Power Shift: How to Produce More for Less

Feb. 9, 2008
Surging energy prices have process manufacturers searching for alternatives and scrambling for cost savings.

Wise Alloys doesn't need motivation from federal and state regulators to reduce its energy usage. What drives the Muscle Shoals, Ala., subsidiary of $1 billion Wise Metals Group LLC is the staggering consequences of doing nothing. For every dollar that natural gas increases per mmBTU, Wise Alloys, a producer of aluminum sheet coils for the beverage industry, pays an additional $4 million per year in energy costs, estimates Alan Tucker, the plant's director of industrial engineers.

Wise Alloys' story rings true for most process manufacturers. The industry uses enormous amounts of energy during heating, refining and distillation processes that produce products ranging from fertilizers to beer. In fact, according to the latest statistics provided by the U.S. Environmental Protection Agency (EPA), the top five industrial energy consumers were process manufacturers. Overall manufacturing is the largest end user of energy in the United States, and the most energy-intensive industries represent the greatest opportunity to reduce operational costs, the EPA reports.

With gasoline reaching $100 per barrel and electric and natural gas rates soaring, process manufacturers are exploring practically every avenue they can to cut energy costs -- and they're often doing it in unconventional and innovative ways. Some food and beverage manufacturers, for instance, have purchased fuel cells to supply much of their energy. Anheuser-Busch Cos. Inc. has expanded its beer-waste-to-energy program that turns wastewater into fuel for its manufacturing processes. Others, such as Wise Alloys, are taking advantage of assessment tools provided by the Department of Energy and local universities to implement energy-savings measures. At FMC Corp. an experimental project that has been in development for the past five years could result in a more efficient way to produce hydrogen peroxide using 30% less energy.

See Also

Chart: How Much Energy Is Your Industry Using?

Benchmarks Energize Industrial Efficiency
Some efforts to cut costs are a matter of wheeling and dealing. Manufacturers in deregulated states are negotiating contracts with energy suppliers for better rates, says Jill Feblowitz, practice director, business technology, Energy Insights. "They've been paying more attention to how they're consuming and when they're consuming. That, in combination with the ability to have some choice of who their supplier is, means they've been more active in considering how they might negotiate better contracts for themselves and how they might operate to take advantage of those contracts," Feblowitz says.

Contracts can come in the form of "dynamic pricing," which means rates fluctuate hourly based on the market price. Then there's time-of-use pricing programs, an agreement that has different rates based on peak and off-peak usage periods. Real-time pricing information is helping the process industry monitor usage and costs, according to an Energy Insights report co-authored by Feblowitz. Plant automation suppliers are providing these tools that allow manufacturers to receive real-time historical information, models of plant processes and optimization analytics for operational decision making and planning.

Strange Brew

If indeed energy experts are correct in their forecasts that traditional fuel supplies are limited and contributing to climate change, then manufacturers will need to start thinking beyond their current contracts with suppliers and pricing programs and search for alternative means. Two U.S. breweries -- one the largest beer maker in the United States and the other a smaller craft brewer -- have utilized fuel sources that are far from the ordinary.

This year, Anheuser-Busch will build its 10th Bio-Energy Recovery System (BERS) at its Fairfield, Calif., brewery. The BERS process works by transporting process waste that can include beer, cleaning solutions or spent grain material through pipes within the brewery to holding tanks where the liquid is treated using organisms that eat the material and produce biogas. The gas is then used to fire the boilers, which create steam. The purified water is sent to the municipal sewer.

The process generates 10% to 15% of each refinery's fuel needs and can heat the equivalent of 25,000 homes in the Midwest, says Al Beers, manager in corporate operations for energy and environmental management. Although Beers would not disclose the required capital investment for the BERS system, at the company's Los Angeles Brewery in Van Nuys, Calif., BERS saves the plant approximately $6 million to $8 million in city sewer charges and offsets about $1 million in natural gas purchases, according to the California Integrated Waste Management Board.

Anheuser-Busch's waste-to-energy facility at its Houston refinery is one of nine the company has in the United States.The technology was initially developed in Europe during the 1970s and was referred to as anaerobic treatment for industrial wastewater. Anheuser-Busch adopted the method a decade later during a spike in energy and sewer costs. "Those two criteria are really what drove the projects," says Beers, whose surname seemingly made him destined for a brewery career. Another benefit was the elimination of an energy-intensive waste-treatment system that utilized evaporation systems and distillation columns to convert the material into ethanol or cattle feed, which the company would sell.

"For every BTU we put into BERS, we get five back. For every BTU we put in a distillation column, we get one back, so these systems break even, whereas the BERS process is a net producer," relates Beers. "It's processing the same liquid in a more energy-efficient technology."

Even with the success Anheuser-Busch has achieved with BERS, the company is looking for further energy savings through alternative boiler fuels such as wood, spent grain and a landfill gas. The company's goal is to increase its use of renewable fuels from 8% to 15% by 2010, and to 20% further down the road.

In the small Northern California town of Chico, the Sierra Nevada Brewing Co. derives power from four fuel cells that were installed more than two years ago. The 250-kilowatt co-generation units are located on site approximately 50 feet from the company's brewing operations. The units, purchased from FuelCell Energy Inc., are direct fuel cells, meaning they produce hydrogen directly within the cells from feedstock or natural gas, says Cheri Chastain, Sierra Nevada's sustainability coordinator. These particular fuel cells operate on a blend of biogas that, like Anheuser-Busch, is derived from wastewater. The fuel cells produce 60% to 65% of the brewery's electrical demand and are twice as efficient as grid-supplied power.

