Mechanical Insulation Maintenance = Return on Investment = Job Creation = Energy Efficiency = Economic Recovery

Ronald L. King

April 1, 2013

For years, industry has viewed many maintenance activities as a necessary expense or barrier to obtaining profit objectives. This thought process is especially prevalent in a tough economic environment, which has certainly been the case in the United States since the recession began and even during recovery. Management has developed and applied justification methodologies to delay, or even abort, maintenance activities on facilities and processes. It appears that businesses require confidence in a sustained economic recovery before they commit to investing in endeavors such as maintenance of mechanical insulation. Maybe businesses, and/or governing bodies, are looking at mechanical insulation maintenance incorrectly.

Mechanical insulation maintenance is one of the few maintenance activities offering a definitive and attractive return on investment (ROI) that, in terms of short- and long-term energy cost reduction, increases profitability and creates direct, indirect, and induced jobs-the core component to sustained economy recovery. This article explores how increased focus on mechanical insulation maintenance will increase a company’s profitability, create jobs, help our country obtain its energy independence goals, and help stimulate our nation’s economy.

Mechanical insulation is most notably recognized for its inherent energy efficiency attributes, but energy efficiency measures are not always looked upon in a favorable light in troubled economic times. In an October 2012 white paper entitled “Energy Efficiency Job Creation: Real World Experiences,”1 Casey J. Bell, with the American Council for an Energy-Efficient Economy (ACEEE), observes, “The notion of energy efficiency as a driver for widespread,  sustained employment may not be immediately intuitive. Increasing energy efficiency means higher levels of productivity and output achieved through lower levels of energy use. At first glance, it may seem like producing less energy to accomplish the same amount of work would have a negative impact on employment. This view, however, falls short of recognizing the complete economic impact of redistributing saved resources.”

Bell notes that many energy efficiency initiatives take substantial human resources to plan, manage, and implement. Mechanical insulation maintenance, however, does not—nor does it take a significant amount of capital. It can be treated as an expense—an advantage from a tax perspective if potentially a deterrent to short-term profitability—but it provides ROI in many cases in fewer than 6 months. The exact ROI will depend on the application, but seldom is the yield lower than a 25 percent internal rate of return; and on many industrial or manufacturing applications, 200 to 400 percent is not uncommon.

The bottom line is that, as Bell observes, “a company that spends less money on its energy bills likely has more cash on hand to expand and hire.” In turn, that employment can translate into additional job growth in the local economy, which then impacts the regional and national economy.

The United States Bureau of Labor Statistics includes in its definition of “green jobs” those “in which workers’ duties involve making their establishment’s production processes more environmentally friendly or use fewer natural resources.”2 Insulation workers without a doubt perform green jobs. Mechanical insulation maintenance is an excellent example of green job opportunities that can be implemented within weeks or months, versus years. It can put tens of thousands of people to work immediately and retain existing jobs while contributing to the competitiveness of U.S. manufacturing, reducing our country’s dependence on foreign energy sources, improving our environment, and increasing profitability of private and public businesses and facilities.

Equally important, the majority of insulation contractors who install and maintain mechanical insulation systems represent independent small businesses in every state. Mechanical insulation is a proven technology. It does not require research and development, engineering, or design processes. Materials and skilled craft personnel are available now and ready to be deployed, and 95 percent of the materials are made in the United States.

The total number of jobs created by implementing a comprehensive mechanical insulation maintenance program extends well beyond the direct and indirect jobs that are created. The employed workers spend their earnings on a variety of products and services, stimulating growth in other sectors, providing those businesses additional dollars to spend on capital, expansion, or other projects as a result of reduced energy cost. Thus, the cycle of job creation is ongoing.

Using job multipliers derived from MIG’s IMPLAN model3, in the ACEEE white paper, Bell indicated that $1 million spent on energy efficiency in the construction sector supports
approximately 20 jobs. That number is potentially low for mechanical insulation maintenance opportunities because of the magnitude of the ROI. The National Insulation Association (NIA) estimates that implementing a comprehensive mechanical insulation maintenance program in the commercial and industrial market segments and going beyond the minimum standards in new construction, would lead to the following, on an annual basis:

  • Energy savings of 1.22 quads of primary energy, or $4.8 billion
  • ROI ranging from 25 to 100 percent
  • CO2 reductions of 105 million metric tons (MMTCO2)

What do those numbers equate to on a national basis?

