dryers were overhauled in 2004 for $200,000, which boosted productivity 30 percent because the dryers use recycled heat from the kiln. That cost will be made up within two years. Last year, Suzuki bought new handling equipment for $400,000, but increased productivity nearly 50 percent, eliminating the need for an entire shift of workers. The cost should be made up within three years. Suzuki also took Edison up on a lighting rebate in 2005, a $25,000 cost that was made up in six months.


Even with those savings, Suzuki said his firm isn’t immune to the gasoline and diesel price crunch. He’s passed some of his trucking costs on to customers, but his biggest challenge has been finding drivers.


“It’s very difficult to find a truck because some people don’t want to drive because it’s so expensive,” Suzuki said. “It’s difficult to find trucking companies right now.”


Most of his wholesalers, he said, are picking up his tiles directly from his warehouse.

No posts to display