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New Tricks to Beat Utility Bills

August 11, 2008

By Ruth, Joao-Pierre S

Companies mull a wide range of alternatives

ENERGY

NEWARK – Remembering to turn off the lights is not enough to slow the drain of rising energy costs on profits. Manufacturers in particular face higher utility bills and increasingly expensive raw materials. With rates climbing for elec- tricity, natural gas and other fossil fuels, small and midsize business- es are struggling to contain costs, and some are coming up with novel solutions.

At Newark-based Cardolite Corp., aproducer of coatings for machine parts and linings for vehicle brakes, “We switched from burning natural gas and fuel oil to burning a natural pro duct called yellow grease,” says company President Anthony Stonis.

Yellow grease is the remnant of cooking oil from deep-frying foods. Cardolite gets its yellow grease from a Baltimore-based fat Tenderer and burns the byproduct in a boiler to generate steam.

Falstrom Co., a contract welder and manufacturer in Passaic, implemented cost-saving steps after an energy audit by Rutgers University two years ago. Falstrom President Clifford Lindholm III says the company’s moves included insulating pipes and carefully monitoring boilers. Since the audit, Falstrom reduced the number of its windows, which saved on heating bills but increased the need for non-natural lights. “We might be saving heat dollars in the winter, but we have to pay a little more on the electric side,” says Lindholm, noting the move resulted in a net savings for the company.

David Brown, vice president of NUS Consulting Group, a cost- management firm in Park Ridge, says electricity bills in the United States for both businesses and residences rose 3.9 percent last year and has climbed 22.6 percent over the past five years. Taking a few simple steps can put businesses on the energy efficiency track, he says.

“One of the things we advocate is having an audit and analysis for energy usage,” Brown says. He suggests installing motion sensors to shut off lighting when a room is unoccupied. “If somebody leaves the restroom they might not turn the lights off,” he says. He also suggests using a timing system to control heat, ventilation and air conditioning systems during standard business hours.

For Stonis at Cardolite, concern extends to the soaring price of raw materials. A chief ingredient in Cardolite coatings is the liquid from crushed cashew shells, which some companies are using as a substitute for oil. “That has driven up the base cost of our raw material substantially,” he says.

Oil and its derivatives are the source of other Cardolite raw materials. “We really have no option other than raising prices for our customers,” Stonis says. “Our latest round of price increases was done at the time oil was at $100 per barrel. With the last spike to over $130, it’s certainly going to precipitate another price increase. I don’t think anyone has a magic solution other than passing the cost on.”

Stonis says Cardolite has a staff of 75 employees at its Newark plant, which generates $40 million in annual revenue. He says Cardolite also operates a plant in Zhuhai, China, that boosts the company’s total revenue to between $60 million and $70 million.

In Newark, Cardolite’s electric bills have risen 10 to 15 percent over the past two years, prompting Stonis to consider generating some of his own power. “Our electricity bill is approaching $600,000 per year,” he says. “It used to be around $400,000″ [in 2006].

Brown at NUS Consulting says some companies are “investing in solar paneling for their facilities to augment the power they are already using.” Another client is considering installing a wind farm to generate electricity. But the cost of investing in pricey alternative energy keeps some businesses from jumping at these options. “You are looking at payback [on the investment] anywhere from six to 10 years,” says Brown.

At Falstrom, Lindholm says alternative power sources are not an option for a business his size, which operates out of an 86-year- old brick factory with fewer than 100 employees. The company makes steel and aluminum enclosures to house defense electronics. “The cost of solar panels and the lifespan just didn’t work out,” says Lindholm.

He estimates that solar panels last about seven years, just about the length of time it takes for the investment to break even. “In a small-business setting, it is a real challenge trying to take advantage of some of those techniques because the costs are just too prohibitive,” says Lindstrom.

Anthony Stonis, president of Cardolite Corp., says the company burns yellow grease instead of natural gas and fuel oil in order fo save on energy costs.

The average electric bill has climbed more than 22 percent over the past five years.

Newark-based Cardolite Corp. uses cashew shell liquid as a chief ingredient in the company’s coatings.

E-mail to jpruth@njbiz.com

Copyright Journal Publications Inc. Jul 7, 2008

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