Picking up the $500 Billion Bill on The Ground: Driving the Next Industrial Revolution Through Efficiency

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"Picking up the $500 Billion Bill on The Ground: Driving the Next Industrial Revolution Through Efficiency"

There is an old joke, widely told among economists, about an economist strolling down the street with a companion when they come upon a $100 bill lying on the ground. As the companion reaches down to pick it up, the economist says ‘Don’t bother — if it were a real $100 bill, someone would have already picked it up’.”

by Ryan Matley, reposted from the Rocky Mountain Institute

President Obama’s call in his State of the Union address to capitalize on “the strongest two-year period of manufacturing growth since the 1990s” by encouraging businesses to bring work back to the United States can be accelerated with energy efficiency innovation.

While Obama urged Congress to take a series of tax steps to encourage businesses to bring jobs back to the United States, RMI has strong evidence that industry can take cost-saving efficiency steps without waiting for policy-makers. Doing so can quantifiably improve U.S. manufacturing’s competitive advantage right now.

Stories about the death of U.S. manufacturing are a recurring theme since the “Japanese invasion” of electronics and autos in the early 1980s, and the sector hemorrhaged 5.5 million jobs over the past decade. But U.S. manufacturing is far from dead, in fact providing a rare bright spot in today’s economy.

Manufacturing employment has grown each of the last two years, driven by a rebounding auto sector, and now employs 11.7 million people.

A number of trends are coinciding to make U.S. manufacturing increasingly competitive globally. Wages and benefits are growing rapidly in China—as Obama noted in his speech—at the same time that U.S. manufacturing wages are falling. The risks of operating a supply chain that stretches halfway around the world are growing: rising transportation costs, the threat of import duties, less product flexibility, slower time to market, intellectual property theft, and product safety/reputation risks are growing concerns when moving manufacturing offshore. All of these factors are translating into making U.S. manufacturing more appealing.

Efficiency and whole-system design can help industry accelerate these growing advantages. Analysis from Reinventing Fire, RMI’s blueprint to running a 158 percent bigger 2050 U.S. economy powered by efficiency and renewables reveals that the industrial sector can achieve 84 percent greater production using 9 to 13 percent less energy, and save $0.5 trillion net.

JR:  That’s a big bill on the ground waiting to be picked up (see also “Energy efficiency is THE core climate solution. Part 1: The biggest low-carbon resource by far”).

For example, with RMI’s help, Texas Instruments (TI) built a new, million-square-foot semiconductor fabrication plant in Richardson, Texas. This facility, opened in 2009, was the first LEED Gold rated semiconductor facility, and its innovative design saved $4 million in annual energy operating cost and 35 percent of its water use compared with TI’s previous chip fab built just four miles away. Building this facility added up to less than 1 percent of the construction budget.

These savings were generated through a combination of simple steps, including building orientation and exterior shade screens to minimize solar gain, light shelves to increase daylighting, big, straight pipes that reduce friction and pumping energy compared to small, crooked pipes. The design team was even able to remove an entire floor, saving the materials needed to build it and energy needed to operate it. Most importantly, these energy savings were obtained while exceeding management’s target of spending 30 percent less capital than the prevailing design. Meeting that goal meant the facility and its 1,000 jobs stayed in Texas rather than heading overseas.

The Texas Instruments story is recently joined by a wave of good news as companies from GE to Intel bring manufacturing back to the U.S. and invest in factories here. Rust Belt economies devastated by offshoring over the past decade are starting to repopulate their vacant industrial land (albeit with lower-wage jobs) while manufacturing in the South continues to grow.

The rising tide does not assure continued U.S. manufacturing growth, though. A number of clouds remain on the horizon. These barriers include a burdensome tax structure — Obama’s target Tuesday — stifling and lengthy permitting processes, and a lack of skilled workers to operate increasingly complex and automated manufacturing processes. Many of these barriers will require some act of Congress for real progress. But industry can take many clear steps on its own.

“The easiest way to save money is to waste less energy,” President Obama said, proposing that manufacturers be incentivized to eliminate energy waste in their factories as a way to lower energy bills, cut pollution, ramp-up manufacturing and provide more American jobs.

Radical energy efficiency improvements, made possible through whole-system design, can unlock far greater efficiency gains than typically thought possible, often at the same or lower capital cost than conventional designs. Because whole-systems design brings together all project stakeholders, from the designers and engineers to the production staff and owners, it can also break down costly assumptions and rules of thumb and yield diverse benefits such as improved productivity, product quality and working conditions.