Energy savings of 1.22 quads per year equates to:

  • 115 billion kWh of electricity—enough to power 10.8 million households (9.4 percent of  U.S. households) for a year, equivalent to annual output from 26,300 wind turbines
  • 207 million barrels of oil—enough to fill about 103 supertankers
  • 49 million tons of coal—enough tofill 490,000 railcars
  • 1,220,000,000,000,000 Btus (1.22 quadrillion Btus) of primary energy—about 1.2 percent of total U.S. annual consumption, or 4.5 days of energy consumption for the entire United States

105 MMTCO2 of CO2 reduction per year equates to:

  • Adding 4.6 billion mature trees (10.6 million acres of new forest, an area the size of Maryland and Massachusetts combined)
  • Removing 19.2 million cars from the roads, about 7.6 percent of the cars registered in the United States
  • Removing the emissions equivalent of 25 coal-fired power plants, or 3.7 percent of U.S. installed, coal-fired capacity
  • Installing 1.8 billion compact florescent light bulbs, equivalent to 6 light bulbs for every man, woman, and child in the United States

Examining the mechanical insulation maintenance opportunity, and applying the October 2012 ACEEE energy efficiency job creation methodology, approximately 153,000 total jobs would be created—more than double the actual direct and indirect jobs. Achieving these numbers cannot be accomplished overnight, but even with a relatively slow implementation rate, imagine what the numbers would be on a compounded basis over 10 or 20 years.

Some operational and maintenance managers have said that maintaining mechanical insulation is a never-ending process. They are probably correct, because people and/or Mother Nature are the primary causes of damage. Educating personnel as to the real cost of damaging a mechanical insulation system would yield long-term dividends. Most people truly do not understand or appreciate the effects of one small hole in a mechanical insulation system. They walk on the system; lay equipment and tools on it; run into the system with vehicles; hit it for some unknown reason; remove it for substrate inspection or maintenance of adjoining equipment and do not replace it, exposing the remaining insulation, etc. The list of issues is seemingly endless.

Mother Nature is another story. She can do extensive damage in a very short period time. Again, educating personnel as to the value of proper and timely repair of that damage will yield a substantial return.

To management, we can only encourage recognizing the ROI aspect with mechanical insulation maintenance—stop only looking at it as an impediment to the bottom line, and do not accept excuses to delay corrective actions. It is so easy to take insulation systems for granted and talk yourself into believing that delaying action for a few weeks is no big deal. Weeks turn into months, and eventually years, and then you could be facing major problems beyond that of replacing the insulation system. An insulation system failure is normally blamed for corrosion, operational cost increases, underperforming equipment, capital investment required, etc., when in most cases it comes back to taking the insulation systems for granted and delayed corrective action, not the insulation system itself.

While this may sound like common sense, you may or may not be surprised about the lack of respect mechanical insulation systems are given throughout the design, operational, and maintenance processes. Designing, installing, and maintaining a successful mechanical insulation system for below- or above-ambient applications, regardless of geographical location, requires a conscious and continual effort.

Policies, business decisions, and regulatory requirements typically revolve around numbers, so look at the numbers: Increased focus on mechanical insulation maintenance will increase a company’s profitability, create jobs, help our country obtain its energy independence goals, and help stimulate our nation’s economy. Whether you examine the numbers holistically or on a prescriptive basis, the equation does not change: Mechanical Insulation Maintenance = ROI = Job Creation = Energy Efficiency = Economic Recovery.

Sources

  1. www.aceee.org/files/pdf/white-paper/energy-efficiency-job-creation.pdf
  2. www.bls.gov/green/green_definition.htm
  3. “IMPLAN US Model 2009 All Sectors.” Hudson, WI: MIG, Inc.