Powerful Opportunities

March 21, 2005
As global manufacturing faces conflicting energy challenges -- an outdated 20th century power grid feeding 21st century manufacturing automation -- new answers are being found. The winners are innovating with power management, renewable resources and dist

Opportunity probably isn't knocking at your door right now, but it might be lurking behind your walls.

Energy -- the invisible force that is the lifeblood of any manufacturing operation need not be thought of as just a cost of doing business. These days the combination of advanced energy-delivery technologies and a desire to find more reliable sources of power have made energy a powerful strategic advantage for those who recognize its value.

"Companies learn they can do a lot to control their energy destiny when they take the steps necessary to understand the important role that energy plays in the overall success of their enterprise," says Ted Klee, vice president, power management, at Palatine, Ill.-based Schneider Electric North American Operating Division, which provides energy management systems and services to manufacturers. "Unfortunately many companies only begin to think about power management in the wake of a disaster like the Northeast's power grid collapse of 2003. Many companies learned a vital lesson the hard way: What matters most doesn't always get measured, monitored or optimized."

More Information, Less Energy

Initially managements tend to value an energy management strategy for its cost-reduction capability. At Delphi Corp., Schneider Electric's power management systems first demonstrated value by monitoring electrical distribution equipment. As more engineers recognized the value of the information being generated, the system grew to monitor the five air compressors responsible for 10% of the energy consumption at the Flint East manufacturing complex. By analyzing the data, Delphi found that only two compressors were needed on weekends. Next, Delphi began monitoring electric furnaces to achieve similar operating efficiencies. The system also was extended to the management of natural gas.

On Aug. 15, 2003, Delphi found unplanned value when the Northeast grid failure impacted the massive Michigan manufacturing facility. With power monitoring systems in place, the readily accessible data enabled Delphi engineers to proceed through an orderly shutdown. The result: "little damage beyond shutting down some equipment in the plant," notes Klee.

Without power monitoring/management, the penalty for such unplanned events can be billions of dollars in lost productivity and damage to plant and equipment.

David D. Petratis, president and CEO of the Schneider division, says his group's challenge is to communicate the dramatic potential of power management. "Consider that a customer with a million dollar line item [for energy] may be unaware of the potential for a 20% cost benefit." He says the biggest opportunities for an energy management strategy are the "pass throughs" -- situations where a facility manager simply hands off the energy bill to the tenant.

Klee says power management begins with a thorough assessment of a company's power usage. "In today's environment, with power costs climbing, manufacturing companies need to know their priorities. It may be cost reduction, quality improvement or a power management system that provides an orderly shutdown to protect people, equipment and products."

Klee traces the beginnings of Schneider's power management services to an internal energy cost focus in the mid-1990s. "We had become serious about reducing our own energy costs. Picking the five plants with the highest utility bills, we went to work using our existing Powerlogic metering and control products. We rapidly went to an enterprise model to study power usage system wide."

In 1997, the first full year of implementation, Klee says the power management system was responsible for what has become a recurring annual saving in the $600,000 range.

Petratis views the optimization of power usage as just a beginning. "Power management programs have got to be followed by bigger industrial bets on renewable resources. We [the manufacturing sector] have got to be leaders."

Garbage In, Energy Out

Is there a garbage dump near your manufacturing facilities? That could offer an easy way to benefit from a renewable energy source -- landfill methane gas -- while protecting the environment from the greenhouse gas, says Detroit-based Joseph C. Bibeau, General Motors Corp.'s director, worldwide facilities energy and utility services.

At GM the annual energy savings from landfill gas now totals in the millions of dollars since project launch in 1997 at a Toledo, Ohio, plant. "GM is proving that the environmental protection goes hand in hand with economic development," notes Environmental Protection Agency's (EPA) regional administrator Richard E. Greene,

Last year, GM was given the 2003 Partner of The Year Award through EPA's Landfill Methane Outreach Program. That followed GM's 2002 receipt of EPA's Energy Star "Energy Partner of the Year." Then in 2004, that consistent performance was recognized with EPA's "Sustained Excellence Award."

And Bibeau expects to win more awards. On Feb. 10 Bibeau presided at the dedication of GM's seventh landfill gas project at the company's Oklahoma assembly plant -- further boosting GM's green image. (In a 2003 study by the World Resource Institute and the Green Power Market Development Group, GM is cited as the largest non-utility direct user of landfill gas in the U.S.)

