Getting Ready for the Next US Industrial Boom

By Elisa Wood

September 4, 2008

Selling large manufacturers on energy efficiency isn’t easy, even though they stand to achieve great bang for the buck. Manufacturers are apt to only consider efficiency improvements as part of a major plant expansion or improvement. Such capital expenditures tend to occur in a cyclical fashion, and manufacturers give little thought between cycles to new efficiency measures.

The good news is that the United States appears to be readying for a new cycle of industrial capital investment, creating a window of opportunity for energy efficiency companies, according to a report by the American Council for an Energy-Efficient Economy.

“Trends in Industrial Investment Decision Making” points to several clues that factories are preparing to refit and expand after years of avoiding the risk of such investments.

•Plant capacity, or level of output in producing goods, is rising to historic levels. High capacity rates encourage factory owners to expand and new competitors to enter the market and build plants.

•Product output per employee is up, a frequent precursor to new capital investment by manufacturers.

•The cost to ship goods to the United States has escalated dramatically because of a shortage of ships and high fuel prices. Thus, it is increasingly cost-effective to produce goods within the country rather than overseas.

These pressures are likely to result in new, long-term investment in factory capacity, the likes of which the United States has not seen in 30 years.

What should energy efficiency companies do to prepare? Start forming relationships with manufacturers now, so that you can learn about their particular investment cycles, as well as the greater market forces that influence their decisions, the report says.

The full report, by R. Neal Elliott, Anna Monis Shipley and Vanessa McKinney, is available free of charge at: http://www.aceee.org.

Visit energy writer Elisa Wood at www.realenergywriters.com and subscribe to her free EE Markets newsletter and podcast.