The company also deployed in September 2007 a 500-kilowatt solar array shade structure in its parking lot and is in the process of installing a rooftop solar-power system that is expected to be finished in June. The company estimates that the parking lot structure combined with the fuel cells will provide 70% to 75% of its energy needs. Once the rooftop system is finished, alternative energy should provide nearly all of the company's power during peak hours, Chastain says.

In the past, it was tough to make a business case for such sustainability projects. The capital costs often outweighed any savings benefit. But that may be changing soon, says Feblowitz.

"My sense is that up until now, it has not necessarily proven to be cost effective to take some of these measures, especially with some of the newer alternative energy sources," she notes. "However, there are three things that have changed or are about to change that will make these investments more attractive." Those three changes include the possibility of a carbon cap and trade market, which would make the cost of compliance high for major carbon emitters; the increasing availability of government funds for sustainability initiatives; and the increasing cost of traditional energy.

State and federal tax incentives helped Sierra Nevada fund its sustainable projects, though Chastain says being a smaller, private company may have hastened the implementation. "The problem I have seen in talking to folks in different areas is the larger companies are corporations and have shareholders they need to get buy-in from, whereas we're a privately held company, so it's much easier for us to have decisions made."

Wise Decisions

Still, the reality for many process manufacturers is that alternative energy can't yet provide the abundant amounts of fuel needed for their operations. Even so, Wise Alloys has found ways to efficiently manage its current energy supplies. With the help of the Department of Energy's assessment program, the University of Alabama and its own energy conservation team, the plant has achieved significant savings from several projects.

For instance, in the plant's melting division, the company installed burners that use more oxygen than gas. The result was a natural gas savings of 10% to 15%, says Bill Quesenberry, plant electrical engineer. The company paid about $450,000 for seven new burners, which the company recovered within a year. The plant also installed a water-softening system that enhanced the operation of its boilers. The high levels of iron and salt in the regional water supply was hindering boiler operation. The addition of water softeners resulted in another 10% savings.

Wise Alloys' conservation team is exploring several other energy-efficient projects, including the implementation of variable speed drives in some of its fans to operate based on air temperature.

The plant is focused on finding as many cost-savings opportunities as possible, but Quesenberry says the company must be selective. "Unfortunately it does take capital to do this kind of thing, so if you don't have a high return, it's kind of hard to get going, but we have a list of about 20 to 30 projects," he explains.

In recent months, students from the University of Alabama's engineering program conducted a steam and air compressor survey, which Quesenberry says will likely result in more opportunities.

In the Works

FMC Corp. is another major consumer of natural gas and other fuels that is actively exploring its energy-savings options. As a chemicals manufacturer the $2.3 billion company is at the epicenter of the energy-costs explosion. Chemicals producers are the most energy-intensive industries in the United States, according to the EPA. Rising costs forced the company to announce in September 2007 a 0.035-cent per pound surcharge on all invoices for hydrogen peroxide through March 31, to offset rapid increases in natural gas prices.

With funding from the Department of Energy, the company has been developing in conjunction with the Stevens Institute of Technology in Hoboken, N.J., a hydrogen peroxide production technology for more than five years that it hopes will save approximately 5 trillion BTU per year of steam and 3 trillion BTU annually of electric energy, says Emmanuel Dada, a principal investigator and research fellow at FMC. The new process would be carried out by a microchannel reactor system located at a smaller on-site customer facility built by FMC.

Conventional production methods involve energy-intensive distillation stages to make highly concentrated hydrogen peroxide solutions because it's not cost-effective to make and transport the product at weaker levels. The hydrogen peroxide is then transported to customer sites where it's diluted into lower concentrations for commercial use.

Through a complex process the microchannel reactor is able to produce hydrogen peroxide at ready-to-use lower concentrations at the customer's site, which also reduces transportation costs. The major hurdle at this point for FMC is determining how to fund the first trial plant, Dada says.

"Right now there are big plants making peroxide," Dada says. "We are suggesting using smaller plants and deploying the smaller plants to our end users. If you have 10 users, we would give each of them a plant, so we are proposing it is more economical to build a small unit. The business decision now is, do you want to now deploy small units to the customer who is already buying the 70% [higher concentrated] peroxide?"

The company's next challenge? Get new customers to accept the technology and buy hydrogen peroxide in less-concentrated amounts.

How Much Energy Is Your Industry Using?

The top five industrial consumers of energy in 2002 were in the process industries, according to a March 2007 study by the Environmental Protection Agency. The data represent annual fuel-related energy inputs. Energy intensity is measured either by energy consumption per volume of production (physical energy intensity), or energy consumption per dollar value of output (economic energy intensity).

Sector Energy Consumption
(trillion BTU)
Energy Consumption per Dollar Value of Shipments (thousand BTU)
Chemical Manufacturing 3,769 8.5
Petroleum Refining 3,086 16.1
Pulp and Paper (within forest products) 2,361 15.2
Iron and Steel 1,455 27.8
Food Manufacturing 1,116 2.6
Transportation Equipment 424 0.7
Cement 409 56.0
Fabricated Metal Products 387 1.7
Wood Products (within forest products) 375 4.2
Alumina and Aluminum 351 12.2
Metal Casting 157 5.6
About the Author

Jonathan Katz | Former Managing Editor

Former Managing Editor Jon Katz covered leadership and strategy, tackling subjects such as lean manufacturing leadership, strategy development and deployment, corporate culture, corporate social responsibility, and growth strategies. As well, he provided news and analysis of successful companies in the chemical and energy industries, including oil and gas, renewable and alternative.

Jon worked as an intern for IndustryWeek before serving as a reporter for The Morning Journal and then as an associate editor for Penton Media’s Supply Chain Technology News.

Jon received his bachelor’s degree in Journalism from Kent State University and is a die-hard Cleveland sports fan.

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