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3. Government energy conservation policies

3.1 Introduction
3.2 Common policy aims
3.3 A selection of adopted national energy policies
3.4 Energy policies of selected developed countries
3.5 Suggested recommendations for Government action

3.1 Introduction

It is generally accepted that a country's energy supplies are considered of utmost importance at the level of national energy planning. As such, policies are established in order to afford Government a measure of control on overall consumption, without dire consequences to either its industry or commerce.

Countries which had turned to oil in preference to other fuel forms, due to its competitive prices and convenience of use, were suddenly faced with high inflation rates and large deficits in their balance of payments as a direct result of the energy crisis in 1973. To disengage themselves from such imbalances and their economic vulnerability to fluctuations in the oil supply market, governments made strident efforts to establish, what was hoped would be, effective energy policies without compromising existing strategy towards growth in industry and commerce.

Indeed the legacy of the "oil embargo" has left the major industries of the developed countries with a greater respect as to the real importance of energy in their operations. The forest products industry for their part, previously complacent to the role of energy in their overall operation, now regard it as an area where potential savings may be made, thereby affording significant reductions to production costs. Yet, in spite of the fact that the present day oil glut has allowed a relaxation in most energy conservation investment projects, both government, industry and commerce, on a worldwide basis, are seen to be keeping a wary eye on developments in the oil market.

An upward trend in energy prices is inevitable, though to what extent is difficult to predict, nor can events such as civil disturbances, local wars or failure in diplomatic relations be foreseen so as to avoid the sharp increases in oil prices, as took place during the years 1973/74, and to allow governments the lead time necessary to establish buffer stocks and implement effective energy conservation measures.

3.2 Common policy aims

As a consequence of the dramatic price rises in oil on the international markets in 1973/74 and 1979/80, an overall awareness and concern was felt by both governments and industry alike as to their security of supplies, vulnerability to further price rises and the finite nature of the world's fossil fuel reserves.

Energy situations, strategies, degree of exposure to such a recurrence, and the inevitable rise in energy cost were reviewed by the governments of every oil importing country, resulting in national policies being adopted. Although such policies were shaped according to whether the governments were energy producers, such as USA, USSR and UK, or net importers, the overall aims and objectives generally undertook a common theme (100), i.e.:

- the substitution of oil-based energy by other energy types;

- the substitution of imported energy by domestic energy;

- the strive towards less dependence on a single type of fuel;

- the development of new and renewable forms of energy (biomass);

- the encouragement in the use of waste heat and industrial waste as a secondary energy form;

- the adoption of energy conservation on a national scale.

3.3 A selection of adopted national energy policies

In order to encourage and bring about energy savings in the forest products industry, national energy policies have been established in the developed countries which take the following form (100):

- research, development and demonstration is being financed by several governments in the domain of energy conservation and alternative fuels and energy forms;

- education and training in energy saving techniques is being actively encouraged and supported by most governments so as to bring about a more widespread awareness as to the importance and manner in which energy conservation can be introduced into mill operations;

- investment grants to encourage the installation of energy-saving equipment, and combustion plant based on non-oil-based fuels, particularly mill residues. Examples of grants made available to industry, linked to the cost of the investment, are as follows: Sweden, 35 percent; Canada, 10-20 percent; France, 15 percent; USA, 10 percent (100).

- loans on favourable terms are made available in France and Sweden to those industries wishing to invest in conservation plant and the like;

- central directives and allocation of resources are a means of control practiced by centrally planned economies;

- energy price structures or pricing policies are also regarded by some governments as an effective means to bring about energy conservation and fuel substitution.

Although the implementation of a pricing policy may restrain energy consumption, it could well introduce the risk of inflation and disruption to income distribution. Industry views the regulation of the energy supply, through pricing, as an external factor beyond their control which necessitates that measures be taken internally in order to pay the price and bring about a reduction in consumption without jeopardizing either their output or competitiveness (101), a fact which may be illustrated by the dramatic cut-backs in energy consumption resulting from the 1973/74 oil crisis.

At mill level, management are encouraged to carry out their energy conservation strategies in three different, yet as interrelated phases, namely:

(a) as a low level of investment in which energy conservation measures are adopted so as to make more efficient use of the available energy sources and in particular to adopt good housekeeping practices;

(b) as a medium level of investment which involves the substitution of old and obsolete equipment where applicable;

(c) as a high level of investment which entails major technological modifications and additions to the manufacturing process in order to achieve an energy efficient operation.

