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U.S. Industrial Companies Must Embrace Energy Management to Remain Competitive
April 10, 2012
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Industrial and manufacturing companies in the United States use close to one-third of all the energy consumed in the country on an annual basis. These companies have had to understand energy use since it is such a critical input to their industrial processes. Industrial companies already have relatively high adoption rates for energy management initiatives, and they continue to spend on energy management products and services for new innovations. According to a recent report from Pike Research, U.S. industries must take additional measures to ensure they remain cost-competitive on a global scale, and the efficient use of energy is one area that U.S. industrial companies can improve upon to accomplish that.
"The energy management industry is entering a dynamic period of renewal and innovation," says vice president Bob Gohn. "New technologies are allowing greater insight into energy procurement and use, as well as the management of energy as an input to the industrial process. At the same time, a variety of assistance programs, plus new standards and certifications, are helping to drive energy performance initiatives into the organizational cultures of companies wishing to gain efficiencies in their industrial processes."
Executives are beginning to understand that they will lose substantial competitive positioning if energy management programs are not initiated in the near-term future. Facing high price volatility and stiff global competition for market share, these companies are quickly coming to the realization that energy and sustainability issues are a critical requirement for the competitiveness and even survival of their businesses.
This realization will lead to significant growth in industrial energy management software and services through the remainder of this decade. Pike finds that the U.S. market for industrial energy management software and services will rise from $960 million in 2011 to $5.6 billion by 2020, a compound annual growth rate (CAGR) of 21.6%.
Market Opportunities
The report finds that the U.S. energy management market offers significant prospects for both software and
service vendors. There is a strong and growing need for assistance in putting programs in
place to understand and manage an industrial facility's energy consumption patterns. Demand for these products and services is projected to increase rapidly in the
coming years. Energy management software and services spending in the industrial
sector is forecast to reach $960 million in 2011 and over $5.5 billion in 2020. Pike estimates
that the compound annual growth rate (CAGR) from 2011 to 2020 will be over 21%, with
growth in the early years of the forecast period being significantly higher.
U.S. industrial companies, which signify a high energy intensity sector, already have
high adoption rates for energy management initiatives. Out of necessity, these companies
have had to understand energy use since it is such a critical input to their industrial
processes. They continue to spend on energy management products and services for
new innovations, but only modest overall growth will be seen in this sector when compared
to other manufacturing and industrial sectors. The main areas of growth for
energy management software and services will be seen in the mid to large size
non-energy-intensive industrial companies and manufacturers. Companies are beginning
to understand that they will lose substantial competitive positioning if energy management
programs are not initiated in the near-term future.
Changing Economic Forces
A number of economic and market forces seem to be changing the climate for
investment and spending on energy management systems (EMS). As the economy
recovers, capital spending by industrial and manufacturing companies is rising, as is
capacity utilization. Although not quite to pre-recession levels, these numbers reflect
willingness by industry to look to the future with regard to plant refits, and systems and
equipment upgrades in order to prepare for future growth opportunities. This is a very
opportune time for product and service providers in the energy management market.
These periods of capital spending and plant upgrades are more ideal for implementation of
energy management programs compared to the normal maintenance cycle.
Outside market forces are also driving change. Increasingly, the supply chain, consumers,
shareholders, and other stakeholders are taking note of a business' initiatives with regard
to sustainability. Brand image and revenue is at stake, and those that do not take note and
make appropriate changes will be left behind. Just as quality was a major competitive
issue in the 1980s and 1990s, so is energy management today.
Even with these market forces demanding change, however, industrial companies are facing
challenges. Internal energy management initiatives sometimes flounder because they are
judged against other internal investments that have a more favorable return or a shorter
payback period. The implementation of energy management programs tends to
encompass a fragmented approach that serves to defeat the true potential of these
programs. Many companies that initially embark on energy projects do realize impressive
savings, but these projects can be considered "low hanging fruit" and are less complex
than the next level of projects that will need to be considered. As projects become more
complex, internal resources and a limited knowledge base on how to take the next step
severely hamper the success potential. Other factors that hinder energy management
program adoption and success rates include less than complete backing by senior
management and the lack of an organizational approach to energy performance issues
within an enterprise.
Source: Energy Management Systems for Industrial Markets by Pike Research. Excerpts and graphic reprinted with permission.
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