Chemical makers play the power game

Chemical manufacturers are using a range of strategies to cope with rising power costs. They are relying more on pooling and cogeneration.

By Mike Spear, editor at large

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Faced with rapidly rising power costs, chemical manufacturers are using a range of strategies to tackle the problem, starting at the corporate level and progressing all the way through to energy-saving activities at the plant level.

The scale of the problem — some even say crisis — was highlighted by the American Chemistry Council (ACC), Arlington, Va., in its recent presentation to the Senate subcommittee on energy and mineral resources. “Today, U.S. natural gas prices are the highest in the world,” the ACC noted, comparing the more than $7 per million BTU cost in the US to Europe’s $5.25, China and Japan’s $4.50 and the $1.25 or less in the Middle East and Russia. This obviously impacts on operating costs at existing plants within an industry that is the nation’s largest consumer of natural gas. Indeed, more respondents (almost one-third of the total) to a recent Chemical Processing survey on costs that most threaten the competitiveness of plants put energy first; feedstock/raw material costs came in a relatively close second, with other factors far behind (see CP, July, p. 13). This competitive disadvantage, of course, doesn’t just affect current plants. It also is now driving investment away from the U.S. chemical industry. “Of the 125 world-scale chemical plants now under construction around the world,” says the council, “50 are being built in China, but only one in the U.S.”

Although the chemical industry has no real sway over the actual price of natural gas, the ACC has welcomed the energy tax package put forward in June by the Senate finance committee. This package includes incentives for manufacturers to switch from natural-gas-fired operations to ones that make more use of synthetic gas produced from coal, biomass and waste materials — a move that has the potential, says the council, of replacing some 7% of total natural-gas demand with synthesis gas, at about two-thirds the current delivered price of natural gas.

The necessary gasification technology for that to happen is already available, of course, but it is hardly an overnight solution to today’s problems of high energy costs. What plants need right now are either cheaper energy prices or ways of reducing their power consumption by improving the energy efficiency of their operations.

The power of pooling
As the ACC recognizes, energy pricing policy is as much a political issue as it is a commercial one. However, one proven way for industry to drive down the price posted by its electricity suppliers is the practice of “power pooling.” Introduced not long after the deregulation of the power industry in the late 1990s, the concept of power pooling calls for like-minded manufacturers to act in concert and leverage their collective buying power to obtain lower energy rates.

One of the first examples of this in the chemical industry was the pool set up by the Chemistry Council of New Jersey (CCNJ) in 1999. Over 40 of its members formed what is still the nation’s largest industrial energy-aggregation group, with each company — including some of the largest chemical and pharmaceutical operators in the state — saving an average of 15-20% in charges. “New Jersey’s energy costs continue to be the fifth highest in the nation and our energy pooling program has worked to the advantage of our members,” says Hal Bozarth, CCNJ executive director. “By combining our buying power of nearly 260 MW of peak electricity load, participating member companies have saved nearly $20 million on energy costs and have a higher level of budget certainty.”

The New Jersey buying pool is renewing its contracts for a third time, while a similar pool is about to be set up in Texas through a partnership with the Texas Chemical Council, the Association of Chemical Industry in Texas, and Priority Power Management (PPM), a Texas-based energy management and consulting services firm.

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