The 8th Waste: How Lean Can Improve Energy Efficiency

American industry is missing a great opportunity to reduce energy costs by becoming more efficient. Lean advocates can assist by adapting lean techniques to address the problem.

            A recent New York Times article noted that increased efficiency holds greater potential for energy savings than alternative fuels:

            Even enthusiastic supporters of alternative energy agree that the easiest way to cut carbon emissions and air pollution is to focus more on efficiency, less on pollution-free generation.

“Efficiency is the steak,” said Carl Pope, executive director of the Sierra Club. “Renewables are the sizzle.”

            What is worse is that industry apparently just isn’t interested:

            At a recent conference on energy efficiency and investment strategy, Pedro Haas, an energy expert at McKinsey & Company, said his consulting firm recently asked people worldwide what payback time they would find acceptable before investing money to save energy.

One fourth of them said they would never spend any money to improve energy efficiency; 50 percent said they wanted to earn back the investment in two years or less.

“That means about 75 percent of the public will require economics that are just not there,” Mr. Haas said.

            Why the lack of interest? Perhaps because, as the article points out, energy efficiency results from implementing many small changes and doesn’t consist of one big project with a clearly measurable payback:

            In most places the traditional ways of making energy still turn out to be easier to do than to save it. William R. Prindle, the deputy director of the American Council for an Energy Efficient Economy, a nonprofit group in Washington, said that it was simpler to finance and build a new power plant than to find the thousands of places to invest in energy efficiency, even if the dollars buy more power through efficiency than through new generation.

But the incentives for energy efficiency are growing, experts say.

“When we started talking about this in 1990s in terms of energy efficiency versus coal energy, we were talking 4 cents a kilowatt-hour for coal, and 4 cents for energy efficiency,” said R. Neal Elliott, the industrial program director at the council. “Today we’re talking optimistically, without carbon taxes, 10 cents for coal. With carbon taxes, we may be talking 20 cents for coal.”

“And energy efficiency,” he said, “is still 4 cents or less.”

            Leadership helps, and the best leadership in this area right now seems to be coming from a handful of states. The Times article, written by Matthew Wald, notes that Vermont contracts with a non-profit corporation whose goal is to help businesses find ways to save energy. And in New York, Gov. Eliot Spitzer has set a goal of cutting electricity demand by 15 percent from what it would otherwise have been in 2015. (That sounds a bit convoluted, but it’s still good. I’m a big fan of setting goals and deadlines to get things done.)

            As I noted in a previous post, lean initiatives often reduce energy usage simply by making a process more efficient.

            But we need to do more to increase lean’s focus on saving energy. I suggest that we expand the traditional list of seven wastes to eight, adding energy. Energy use can be added as a metric on value stream maps, and kaizen events can be held with the primary objective of reducing energy use. Widespread deployment of such techniques can go a long way toward reducing the world’s hunger for ever-increasing amounts of energy.