As we face the growing likelihood of federal control of greenhouse gas emissions, either through legislation passed by Congress or the unilateral action of the Environmental Protection Agency ¹, a key issue for many companies going forward will be managing their greenhouse gas, or GHG emissions.

If the EPA captures control of GHG regulation, as the current activities suggest they might², the implications for the many companies that will have to meet the established regulatory threshold will be significant³. Therefore positioning oneself to reduce your facility’s production of GHG emissions — either directly or indirectly — becomes more than good economic or environmental policy, it becomes a matter of legal compliance. One such route to emission control is through energy consumption control. In particular, companies can focus on controlling the energy intensity of its production processes.

In other words, energy intensity is the measure of how much energy is required to produce a unit of output. Namely, the more energy required to make the product, the higher the product’s energy intensity level. Moreover, the higher energy intensity of the company’s production process, the higher its level of GHG emissions, on average. This is true for both direct and indirect emissions. Firms that posses high energy intensities consume significant amounts of energy, the majority of which come from fossil fuels — which supplied 92 percent of energy consumption in 2008 according to the Energy Information Administration (EIA), as seen in the chart below⁴.

Therefore, high energy intensity firms present excellent candidates to develop initiatives that foster energy savings and environmental leadership, as well as assisting these same firms for the eventual onset of greenhouse gas regulation if the EPA elects to continue to pursue its current course⁵.

To this end, the U.S. Department of Energy has developed its Save Energy Now LEADER program. This program is designed to assist businesses in both quantifying and reducing their energy intensity and consumption, which in turn will help them reduce their GHG emissions. As noted above, energy usage and GHG emissions are often closely tied together. In fact, according to the Department of Energy, “the U.S. industrial sector accounts for … nearly 30 percent of the energy used nationwide and 27 percent of the country’s carbon emissions.”⁶ Therefore the companies that commit to joining this program not only take a leadership role in controlling their energy usage and intensity — a 25 percent reduction in energy intensity over 10 years is required for participation in the program⁷ — they also take a significant role in reducing GHG emissions.

To this end, 32 companies have signed on to the Save Energy Now LEADER Program. These companies have taken a leadership role in recognizing the importance of reducing the energy intensity of the production processes, and also will benefit from the reduction of their GHG emissions from these energy usage reductions.

Many of these companies are acknowledged leaders in addressing energy concerns. In fact, nearly half (15 companies) are members of the Alliance to Save Energy ⁸. At Orion Energy Systems, we also salute the foresight of these companies and their leadership on this critical economic, energy and environmental issue. Moreover, we are proud to count 13 of the initial signatories as existing customers of Orion as seen in the chart below.

Table 2: Energy Savings Reduction by Orion Customers

As seen in the chart above, the 13 Save Energy Now LEADERS, who also are Orion customers, have saved more than 147 million kilowatt-hours — the average American home in 2007 consumed 936 kWh⁹. These savings translate into significant GHG emission reductions, including nearly 100,000 tons of carbon dioxide and 2 tons of methane.

Orion is proud to have provided its customers with such potent tools to reduce both energy consumption and GHG emissions. Orion is committed to developing additional avenues for both existing and prospective customers to maximize the benefits of both energy efficiency and environmental stewardship for all stakeholders involved.

With apologies to The Who, recent developments have suggested that we just might. One such example deals with details regarding the decision by the government of Qatar to redirect a significant portion of the liquefied natural gas, or LNG, from the United States, largely due to the Chinese inclination to pay more for LNG¹.

Some organizations, like the American Energy Alliance, have raised the alarm about the issue, yet many commentators have suggested that the diversion of energy resources away from the United States is not a cause for concern² . Their argument is that “one of the big reasons natural gas prices are low in the U.S. is because the country’s swimming in the stuff thanks to a spate of new production. Gas inventories are well above average levels.”³

The commentators fail to address or, quite frankly, even ask how much of the reserves flush we are experiencing due to new production, and how much is due to a more likely source, decreased demand due to the recession. In fact, current gasoline and jet fuel demand over the recent Thanksgiving weekend barely exceeded demand from last year, when the nation was experiencing the depths of the economic malaise.⁴ When the recession eventually eases and the demand for natural gas increases will the spate of new production meet our needs or will we face another round of rapidly increasing energy prices? Furthermore, the glut of natural gas on the market has led to production cuts that have finally begun to take hold, suggesting that natural gas prices might start to rebound, even before the recovery fully takes hold⁵ . Moreover, now that the capacity has been diverted to China, it will be difficult — and costly — to return it to the United States, if that will be even possible when demand for energy ramps back up.

All this serves to remind us that we are not likely to see a prolonged lull in energy prices, like we saw after the oil embargoes of the 1970s, this time around. Despite significant earning drops for oil companies like Exxon Mobil (68 percent drop in earnings for 3rd quarter 2009 as compared to the previous year)⁶ and despite the tremendous drop in oil (and by extension other energy prices), we saw between the July 2008 peak and December 2008 floor, we should not expect prices to hover around their floor levels as the economy recovers from the current recession.

U.S. West Texas Brent Crude Oil Prices, Weekly, January 3, 1986 – October 23, 2009⁷

In fact, as seen in the chart above, oil prices have already shot up more than 140 percent from December lows to current October 2009 levels. Moreover, the current October prices are about as far above the market low for the period ($80 vs. $32) as they are below last summer’s high ($144 vs. $80).

What does this mean for American consumers and businesses?

It means that as we saw last year, companies and individuals will need to seek tools and opportunities to limit their exposure to rising energy prices and protect their productivity from being eaten away by fuel costs. One such method is energy efficiency, which will help both consumers and companies manage their energy consumption and by extension manage their exposure to rising market prices for energy, not to mention rising energy costs associated with any potential climate change regulations that are being contemplated by both the federal and many state governments.

By finding innovative solutions to meeting their energy needs — be they process (petroleum, natural gas, electricity), illumination (home/business electricity), climate control (home/business natural gas, electricity), or transportation (home/business petroleum) — energy efficiency solutions can help people and firms decrease their dependence on these volatility priced commodities, therefore insulating themselves at least to some degree, and ensuring that they do not get fooled into failing to prepare for the next energy price shock, again.