Such investment strategies shall be covered in more detail in Chapter 4.

3.4 Energy policies of selected developed countries

3.4.1 United Kingdom
3.4.2 Canada
3.4.3 Sweden
3.4.4 Finland
3.4.5 United States
3.4.6 France
3.4.7 Germany
3.4.8 Greece

This section provides a basic background as to how some energy conservation policies and government bodies were established in selected developed countries in order to handle their specific energy problems. Comment is restricted, however, to those adopted policies which are considered applicable to the forest industries.

3.4.1 United Kingdom

Apart from encouraging industry to undertake co-ordinated efforts to reduce its energy consumption, the British Government is becoming increasingly involved in energy technology and conservation measures. Financial support is being offered to industry, equipment manufacturers and research and development institutions so as to promote energy related research projects. Additionally, financial incentives are also being offered to induce manufacturers into implementing energy saving methods into their operations and to install such a plant that would generate heat more efficiently and recover waste heat wherever possible.

In recent years the Government set up an Energy Efficiency Office, embracing all government departments, with the object of monitoring, co-ordinating and developing energy conservation policies. By way of publicity, information and advice, the Office aims to create an awareness as to the benefits of energy efficiency and encourages energy conservation in all user sectors through its efforts to administer such schemes as: (21)

(a) getting top management to actively support and become involved in energy efficiency, as well as appointing energy managers;

(b) developing and running educational courses as workshops or day courses in conjunction with educational establishments and professional and trade associations. The production of literature and short films, available on free loan, covering the various aspects of energy conservation;

(c) the organization of an annual national energy management conference and exhibition aimed at both the private and public sectors of industry and commerce,

(d) the offer of advice on most energy efficiency aspects by specialist staff located in regional offices. The staff also maintain close links with the industries' appointed energy managers and encourage the formation of regional groups for the interchange of ideas and experiences in energy conservation efforts;

(e) the collection of data from selected representative plants is being undertaken to gain an insight into the overall operating efficiencies and the potential areas for energy savings. Hence, recommendations may be made as to those modifications to both plant and operating methods which should bring about a greater degree of energy efficiency in the forest products industry as a whole;

(f) energy monitoring and target setting by trade and research associations is being assisted in selected industrial sectors and the resultant pilot studies and recommendations are freely available to interested parties. Additionally, energy audit reports, resulting from detailed study of specific lead companies of a particular product line, are published as information guides;

(g) grants of 50 percent of consultants' fees, up to a maximum of £250, are available for short surveys and up to a maximum of £10 000 for extended surveys and combined heat and power feasibility studies. The aim of such studies being:

- short survey: to identify areas where energy savings may be made by simple modifications or operational changes;

- extended survey: to examine in detail the site's energy consumption and to appraise the management techniques adopted, operating procedures and process equipment with the view to identifying potential energy saving opportunities;

- combined heat and power feasibility studies: to undertake an energy audit, including existing generating facilities and to examine the choice of fuels and the overall operating efficiency of the plant. To put forward recommendations as to modifications, new heat raising plant, recovery systems or alternative power systems as considered economically feasible, together with capital and operating cost estimates.

Grants are also available to those industries wishing to convert existing oil or gas fired equipment to coal. Those industries whose energy bill exceeds £100 000 per year may also receive £8 000 towards consulting fees and 50 percent of fees above that level, up to a maximum of £10 000, for the design and tendering of heat recovery projects.

Small businesses are eligible for loan guarantees, from the Department of Trade and Industry, of up to £75 000, to cover 80 percent of each qualifying loan from the banks.

(h) 100 percent first-year tax allowance on capital expenditure may be applied for by firms installing energy efficient machinery or plant, or who are undertaking the insulation of existing buildings;

(i) equipment manufacturers and suppliers of service are given incentives to undertake research and development in new and improved energy saving technologies which may prove cost-effective;

(j) financial assistance, the appointment of a monitoring organization and the dissemination of results are on offer to those organizations able to demonstrate new or improved technologies which will bring about efficiency;

(k) free publications, aimed at management and plant operators alike, are made available to provide the latest information on energy saving technologies and materials. Advertising and publicity campaigns are also aimed at all levels of energy consumers, and demonstration facilities are sponsored for potential investors in energy efficient plant or production methods.

