Lufkin Industries Improves Profitability Through Sustainability

by Ritchie Priddy, GDF Suez Energy Resources NA

Creating an energy management strategy that’s right for your business and your bottom line can be complicated for any organization.

Efficiency often is dictated by a slew of variables and cost components that sometimes change rapidly. In large manufacturers in particular, these factors regularly are compounded by pressures from increasing competition and potential climate change legislation that can make a successful energy management plan more difficult to achieve.

Enter Lufkin Industries Inc., a vertically integrated company headquartered in Lufkin, Texas, that specializes in oil field equipment and power transmission products.

Like most manufacturing plants in 2010, Lufkin faced similar pressures and energy costs on par with the industry average of 5 to 7 percent of total operating expenses. Its annual consumption typically reached upward of 70 million kilowatt-hours–a number that was expected to rise. In addition, the U.S. Energy Information Administration has indicated a potential 42 percent increase in usage in the industrial sector by 2035.

Thinking Beyond the Bottom Line

Considering the two standard approaches to managing climbing expenses–cutting costs and increasing sales–Lufkin opted to examine energy-related expenditures. But the goal wasn’t just to achieve the classic reduction in consumption. Executives wanted to develop a plan that addressed all aspects of energy usage from individual cost components to total environmental impact.

Lufkin teamed with GDF Suez Energy Resources, one of the largest U.S. providers of retail electricity to commercial, industrial and institutional buyers that helps organizations improve profitability through sustainability.

The first step was to conduct an energy audit designed to help companies make the most of the intersection between fiscal and environmental responsibility. In cooperation with American Energy Solutions Inc., GDF Suez Energy Resources benchmarked Lufkin’s usage patterns to address potential opportunities to improve enterprisewide efficiency. The initial assessment provided Lufkin with an opportunity to consider areas, systems and manufacturing processes that could be modified to achieve a better return on investment.

Of the identified improvement opportunities, one presented the greatest potential to save an enormous amount of money, to reduce Lufkin’s carbon footprint dramatically and to promote its commitment to environmental stewardship. The potential benefits were so significant that the company’s leadership team authorized an unbudgeted capital project to take advantage of the opportunity as quickly as possible.

Lighting the Way to Sustainability

At the time, nearly one-third of the company’s total energy consumption was attributed to lighting. Some 30 percent of its energy spend was going to a system that consumed far beyond necessary levels for business operations. That system mainly included high-wattage, metal halide and high-pressure sodium fixtures for hi-bay applications and magnetic, T12 lamps and ballasts for lo-bay and office lighting. The proposed plan involved a complete lighting retrofit to convert Lufkin to a much more efficient system with custom fixtures–predominately four-lamp and six-lamp T5HO–for hi-bay applications and T8 fixtures with electronic ballasts for lo-bay and office lighting. Occupancy controls also were recommended for installation throughout, including in select office areas, to turn lights off when spaces are unoccupied.

The Big Benefits of One Bright Idea

The retrofit would take place at five of Lufkin’s facilities: the corporate office, Buck Creek location, Lufkin Foundry, gear repair facility and the power transmission site.

It was estimated that it would reduce the company’s overall energy usage in lighting by 11.9 million kWh–nearly 18 percent of the total electric load–annually.

The estimated decrease in kilowatt-hours was so substantial that Lufkin qualified for two rebate programs totaling $675,000, as well as federal tax incentives in excess of $100,000 through the Energy Policy Act of 2005.

With the new lighting system, the company would save more than $800,000 annually.

After rebates, tax incentives and resulting annual cash flow from reduced consumption, the payback period for the $2 million upfront investment to fund the initiative is estimated to be about a year and a half.

The potential reduction in carbon dioxide emissions is 16.9 million pounds.

Although the retrofit was massive and affected a wide range of departments and locations, the lighting upgrades were carried out in phases and were completed on time, within budget and without disruption to normal operations.

Lufkin is reaping the rewards of a much more efficient energy management strategy.

By going beyond cost-cutting to do the right thing for the company and the environment, Lufkin has found success in sustainability.

It has improved profitability by reducing consumption and expenses and has become a model of elevated eco-friendly practices for plants throughout the nation.


 

Lufkin’s Success Story in Pictures– The Before and After

 

 


 

 Environmental Benefits by the Numbers

With a more efficient energy management strategy, Lufkin Industries has improved profitability dramatically while reducing its carbon footprint more than 16.9 million pounds of carbon dioxide. That decrease, coupled with reductions in nitrogen oxides and sulfur dioxide, translates to a total decrease in greenhouse gas emissions equivalent to:

â–  2,022 passenger cars off the road for a full year, or
â–  1,063,693 gallons of gasoline, or
â–  21,720 barrels of oil, or
â–  126 tanker trucks filled with gasoline, or
â–  1,198,000 households using electricity for one year, or
â–  76 acres of forest preserved from deforestation, or
â–  389,134 propane cylinders used for home barbeques, or
â–  47 railcars of coal burned, or
â–  3,144 tons of waste recycled instead of going into landfills.

Author

Ritchie Priddy, marketing director of sustainability for GDF Suez Energy Resources NA, is a 26-year veteran of the energy business, with significant experience in demand-side management projects in the natural gas and electricity industries.

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