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Real Prospects for Energy Efficiency in the United States (2010)

Chapter: 4 Energy Efficiency in industry

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Suggested Citation:"4 Energy Efficiency in industry." National Academy of Sciences, National Academy of Engineering, and National Research Council. 2010. Real Prospects for Energy Efficiency in the United States. Washington, DC: The National Academies Press. doi: 10.17226/12621.
×

4
Energy Efficiency in Industry

Building on improvements in energy efficiency in U.S. industrial manufacturing that have occurred over the past several decades in response to volatile fossil-fuel prices, fuel shortages, and technological advances is essential to maintaining U.S. industry’s viability in an increasingly competitive world. The fact is that many opportunities remain to incorporate cost-effective, energy-efficient technologies, processes, and practices into U.S. manufacturing. This chapter describes the progress made to date and the magnitude of the untapped opportunities, which stem both from broader use of current best practices and from a range of possible advances enabled by future innovations. It focuses on the potential for improving energy efficiency cost-effectively in four major energy-consuming industries—chemical manufacturing and petroleum refining, pulp and paper, iron and steel, and cement—and discusses the role of several crosscutting technologies as examples. In addition, this chapter identifies major barriers to the deployment of energy-efficient technologies, outlines the business case for taking action to improve the energy efficiency of U.S. manufacturing, and presents the associated findings of the Panel on Energy Efficiency Technologies.

4.1
ENERGY USE IN U.S. INDUSTRY IN A GLOBAL CONTEXT

As shown in Chapter 1, Figure 1.1, industry is responsible for 31 percent of primary energy use in the United States. Figure 4.1 illustrates how this energy use was distributed among industries, particularly the most energy-intensive ones, in 2004.

Suggested Citation:"4 Energy Efficiency in industry." National Academy of Sciences, National Academy of Engineering, and National Research Council. 2010. Real Prospects for Energy Efficiency in the United States. Washington, DC: The National Academies Press. doi: 10.17226/12621.
×
FIGURE 4.1 Total energy use in the U.S. industrial sector in 2004, quadrillion Btu (quads). Values include electricity-related losses. Total U.S. energy use in 2004 was 100.4 quads; total U.S. industrial energy use in 2004 was 33.6 quads.

FIGURE 4.1 Total energy use in the U.S. industrial sector in 2004, quadrillion Btu (quads). Values include electricity-related losses. Total U.S. energy use in 2004 was 100.4 quads; total U.S. industrial energy use in 2004 was 33.6 quads.

Source: Craig Blue, Oak Ridge National Laboratory, based on EIA (2004) (preliminary) and estimates extrapolated from EIA (2002).

Globally, industry is the largest consumer of energy—the energy that it consumes exceeds that devoted to transportation, the residential sector, and commercial buildings combined. According to the International Energy Outlook 2009, the industrial sector worldwide used 51 percent of the total delivered energy (or 50 percent of the primary energy) in the year 2006, and its demand was projected to grow by an annual rate of 1.4 percent between 2006 and 2030 (EIA, 2009a).1 Before 1973, manufacturing was the largest energy consumer in most member countries of the Organisation for Economic Cooperation and Development (OECD), but in recent years its dominance has subsided as industrial output has slowed, energy efficiency has increased, and other sectors have surged ahead (Schipper, 2004). As a result, industrial energy demand in OECD countries was anticipated to grow only 0.6 percent annually. In contrast, industrial-sector energy

Suggested Citation:"4 Energy Efficiency in industry." National Academy of Sciences, National Academy of Engineering, and National Research Council. 2010. Real Prospects for Energy Efficiency in the United States. Washington, DC: The National Academies Press. doi: 10.17226/12621.
×

consumption in non-OECD countries was projected to increase by 2.1 percent per year over the same period, with the most rapid growth occurring in China and India.

