SHAPING STRATEGY


No U.S. Energy Plan Means More Risk for You Te default U.S. energy policy was


Redmond Clark, CBL Industrial Services, Cary, Illinois W


hen the Fukushima nuclear reactors in Japan failed and melted down earlier this


year after a tsunami, the energy industry experienced yet another “black swan” event. Te global political and energy systems are still feeling the effects from this disaster. How have governments responded, and what might the event mean to metalcasters in the U.S.? After careful review of plant designs


and safety systems, the Japanese government shut down almost 70% of the nuclear facilities in the country for inspection and maintenance. It is un- clear when those units may go online again, but the prime minister is calling for a nuclear-free Japan. Te country is considering a significant expansion in gas-fired generation plants (and increased greenhouse gas emissions) as an alternative to nuclear power. Germany and Italy have decided to eliminate all nuclear power generation over the next eight to 10 years. Te nuclear power resources will be replaced with aggressive conservation measures and an expansion of both coal and renewables (wind in particular). Ger- many remains committed to reducing its carbon fuel use by 80% before 2050, and even without nuclear power, the country still feels it will meet the goal. China continues to embrace nuclear,


carbon fuels and renewables because expansion of its energy system is a political necessity. Here in the U.S., the nuclear


power industry is limping along, with limited project progress because of costs and weak federal financial support. Domestic venture capital investment in the “clean tech” sec- tor (battery technology, renewable energy and alternative fuels) has fallen almost 50% year-over-year, and public sector investment is likely to follow, dimming the future for non-carbon fuel market development at home. The overall venture invest- ment trend is down partly because global and domestic financial issues are taking center stage away from energy and climate concerns.


pretty basic in the past: if we needed more energy, we obtained more energy. Te government focus was on price and supply stability. Climate issues aside, that default policy is likely a dead end over the next few decades for the simple reason that a growing number of nations will compete aggressively for a finite global carbon fuel inventory and static production, forcing prices significantly higher over time. Te fact that the U.S. has vast inventories of gas,


significant impact on the bottom line.


intensive industry, so changes in supply can have a


Metalcasting is a mature, energy-


coal and oil shale does not keep global pricing out. Just as lower international labor costs pulled jobs out of the U.S. economy, international competition for energy is expected to drive domestic fuel prices higher. Here is a great case-in-point.


Canada is supplying about 15% of the total U.S. oil needs, primarily from the tar sand deposits in Alberta. Te U.S. has dragged its feet in approving a new pipeline from Canada to the U.S. that would boost Canadian sales, but China has approached Canada and suggested a new pipeline to the west coast of Canada would increase the value of the oil by allowing international com- petition for the product. Trough a combination of chang- ing demographics, economic cycles and the emergence of the global economy, we are seeing an energy/ environment paradigm shift in many developed nations. Because of the re- cession and high unemployment rates, cost-cutting, economic development


and job creation are the top priority for governments that mismanaged their fiscal resources. Tose countries are now all but ignoring energy and environmental issues because there is no money. Te healthy/growing economies in the developed and de- veloping nations are investing heavily in carbon fuel alternatives, renewable energy and a modern energy distribu- tion infrastructure, both for energy security and possible future manu- facturing employment growth. Tose same economies have a long-term energy plan with a reasonable degree of continuity. Te U.S. does not. It is not hard to predict that the


costs of carbon fuels are going to rise over time and the price of renewable and alternative energy will fall below carbon fuels at some point. For many metalcasting companies, the absence of a national energy plan means we are even more exposed to the vagaries of the world carbon fuels markets. Tat is not a good place to be right now. Metalcasting is a mature, energy-


intensive industry, so changes in supply economics/availability can have a signifi- cant impact on the bottom line. When faced with such risks, a good manager looks to reduce risk by improving pro- ductivity. In this case, productivity is not defined by more output per hour, but by a lower energy application per pound of castings produced. Energy efficiency projects are like


any other capital project in that we invest with an expectation of a rate of return. Te policy, supply and economic uncertainties surrounding your energy supply may increase your operating risks, but those same uncertainties offer an opportunity for progressively greater returns on energy efficiency investment. If you are feeling a sense of unease about energy supply and cost risk, perhaps energy efficiency should be a higher priority on your list of projects. If energy efficiency projects make sense now, they will likely make dollars in the future. Redmond Clark is president and CEO of CBL Industrial Services, Cary, Ill.


September 2011 MODERN CASTING | 47


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