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"The Importance Of Energy Efficiency For Industry"​

Ron Miller's picture
Principal Reliant Energy Solutions LLC

Ron Miller is an energy industry expert creating value by analyzing assets, markets, and power usage to identify, monetize, and implement profitable energy and emission reduction projects. He is...

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  • Oct 18, 2021

Energy efficiency for industrial equipment is very important as it can generate life-cycle dollar savings, while also reducing emissions. Energy efficiency is the first fuel of a sustainable global energy system, as it reinforces the idea that the cheapest and cleanest energy choice of all is not to waste it.

Energy efficiency simply means lowering the amounts of energy to perform the work required, while yielding a number of benefits such as:

1.    reduce greenhouse gas emissions and water use,

2.    lower operating costs,

3.    lower electricity price volatility,

4.    reduce energy requirements from the grid,

5.    lower the need for new electricity generation and transmission/distribution infrastructure,

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6.    assist the grid to maintain the required reserve margins to prevent system-wide outages, and

7.    save money and be faster to implement than other new energy supply resources

Energy efficiency progress:

Energy efficiency is also often the lowest cost energy resource, meaning it is less expensive to save energy through efficiency measures than it is to generate it through any other means (Molina 2014; Billingsley et al 2014). Studies have consistently shown that investments in efficiency cost utilities an average of about two to five cents per kWh, while generating the same amount of electricity from other sources can cost two to three times more (LBNL 2017, Lazard 2017).

Vermont’s Regulatory Assistance Project study of the statewide 2010 efficiency portfolio is one of the few examples of including increased reliability, transmission & distribution capacity savings, avoided reserves, and reduced risk provided by efficiency in cost effectiveness testing. The study found the value of avoided costs to maintain the reliability provided by energy efficiency to be $0.026/kWh – a value not typically included in other efficiency program cost-effectiveness testing. 

According to the American Council for an Energy-Efficient Economy (ACEEE), the levelized cost of one kWh “generated” as a result of energy efficiency costs $0.02-$0.04. Natural gas costs approximately $0.05-$0.08/kWh, and coal can cost as much as $0.15/kWh. On average, energy savings from energy efficiency programs come at one-third the cost of new energy generation resources. In the decades since the 1970s, when the U.S. Department of Energy (DOE) created equipment and appliance energy standards, energy efficiency has become the nation’s third-largest electricity resource, alleviating the need for several hundred additional large power plants.

Efficiently meeting industrial energy demand: 

The industrial sector is unique among end-use sectors in that its energy intensity has declined consistently in recent decades, decreasing 45% from 1977 through 2016. The decline occurred even though the sector’s energy use has fluctuated, its output has almost doubled, and economic activity has risen and fallen with economic cycles. 

This trend is promising because the industrial sector accounted for slightly more than 30% of the US gross domestic product in 2016.

For the industrial sector as a whole, an inverse relationship exists between intensity and value of shipments. When utilization of capacity increases, intensity decreases. (“Value of shipments” measures the economic value of all products shipped from industrial plants in an industry.) 

As an example, the steel industry has made major modernization investments that resulted in a 28% reduction in BTUs per ton of steel produced between 1990 and 2004. A large factor in this improvement has been a shift toward more reliance on secondary steel (recycled steel) and less reliance on primary steel (from iron ore through a reduction process).  

Combined heat and power (CHP) is an energy-efficient method of generating both electricity and useful thermal energy in a single, integrated system. A CHP system saves energy by recovering heat from power-only generation that would otherwise be wasted and using it to satisfy on-site thermal energy needs. The chemical industry has reduced energy use per unit of product by about 40% since 1980 by expanding CHP installations and modernizing process technology. 

America’s electric and natural gas utilities are now investing more than $7.5 billion annually in programs to help customers use energy more efficiently.  

Industrial Efficiency: 

Researchers are exploring ways to make industrial and manufacturing processes much more efficient. Industry accounts for about one-third of all energy consumption in the United States, more than any other sector of the economy, and its use of energy is expected to grow about 11% (0.4% per year) during the next 25 years. Nearly all of that increased demand will be for petroleum and natural gas.

Economics is the principal driver for industry to be more energy efficient.  

Independent studies indicate that U.S. industry as a whole could reduce energy use by 14% to 22% in the near term through cost-effective efficiency measures—particularly existing technologies that make use of the heat produced in power generation. 

The most energy-intensive industries are petroleum refining, bulk chemicals, paper, and metal—chiefly iron and steel, and aluminum. As a result, public-private sector partnerships and research programs are focusing on those areas. 