To date, a six percent (21) reduction in overall energy consumption has been recorded between 1973 and 1982 as a result of such measures and pricing. It is estimated that there is potential for a further 20 percent reduction by the end of the century, through increased efficiency in the use of energy.

3.4.2 Canada

In spite of vast natural energy resources Canada depends very much on its imported oil, for which reason the 1973 oil crisis prompted the Government into establishing a Renewable Energy branch within the Department of Energy, Mines and Resources, in order to assess the renewable energy potential of the forest biomass in Canada. The industrial sector was also examined and it was found that the forest products industry, being the largest industrial consumer of petroleum products in the country, had the potential in certain of its activities to be able to substitute oil from its own residues.

Based on recommendations, federal support was made available for research, development and demonstration projects so as to encourage industry to reduce its dependence on oil and look towards energy conservation and its own resources in the form of residues.

In order to establish priorities in forest usage, the scheme was divided into three time frames: short-term to 1983, medium-term to 1990 and long-term to 2025, allowing for research and development into processes which would ultimately lead to the establishment of a large-scale energy or synthetic chemical industry.

Surveys were commissioned to gather statistical data on the forest industry and to ascertain the production levels of residues and to what extent they were being used to meet the mills' own energy requirements. In 1973 a survey of the wood products industry in British Columbia indicated that 50 percent of their energy requirements were obtained from hog fuel, whereas between 12-17 percent of energy for lumber drying was derived from mill waste (95).

In 1976 the Government introduced a tax incentive which allowed for a 50 percent (95) capital write-off on wood-waste energy conversion plant installed to replace traditional fuels; a scheme which did encourage several mills to participate.

A federal-provincial-industry committee was formed in 1977 to coordinate activities so as to increase the use of mill residues and to investigate the reasons for reluctance to convert to such systems by the industry itself. A review of currently available wood-waste energy conversion systems was commissioned by the committee to examine the state of the art and assess the potential afforded to the industry of such a system. However, although conversion systems were found to be adequately proven, the lack of response from the industry would appear to be based primarily on economic considerations of the wood waste as fuel, compared to natural gas.

Incentives towards modifying existing equipment or the establishment of new conversion plant, by way of contributions of 1020 percent (101) of direct capital costs, was offered to the industry through the Forest Industry Renewable Energy Programme (FIRE). In addition to the FIRE programme, a five-year budget, co-funded by the federal and provincial governments, was set up in 1978 for the years 1979-84, with the object of providing financial assistance for research, development and demonstration projects in forest biomass supply and conversion to fuels and chemical, through the Energy from the Forest Programme (ENFOR).

In 1980 the National Energy Programme was established by the Canadian Government for the purpose of reducing, still further, its dependence on oil to the point of becoming self-sufficient in oil by the year 1990. By so doing a renewed effort was made in offering financial and fiscal incentives; programmes involving the demonstration of new energy saving technologies and production methods were launched, together with a campaign in training and publicity so as to develop national awareness as to the needs and benefits of energy conservation.

3.4.3 Sweden

Not unlike the majority of Governments, the Swedish Government, jolted by the oil crisis in 1973, initiated several investigations and studies with the object of establishing a new basis for energy planning. An energy policy programme was introduced in 1975 which coincided with the formation of several government agencies, of which the National Industrial Board administered grants for energy conservation to the forest industry. Research and development into energy saving plant and processes were also given financial support through the National Board for Technical Development and the National Board for Energy Source Development.

The tasks of such Boards may be summarized as follows: (86)

- the analysis of industrial, energy and mineral policy;
- coordination, planning and administration of industrial support and development;
- the offer of education and technical services to small and medium-sized companies;
- the handling of questions concerning security, licensing and authorization in the energy field;
- the administration of grants for energy conservation measures in industry and commerce.

Like most other countries, the programme is aimed at conservation, research and development, security of power supplies, an active oil policy and the development of international cooperation. Pricing policies were put into effect, particularly by way of taxes and charges and an active programme of education in energy conservation through information centres and advisory services was established.

Oil substitution by coal, forest residues and peat is being encouraged by the Government, with the object of increasing their use to three times present consumption rates. Financial support is offered by the Government for large projects by way of loans, or grants in the case of highly technical risk ventures, particularly in prototype or demonstration plant.

