Use it or Lose it: Chemical Industry Energy Consumption

May 15, 2005
One of the chemical industry’s biggest—and most misunderstood—business opportunities is the recovery of income lost to energy waste.

One of the chemical industry’s biggest—and most misunderstood—business opportunities is the recovery of income lost to energy waste.  Out of 3.73 quadrillion Btu of fuel and electricity delivered “to the fence” of chemical industry facilities in 2001, a conservative estimate claims that 37 percent (1.36 quads) was lost in combustion, distribution, and energy conversion activities.  At today’s fuel prices of about $7 per MMBtu, those losses equate to over $26 billion.

Table 1 presents an overview of the U.S. chemical industry’s energy use and losses in 2001.

The fundamental laws of physics and thermodynamics make some losses unavoidable, but much of this loss is an opportunity to embrace efficient technologies and practices.  Every one percent recapture of energy losses saves the chemicals industry over $95 million.  Estimates of practical energy savings available to industry range from 10 to 20 percent.  Note that this is an industry average—some plants can save more than this range, some less.  If the chemical industry recaptured 10 percent of energy waste, this would represent $1.7 billion.  Keep in mind that each dollar of energy cost savings is one extra dollar of net income.   

Case studies and research conducted by the Alliance to Save Energy have articulated industry’s energy management barriers and strategies.  The Alliance shares some major lessons:

• Technology is crucial to achieving energy efficiency, but plant managers not fully convinced by even by impressive site demonstrations. This is especially true when managers feel that risks are involved.
• Information is crucial to adopting energy efficient solutions. But the best of engineering proposals, cash flow projections and even outright public grants cannot always overcome the barriers that manifest within manufacturing organizations.
• Top management direction does not always ensure that energy efficiency will be effectively carried out. The conflicting accountabilities that arise from a lack of cooperation across departments and production facilities within a company must first be recognized, then circumvented.
• Energy management is a process, not a project.  Sure, engineering hardware projects are part of the solution.  But energy-smart behaviors, folded into standard operating procedure, represent about 30 percent of potential energy savings.

The barriers to industrial energy efficiency include lack of awareness, lack of cross-departmental cooperation, outdated accounting techniques, restrictive budget and financial criteria, lack of management accountability, lack of resources, and complacency.  We will take up a spirited discussion of these in next month’s column.

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