At Oklahoma annual energy savings of up to $1 million are projected from substituting the landfill's methane emissions for natural gas purchases, Bibeau says. Corporate-wide GM's renewable energy projects are saving up to $5 million annually. GM's landfill gas projects are being used to both generate electricity and to replace fossil fuels in firing boilers. (Electricity generated from landfill gas helps power GM's Service Parts Operations in Grand Blanc and Flint, Mich. They purchase 13 million kilowatt hours annually generated from the Granger Energy landfill project.)

By driving energy conservation initiatives and by using various renewable energy sources, such as methane gas, GM has reduced its natural gas consumption by 21% since 1995 and is well on its way to achieving its 25% energy reduction goal in 2005. The sum of the landfill gas capacity at the GM operations is 1.6 trillion BTUs per year, which is equivalent to the energy needed to heat over 25,000 households.

Bibeau estimates that a million tons of municipal solid waste in a landfill typically generates 300 cubic feet per minute of gas. On an annual basis about 7 million kilowatt hours could be generated. That's enough energy to power 700 homes for a year or for about 5% of the heating requirements of a GM assembly plant, he adds. Current U.S. capacity is estimated at 900 megawatts.

Since 1999, EPA statistics show 150 new landfill gas initiatives have brought the total to 375. Bibeau estimates that over 500 landfill sites could still be tapped. Future renewable energy projects on Bibeau's agenda go beyond landfill gas. They include wind power, photovoltaic generated solar power, hydroelectric generation and a solar heat project.

In addition to being cheaper than natural gas, the use of landfill gas also reduces global warming risks. Bibeau says that as a greenhouse gas, methane is 22 times as potent as carbon dioxide.

Growing In the Wind

Is there enough wind to power the world? An assessment in the British Journal New Scientist (Sept. 25, 2004) might be encouraging wind turbine providers and potential users: "It would take a wind farm the size of Saudi Arabia, and the electricity would cost twice as much as it does today, but there is more than enough to meet the world's needs."

Should the power infrastructure feel threatened?

Speaking as vice president, power generation for GE Energy, Mark Little doesn't categorize wind power as a disruptive technology -- yet. In the near term he doubts that wind or even solar will displace the strong central power generation infrastructure in the U.S.

But over time, he is confident that wind -- and solar energy, too -- will constitute a challenge to how utilities conduct their businesses. That philosophy underlies GE's strategy of augmenting its depth and strength of market presence across the breadth and scope of conventional power generation.

"Wind and solar form very big markets with a strong potential for growth, and GE's strategy is to participate with solutions." Little sees his challenge as one of helping to direct the organization to where customers expect GE to offer solutions.

He says customers have already built a $9 billion wind market that is growing at the rate of 10% annually. Worldwide, wind remains the fastest growing energy technology, says GE. The company entered the wind market in 2002 with the acquisition of Enron Wind by GE Power Systems.

To encourage cleaner, greener power, governments around the world are providing incentives such as the U.S. Renewable Energy Production Tax Credit (PTC). Last fall GE Energy's order books rapidly began to fill after Congress extended the tax credit. GE secured contracts to supply more than 750 megawatts of wind turbines with commitments for another 750 megawatts. The orders and commitments totaled more than $1.3 billion.

The PTC provides a 1.8-cent per kilowatt-hour credit (adjusted annually for inflation) for electricity produced during the first 20 years of a wind project's operation. With the extension, the PTC will remain in place through December 2005 and is expected to spur new waves of wind turbine projects, says Randall Swisher, executive director, American Wind Energy Association. The extension "means that approximately $3 billion in wind energy investments forecast over the next several years are now back on track across the country."

"Back in 2000 there were only 15 countries in the wind power game, but the total reached 45 countries in 2004," notes Little. In Denmark, wind accounts for 20% of the country's electricity. In Germany, wind's share is 5.9%. Little notes that the Kyoto agreement will supply additional incentives to seek emissions credit and wind and solar energy are ways to do that. For example, the European Union's goals by 2010 include having 22% of its electrical power come from renewable sources.

In the U.S. wind energy provides less than 1% of the energy mix, which currently comes from coal (over 50%), nuclear (20%) and natural gas (18%) with hydropower making up most of the rest. In an aggressive growth scenario, the American Wind Energy Association estimates that wind's share could reach 6% by 2020. GE says the U.S. holds the world's third-largest wind power capacity, behind Germany and Spain.

GE's implementations now total 7,100, up from 5,500 in 2003. About 2,500 are rated at 1.5 megawatts, the largest wind turbines assembled in the U.S., says GE.

