Viewpoints: In Support of Advanced Energy Technologies
By Jean Redfield
President & CEO
Recently I read that global competitiveness comes down to three factors: labor productivity, capital productivity and natural resource productivity. Most people would agree that the United States excels at labor productivity. Since 2000, the US manufacturing sector value of shipments rose 18%, while the number of paid employees in the manufacturing sector dropped 38%, equaling a 90% improvement in labor productivity. We are also starting to hear more about reshoring because, all in, the US is becoming cost competitive with any other manufacturing location. Our labor may be slightly higher priced, but because of our productivity, quality, innovation, and logistics infrastructure, we are, in fact, cost competitive.
When it comes to capital productivity, the US is the envy of the world. We have well-developed capital markets that include angel and venture capital for early stage investments, orderly, established private equity and publicly traded markets for later stage, and a world class banking system for working capital and debt. Our public capital may not be as productively deployed as some of our global competitors who develop long term, centralized development plans and then invest in the talent, infrastructure, and business formation/support in order to accomplish them. The US system for public funding has multiple layers, is largely decentralized and is subject to fits and starts based on election and budget cycles. However, it could be argued that the higher productivity of our private capital markets more than makes up for its weaknesses.
What about natural resource productivity? The US is the second most energy-intensive nation in the world behind Canada. We are about two times more energy intensive than Europe, and four times more energy intensive than China on a kg oil equivalent per person, which is how the World Bank measures energy use. However, energy use per person is not as important as energy use per unit of output. We know that the US is very productive, except that our energy use per unit of output is 160% of Europe’s, and has grown from 61% to 64% of China’s, meaning that we are losing ground. So when it comes to natural resource productivity, as measured by energy intensity, we are not competitive. When we consider other key natural resources like water, land, food (consumption more so than production), metals and minerals, it’s clear that if global competitiveness ultimately comes down to natural resource productivity, the US has a great deal of room for improvement.
Energy is the backbone of our economy and our way of life. There is an energy component in every produced good and most services, and it’s involved in everywhere we go and everything we do. Energy is also a key component in water (for treatment and pumping), land (due to our distributed land use and preference for sprawl), and food (due to use of heavy equipment, fertilizers, water, food processing and transportation).
The US must commit to reducing our energy intensity as a first step in improving our natural resource productivity. This commitment is critical to US competitiveness. Our abundance of natural resources makes it difficult to argue for aggressive conservation or innovation investments to wean us from depletable natural resources (like fossil fuels) or throw-away single use patterns (like our bottled water use). These investments just don’t seem to pay. However, as global competitiveness becomes more a function of natural resource productivity rather than the quantity of natural resources, it’s imperative that the US make these investments to reduce our energy intensity. This is where advanced energy technologies can make a difference.
Investments that can make that difference include energy efficiency in our buildings and manufacturing processes, and new sources of power generation and distribution that include renewables, energy storage, Direct Current (DC) power networks and micro-grid/smart grid technologies. We also need to work toward the development of new paradigms for transportation including alternative fuels, hybrid, electric and light-weighted vehicles as well as new mobility systems that leverage information and communication technologies to minimize and optimize the movement of goods and people. If the US makes the commitment to these advanced energy technologies and new ways of thinking, we can truly affect our natural resource productivity and, in the long run, improve our global competitiveness. ME
This article was first published in the June 2013 edition of Manufacturing Engineering magazine. Click here for PDF.