Manufacturing Sector

Overview

1991-1994

Energy Information Administration/Manufacturing Consumption of Energy 1994 xiii
Why Do We Investigate Energy Use in the Manufacturing Sector?

What Data Do EIA Use To Investigate Energy Use in the

Manufacturing Sector?

In 1991, output in the manufacturing sector fell as the country went

into a recession. After 1991,

however, output increased as the

country slowly came out of the

recession. Between 1991 and 1994,

manufacturers, especially manufacturers of durable goods such as

steel and glass, experienced strong

growth. The industrial production

index for durable goods during the

period increased by 21 percent.

Real gross domestic product for

durable goods increased a corresponding 16 percent. The growth

of nondurables was not as strong--

the production index increased by

only 9 percent during this time

period.

As production grew, the prices

manufacturers had to pay for both

material inputs and wages experienced very little growth. One

measure of labor productivity, the

output per hour index, increased

during this time period by 11

percent.

It is in the context of this economic environment that the Energy Information Administration (EIA) investigates energy use in the

manufacturing sector for the years 1991 and 1994. Energy costs may be only a small percentage of the total cost of production

for manufacturers in general--so why bother investigating energy use by manufacturers? Energy use is important to

manufacturers. Energy costs are substantial for manufacturers such as the chemical, paper, and petroleum refining industry

groups. Additionally, in the low-inflation environment of the early 1990's, manufacturers, holding the line on prices for their

goods, looked at all of their inputs, including their energy inputs, for cost reductions. From a national view, manufacturing energy

use is important. Environmental and energy security concerns increase the importance of our investigation. A clearer

understanding of how energy is used can also help the Nation anticipate how future expansion of the manufacturing sector might

affect future energy needs.

Most of the data used in this investigation were collected as part of two mail establishment surveys, the 1991 and 1994

Manufacturing Energy Consumption Survey (MECS) conducted by EIA. The survey, the most comprehensive source of nationallevel data on energy-related information, was designed to contribute to the understanding of energy usage in the sector. The 1994

MECS is the focus of this report. Previous surveys were conducted in 1985 and 1988.

What Took Place in the Economic Environment Between 1991

and 1994 That Affected the Energy Manufacturers Used ?

Industrial Production, 1985, 1988, 1991, and 1994

119.8

113.1

125.7

90

100

110

120

130

1985 1988 1991 1994

Industrial Production Index (1987=100)

All Manufacturers

Durable Goods

Nondurable Goods

Source: U.S. Federal Reserve Board, Statistical Release G-17. Online.

(http://ww.bog.frb.us/release/G17). (November 27, 1996).

Industrial Production

Index

Manufacturing 15

Durables 21

Nondurables 9

Manufacturing 11

Durables 16

Nondurables 6

Intermediate Materials 4

Crude Materials 0

Manufacturing Indicators (Percent Change 1991 to 1994)

Real Gross Domestic

Product

Producer Price Index

Real Hourly Compensation

Index

Output per Hour Index

Manufacturing 2

Manufacturing 11

Sources: Federal Reserve Board Statistical Release G-17.

Online. (http://www.bog.frb.fed.us/release/G17). (November 27, 1996).

, , and

: U.S. Bureau of the Census.

(116th edition) (Washington, DC, 1996) Tables 685, 751, 218, and 665.

Industrial Production:

Real Gross

Domestic Product, Producer Price Real Hourly Compensation Output per

Hour Indices Statistical Abstract of the United States: 1996 ,

xiv Energy Information Administration/Manufacturing Consumption of Energy 1994

0

Survey Years
How Is the Manufacturing Sector Classified?

20 Major Groups (two-digit)

139 Industry Groups (three-digit)

459 Industries (four-digit)

The manufacturing sector encompasses a wide variety of production activity, and, as such, accounts for a major part of the

diversity in U.S. economic activity. The current definitive classification of the entire range of U.S. economic activity is the

1987 Standard Industrial Classification (SIC) System, which defines industries in accordance with the composition and

structure of the economy. In the manufacturing sector, each establishment (see glossary for definition) is placed in a

category associated with the types of goods it primarily produces.

