Utilities and manufacturing driving recovery together
Co-authors: PwC US Power & Utilities Leader Casey Herman and PwC US Industrial Products Leader Jeff Sorensen
Recently, we had the unique opportunity to bring together executives from the energy, utilities and industrial manufacturing industries to discuss the timing, magnitude and sustainability of economic recovery. These sectors are intrinsically linked, with manufacturing being a key customer driving electricity and natural gas demand for energy and utility companies — while energy and utilities work to keep manufacturers running as efficiently as possible.
The conversation, part of PwC’s ongoing executive webcast series, squarely addressed the short and long-term economic impacts of COVID-19. At the time of the September 2020 webcast, sobering data showed 9.5 million people out of work, with more than 8 percent unemployed.
As we’ve seen, the current downturn has benefited certain industries and sectors such as data centers, B2B commerce, air freight and logistics with the massive increase in home deliveries. And, of course, others face a long recovery, such as air travel, commercial real estate, building technologies and more.
In turn, utilities have unique considerations. While residential usage is up, commercial and industrial electricity and natural gas use has declined, impacting the power sector overall demand.
The inside perspective
During the webcast, David Burritt, President and Chief Executive Officer of United States Steel Corporation, offered a perspective since his company is one of many sitting in the middle of these economic, pandemic-driven forces. Steel prices have begun to recover, led by factors such as improving auto, appliance and packaging demand. Still, the company remains focused on driving continued cost and cash improvements. However, the steel industry continues to progress on emissions and sustainability improvements, including U. S. Steel, with its goal to reduce global greenhouse gas emissions intensity by 20 percent by 2030 from a 2018 baseline.
Dr. Chad Moutray, Chief Economist for the National Association of Manufacturers, noted that from the pandemic’s early days in May, only about 34 percent of the group’s members were positive about their own company’s outlook, the worst reading since the Great Recession. That’s increased to 66 percent today, but still below the 75 percent threshold that’s the historic average. Simply, manufacturing output continues to be well below where it was pre-pandemic.
What’s next?
As we (hopefully) march toward a scalable vaccine, treatments and other safety protocols to help bring life back to normal, we’ll learn much from studying and reevaluating manufacturing trends we’re seeing in terms of demand and the way people and companies buy goods and products. This overall movement indicates a long-term demand for energy from the manufacturing industry, but still balanced with companies looking at ways to increase their sustainability, using a variety of energy sources — both to improve the bottom line and in appreciation of customers’ growing expectations.
Future of electrification
We anticipate a continued drive toward electrification via other factors, such as the greater adoption of electric vehicles and shipping, itself a growing output of manufacturing. Diving into the steel industry, as an example, we’re seeing electrification playing a bigger role in efficiency and sustainability. Electrification in the industry’s manufacturing elements has vastly reduced the amount of time necessary to produce steel, with the outcomes being stronger metal composition, lower costs and even lower carbon footprint. Of course, scale is a factor. As adoption of these processes spreads across the steel industry, we should see more long-term electricity demand, particular for the more environmentally friendly process improvements and newer technologies and equipment.
Beyond this, how else can energy providers and manufacturers work together to achieve growth and operational efficiencies? Companies can consider actions such as emission-free energy certifications from energy providers, continuing the practice of virtual meetings (versus travel) and adopting more advanced technologies such as AI. But, this is only part of the equation. Together, energy providers and manufacturers can partner to find new ways to meet investor, customer and other stakeholder Environmental, Social and Governance (ESG) expectations.
To hear more of this conversation with the energy, utilities and manufacturing industries, view this on demand webcast. You may also be interested in registering for our next executive series webcast: View from Wall Street.