Energy Costs Force Modernization and Competitive-Edge Thinking
In a statement to Congress June 10, 2003, Federal Reserve Chairman Alan Greenspan said, "Today's tight natural gas markets have been a long time coming...futures prices suggest that we are not apt to return to earlier periods of relative abundance and low prices anytime soon. Such prices are a relic of the past." Of course, Greenspan's concerns are focused on the effect on industry and the impact on an already sputtering economy. For those directly affected at the local production level, this is old news. This is painful news to hear again and again. Lower profits in the industrial sectors of fertilizer production, chemicals, automotive, cement, glass, and even food have already been stressed to the point that many manufacturers are faced with closure or the decision to move production overseas. Obviously, steel and industrial heating processes are sitting in the midst of the maelstrom when it comes to the energy dollar crisis.
Statistics show that industrial users account for 34% of all natural gas demand in the U.S., with nearly 8-trillion ft3 consumed annually. This is 25% more than electric power-generation plants, which are expected to match industrial usage by 2020 . This, of course, means that it's not just natural gas that is skyrocketing in price while reserves are low, but electrical costs will follow suit. It's the total energy cost scenario that has us staggered.
What can be done? Several groups have taken the fight to Washington, and admirably have gotten the ear of our Government. The Metal Treating Institute has been active with NAM Board member Gary Huss, who has presented the case not only in Washington, but also on television via PBS's Nightly Business Report . Trade organizations like these are crucial to getting the attention of legislators and industry leaders alike, and deserve any support they may require to wage the battle. Writing to U.S. Senate offices and urging passage of the Comprehensive Energy Bill will bolster these efforts.
The biggest issue that everyone looks at is "the cost." But, the real issue is that the cost is being driven by lack of supply. Demand has outstripped production and reserves. And we are being warned that this situation could be surrounding us until new reserves can come on line in about 2010. In the meantime, gas prices could hit $12/MMBtu in some sectors by mid-winter 2003 (Fig. 1). The same scenario applies to oil and electricity .
Who can wait for prices to go down? What must be done to save what reserves are currently available? The answer: Conserve, and become efficient. U.S. Dept. of Energy Secretary Spencer Abraham said recently that he saw "limited opportunities" to boost supplies for the next 18 months, and therefore, emphasis should be on "conservation and energy efficiency."
We're lucky, because most of the technology to get energy efficient already exists. It's having the gumption to force ourselves to get informed and take action. For example, one of the business units at Eclipse that manufactures combustion equipment had a wash tank equipped with 35-year old burners. We make the equipment that obsoletes these burners, but continued to use the old burners because they worked and required little attention. But it cost the company money, and if the company had not taken a concerted energy stance some years ago, it would be costing us dearly now.
The point is that everybody has to get serious about efficiency, and fast. We're not going to get the three-month reprieve that historically has brought the prices for energy back in line. It's time to get smart, prosper while the cost of energy is high and be in really good shape when it stabilizes some years from now.
AGA released several programs to spur this type of thinking . Following are some common-sense tips they assembled:
- Top-level management must be committed to an energy conservation plan
- Assign an energy management coordinator or team with authority to implement the plan
- Conduct an energy audit (know where your energy dollars are going)
- Define, communicate and educate
- Make the program permanent
What kind of results can you expect? Following is what an energy audit can do for you if it identifies a simple 5% shift in efficiency, and if the discrepancy is remedied. Assume a furnace requires 1-million Btu for the process, and the heating system is determined to be out of tune by a factor of 5%. That's an average of 100 ft3 of gas (net heat) lost to poor tuning every time the furnace runs. Table 1 shows what you can expect by increasing burner efficiency, projecting it over a year using $6/1,000 ft3 gas cost.
For open atmospheric burners at 30% efficiency, the annual energy cost is $107,989 (6 day work week and 75% firing output). Just getting a 5% gain in efficiency by servicing and tuning the burners saves $15,379 per year on the same furnace. Replacing the open atmospheric burners with newer technology sealed, nozzle-mixing burners to increase efficiency to 45% saves $20,217 per year. Adding heat recovery to the modern burners boosts savings in excess of 50% of the current cost. Every plant should have some form of heat recovery on almost every process today. Why let the heat that cost so much go up the stack?
EPA rulings and activities also should be of concern. While companies might not currently be required to adhere to emissions guidelines, it would be shortsighted to believe regulations will not eventually impact them. It is smart to address these issues ahead of the penalty curve. The technology exists now (Fig. 2).
In almost any circumstance, the payback for the equipment will be less than one year. A bonus is that this equipment will continue to thwart high energy costs for years to come. In any case, it helps maintain the status quo of current energy costs, which helps maintain a competitive edge. If energy costs continue to skyrocket, paybacks become even more attractive.
Some companies could face curtailment this winter. Companies facing this situation should consider planning for propane backup very soon. Most of these systems are custom fit to meet specific process requirements, and therefore, require some engineering and erection time. Simple backup or blending stations can make a transition simple.
There are many new technologies available to the process heat user. Many have been available for years, but reasonable energy costs have made it somewhat easy to ignore them (Fig. 4). Whether it is a simple tune-up, an energy audit or the addition or specification of new equipment, it has never been more evident that these actions are required. Maybe an old furnace finally needs to be replaced. With a plethora of new high-tech materials, process control improvements and energy-efficient heating systems available, in many cases, a new furnace can replace several pieces of older equipment with no drop in production. And with the increasing energy costs, the paybacks should be very attractive. It is also possible that special tax credits exist on capital depreciation for some of this newer more efficient equipment as well, which should be researched by company financial personnel. There are rebate and investment plans offered by several of the utilities as well, all aimed at getting industry more energy efficient. Heating equipment suppliers have new equipment and technologies that should be explored.
The technologies, assistance programs and savings potential are all available now. The astute businessperson should be looking and acting on these opportunities now.