From coast to coast, rising energy costs are hitting foundries hard. For many foundries, including AB&I Foundry in Oakland, CA, and Bridesburg Foundry in Whitehall, PA, energy is a huge expense, only behind raw materials and labor in terms of costs of doing business.
Energy prices are skyrocketing because the growth in energy demand is rising faster than the growth in supply. By 2030, the Energy Information Administration expects electricity demand to grow by 44% globally, and as high as 73% in developed countries (EIA, “International Energy Outlook 2009,” 5/09). If present trends continue, United States peak energy demand will exceed a terawatt in the early 2020s.
While energy costs are volatile, over the long-term, the EIA data suggests that the challenge of rising energy costs is not likely to fade away anytime soon. Foundries have begun to adopt more energy-efficient practices to help cut back on operating costs and eliminate energy waste. Demand response is one approach that’s being widely adopted because it pays foundries directly for their participation, enables significant cost-savings, and has minimal impact on day-to-day business operations. It is a technology-based concept that is efficient and offers an immediate, cost-free opportunity to earn payments while improving operational reliability.
What is demand response?
Because electricity cannot be stored like other resources, supply and demand must remain in balance. Traditionally, balance has been maintained through the use of designated peaking power plants during times of peak demand. As a result, approximately 10-12% of North America’s power plants are used less than 1% of the time. But, constructing and operating these peaking power plants have major economic and environmental effects.
Typical 100-MW peaking power plants take about three years and $60-100 million to build, a cost that has risen about 30% since 2006. They also emit approximately 5,100 metric tons of CO2 in 100 hrs of operation (Morgan Stanley Research, “Electric Utilities- Attractive View,” 3/08). In the past, these plants were necessary to avoid blackouts and brownouts and to mitigate dramatic spikes in prices. Demand response tackles the problem by focusing on reducing the amount of demand for electricity, as opposed to generating more electricity, during times of peak demand.
Demand gives electricity users incentives, typically cash or rate reductions, to reduce energy consumption when called into action, typically less than 80 hrs per year. Reductions are customized for each facility and can include turning off lighting, air conditioning, pumps, and other non-essential equipment.
Demand-respones companies, such as EnerNOC Inc., work with commercial, institutional, and industrial businesses to identify ways for individual facilities to reduce energy consumption, without affecting business operations, comfort, or product quality. Once a customized energy-reduction plan is implemented, EnerNOC notifies participating facilities when the electric grid is under duress due to instances of peak demand, spikes in electricity prices, or other grid emergencies. Facility managers then enact their customized energy reduction plan for the duration of the demand-response event, which can last from a few minutes to a few hours. Facilities that participate in DR are paid for being on standby in case a demand-respones event is called, and also based on the amount of electricity they reduce during a demand-respones event.
“EnerNOC DR is really almost too good to be true,” says Vince Rivetti, president of Bridesburg Foundry, which earns approximately $25,000 annually in payments from EnerNOC. “We haven’t had to do too much. They made the whole process really easy. And in the end, we earn significant annual payments.”
How can foundries participate?
Foundries operate some of the most energy-intensive processes of any industry. Many foundries participate in DR by turning furnaces down or off during a DR event. “We make changes in ways that are almost invisible and that most of our team members are unaware of,” says Dave Robinson, engineering manager at AB&I. “DR doesn’t affect our operations, since many of the changes are behind the scenes. The iron in our furnaces may be a little cooler at times, but overall, it has very little impact on production.”
Some foundries choose to shut down all equipment for the duration of the demand-response event. At Bridesburg Foundry, most energy-intensive work is completed early in the day, and most demand-respones events occur in the afternoon on the hottest days of the year. Because most DR events do not coincide with Bridesburg’s peak production periods, the facility can typically shut down completely while still meeting their aggressive production schedules. One benefit of demand response is that facilities always maintain complete control over what is or is not shut down during a DR event, and can choose specific energy reduction procedures based on their current production status.
Benefits of demand response?
Though the energy-reduction strategies foundries adopt typically have little impact on production, they can have significant overall benefits.
Financial benefits — When AB&I signed up for EnerNOC DR in 2007, it committed to reducing 100 kW during a DR event, which netted the company about $7,000 annually. Due to consistently exceeding its target energy reductions, AB&I increased its target to 300 kW, and now receives approximately $15,000 in payments from EnerNOC annually. “When we get a check for an amount like that, it’s significant,” says Robinson. “The payments matter to us, and make us feel like we’re achieving something important and valuable for our company.”
New insights — Some DR providers offer participants energy monitoring software to give them a real-time view into how they are performing against target energy reductions during DR events, and to help identify other areas where energy can be managed more efficiently. Through the use of PowerTrak, EnerNOC’s free, web-based energy-management platform, AB&I learned it could run its compressors less often, saving energy without affecting operations. “We keep finding new ways to reduce energy use without affecting our operation at all, so we’re confident that we can continue to reduce energy in the future – and earn higher payments,” says Robinson.
Easy implementation — Bridesburg Foundry executives agree that the financial benefits of DR participation are paralleled by an equally important related benefit: very little investment of the company’s time. When selecting a demand-respones provider, make sure that the implementation process is clearly outlined, and that you and your team know your roles and responsibilities. With a full-service DR provider, your facility can be enrolled and ready to participate, quickly and easily.
In-house control — During a DR event, foundries retain control over how furnaces are shut down, a critical capability that recognizes the unique nature of foundry work. Facilities can choose their specific energy reduction plan based on where the production process stands. Given the complexity of foundries, there may also be times when participating in a DR event is impossible. To minimize risk, it’s important to select a DR provider that will protect you from the penalties associated with non-performance.
Simple change — “Change is difficult in our industry,” says Robinson. “People in a foundry operation get used to doing things certain ways… [But] if you don’t innovate, you disappear.” With demand response, many changes go unnoticed by employees, since the adjustments are centrally controlled, do not affect operations, and even more importantly, do not affect final product quality. Although changes from DR are not drastic, it is one innovation that impacts companies’ bottom lines and enables them to stay competitive in a challenging economy.