Metalworking is a complex, energy-intensive process. The National Energy Education Development Project reports the cost of energy in steel and aluminum manufacturing is approximately 25 percent of production cost. With the summer months upon us and market prices expected to increase, according to the Average Hour Whole Market Prices Report, managing energy costs and ensuring they match budget and production cycles can increase profits for metalworking companies.
Experienced energy retailers offer products that can help mitigate market price fluctuations. For example, customers may be able to obtain a fixed-price electricity plan for their energy commodity supply that cannot fluctuate regardless of the market. Implementing strategic energy management can have an impressive impact on a facility’s energy consumption.
Regardless of which action your company chooses to implement, the key is to take control of your energy usage. Metalworking facilities can manage their energy usage better by understanding it, learning about energy contract options and forecasting market cycles.
Understand energy usage
Identifying the best time to ramp up or slow down production can facilitate cost savings. In order to do this, facility operators need to be aware of when and how their facility consumes energy. Facilities need to record their energy consumption to pinpoint high energy demand times. One way to determine consumption is through an audit, which will analyze your energy usage profile and develop a strategy to improve operational performance. The energy usage profile also will provide a framework for the facility to help management recognize the energy solutions that encompass the total scope of energy procurement and demand-side needs.
Learn about energy contract options
Understanding the options available for energy procurement in deregulated markets involves ensuring your company’s energy purchasing plan matches your usage and budget. Most competitive retailers can provide customized energy plans that offer sophisticated products and strategies to create an efficient and predictable energy plan.
Cost-effective energy rates are not only available through traditional energy plans. Competitive price plans now are available when purchasing renewable energy tools. In Illinois, Direct Energy Business enabled Stanley Machining & Tool Corp., a precision machine shop serving an international customer base, to offset 60 percent of its energy usage for two years through the purchase of Renewable Energy Credits while still operating under a cost-effective energy plan.
In regulated markets, renewable energy plans are offered through local utilities that offer RECs and carbon offset programs. A Leadership in Energy and Environmental Design (LEED) certification also is available, which involves implementing practical and measurable maintenance solutions.
In addition, choosing a fixed-price energy product may assist in providing control over production costs. Fixed-price contracts provided by competitive retailers offer secure fixed-rate pricing for your energy supply costs that will not fluctuate for the term of your agreement.
Forecast market cycles
Market cycles can influence energy prices based on factors such as the time of year, demand, availability, temperature, economy and natural disasters. Being aware of these factors and able to recognize or forecast their typical results is important because it helps mitigate risk and helps anticipate if market prices are set to increase or decrease.
With summer in full swing, now may be the appropriate time for your facility to take advantage of fixed energy contracts with competitive retailers. Summer power prices are approximately 35 percent to 45 percent higher compared to the rest of the year, according to the Average Hour Whole Market Prices Report. Hotter temperatures lead to an increase in residential demand, which consequentially results in more expensive energy prices. Take advantage of colder days this summer when demand is less and energy prices are lower by locking in your energy price for the rest of the summer. This solution may help eliminate the risk of prices fluctuating during high-demand months and helps provide more control over production costs.
Knowledge of energy procurement and the products and plans available is the first step to successful energy management. By adopting an energy plan that supports their facility’s need strategically, customers have the potential to achieve a high-performing bottom line. MM
Mike Senff is the vice president of North American sales and marketing for Direct Energy Business, a leading energy supplier across North America with more than 20 years of experience. Direct Energy Business is committed to offering experienced, straightforward guidance, industry-leading products and personalized service to commercial and industrial organizations across all sectors.
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