Rising Energy consumption – do we have a fitting response in Asset Management?
I shall rely on World Energy Outlook – 2008 report from IEA to describe the prevailing Energy situation. Outlook Fact1: the demand for energy is set to grow rapidly in the next 20 years; that the world primary energy demand would increase by 45% between 2006 and 2030 – an average rate of growth of 1.6% per year. Given that fossil fuels account for almost 80% of the world’s primary energy mix, one can imagine the immense pressure on this fast depleting natural resource. Outlook Fact2: the power sector will account for 52% of the cumulative energy supply infrastructure investment totaling $26.3 trillion till 2030. It wouldn’t be wrong to thus assume that with such huge capital investments, the rising energy prices will be on an inflationary trend. Outlook Fact3: At such a demand rate, we are on-course to doubling the concentration of Green-House gases (GHG) in the atmosphere by the end of the century eventually leading to a 6 0C temperature increase.
So, how do we respond to this situation of energy-demand fast moving out of the supply-side “lassoing” range without going into the controversial subject of imposing curbs based on consumption? Turning a blind eye, for once, is not an option. McKinsey, in one of their quarterly publications, suggests productive usage of energy to counter this demand surge. Per the article, one way to boost energy productivity is by increasing the quantity and quality of economic output from a given set of energy inputs. In simple terms, we need to use energy in a more technically efficient way. This is where, I strongly believe, Enterprise Asset Sustainability (EAS) rolls in. As described in one of my earlier blogs, EAS, an offshoot of Enterprise Asset Management, introduces environmental performance (energy consumption and GHG emissions) as an added dimension to an asset’s maintenance there-by helping companies identify energy sinks and leakages. If companies are able to keep their assets’ energy consumption well within the expected and accepted design parameters, they are well on their way to an effective energy preservation program besides keeping their assets well maintained. Amory Lovins, the highly acclaimed energy guru and co-founder of Rocky Mountain Institute, in a candid interview with McKinsey states that businesses acting quickly to make their operations more energy efficient will gain a significant competitive advantage. He further states (and buttresses his statement with examples) that organizations are consuming more than the required energy and it is high time, business executives look for savings in the nooks and crannies of offices and factories. High time, I say, for a fitting response!!