Future MECS samples will conform to the recently developed North American Industrial Classification System (NAICS)

developed by the Office of Management and Budget (OMB), Executive Office of the President, which will replace the 1987

SIC. The NAICS is the first industry classification system developed in accordance with the principle of aggregation,

whereby producing units that use similar production processes are grouped together in the classification.

In accordance with OMB guidance, industry breakdowns of data will be tabulated according to the NAICS starting with the

1998 MECS. Along with the new industry breakdown, comparable estimates of energy measures will be prepared

according to the 1987 SIC, so that data users can understand the effects of the new system.

The broadest classification level contains 20 major groups

(SIC 20 through 39). The four largest energy consumers

are Paper and Allied Products (SIC 26), Chemicals and

Allied Products (SIC 28), Petroleum and Coal Products

(SIC 29), and Primary Metal Industries (SIC 33). The

MECS reports on all 20 two-digit SIC groups.

The 20 major groups are subdivided into 139

three-digit industry groups (SIC 201 through

SIC 399). At this level, the MECS reports

only on three three-digit industries:

Miscellaneous Plastic Products (SIC 308),

Blast Furnace and Basic Steel Products (SIC

331), and Computer and Office Equipment

(SIC 357).

The 139 industry groups are further subdivided

into 459 four-digit industry groups (SIC

2011 through SIC 3999). The 1994 MECS

reports only on 49 four-digit industries that are

the largest energy consuming industries--most

have historically consumed most of the energy

used in the manufacturing sector. The four

largest energy-users in this group are Paper

Mills (SIC 2621), Organic Chemicals not elsewhere classified (SIC 2869), Petroleum Refining (2911), and Blast Furnaces and Steel Mills

(SIC 3312).

Energy Information Administration/Manufacturing Consumption of Energy 1994 xv
Distillate Fuel Oil

Residual Fuel Oil

Liquefied Petroleum Gas

(LPG)

Other Energy Sources Used in the Manufacturing Sector

Manufacturing establishments also use large quantities of steam . Most of the steam used is

produced from the combustion of energy sources in onsite boilers. Because these energy sources

are already counted as boiler fuel, they are not counted again in the MECS. Electricity that is

generated onsite from combustible energy sources also is not counted for the same reason--to

avoid duplication. The quantity of steam and electricity that is counted is the quantity produced

offsite plus the quantity produced from renewable energy (hydropower, solar power, wind energy,

and geothermal energy) minus sales and transfers leaving the establishment.

Manufacturers use energy sources that are not commonly used by other sectors, such as wood

chips, bark, and wood waste materials produced during the preparation of wood pulping. The

pulping process itself produces an energy source known as pulping liquor, or black liquor, which

is also consumed as fuel. Other sources uncommon in the other sectors include blast furnace or

coke oven gas resulting from the production of coke from coal, as well as petroleum coke and still

gas produced at petroleum refineries. These are called byproducts because they result from

the feedstock use of energy or the processing of nonenergy materials.

In addition, certain manufacturers consume biomass (such as rice hulls), packing crates, and

other similar materials as energy sources.

Natural Gas Coke and Breeze

Coal

Electricity

Electricity is a form of

energy used by manufacturers

to produce heat and power.

It is generated by friction,

induction, or chemical change.

These energy sources are

that manufacturers burn to produce

heat and power.

Additionally, manufacturers use these

energy sources as feedstock or

nonenergy inputs into the manufacturing

process-- use.

fuels

nonfuel

What Common Energy Sources Do Manufacturers Use?

xvi Energy Information Administration/Manufacturing Consumption of Energy 1994
Manufacturing Sector:

How Does EIA Measure Energy in the Manufacturing Sector?