Grants are only intended to assist in the conversion of existing buildings or processes where the investment would, to all intents and purposes, not be considered profitable by the company, as capital investment or energy efficient technology in new projects is expected to pay for itself by virtue of energy savings.

Grants of up to 35 percent (86) of approved costs are offered to all sectors of industry and commerce wishing to undertake energy saving measures within their existing process, and cover:

- heat recovery;
- conversion to less energy consuming process equipment;
- modifications to process chains;
- energy saving instrumentation and control equipment;
- conversions from fossil fuel burning equipment to solid fuels such as bark, wood waste, etc.

In all cases the provision of such-grants are based on the premise that the energy savings should provide a pay-off within a set period of time. Those projects that are deemed so highly profitable that they can be self-financing are not applicable.

Additionally, up to 50 percent (86) grant is available to companies who wish to manufacture and construct prototypes and demonstration plants which incorporate a new energy saving technique. These may be in the form of new production methods, processes or technologies which will improve the energy economy, produce or convert energy or the utilization of energy from waste. However, research and development must be fairly well advanced, with a demons/ratable potential market.

3.4.4 Finland

With a natural energy resource restricted to hydro-electric power, peat, wood and pulp mill waste liquor, Finnish Government support has been actively given to the forest industry and other heat consumers to use wood more efficiently as a fuel, and for the effective conversion of forest and forest product residues to energy.

During the period 1980-1982 (100), with financing by the Ministry of Trade and Industry and specialist assistance from the forest products industry, an energy research project was undertaken to study the overall energy consumption and potential opportunities for saving energy in the mechanical wood-based industry. All aspects of raw material transportation, production, energy generation and use were examined in detail and specific projects were carried out in areas of high energy usage, such as lumber and veneer drying. The study effectively highlighted the needs for development in dryer design, the effect of varying drying temperatures in relationship to energy consumption, product quality and degrade as well as the optimization of dryer operation.

As a result of the report, much was learnt about the energy aspects of the industry, which was not previously fully documented. The effect of conservation measures and the use of energy-efficient plant was better appreciated and areas where potential savings could be made, as well as the short-comings in standard equipment and process design, became plainly obvious. The report also allowed for comparisons of energy use to be made with similar forest product operations in other countries, added to which it has proved beneficial to mill managers and investors enabling them both to plan with a better understanding of the energy aspects of their industry.

3.4.5 United States

America's main aim, since the 1973 oil embargo, is for increased self-sufficiency in energy by way of adopting policies which discourage the consumption of scarce and imported fuels and encouraging the development of its own energy resources. This has been done through price controls and a nationwide drive towards energy conservation.

All industries consuming in excess of one million GJ/A (100) must report their energy consumption and conservation efforts to the Department of Energy, who assist the company in becoming aware of its usage and the means with which to bring about greater efficiency of use. Incentives in the form of ten percent investment tax credits are also provided for expenditures on new capital plant which are based on an alternative energy source to fossil fuels. In order to achieve a greater national energy independence, government agencies are directly involved in research and development, advisory services and education, which are funded and conducted through such bodies as the Forestry Service, Department of Energy and State Governments.

A survey undertaken in 1982 indicated that self-generated residues accounted for some 80 percent (100) of the sawmills' energy needs, of which bark made up 10-20 percent. In fact maximum use is now being made of sawmill waste, either as fuel, pulp chips or for panel production.

Recently federal legislation was approved to allow the production of electricity by sawmills and other small producers to be purchased by the electrical power utility companies, thereby encouraging yet greater efforts to utilize residues as an energy source.

3.4.6 France

French Government policy objectives are basically:

- the investigation into energy savings;
- diversification of energy sources;
- the realization of the national energy potential.

Loans in the order of 35-55 percent of the total investment are made available, at five percent interest per year over an eight year period, for energy saving projects, particularly those in which bark and wood waste are used to meet the plant's energy needs.

3.4.7 Germany

The Federal Government of Germany has based its Energy Policy Programme on market economy principles, whereby higher prices of energy bring about a desire for reduced consumption and the substitution of oil by other traditional and renewable resources.

Industry is also encouraged to actively undertake energy conservation measures so as to maintain their competitiveness in international markets. Financial incentives are on offer to allow for the introduction of energy saving plant and processes, as well as research and development into such fields. Small- and medium-sized companies are offered special advisory services as part of the energy conservation programme.