As of 2006, industry accounted for 33 percent of the primary energy consumed in the United States and 28 percent of carbon dioxide (CO2) emissions (EIA, 2008). Overall, the quantity of energy used by U.S. industries is huge, estimated at 32.6 quadrillion British thermal units (quads) of primary energy in 2006 at a cost of $205 billion. About 5 quads, or 21 percent of this total, was for nonfuel uses of coal, gas, and oil—for example, the use of oil refining by-products in asphalt, natural gas employed as a feedstock for petrochemicals, and petroleum coke used in the production of steel (EIA, 2009b). U.S. industries use more energy than the total energy used by any other Group of Eight (G8) nation and about half of the total energy used by China (DOE, 2007b).

The average annual rate of growth of energy in the U.S. industrial sector is projected to be 0.3 percent out to 2030, while CO2 emissions from U.S. industry are projected to increase more slowly, at 0.2 percent annually (EIA, 2008). These low rates are due partly to the presumed introduction of energy-efficient technologies and practices in industry. They also reflect the projected restructuring of the economy away from energy-intensive manufacturing and toward service and information-based activities. Many of the commodities that were once produced in the United States are now manufactured offshore and imported into the country. The energy embodied in these imported products is not included in the standard energy metrics published by the Energy Information Administration (EIA) of the Department of Energy (DOE). According to an analysis by Weber (2008), products imported into the United States in 2002 had an embodied energy content of about 14 quads, far surpassing the embodied energy of exports from the United States (about 9 quads).

The most energy-intensive manufacturing industries are those producing metals (iron, steel, and aluminum); refined petroleum products; chemicals (basic chemicals and intermediate products); wood and glass products; mineral products such as cement, lime, limestone, and soda ash; and food products. As shown in Figure 4.1, these industries are responsible for more than 70 percent of industrial energy consumption. Industries that are less energy-intensive include the manufacture or assembly of automobiles, appliances, electronics, textiles, and other products.

Suggested Citation:"4 Energy Efficiency in industry." National Academy of Sciences, National Academy of Engineering, and National Research Council. 2010. Real Prospects for Energy Efficiency in the United States. Washington, DC: The National Academies Press. doi: 10.17226/12621.
×

4.1.1
Recent Trends in Industrial Energy Use

Primary-energy use in the industrial sector declined in the 1970s following the run-up of energy prices. Energy consumption bottomed out in the mid-1980s and then increased steadily through the turn of the century, exceeding its previous peak. Table 4.1 shows energy use for selected years within this period (excluding nonfuel uses). In recent years, industrial energy use has declined partly as a result of the economic restructuring noted above. Energy use in the manufacturing sector continues to be significantly higher than in the nonmanufacturing sectors, which include agriculture, forestry and fisheries, mining, and construction. Energy-use trends in some sectors have been relatively stable, such as in chemical manufactur-

TABLE 4.1 Total U.S. Industrial Energy Use (Excluding Nonfuel Uses of Coal, Oil, and Natural Gas), in Selected Years from 1978 to 2004 (in quadrillion Btu)

Usea

1978

1985

1990

1995

2002

Food Manufacturing, Beverage, and Tobacco (311/312)

1.36

1.4

1.35

1.72

1.77

Textile Mills, Textile Mill Products (313/314)

0.53

0.43

0.46

0.54

0.44

Apparel, Leather and Allied Products (315/316)

0.19

0.10

0.11

0.16

0.66

Wood Product Manufacturing (321)

0.64

0.52

0.59

0.67

0.70

Paper Manufacturing (322)

2.38

2.66

3.16

3.17

3.14

Printing and Related Support Activities (323)

0.16

0.15

0.20

0.22

0.23

Petroleum and Coal Products Manufacturing (324)

3.09

2.01

3.37

3.37

3.92

Chemical Manufacturing (325)

4.20

3.05

4.22

4.22

4.06

Plastic and Rubber Products Manufacturing (326)

0.45

0.44

0.52

0.67

0.86

Nonmetallic Mineral Product Manufacturing (327)

1.62

1.16

1.29

1.23

1.32

Primary Metal Manufacturing (331)

5.01

2.43

2.73

2.74

2.70

Fabricated Metal Product Manufacturing (332)

0.66

0.58

0.65

0.75

0.72

Machinery Manufacturing (333)

0.50

0.38

0.43

0.44

0.39

Computer and Electronic Product Manufacturing (334)

