The hidden tax on industry: why energy productivity is the next competitiveness frontier

When I speak with industrial owners across the Middle East and Asia, the conversation usually turns to the same three costs: people, materials and energy. The first two are negotiated every year. The third is often treated as fixed — a number that arrives on the utility bill and is simply paid.

That is a mistake, and it is becoming an expensive one.

Energy is a tax you set yourself

Unlike most taxes, the energy bill is partly under your control. Two factories with the same output and the same tariff can pay very different amounts because one of them wastes more — through poor power quality, ageing motors, unbalanced loads or simply running equipment at the wrong time. The IEA has long estimated that electric motor-driven systems account for well over 40% of global electricity use, and for most industrial plants they are the largest single cost lever.

I call this the hidden tax: the share of the bill that buys no production at all.

Why it matters more now

• Demand is rising. Electrification, cooling and digital infrastructure are pushing electricity demand up faster than in the past decade, putting pressure on prices and grid capacity.
• Tariffs are getting smarter. Time-of-use pricing and demand charges reward companies that manage when and how they consume.
• Buyers are counting carbon. Export markets increasingly price embedded emissions, and electricity is a large part of them.

Energy productivity as a management discipline

The most competitive companies I know treat energy the way they treat working capital: measured monthly, owned by a named executive, and improved through a pipeline of projects with verified returns. They ask not “what did we pay?” but “how much did we produce per kilowatt-hour, and why did it change?”

The good news is that the first gains are rarely expensive. Measurement, maintenance, scheduling and targeted technology often deliver double-digit savings with short payback. In our own group, verifying results with independent and production-adjusted methods has taught us that the discipline of measurement is worth as much as any single technology.

In the next decade, competitiveness will be measured not only in output per worker, but in output per kilowatt-hour. The companies that start managing it now will set the price for everyone else.