The Fixed Energy Cost Trap: How Lower Output Drives Up Unit Costs

By Author: The Wasmer Company
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In manufacturing, every decision about production levels carries a ripple effect on costs. While it’s easy to assume that producing less automatically reduces expenses, energy tells a different story. For many facilities, energy costs don’t scale down with output — and that can dramatically increase your cost per unit.

This is known as the Fixed Energy Cost Trap — and it can quietly erode your margins when production slows.

Understanding Fixed Energy Costs

Every manufacturing facility has fixed energy costs — the portion of your utility bill that doesn’t change much whether you’re producing at full capacity or not.

Examples include:

Lighting for the entire facility, even if fewer machines are running
Compressed air systems running continuously
HVAC (heating, ventilation, and air conditioning) to keep temperatures constant
Control systems, servers, and process equipment that must remain powered
Base load from equipment idling between shifts
These systems are always consuming ...
... energy, regardless of how many units you’re producing.

The Math Behind Rising Unit Costs

Let’s break it down with a simple example:

Full Production: Energy cost: $100,000 → $1 per unit, 100,000 units per month

Half Production: 50,000 units/month, same $100,000 energy cost → $2 per unit

Your total utility bill hasn’t been budgeted, but the cost allocated to each unit has doubled. That extra $1 per unit can be the difference between profit and loss — especially in competitive markets.

Why This Matters During Slow Periods

Many manufacturers face seasonal demand shifts, market slowdowns, or supply chain interruptions. When output drops, margins are already under pressure. Rising unit costs from energy can make it even harder to stay competitive, especially if customers push back on price increases.

How to Break the Fixed Energy Cost Trap

1. Identify and Reduce Base Load Consumption

Perform an energy audit to identify systems that run continuously and see if they can be cycled down, shut off, or replaced with more efficient equipment.

2. Implement Smart Controls

Automated systems can ramp down HVAC, lighting, and process equipment during low production periods — saving energy without sacrificing safety or quality.

3. Upgrade to Energy-Efficient Equipment

Invest in high-efficiency motors, LED lighting, and variable-speed drives (VSDs) to cut down on fixed usage.

4. Train Staff on Energy Awareness

Encourage teams to shut down idle machines, turn off unnecessary lights, and schedule processes strategically.

5. Explore Energy Rebates and Grants

Programs like Focus on Energy and DOE Industrial Efficiency Grants can offset the cost of efficiency upgrades.

The Strategic Advantage of Energy Management

Manufacturers who actively manage their energy use gain a significant advantage. Not only can they protect margins during slow periods, but they can also improve sustainability metrics, qualify for incentive programs, and strengthen their position in competitive bids.

By avoiding the Fixed Energy Cost Trap, you ensure that energy is working for your bottom line — not against it.

CTA:
Are you prepared to preserve your margins and reduce your fixed energy expenses? Partner with Wasmer to identify savings opportunities, secure funding for upgrades, and implement solutions that keep your cost per unit in check — no matter the production level.