0.29

0.39

0.47

0.47

0.38

Electrical Equipment, Appliance, and Component Manufacturing (335)

0.24

0.23

0.29

0.34

0.27

Transportation Equipment (336)

0.73

0.66

0.70

0.77

0.82

Furniture and Related Product Manufacturing (337)

0.12

0.09

0.12

0.13

0.14

Miscellaneous Manufacturing (339)

0.14

0.11

0.12

0.14

0.17

Total (Manufacturing)

22.3

16.8

20.8

21.7

22.1

Total (Non-Manufacturing)

Not available

6.0

4.8

5.5

3.3

aNorth American Industry Classification System codes are given in parentheses. Totals may not equal sum of components due to independent rounding.

Source: U.S. Department of Energy, U.S. Energy Intensity Indicators, Trend Data, Industrial Sector. Available at http://www1.eere.energy.gov/ba/pba/intensityindicators/.

Suggested Citation:"4 Energy Efficiency in industry." National Academy of Sciences, National Academy of Engineering, and National Research Council. 2010. Real Prospects for Energy Efficiency in the United States. Washington, DC: The National Academies Press. doi: 10.17226/12621.
×

TABLE 4.2 Primary Energy Consumption by Type of Fuel in the U.S. Industrial Sector (quadrillion Btu, or quads)

 

1978

1985

1990

1995

2002

Petroleum

9.87

7.74

8.28

8.61

9.57

Natural gas

8.54

7.08

8.50

9.64

8.67

Coal

3.31

2.76

2.76

2.49

2.03

Renewable energy

1.43

1.91

1.67

1.91

1.68

Source: U.S. Department of Energy, U.S. Energy Intensity Indicators, Trend Data, Industrial Sector. Available at http://www1.eere.energy.gov/ba/pba/intensityindicators/.

ing and wood product manufacturing. In other sectors, however, energy use has increased significantly. For example, energy use in the plastic and rubber products manufacturing sector almost doubled between 1978 and 2002.

Petroleum and natural gas are the two most common fuels consumed by the industrial sector (Table 4.2). While the use of petroleum and natural gas increased by 24 and 22 percent, respectively, from 1985 to 2002, coal consumption dropped by approximately 27 percent. The use of renewable energy has fluctuated over the years, totaling 1.43 quads in 1978, rising to 1.91 quads in 1985, and then retreating to 1.68 quads in 2002.

4.1.2
Energy-Intensity Trends and Comparisons

Between 1985 and 2003, industrial-sector gross domestic product (GDP) increased by 64 percent, while industrial energy use increased by only 12 percent (Figure 4.2), resulting in a significant decline in the energy intensity of the industrial sector (DOE/EERE, 2008). As previously noted, over the past decade structural factors (the change in manufacturing output relative to industrial output and the shift among manufacturing sectors to less energy-intensive industries) have caused a decline in energy intensity and in total industrial energy use.

By comparing the energy intensity of manufacturing across 13 countries that are members of the International Energy Agency (IEA), Schipper (2004, p. 18) provides a glimpse into the relative efficiency of U.S. manufacturing. A simple comparison of manufacturing energy use per dollar of output suggests that the United States has a slightly higher than average manufacturing energy intensity. This is corroborated by statistics from the IEA (2004, p. 69) on energy use per unit of manufacturing value added in countries that are members of the OECD.

Suggested Citation:"4 Energy Efficiency in industry." National Academy of Sciences, National Academy of Engineering, and National Research Council. 2010. Real Prospects for Energy Efficiency in the United States. Washington, DC: The National Academies Press. doi: 10.17226/12621.
×
FIGURE 4.2 Trends in U.S. industrial sector gross domestic product (GDP), energy use, structure, and energy intensity, 1985–2003. Industrial GDP increased 64 percent between 1985 and 2003; energy intensity (energy use per dollar of GDP) declined by 19 percent over the same period, with most of the decline occurring since 1993. “Structure” represents the change in manufacturing as a fraction of total industrial output, and the changes that have occurred within manufacturing.

