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Industry Report: Mechanical Insulation's "Perfect Storm"
Wednesday, February 12, 2014

MECHANICAL INSULATION’S “PERFECT STORM”

The “perfect storm” for the insulation industry is becoming reality.  An industry does not get this kind of opportunity often.  All of the stars are aligned for our industry to alter, in significant ways, the energy consumption of this nation.  How exciting is that?  The nation has a desire to reduce our dependence on foreign oil, reduce greenhouse gas emissions, and become more self sufficient regarding our energy use.  Regardless of your belief in the man-made global warming issue, the right thing to do is reduce our use of fossil fuels and help keep our environment clean.  People all over the United States and Canada are beginning to see the need.  Federal and State governments are insisting that this be accomplished.  The cost of energy is motivating industry to reduce their use of fossil fuels.  The light being shined on the long term cost of operating commercial buildings is motivating owners and managers to think twice about accepting “value engineering” mechanical insulation out of their buildings and they are actually increasing mechanical insulation thickness.

We would like to think that we, in the mechanical insulation industry, had planned for the “perfect storm” heading for our segment of the construction industry as viewed by architects, engineers, plant managers, owners, and government officials.  We did know that significant changes were going to take place in our industry that would alter the way architects and engineers specify insulation materials for mechanical services.  We did not know, if or when and to what extent the changes would come.  We went about the business of manufacturing and installing mechanical insulation the same way for decades.  We saw specifications with the same materials, the same thickness’, the same finishes, all using the same business model for determining what systems would receive insulation and how thick and what material would be used.  Sure, we did see some new and exciting materials, but even with the newest materials available we struggled to be heard.   It was the old economic thickness business model.  How things have changed.

This “perfect storm” is changing the way the Nation looks at mechanical insulation.  For decades those of us in the contracting sector of this industry have been caught in the vice between low initial building costs and the proper thickness and material type for optimum life cycle cost for a building or facility.  Indeed, I have written about this subject in previous Outlook issues.  We have been asked to value engineer our service.  This always meant reduce or eliminate mechanical insulation.  In recent months we have seen numerous articles, written by industry professionals, discussing the error of this thinking.  In an article entitled “Trimming mechanical insulation from building budgets may lead to higher long-term operating costs”, published by Reed Construction Data, correspondent Don Procter eloquently makes this argument.  Cutting or eliminating mechanical insulation is unwise from a building operation standpoint and from an environmental standpoint.

We have embarked on a mission to educate members of congress and the markets about the value of mechanical insulation.  Untold man hours have been spent visiting members of congress to educate them about the value of mechanical insulation as it pertains to their (congress’) desire to reduce our nation’s dependence on foreign oil and reduce greenhouse gas emissions.  These visits are resulting in mechanical insulation awareness.  Mechanical Insulation, “The Forgotten Technology”, has been mentioned in the Congressional Record. Members of congress now actually know what mechanical insulation is and, more importantly, what it does.  Change is in the air.  Money to help educate the nation about mechanical insulation is now a possibility.  Money may become available to help train workers, estimators, energy auditors, and other industry professionals.  It is now a possibility that legislation may be enacted to give tax incentives to energy users to increase the mechanical insulation on new and existing facilities.  Getting credit for increasing mechanical insulation in green buildings is being discussed.  It will be more and more difficult for some general or mechanical contractor to insist on “value engineering” the mechanical insulation when the state and local governments insist on greater thickness’ or when a tax is placed on the owner for not having the proper degree of mechanical insulation on the building services thus making that building a polluter.
 
For the first time we are discussing changing the business model under which mechanical insulation is specified.  The problem was that the cost of energy has escalated dramatically.  Ron King, a former Industry Representative began talking about this dynamic change many months ago.  The thought process is now changing to the greenhouse gas emission reduction model.  When comparing 1” of fiberglass insulation to 2” on a 350 degree pipe the increase to 2” costs more to install, but we achieve an increased reduction in greenhouse gas emissions of 38%.  The markets must look at the long term effect of insulation values as they pertain to greenhouse gasses and the reduction of our use of energy.  The owners and plant managers who bought into the old values will be paying for those poor decisions long into the life of the facility.  They may be paying even more in the future if the cap and trade legislation is passed.

These new business paradigms will have an effect on the industrial sector also.  The industrial markets are much less likely to buy into the “value engineering” idea of thickness reduction, (they usually need minimum thicknesses of materials to operate the facility) they will benefit from increased insulation thickness because increased thickness translates into greenhouse gas emission reductions.  The reduction of greenhouse gas emissions translates into tax incentives which translate into dollars.  Even in a retrofit situation, where some insulation is already in place, increasing insulation thickness, maintaining existing insulation, and replacing missing insulation can save the facility money both on energy consumption and in tax incentives and it will reduce greenhouse gas emissions.  A group called the Rebuilding America Coalition has embarked on a mission to retrofit 40% of the nation’s building stock by the year 2020.  Sure many of those buildings are residential but many are commercial and institutional which will provide work for the mechanical insulation industry. Building retrofits can reduce energy consumption by 20 to 40%.    

We have numerous strategic partnerships with dozens of other construction related associations to educate all sectors of the industry.  One industry representative performed an analysis of the Energy Department’s Save Energy Now data and our work with Oak Ridge National Laboratory:  showing a moderate increase in the use of mechanical insulation could generate nearly $4.8 billion in energy savings and 89,000 jobs.  It is all coming together.  When people understand what mechanical insulation can do for the operation of a facility and the environment they will respond.

So, we have movement in all directions.  We have owners and operators changing the way they view mechanical insulation.  We have architects and engineers changing the way they specify mechanical insulation.  We have contractors saying “no” to the old “value engineering” requests.   Labor, government, manufacturers, architects, engineers, owners, plant managers, etc. all promoting the same message of reduced fuel consumption and reduced greenhouse gas emissions.  It looks like a “perfect storm.”

When we are successful on all of these fronts, are we going to be able to perform this work?  Will the manufacturing community be ready with production capabilities?  Will the thicker materials meet the current 25/50 standards?  Will the distribution facilities be prepared to house the thicker materials and will they have adequate transportation to move the materials to project sites?  Will the banking community be prepared to assist contractors with financing the business growth that will come from this renewed interest in mechanical insulation?  Will the contractors be prepared to grow their businesses from a financial and manpower standpoint?  It isn’t here yet, but it is going to come.  When an owner specifies 3 ½” thick fiberglass on his steam system will the mechanical contractor be prepared to allow adequate room with the proper pipe hangers for these materials?  Will the architects have designed the buildings with shafts large enough and ceilings high enough to install the greater thickness?  Will we have a trained labor force prepared to perform the increased work load.  Remember, we are not just talking about new construction with new specifications.  We are talking about retrofitting 40% of the nations building stock and expanding numbers of industrial and institutional facilities.  Much of this work is “shovel ready” as they say.  Retrofitting existing buildings will begin to show immediate results.  It will put thousands of people to work in all segments of the industry.   

We can’t answer all of these questions.  We do know that our contractors, manufacturers, and distributors will be ready.  We also know, from conversations across the country, that many small businesses are not ready to finance expansions. The government must be willing to assist small businesses with this growth.   

Get your raincoats out and batten the hatches.  This is going to be a wild and wonderful storm.