Working Within Markets to Affect Change
Industrial compressed air systems in the U.S. consume nearly 90 billion kWh annually. The efficiency of these systems could be improved by 20 to 50% by applying best practices that rely primarily on changes in operation and maintenance procedures. Yet these best practices are not in common use despite widespread recognition among industry experts. Taking advantage of the large but overlooked opportunities for improving the energy efficiency of entire systems will require a shift in thinking by both system users and the businesses that serve them.
Is there a role for government to work within U.S. industrial markets to encourage greater energy efficiency? EETD's researchers in the Washington, D.C., office think so, and have been developing, testing, and implementing ways to collaborate more effectively with industry in the area of electric motor-driven systems.
EETD researchers have been seeking methods to effect an institutional and behavioral change, rather than the technological change more typical of energy-efficiency market interventions. It is assumed that the structural shifts resulting from institutional or behavioral change will create an environment for further technological innovation. Since it engages many aspects of a market, this approach is described as collaborative intervention. Its success depends on identifying business opportunities to sustain the desired market change.
Collaborative intervention places government in the role of a broker or facilitator, responsible for setting out initial goals. Market participants are invited to be champions of these goals and collectively determine the best way to achieve these goals. In exchange, government—acting as the broker—can recognize them for the risks they assume. This approach seeks to exploit the different, and potentially complementary, roles and competencies of the public, private, and not-for-profit sectors. The four key elements of this strategy are:
- broadly defining the goals with no predetermined way of achieving them;
- creating an atmosphere of mutual respect;
- acknowledging and accepting that the participants will act in ways that are consistent with their economic and political self-interest; and
- establishing a high tolerance for the ambiguity and tension involved in forming coalitions across typical market structures.
The first application of this approach is the Compressed Air Challenge (CAC), which seeks to transform the customer and supplier relationships for industrial compressed air systems. The CAC is an outgrowth of work on Industry Partnerships for the U.S. Department of Energy's Motor Challenge Program. This industry is suited for a collaborative intervention because of characteristics including market structures, market size, pressure to change, system improvement opportunities, and barriers to achieving those opportunities.
Fourteen project sponsors each contributed $30,000 per year for two years to provide development funds for the project. The sponsors make up an Advisory Board. Another body, the Project Development Committee, represents a cross-section of stakeholders, whether or not they were sponsors. The group decided that its primary mission was education and awareness to encourage a shift from a components to a system services approach. The focus is on encouraging this shift in the relationship between users of compressed air systems and the businesses that serve them.
Accomplishments to date include:
- in cooperation with the U.S. Department of Energy, prepared, published, and sold more than 1,200 copies of Improving Compressed Air System Performance: A Sourcebook for Industry;
- developed and tested a one-day training program for plant engineers, Fundamentals of Compressed Air Systems;
- selected and trained 24 instructors;
- conducted 35 Fundamentals training sessions as of June 1999;
- placed full-page ads in Plant Engineering and Plant Services magazines and sent a national mailing to 5,000 plant engineers;
- created a web site; and
- began work on a two-day advanced training session.
While the impact of this effort is too new to measure, evidence of change is accumulating. For instance, at one recent meeting of a distributors' association, one seasoned distributor described how the change to a system services approach had built a lasting customer relationship:
"A new customer called me asking for a third bid on a 200 hp air compressor. In the past, I would have sharpened my pencil and submitted the lowest bid possible to try to get a new customer. This time, I asked two questions: 'Are you sure you need one? Do you mind if I come out and take a look at your system to see if you do?' The result was that I didn't sell him a 200 hp compressor; I sold him a smaller one, controls, storage, and other services. I got his system running better than it ever had before. Now that customer thinks I'm a hero."
The collaborative approach is also being applied to the pulp and paper industry, industrial pumping systems, and international work on behalf of the U.S. Department of Energy's Motor Challenge program.
For more information, contact:
- Aimee McKane
- (202) 484-0880; fax (202) 484-0888
This work is sponsored by the Office of Industrial Technologies.