Trends in Industrial Investment Decision Making
Report Number	IE081
Author Info	R. Neal Elliott, Anna Monis Shipley, and Vanessa McKinney
Details	Executive Summary Energy efficiency investments in the industrial sector are made differently from those in the commercial and residential sectors. Retrofit opportunities are much more limited in the industrial sector, and project cycles can be substantially longer in order to coordinate with overall plant refit cycles. However, the efficiency savings in the industrial sector can be large and very cost-effective when implemented as part of a normal capital investment cycle, while also offering substantial productivity benefits. At the 2007 ACEEE Summer Study on Energy Efficiency in Industry, many manufacturing sector program managers noted recent changes in energy efficiency investment. Manufacturers have been reluctant to invest in energy efficiency and have further deferred domestic investment due to domestic market uncertainty and global investment opportunities. These investment changes have occurred over the past few years, and are anticipated to continue in the short run, particularly as access to capital is constrained by nervous lending markets and the uncertainty in the global outlook persists. Economic indicators, however, suggest that the industrial sector is poised for a new period of major capacity investments because existing capacity is approaching full utilization. Without new capacity, industry will not be able to meet growth in demand for its products. We are already seeing industries such as steel begin to make major capacity investments of the kind not seen in a generation. In addition, a number of market trends are beginning to favor a shift to domestic production for domestic consumption. One important trend is the dramatic increases in marine freight costs that are offsetting much if not all of any benefit in manufacturing overseas. Combined with a relative decrease in the price difference between U.S. and global energy markets and a weak dollar, we see some manufacturing beginning to return to the U.S. Currently, a number of market forces appear to be encouraging many industries to defer investment plans for the immediate future. The forces deferring investments include global market uncertainty, tight capital markets, and the unsustainable tight markets certain industries have created to increase prices. In the near future, many industries will enter a new period of major capacity investment. This period will represent a major opportunity to influence the energy efficiency of these facilities for generations to come. The challenge is that program managers must begin engaging their industrial customers now, so the programs are positioned to exploit a rare opportunity to change energy use patterns for years to come.
Other Info	20 pp., August 2008 View report in PDF
Publication Price	$ 16.00 each
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