Energy Produced

Offsite Onsite Onsite (from nonenergy inputs) (from energy products)

First Use of

Energy for All

Purposes

(Formerly

Primary

Consumption )

and Consumed for

*

The First Use of Energy for All Purposes includes all energy used in the manufacturing sector for two purposes--for heat,

power, and electricity generation and as a nonenergy use (feedstock). Excluded are: (1) electricity generated by the

establishment using a combustible fuel; (2) byproduct fuels produced onsite from energy inputs, such as coke from

metallurgical coal; and (3) refinery crude oil inputs that end up as energy products sold to and used by other sectors. Refined

products and byproducts used by the refinery are counted, as well as the energy content of products created for their physical

or chemical properties rather than for their energy content such as waxes, asphalt, and lubricants. Steam is included under

Other.

Energy Produced

Offsite Onsite Onsite (from nonenergy inputs) (from energy products)

and Consumed for Total Inputs

of Energy for

Heat, Power,

and Electricity *

Generation

Total Inputs of Energy for Heat, Power, and Electricity Generation includes energy used for heat, power, and electricity

generation and byproduct fuels. Feedstock is excluded from this measure. Steam is included under Other.

Energy Produced

Offsite Onsite Onsite

(from nonenergy inputs) (from energy products)

Offsite-Produced

Energy for Heat,

Power, and

Electricity

Generation

and Consumed for

Offsite-Produced Energy for Heat, Power, and Electricity Generation includes all energy used for heat, power, and electricity

generation purchased by the establishment or transferred into the establishment. Also included is steam that has been

purchased or transferred from offsite. Feedstock and onsite-produced energy are excluded from this measure. Purchased

steam is included under Other.

Legend

* Steam and electricity generated from renewables minus all sales and

transfers offsite of steam and electricity, regardless of origin.

Fuel Nonfuel Electricity Steam

Energy Information Administration/Man
EIA Measures of Energy

How Much Energy Did the Sector Consume in 1991 and 1994?

Improvements in the economic conditions in the manufacturing sector between 1991 and 1994 are reflected in

the 4-percent growth of the most comprehensive measure of energy use, First Use of Energy for All Purposes.

The largest percent increases belong to net electricity, natural gas, and coke and breeze, 12 percent, 12 percent,

and 47 percent, respectively.

First Use of Energy for All Purposes

Total Energy

Net electricity

natural gas

coke and breeze

, defined as electricity purchased, transferred in, or

generated from noncombustible

energy sources minus sales and

transfers offsite, has two large

users. In 1994, out of all of the net

electricity in the manufacturing

sector, the chemical and the

primary metal industries' shares

were 20 percent and 19 percent,

respectively. Between 1991 and

1994, energy use by the primary

metal industries was constant,

whereas energy use by the

chemical industry grew by 18

percent.

In 1994, accounted

for 32 percent of First Use of

Energy for All Purposes. Thirtyeight percent of the natural gas

was used by the chemical industry.

Between 1991 and 1994, the

industry increased its natural gas

use by 15 percent.

Almost all is

used in the primary metal industries. From 1991 to 1994, that

industry's coke and breeze use

increased by 54 percent, led

predominately by use in blast

furnaces and steel mills. Blast

furnaces and steel mills also

increased their use of coal by 8.8

percent, indicating that the growth

in coke and breeze may not have

been a substitution effect, but

rather the effect of an increase in

output.

Net Electricity

Residual Fuel Oil

Energy Source

Distillate Fuel Oil

Natural Gas 1991

1994

LPG

Coal

Coke and Breeze

Other

0 5 10 15 20 25

Quadrillion Btu

Total Inputs of Energy for Heat, Power, and

Electricity Generation

Total Energy

Net Electricity

Energy Source

Residual Fuel Oil

Distillate Fuel Oil 1991

Natural Gas 1994

LPG

Coal

Coke and Breeze

Other

0 5 10 15 20 25

Quadrillion Btu

Offsite-Produced Energy for Heat, Power, and

Electricity Generation

Total Energy

Electricity

Residual Fuel Oil

Energy Source

1991 Distillate Fuel Oil

Natural Gas 1994

LPG

Coal

Coke and Breeze

Other

0 5 10 15 20 25

Quadrillion Btu

ufacturing Consumption of Energy 1994
In 1994, 27.3 quadrillion Btu (quads) of Total Primary Energy can be attributed to the manufacturing sector . This

amount included 5.5 quads of energy lost in generating and transmitting electricity and 21.7 quads of First Use of

Energy for All Purposes .

