March 23, 2013 Thinking Ahead No Comments

W
ith the recent Eskom announcements and the uncertainty surrounding them, many businesses in the plastics industry are weighing up their options with regard to ballooning energy costs. If we are to believe Eskom, then the reality is that in a few months if nothing is done by many smaller companies, energy costs will drive them out of business. In an industry already burdened with high labor and material costs, an effective doubling of energy costs will drive most marginal converters out of business. On the broader industrial front, some companies are planning a move to India to counter, what to them is an unjustified and unwarranted increase in energy costs, according to Devan Pillay, head of Engineering at Glaxo Smith Kline in his submissions to the National Energy Regulator (Nersa), in Cape Town reported on the 20th of January on the Timesonline website. (http://www.timeslive.co.za/business/article270521.ece) Glaxo Smith Kline was in a position to be able to switch plants with relatively little trouble, but the real losers here are the South African workers who became unemployed as a result of this action. The often overlooked cost is what smaller satellite businesses will also suffer a s result of this closure. What realistically can smaller companies do to minimise the impact of these impending increases?

Use less energy by changing habits and consumables

I don’t believe that there are many people in management positions, who at this point are not aware of the advances made in light technology with low energy consumption lamps. These can reduce energy consumption for lighting, by up to 80% when compared to old incandescent lamps, but how many of the businesses still use incandescent lamps? Very few. The savings to be made in lighting, of small factories and ware houses are to be made in installing modern energy efficient solid-state ballast fluorescent lighting which in time will pay for itself, but depending on consumption, payback periods may be quite long. Another below the line technique of saving energy is to become aware of the energy consumed by mostly older appliance s and office equipment and when purchasing replacements due to age or obsolescence to shop for the most energy efficient replacements.

Making environments more energy efficient
When a company is planning new offices or factories, make use of insulation and natural ventilation which is a once off cost to reduce the need for additional heating or cooling in a particular area. Effective insulation can reduce the energy consumption of a workspace permanently. So a once of cost, if planned effectively, could contribute to the bottom line profit of a company forever. It could also make for healthier buildings and reduce the incidence of absenteeism due to seasonal flu outbreaks in temperature controlled enclosed workspaces. That too may make many companies more profitable by reducing wasted production hours.

Effective use of natural light during daylight operations coupled with LED lighting technology at night can not only save energy, it can also result in healthier vision in employees, reducing medical costs and increasing productivity. LED lighting technology is advancing at a rapid rate in first world markets driven by high energy costs. Not only is this technology energy efficient, it is also about five times as durable as fluorescent lighting.

Capital Equipment selection

Companies using large machinery are the most obvious candidates for energy efficient equipment replacement programs. Consider a company who currently pays R 50 000.00 per month in energy costs, can this company survive if this cost is increased to R 150 000.00 per month? If Eskom succeeds in obtaining the increases they have mooted, this will become the new reality. So what options are there to reduce energy consumption in the Plastics Industry on a scale that will make difference?

To turn to own power generation using Diesel fuel to power generators is prohibitively expensive, and would have no benefit for a company other than in the case of a complete failure to supply on the part of Eskom. However, the emergence of energy efficient machines which still use three phase power means that a company could continue to produce the articles that sustain their business with reduced consumption. This would in the short to medium term maintain their profitability on the products they sell. Of course, the cost of the equipment would have to be taken into account, when undertaking such an exercise, but for companies who have a schedule of equipment replacement and modernization; this cost would have relatively little impact, with older technology making way for newer more energy efficient technology.

For the smaller companies, now reliant the low cost energy inefficient equipment originating in the East, their problems continue, until the worldwide trend of low energy consumption capital equipment influences their suppliers. Perhaps they could motivate their suppliers to embrace these trends and enter competitively into this low energy consumption sector of capital equipment?

 

Non technical savings and motivation

How aware are employees of the absolute need for energy saving? This is a question that every company should be asking itself every day. Constant education of employees emphasizing the need for energy savings and what energy savings will mean to the well being of each and every employee, should be conducted by the management of every company, until energy saving becomes entrenched in the culture of the company. Management and shareholders best intentions and goals can only be attained through total involvement and acceptance by the employee compliment. Many company employees come from diverse backgrounds, and energy saving may have to be introduced to them as an entirely new concept. Managers should take into account the rapid urbanization of cities with the influx of people from rural areas, when they speak about energy consumption to their employees, they may have to find ways of expressing the need to conserve energy, which can be understood and appreciate by all. The payoffs to total commitment and involvement by all members of the company’s workforce may well mean the difference between success and failure.

 

Political pressure and lobbying

For many larger corporations political leverage and lobbying are a way of life, and for those companies with the necessary political clout and financial leverage to negotiate directly with Eskom regarding energy costs, this is not for you. But for the smaller enterprises, without the power to fix energy costs for extended periods of time, there are options that can be exercised to make your voices heard. Companies can join the various business organisations, which involve themselves in regulator activities, by lobbying the energy regulator and government. That way the voice of the smaller business may be heard at higher levels. Companies are also at liberty of sponsoring those political parties that promise to be more energy responsible, not only by financial means, but by hosting public information sessions for their employees where these matters will be discussed and debated. There are many imaginative ways of uniting the consciousness of the employees in saving energy and jobs, without becoming overly involved in grass roots politics.

 

The bottom line

What is at stake are the jobs of thousands of employees, the investment of thousands of shareholders and the continued viability of the South African Plastics Industry. Justification surely for a broad based concerted effort on the part of all stake holders. This is fight no one in the industry can afford to lose.

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