The extraction and processing of mined materials, such as coal, is also highly energy-intensive. By 2040, mining is expected to consume 53% of all the energy used in the non-manufacturing subsector of U.S. industry, while accounting for only 23% of the value of all shipments. This is not entirely because of inefficiencies: energy intensity will increase as established sites are exhausted and mining moves to less productive areas. Nonetheless, the equipment and processes used to search for and extract ore, separate it from unwanted materials, and transport it all present opportunities for energy savings. 

All three non-manufacturing industries—construction, agriculture, and mining—are on track to reduce their energy intensity through 2040, resulting in a total reduction of 9.2%. 

Energy Efficiency Impact Example: 

For the decision to replace a 100 HP, 93%-efficient pump with a new

98%-efficient pump, the analysis is shown below. 


Improvement in energy savings: 5.1%

Energy price in 2020, USD/MWh: 127.00

100 HP pump price, USD: 5,000

Premium for high-efficiency pump, USD: 500

Electricity from a gas-fired turbine generator 


Energy cost savings, USD per year: 216

10-year NPV8% energy savings net of pump premium: 1,233

Payback, years: 2.31

Emissions savings, metric tons per year: 17.7 

Strategies to be more energy efficient:

1.         Turn it off – Compressors, conveyors, machinery, computers and lights left on but not used can consume up to 70% of their full power.

2.         Switch to LEDs – LED bulbs use about a quarter of the energy needed to produce the same light as halogens and can last five to ten times longer.

3.         Waste heat recovery – Reusing the wasted heat already being generated in industrial processes is one way companies can significantly improve energy efficiency. By installing a condensing economizer, companies can improve overall heat recovery and steam system efficiency by up to 10%.

4.         Control temperatures – A programmable thermostat can reduce consumption by as much as 15 percent.

5.         Maintain equipment – Regular cleaning and planned maintenance of electrical and mechanical equipment goes a long way towards optimizing its performance and lifespan, which can translate to energy efficiency savings.

6.         Replace outdated equipment – Upgrading machinery with recognized efficiency ratings could significantly reduce energy and costs. Correctly sized motors that run at higher loads and efficiencies is also an important way to gain energy savings.

7.         Stick to the speed limit – In some cases variable or adjustable speed drives, which are devices that can vary the speed of a normally fixed speed motor, can reduce energy consumption by as much as 60%. For a 90 kW motor in continuous duty, this can save over $11,000 USD per year.

8.         Schedule machinery use – When possible, schedule certain machinery outside of peak hours. Peak hours can constitute up to 30% of a manufacturing facility’s monthly utility bill.

9.         Optimize air compressors – Industrial air compressors are to blame for huge amounts of energy consumption and waste. Altogether, air compressors account for up to $3.2 billion in wasted energy costs annually in the U.S. In fact, just one leak can cost your business $500 or more per year.

10.     Conduct an energy audit – It’s impossible to improve your energy use if you aren’t aware of the amount your company consumes in each part of the production cycle.  

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Matt Chester's picture
Matt Chester on Oct 18, 2021

How do you recommend industrial sites weigh the benefits of upgrading to more efficient equipment vs. the useful life that's remaining in their equipment? It's one thing to know you'll upgrade to more efficient equipment when the existing machinery breaks down, but it's a harder sell when it would be replacing equipment before end of life. 

Ron Miller's picture
Ron Miller on Oct 25, 2021

Matt, thanks. Efficiency improvements are driven by economics, and also by emissions reduction. The life of mine always comes into play so as not to replace a machine with a more efficient one only to have the mine end before payback.

Sid Abma's picture
Sid Abma on Oct 20, 2021

What natural gas is not wasted today, will be there to be used another day.

How much natural gas is being blown up chimneys across America and the world as hot exhaust into the atmosphere. The natural gas was combusted for a purpose. The problem is the equipment in which the natural gas was combusted. This equipment can only transfer approx. 80% of the combusted energy into the process. The rest gets vented up the chimney and is lost into the atmosphere.

The residential market has proven that natural gas can be consumed to near 100% energy efficiency with their condensing boilers and water heaters.

Large commercial and industry now have to catch up and realize that they too can operate to near 100% energy efficiency.

America wants to reduce it's CO2 emissions. For every 1 million Btu's of heat energy captured and recovered out of the combusted natural gas exhaust and is utilized in the building or facility, 117 lbs of CO2 is not put into the atmosphere. At a lot of larger facilities this turns into tons quickly.

Check out: Sidel SRU Flue Gas Condensers

Ron Miller's picture
Ron Miller on Oct 25, 2021

Sid, thanks. Globally, we should be capturing waste heat and repurposing it for other heating demand or to generate electricity. Natural gas at the point of demand is much more efficient for heat load than a similar electric heater that is supplied with electricity from the grid from a gas generator. Re-cycling waste heat from natural gas exhaust must be done if economically-feasible and if we have any hope of a circular/recycled economy.

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