The 21.7 quads of First Use of Energy for All Purposes are the sum of:

The 2.7 quads of electricity delivered to the manufacturing site

11.6 quads of natural gas, coal, fuel oil, and other major energy sources ; with 8.3 quads of this amount

being used inside the establishment (the fence) to produce heat and power and 3.2 quads being used for

nonfuel uses

1.4 quads of offsite waste, byproducts, and other materials and ; with .4 quads of this amount being

used for nonfuel uses

3.1 quads of crude oil input to nonenergy products (such as asphalt and road oil) at refineries

3.6 quads of onsite-produced energy for heat, power, and electricity (waste and byproducts from onsite

processing; energy from mines and wells onsite; and electricity and steam generated onsite from wind, solar,

hydropower, and geothermal sources) minus 0.1 quads of sales and transfers of electricity and steam.

The feedstock components of the First Use of Energy for All Purposes measure included 3.2 quads of natural gas,

coal, fuel oil, and other major energy sources ; 0.4 quads of offsite waste, byproducts, and other materials ;

and 3.1 quads of crude oil input to nonenergy products Of the 6.7 quads of site energy used for feedstock 5.1

quads were used in finished products, such as fertilizer, ammonia, and wax , and 1.6 quads were reclaimed for use

in producing heat and power, and generating electricity onsite .

(1)

(2a)

(3)

(3)

(2b)

(4)

(4a)

(4b)

(5a 5b)

(5b)

(6)

(7),

(8)

(4b) (5b)

(6). (8),

(9)

(10)

!

!

!

!

!

Manufacturing Ener

Electricity to site: 2,742

Total First Us

of Energy

Onsite for

All Purposes

21,663

Total

Primary

Energy

Attributed to

Manufacturing:

27,279

Embodied energy

for electricity

generation:

8,262

Oil, natural

gas, coal, and

other major

energy sources

from offsite:

11,558

Shipments: 587

Offsite waste, byproducts,

and other materials

for nonfuel use: 395

Energy to

produce heat

and power: 8,346

For nonfuel use: 3,212

Offsite-Produced Energy for

Heat, Power, and Electricity

Generation: 12,066

Onsite-Produced Energy for Heat, Power,

and Electricity Generation: 3,563

Crude oil input to nonenergy

products at refineries: 3,110

Offsite waste, byproducts,

and other materials to produce

heat and power: 978 Losses:

5,520

Sales and transfers

of electricity and

steam to offsite

locations: 96

Manufacturing Ener

(Estimates in Tr

1

---------------------

---------------------

Energy Information Administration/Manufa

Web Site for the Energy Information Administration:

http://www.eia.doe.gov
The 16.5 quads of Total Inputs of Energy for Heat, Power, and Electricity Generation included:

1.0 quads from offsite waste, byproducts, and other materials

2.7 quads of electricity delivered to the manufacturing site

8.3 quads of oil, natural gas, coal, and other major energy sources produced offsite and used to produce heat

and power

3.6 quads of onsite-produced energy for heat, power, and electricity (waste and byproducts from onsite

processing energy from mines and wells onsite; and electricity and steam generated onsite from wind power,

solar power, hydropower, and geothermal energy)

1.0 quads of energy reclaimed from the byproducts and waste of raw materials produced onsite and used for

heat, power, and electricity generation .

The 16.5 quads of Total Inputs of Energy for Heat, Power, and Electricity Generation also excluded the 0.1 quad of

electricity and steam that was transferred to offsite locations .

The 12.1 quads of Offsite-Produced Energy for Heat, Power, and Electricity Generation included:

2.7 quads of electricity

1.0 quads of offsite waste, byproducts, and other materials

8.3 quads of oil, natural gas, coal, and other major energy sources from offsite .

