Manufacturers realizing gains from innovative technologies
By Mark Green
Editor of The Lane Report
Undreamed of a decade ago, an innovation-driven U.S. energy revolution is driving a manufacturing renaissance producing millions of new American jobs, National Association of Manufacturers President Jay Timmons told a Kentucky Association of Manufacturers Energy Conference audience Thursday in Lexington.
“The American Chemistry Council reports that $100 billion of new U.S. investments are planned in the chemical sector,” Timmons said in the keynote presentation of the two-day KAM conference. “Industries that were once all but lost in the United States are coming back.”
According to a study by global research firm HIS, ongoing development of shale oil and gas resources will boost U.S. employment by nearly 4 million jobs by 2025. Natural gas prices in North America have fallen from above the global average to well below it with supplies forecast to exceed demand here for decades.
Price has created a U.S. competitive advantage, but Timmons said manufacturers are realizing further gains from adopting innovative energy-efficiency technologies as well.
Manufacturers, however, must not become complacently optimistic, he said, because energy policy is among the most politicized in Washington, and “the wrong policy choices could bring the energy revolution to a halt.”
For example, Timmons said the Obama administration should authorize the 1,500-mile Keystone XL pipeline that will bring crude oil the Canadian tar sands region to Gulf Coast refineries because it will create jobs, increase U.S. energy security and, according to State Department reviews, have minimal environmental impact.
Much more worrisome are pending Environmental Protection Agency revisions to National Ambient Air Quality Standard for ground level ozone, currently at 75 parts per billion. If federal environmental officials enact standards they suggested in 2010 and again this year of 60 to 70 ppb, manufacturers and the energy sector will be suffocated, according to Timmons.
While Kentucky meets current ozone limits, the entire state would be in violation under the more stringent NAAQS proposal.
“Nonattainment, as it’s called, means economic paralysis,” he said. “It would be nearly impossible to get a permit to expand operations if a state is in nonattainment.
“Manufacturing would come to a standstill; our domestic energy boom would go bust; existing plants would be required to install additional expensive equipment; and the cost of nearly every manufactured good in this country would increase.”
“Kentucky would become a ‘no-growth zone,’ ” according to Timmons.
Meanwhile, new EPA emissions limits for existing power plants will be the “next shot in its effort to ban coal.”
Timmons and other speakers Thursday said the United States must maintain ready access to all of its energy sources now and in the future to meet expected demand growth and maintain competitiveness in the world marketplace.
Natural gas is increasing its share of the energy-source pie and will surpass coal globally as a electricity power plant feedstock in the next 25 years, said Dong Fu, senior economist for corporate planning for Exxon Mobil. World energy demand will growth 75 percent by 2040, Fu said. Electricity generation will be the number one driver of energy demand growth, followed by industry, residential use and commercial activity.
Fu forecasts that heavy industry energy demand will be steady through 2040 as vehicle makers, steel and aluminum producers and other high-power-consumption power users make their processes more efficient and become smarter about managing their energy costs. Chemical industry demand will increase 35 percent, however.
In terms of basic sources of power used, Fu said, natural gas will increase, electricity will increase greatly, biomass will decrease and coal’s significant share will remain relatively steady; Electricity demand will grow by 90 percent between 2010 and 2040.
Fu predicts the overall vehicle fleet mileage average will be 46 miles per gallon by 2040.
U.S. residents use two to four times as much energy per capita as the rest of the world, and per capita energy use will increase slightly by 2040, he said, while residents of the Asia Pacific and Latin America double their energy consumption.
In Kentucky, industry consumes 50 percent of energy, said Len Peters, secretary of the state Energy and Environment Cabinet. That compares with a U.S. average of 28-30 percent.
Average commonwealth electricity rates have remained among the five lowest-cost U.S. states for years, with 92 percent of power production currently coming from coal-fired plants.
Peters advised, however, that carbon dioxide emission targets in the President’s Climate Agenda presented on June 25 “virtually prohibit new coal fired power plants.”
Kentucky utilities have announced plans to close four coal-fired power plants in the past year, mostly because of their advancing age, Peters said. The plants closed or closing are all more than 50 years old, he said, noting that the average age of power plants in the state is 43 years old.
While Kentucky has ample and reasonably priced coal available for power generation, coal from Eastern Kentucky mines is now the mostly costly in the United States by the time it gets to the market, Peters said, and the state has lost half its coal mining jobs in that part of the state during the past two and a half years.
An expected shift to natural gas generation will bring coal’s share of electricity production in Kentucky to 78 percent by 2020, and result in higher energy costs, Peters said. While the amount of cost increase remains unknown, he said should Kentucky rates increase 25 percent from 6 cents per kilowatt hour to 7.5 cents per kilowatt hour it is estimated the state would lose 30,000 jobs, most of them in manufacturing.
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