Nearly all forms of energy have gotten more expensive in the past couple of years. However, the North American chemical industry pays particular attention to the cost of natural gas. After all, the industry relies heavily on the gas, which serves both as a source of energy and feedstocks. Indeed, the chemical industry ranks as the largest industrial consumer of natural gas in the U.S., representing 3 percent of the national market, according to federal statistics.
Spot gas prices hit near-record highs last winter, as colder-than-average temperatures exacerbated tightening gas supplies. Gas was running at $6 per million cu.ft. (mmcf) last spring, but has eased to around $4.50,"going from "horrible to merely awful," says Tom Gilroy of the American Chemistry Council (ACC), Alexandria, Va.
Energy forecasters expect somewhat calmer markets near-term, while meteorologists foresee a mild winter. However, long-term macro trends point to adequate supplies but at higher prices.
So, time is ripe to dust-off your old energy-conservation plans. Projects or maintenance activities hard to justify with gas at $2 or $3/mmcf may make good economic sense now. "A few months or years ago, you would have called these conservation opportunities the stereotypical low-hanging fruit,'" says Neal Elliott, program director at the American Council for an Energy-Efficient Economy (ACEE), a Washington, D.C., think tank. "Today, they're rotting fruit lying on the ground."
Jobs and energyGas prices affect the competitiveness of the U.S. chemical industry and impact jobs. In September, the National Petroleum Council (NPC), an industry advisory body to Secretary of Energy Spenser Abraham, released a report entitled "Balancing Natural Gas Policy,"Fueling the Demands of a Growing Economy." The report notes, "Gas consumption will grow, but such growth will be moderated as the most-price-sensitive industries become less competitive, causing some industries and associated jobs to relocate outside North America."
With the economy and jobs emerging as key political issues in the buildup to next year's presidential election, we can expect that energy policy will be a legislative priority. However, any law passed,"even tomorrow,"won't affect actual gas supplies for years. Expedited permitting for new gas wells could produce gas in a year or two. An Alaska pipeline for supplies from there and western Canada will take three years or more. LNG terminals being planned now will only impact gas supplies significantly in 2006 and beyond. "Greater energy efficiency and conservation are vital near-term and long-term mechanisms for moderating price levels and reducing volatility," concludes NPC.
What to do nowThe Dept. of Energy has well-established programs to spur energy conservation. One program has established Industry Assessment Centers (IACs) specifically for small- to medium-sized manufacturers. These centers offer a wealth of information; check www.oit.doe.gov to find a center near you.
Of course, many conservation opportunities fall squarely in the category of good plant management. Cases in point:
Steam traps. Leaky steam traps are relatively easy to find and fix. Yet a rigorous review of their performance can save six figures annually in energy costs.
Compressed air circuits. Many systems are overpressured, leak, or let down pressure wastefully. Older air compressors may be electrically inefficient.
Insulation systems. Much pipe and vessel insulation probably was sized on the basis of cheaper steam costs. Plus, some insulation may be worn out and ineffective.
Improvements in these areas generally have paybacks of a year or less. Other projects, often with a less-than-three-year payback, involve capital expenditures for heat recovery boilers, energy-efficient motors, or advanced control software and sensors.
A thoroughgoing conservation program usually begins with a "plant-wide assessment" (PWA). "PWAs do not cost a whole lot of money but, even so, many states have funding sources that you can tap into to pay for them," says Ahmad Ganji, an executive with Base Energy Inc., San Francisco, and head of the IAC there.
Surprisingly, even at companies with well-regarded ongoing programs, there is a need to re-evaluate. "We're still continuing to assess lower-cost opportunities," says Ken Tannebaum, Global Energy Conservation Manager for Dow Chemical, Midland, Mich., whose enterprise-wide program is considered the gold standard in the industry. "Plants and processes change dynamically, and we may have neglected some conservation habits during the late 1990s," he notes. "There's always an opportunity to take a closer look."
Paybacks of less than a year, plus cheap or free assessments,"what's not to like? The catch, though, is that the programs demand management attention to succeed. ACEE's Elliott speaks of industry leaders, who are aggressively managing energy costs, laggards, whose plight is near hopeless, and then the "ostriches," who are burying their heads in the sand, wishing that the problem will just go away.
You don't want to be an ostrich, do you?