(12)

(5a)

(2b)

(4a)

(7)

(10)

(11)

(13)

(2b)

(5a)

(4a)

!

!

!

!

!

!

!

!

Components may not sum to totals due to independent rounding.

Source: Energy Information Administration, 1994 Manufacturing Energy Consumption Survey.

rgy Throughput, 1994

Total Inputs

of Energy for

Heat, Power, and

Electricity

Generation:

16,515

e

:

Reclaimed energy:

982

Finished

products:

5,148

Site energy

for raw

material

use: 6,717

Examples

WAX

Bounds of Manufacturing Establishments ( the fence )

rgy Throughput, 1994

rillion Btu)

1

acturing Consumption of Energy 1994
How Did Manufacturers' Energy Prices, Quantities Purchased, and

Expenditures in 1994 Compare With Those in 1991? (Annualized Rate Change

Legend

Distillate

Fuel Oil Liquefied Electricity Natural Gas Petroleum Gas

Coke and

Breeze

Residual

Fuel Oil Coal

1991

Thousand

Cubic Feet Barrel Shor Barrel t Ton

1994

$.050 $2.56 $35.36 $17.24 $121.78 $18.74

$.046 $2.65 $29.92 $16.20 $106.89 $17.31

Prices Were Lower for Most of the Purchased Energy Sources

(1994 dollars per unit)

Kilowatthour

2.7% 1.2% 5.1% 2.0% 4.1% 2.5%

Barrel Short Ton

$45.65

$41.85

2.8%

3.2%

1991

1994

697,553 61,475

788,070 67,343

Manufacturers Bought More Energy for Most of the Purchased Energy Sources

(physical units)

Million

Kilowatthours

4.3%

5,713

6,490

Billion Cubic

Feet

4.5%

9,340

15,259

Thousand

Short Tons

21.1%

24,442

25,939

Thousand

Barrels

2.0%

336,791

328,117

Thousand

Barrels

Thousand

Barrels

78,616

86,920

Thousand

Short Tons

3.5%

Manufacturers Spent More Dollars for Some of the Purchased Energy Sources

(million 1994 dollars)

1.3% 5.9% 3.4% 1.0% 3.3%

1991

1994

$34,638 $14,630 $864 $3,589 $1,137 $6,311

$35,970 $17,216 $776 $3,638 $1,631 $5,681

14.5%

$1,060

$1,091

.05%

Energy Information Administration/Manufacturing Consumption of Energy 1994 xxi

0.9%

Notes: All percents were calculated at an annualized rate change. Nominal dollars were converted to real 1994 dollars using the

chain-type indexes for Gross Domestic Product (1992=1.0) as published by the U.S. Department of Commerce, Bureau of Economic

Analysis. See the glossary for a detailed definition of real dollars.

Source: Energy Information Administration, 1991 and 1994 Manufacturing Energy Consumption Surveys.
How Do Manufacturers Use Energy?

Electricity Residual Fuel Oil

Distillate Fuel Oil

Heating

Manufacturing End Use

Boiler Fuel

Conventional Electricity

Generation

Other Nonprocess Use

Coal

Major End Uses of Some Common Energy Sources

(Percent of the Energy Source Used for the Particular End Use)

54% 71%

28% 34% 23%

Natural Gas

39% 44%

73%

Note: Calculations are based on the energy measure Total Inputs of Energy for Heat, Power, and Electricity Generation.

xxii Energy Information Administration/Manufacturing Consumption of Energy 1994

Boiler Fuel Direct Process Direct Nonprocess Feedstock

Cooling

& Refrigeration

Machine Drives

Electrochemical

Processes

Other Process Use

Heating, Ventilation,

and Air Conditioning

Facility Lighting

Facility Support

Onsite Transportation

Machine Drives Boiler Fuel

Boiler Fuel Heating Onsite Transportation

Boiler Fuel Heating

Boiler Fuel
What Important Changes Took Place From 1991 to 1994?