Successfully nurturing a whole-systems design process from inception to construction is not easy. Despite all the benefits, the approach poses number of sticky challenges to navigate along the way. Whole-systems design takes more time than an off-the-shelf solution, and the exact outcome cannot be predicted at the outset. New approaches not yet familiar to the design team carry perceived technical risks, but a growing body of robust examples show the power of whole-systems design.

Manufacturing serves as the bedrock of our economy. It is the engine that has driven our dramatic economic growth and lifestyle gains since World War II. It has the largest multiplier of any other sector by far—for every $1 in manufacturing value added, $1.40 of value is created in other areas of the economy. It is worth our attention and persistent investment in ensuring its success. Alan Mulally, CEO of Ford Motor Co. after leading a resurgence at Boeing, underscores the point: “We have to make manufacturing a priority. It’s the foundation of everything associated with the economy.” It’s time to unlock the next industrial revolution through efficiency.

– Ryan Matley is an electricity consultant with the Rocky Mountain Institute. This piece was originally published at the Rocky Mountain Institute blog.

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16 Responses to Picking up the $500 Billion Bill on The Ground: Driving the Next Industrial Revolution Through Efficiency

  1. prokaryotes says:

    Mitt Romney: Young People Are Concerned About Issues Like Global Warming http://www.energyroundup.com/videos/2012/01/29/romney-youth-global-warming/

  2. Leif says:

    A few of us are discussing the implications of the Smith Act of 1957? lately. Very early into this ave. Very low in legal expertise. The first question in my mind is just who is being “violent” in this instance? “We the People” attempting to occupy our street, or those siting in the ivory towers actively working to ignore the best science the world over and the very facts right before our eyes? Are we the “terrorists” because they decide to label us such, or are the perpetrators of the ecocidal fossil era the “terrorists” for there clear acts against humanity and earth’s life support systems?

    I sent a question off to a civil rights lawyer I know. The Smith Act does have some interesting wording if read with our existing plight in mind. It is still on the books to my knowledge. Any one want to weigh in?

  3. fj says:

    Over the years finding myself highly informed by Amory Lovins and the Rocky Mountain Institute especially in ideas like natural capital, exponentially rapid disruptive design, and perhaps soft path:

    #1 Intense integration with natural capital where human capital is the most important component, and

    #2 Factor 10x^e engineering

    The discussions of the case study of building the Texas Instruments plant and other stuff which will have to be dealt with are most encouraging.

    At times the complexity seems unmanageable — currently surfacing are discussions of Apples’ Chinese manufacturing connection — while Lovins’ and RMI’s pragmatic philosophy seems to be boots on the ground making dramatic change as one may; which is quite reassuring, while somewhat ignoring the complexity (likely out of necessity).

    Unfortunately, my deviancy tends toward radical change that seems to me a lot more disruptively here-and-now practical such as net-zero mobility, buildings, cities, civilizations; (and, adjectives) ecoagile, intelligent, rapidly evolving . . . with #1 taken to the logical extreme.

    Fun stuff indeed!

  4. fj says:

    We need a baseline target to focus on and net-zero emissions, energy, and cradle-to-cradle environmental impact may just be it:

    Of sufficient difficulty and elegance to attract some really smart people yet achievable in hopefully many important instances; totally positively disruptive.

    Most importantly, net-zero is a milestone on the critical path to timely addressing climate change.

    • fj says:

      net-zero by year 2020 addresses the urgency: netzero2020

      • Leif says:

        That is a “Moon Landing” to be proud of fj, and would not cost much more than the Newt’s envision moon attempt.

        • fj says:

          stuff like this is coming from places like scotland and companies like pepsi and not as far-fetched as you might believe. as reported on climate progress and at a recent new york academy of sciences germany has made terrific strides in a single decade.

          oh yeah, 0.5 million Chinese cyclists have been using net-zero mobility for some time.

        • fj says:

          first, paris had the world’s largest public bike system or bikeshare as it’s often called — which might be considered early-stage net-zero transit — then ganzhou china, and soon new york city will likely top the list with disruptively low-cost, practical zero-carbon transit going viral.

        • fj says:

          recent $6 billion in funding for southern california active (and net-zero) transportation, doubled if city-level funding is considered

  5. prokaryotes says:

    We need a CO2 price and global market to start changes -Polman #wef #davos https://twitter.com/#!/wef/status/163562614616633344

  6. kvaughn says:

    One clarification in the blog: the statement, “Building this facility added up to less than 1 percent of the construction budget,” should instead read: the “LEED elements of the project added less than 1% to the total construction budget.”