3.4.8 Greece

Greece's energy policies are strongly oriented towards conservation, and in 1980 an act was passed by the Government whereby all industries, whose consumption exceeded 50 mtoe (100), had to reduce their consumption to below five percent of that for the year 1978. Additionally, the industrial sector was to invest at least three percent of its total capital investment, within the following three year period, on plant which would bring about improvements in energy efficiency and reduce energy losses. All new installations had to be designed to international standards and incorporate accepted techniques, with the view to bringing about efficient use of energy during the plant's operation.

In 1982 (100) a grant, amounting to some 15 percent of total investment in new projects, was made available for the substitution of oil or electricity for gas or other alternative energy sources, as well as for the installation of heat recovery plant.

3.5 Suggested recommendations for Government action

3.5.1 Expected benefits

It is true to say that the majority of Governments have established energy policies tailored to their specific situations and future aims with respect to national energy consumption. However, listed below are some pertinent recommendations based on policies and initiatives which have been taken by various countries and found to have made an impact on the attitude of their industrial sector towards energy conservation and which equally apply to the forest industry.

(a) The establishment of an accurate national data base1/ and an effective means to collect and record information, would enable Government departments and the forest products industry to draw up effective policies, monitor results and effect adjustments when needed. Such information as product types, plant capacity and output, production methods, generation and use of residues, sources of energy, energy consumption and trends, conservation measures adopted, etc., are considered essential if an overall picture is to be gained of any nation's forest products industry.

1/ During the process of research and compilation of data for the purposes of this document it became evident that for most countries, and in particular developing countries, accurate and meaningful statistics pertaining to their forest products industry was scant, did not cover the industry as a whole and, in many cases, was found to be inaccurate and out-of-date

(b) Governments should enlist the support and actively participate in conservation programmes afforded by the relevant United Nations specialized agencies, international institutions, international development banks, non-government organizations and bilateral assistance programmes.

(c) International cooperation within the forest industries should be encouraged, with the transfer and adoption of technologies, as well as the exchange of information and persons directly related to the conservation effort.

(d) A programme of energy conservation measure should be established on a national scale and actively supported by all government departments. Policy-makers should be afforded a thorough understanding of the conservation measures available in order to promote a greater liaison between governmental, non-governmental agencies and those directly involved in their implementation.

(e) Government encouragement and financial support for worthwhile national studies, and research and development in energy related activities of the forest industry, combined with the dissemination of the data would lead to real energy savings.

(f) Current educational facilities should be extended and training schemes developed in order to improve the skills, knowledge and methods in the management and implementation of conservation measures.

(g) By way of publicity on a national scale, seminars, freely available literature and visits by energy specialists to educational centres and production plants, the need for energy savings may become more widely recognized and accepted, and the means available to bring about conservation measures understood.

(h) By engaging the support of manufacturers associations and the major producers of forest products, a pool of data and technical advisors could be formed. Financial support should be made available to those plants wishing to engage consultants on matters directly related to their energy conservation effort.

(i) To accelerate the introduction of energy saving methods and plant into the forest products industry, by way of plant modifications and capital investment, managers need to be offered financial incentives so as to improve the short-term economics and reduce the risks involved.

(j) In view of the potential of certain forest products plants to generate power in excess of their needs from their waste, serious consideration should be given to authorizing the sale of the surplus to the national grid.

3.5.1 Expected benefits

Notwithstanding the short-term hardship imposed on the forest industries by the introduction of certain energy policies, it must be appreciated that ill-equipped and poorly managed plants, operating on narrow profit margins, would eventually succumb as energy prices continue to rise. Yet in the long-term such policies would lead to benefits in the form of: (101)

- a greater awareness by management as to the role energy plays in the price of forest products and profitability;

- an alertness to future trends in energy prices and supply, and their overall effect on the industry's operation;

- the recognition as to the need for energy conservation measures and the willingness to bring about both immediate and long-term steps by planned investment and implementation;

- a new attitude by planners, designers, equipment manufacturers and investors alike as to the necessity of embodying energy saving features in new investment projects;

- a positive attitude towards the collection and re-use of residues as a fuel source;

- a re-appraisal of the pricing levels of various forest products in relationship to their energy input, market competition and competing materials.

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