Energy Information Administration/Manufacturing Consumption of Energy 1994 xxiii

Renewables Used To

Generate Electricity by

Means Other Than Cogeneration

34%

Electricity Use

Increased

12% All Manufacturing

13%

Petroleum Refining

Industry

17%

Chemical Industry

Residual Fuel Oil

20%

Natural Gas

18%

Trends in Feedstock

Energy Use

Net Electricity Increased

Between 1991 and 1994, the manufacturing sector increased

use of net electricity by 12 percent. Most of this increase was

in two industries--the chemical and petroleum refining industries.

Leading the 17-percent growth in the chemical industry was an

increase in the use of machine drives. Net electricity for machine

drives increased by 9 percent. The petroleum refining industry

displayed similar results. Leading the 13-percent growth in net

electricity was a 9-percent growth in the use of electricity for its

machine drives.

Use of the Byproduct

Petroleum Coke Grew

40% All Manufacturing

Trends in Onsite-Electricity

Generation

Cogeneration

(Energy sources used include

fossil fuels, wood, and

other biomass.)

12%

Onsite-Electricity Generation Increased, While the

Use of Renewables to Generate Electricity Declined

In both 1991 and 1994, 84 percent of manufacturing electricity

demand was produced outside of the establishments, while the

other 16 percent was generated onsite. What did change was the

mix in the sources and the amount of onsite-generated electricity.

The manufacturing sector experienced a sizable decline (34

percent) in the amount of electricity generated onsite using

renewable energy (excluding wood and other biomass which is represented in cogeneration). During the same time, total onsite-generated electricity increased by 10 percent. The increase was driven

by a 12-percent rise in the amount of cogenerated electricity--the

dominant subcategory of onsite-generated electricity, although the

share of cogenerated electricity in electricity demand remained at

14 percent.

The paper industry has historically been dominant in using renewable energy (mainly hydropower) to generate electricity onsite. In

fact, the paper industry's share of manufacturing self-generation from

renewables rose from 64 percent in 1991 to 85 percent in 1994,

even though the amount of renewables-based generation in the

paper industry dropped by 13 percent during that period. Obviously, the estimated amount of renewables-based electricity decreased

drastically in other industries. However, data suppression for confidentiality protection prevents analysis of those other industries.

The MECS does not provide data on the reasons for the decline in

hydropower. However, several legal and market developments

during the 1991 to 1994 period may have caused some existing operations to be shut down and prevented new investments in hydropower. During that time period, there was an unusual number of

hydropower projects up for license renewal by the Federal Energy

Regulatory Commission; hydropower generators were aging, and

low-priced imported electricity became readily available along the

Great Lakes. In May 1994, the U.S. Supreme Court held that

States may impose conditions on hydroelectric operations as part

of their authority under the Clean Water Act of 1977 and new water

quality initiatives were anticipated such as the Great Lakes Water

Quality Initiative (officially released in March 1995--6 years after

the start of negotiations). Additionally, earlier this decade, wood

supply was severely constricted in the Northwest. As a result, some

paper industry establishments moved to the South where there are

very limited amounts of hydropower.
What Are Some of the Most Important Changes That Took

Place in Energy Management Activities From 1991 to 1994?

Computer Control of the Building Environment

(e.g., lights, air conditioning)

This technology was used in establishments that accounted for

5.1 quadrillion Btu in 1994.

65%

Computer Control of Processes or Major

Energy-Using Equipment (e.g., boilers)

18%

Adjustable-Speed Motors

31%

Participation in at Least One Energy Management Program

(e.g., utility, government, or self sponsorship)

17%

Participation in at Least One Equipment Rebate

220%

This technology was used in establishments that accounted for

12.1 quadrillion Btu in 1994.

This technology was used in establishments that

accounted for 11.3 quadrillion Btu in 1994.

Establishments participating accounted for 12.6 quadrillion Btu in 1994.

Establishments participating accounted for 2.5 quadrillion Btu in 1994.

xxiv Energy Information Administration/Manufacturing Consumption of Energy 1994