In January, GE announced that 65 of the 1.5 megawatt units will be used at a new Canadian wind project near Shelburne, Ontario. Government incentives could boost Canada's wind capacity to 5,000 megawatts by 2012, says Robert Hornung, president, the Canadian Wind Energy Association. As of September 2004, Canada's installed wind energy capacity was 439 megawatts. GE reports that 21 of the 1.5-megawatt units will be installed in Shanghai, China's first utility-scale wind facility.

Solar power, which today represents a $7 billion market is also expanding rapidly, says Little. "Although solar's cost per kilowatt hour is fives times that of wind energy, that's largely offset by its distributed power capability. Solar can generate power locally without the need for transmission lines."

GE initiated its solar energy bet last April with the acquisition of AstroPower Inc., a leading manufacturer of solar electric power products. Customers range from solar-housing projects where GE's roof-integrated solar panels could supply as much as 70% of a home's power needs.

At Shafer Vineyards in Napa, Calif., solar power has taken the facility entirely off the grid, says Dean Marks, president of Premier Power, GE's Northern California distributor. With GE's collaboration, Premier integrated the 129-kilowatt solar electric system into the vineyard's landscaping and existing structures.

System output: about 12,900 kilowatt hours per month or approximately 155,000 kilowatt hours per year. That could power roughly 20 to 30 U.S. homes. Doug Shafer, the vineyard's president, anticipates the project to pay for itself in seven to eight years. In addition, the winery is on track to receive a rebate of up to $490,000 from Pacific Gas and Electric Co. through the local utility's Self Generation Incentive Program, which covers up to half the cost of clean, on-site electric generating systems.

The Grid As Standby

Regardless of the rising energy cost for Bob Bechtold's heating and air conditioning, he gets away free. Bechtold, president of Harbec Plastics Inc., an Ontario, N.Y.-based plastics injection molder, generates his own power and harnesses the waste thermal energy for both heating and cooling.

In the winter, the employees in his 48,000 square-foot facility enjoy forced air and radiant floor heating and in the summer an absorption chiller provides cool breezes. The thermal byproduct is recycled from the 25 ultra-low emission 30-kilowatt microturbines (natural gas powered) from Capstone Turbine Corp., Chatsworth, Calif.

Bechtold evolved his distributed power strategy in 2000 as a result of many motivators. At the top of his list is the need to have the flexibility to gain maximized economic advantage. "If you have your own generating capacity, that adds the ability to avoid being victimized by factors of energy supply and demand.

"For example, natural gas price hikes mean we just generate enough electricity to give us the heating and cooling, and we use more grid supplied electricity." The only constant in his energy strategy is how he depends on his 250-kilowatt wind turbine. "It produces 20% of our total annual energy usage." That shields 20% of our energy usage from any price volatility, he adds. "That gives me an opportunity for building my opportunities for competitive advantage into the future." Bechtold says a distributed power generation strategy also helps resolve power quality problems.

For those power users who have doubts about distributed power generation, Bechtold asks them to take a close look at any utility's central generating facilities regardless of whether it's natural gas, coal, or nuclear. "They all have elaborate systems for dissipating waste heat. Ask yourself what you could do with that waste heat. That's a big part of the benefit of distributed generation."

For John Tucker, Capstone's president and CEO, the central issue is reduced to "are you ready to take control of your generation?" In addition to maximizing an energy strategy ala Harbec, Tucker's microturbines are being implemented in more unusual circumstances. Examples: energy recovery from coal mine or landfill methane gas and powering offshore drilling platforms.

In preparing a strategy to confront an energy problem, the real challenge may be in realizing that what may have begun as a departmental issue has to be considered as an enterprise opportunity. For example, consider that market analysts tend to relate the quality of energy management as a key corporate performance indicator.

Bibeau also notes that in GM's case, a meaningful approach to renewable solutions was only possible after the company consolidated and integrated its old divisional organization. He says GM's original divisional separation would have been a substantial detriment to corporate-wide energy initiatives in the manufacturing and assembly steps.

Further clues on embracing the potential of energy solutions can be found in how Bibeau presents the values of Green Power. He keeps a list, and cost savings are not at the top of it. That's where he puts "Positive Impact on the Environment" and "The Right Thing To Do." Immediately after "Cost Savings" comes "Energy Hedge" and "Improved Reliability." Last on the list: "Enhanced Public Image" and "Potential of Increased Sales."

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