FIGURE 4.2 Trends in U.S. industrial sector gross domestic product (GDP), energy use, structure, and energy intensity, 1985–2003. Industrial GDP increased 64 percent between 1985 and 2003; energy intensity (energy use per dollar of GDP) declined by 19 percent over the same period, with most of the decline occurring since 1993. “Structure” represents the change in manufacturing as a fraction of total industrial output, and the changes that have occurred within manufacturing.

Manufacturing, which is more energy-intensive than nonmanufacturing, has seen a growth in GDP relative to total industrial GDP, with most of that change occurring since 1995. This factor has added about 6 percent to energy use, most of this effect occurring after the recession in the early 1990s. Manufacturing industries that are less energy-intensive have grown relative to those manufacturing industries that are highly energy-intensive, thus reducing the energy intensity of manufacturing as a whole.

Source: DOE/EERE, 2008.

The United States is considered a country with medium energy intensity country along with Finland, Sweden, and the Netherlands. High-energy-intensity countries include Norway, Australia, and Canada. At the same time, the United States has a less energy-intensive manufacturing sectoral structure relative to the other 12 IEA member countries, many of which are big producers of raw materials (e.g., Australia, Canada, the Netherlands, Norway, and Finland).2 Correcting for this difference raises the U.S. energy-intensity index compared with that of other IEA coun-

2

Taking into account the activity of multinational corporations headquartered in each country.

Suggested Citation:"4 Energy Efficiency in industry." National Academy of Sciences, National Academy of Engineering, and National Research Council. 2010. Real Prospects for Energy Efficiency in the United States. Washington, DC: The National Academies Press. doi: 10.17226/12621.
×

TABLE 4.3 “Business as Usual” Forecast of U.S. Industrial Energy Consumption (quadrillion Btu, or quads)

Industry

2006

2020

2030

Refining

3.94

6.07

7.27

Aluminum

0.39

0.36

0.33

Iron and steel

1.44

1.36

1.29

Cement

0.45

0.43

0.41

Bulk chemical

6.83

6.08

5.60

Paper

2.18

2.31

2.49

Total

32.6

34.3

35

Source: EIA, 2008a.

tries. While the analysis by Schipper is based on somewhat dated statistics (focusing on 1994), the panel’s assessment is that its fundamental conclusion regarding the relative energy inefficiency of U.S. manufacturing remains valid.

The EIA’s Annual Energy Outlook 2007 forecasted that U.S. industrial energy consumption would increase from approximately 34.1 quads in 2006 to 35.8 quads in 2020 and 38.7 in 2030 (EIA, 2007). This baseline forecast assumed the continuation of current policies and some autonomous, or naturally occurring, efficiency improvement (see Section 4.2.1.4).

The EIA’s Annual Energy Outlook 2008 reduced the 2007 forecast’s projected increase in U.S. industrial energy consumption substantially to reflect the nation’s economic slowdown, rising energy prices, and the passage of the Energy Independence and Security Act of 2007 (P.L. 110-140) (EIA, 2008). With rising prices and more policy levers encouraging energy efficiency, greater energy efficiency improvement is anticipated to occur naturally as part of the 2008 baseline forecast. Specifically, the 2008 EIA estimate of U.S. industrial energy consumption for 2006 is 32.6 quads, 34.3 quads for 2020, and 35.0 quads for 2030 (Table 4.3). With a lower anticipated rate of growth in energy consumption, the potential for further cost-effective efficiency improvements must be recalibrated. This has been done by scaling the percentage savings for 2007 to the 2008 projections (see Section 4.2.1.1).

Suggested Citation:"4 Energy Efficiency in industry." National Academy of Sciences, National Academy of Engineering, and National Research Council. 2010. Real Prospects for Energy Efficiency in the United States. Washington, DC: The National Academies Press. doi: 10.17226/12621.
×

4.2
POTENTIAL FOR ENERGY SAVINGS

4.2.1
Review of Studies of Energy Efficiency Potential

Two major studies that have attempted to assess the potential for cost-effective energy efficiency improvements across the U.S. industrial sector—Scenarios for a Clean Energy Future (IWG, 2000) and The Untapped Energy Efficiency Opportunity in the U.S. Industrial Sector (McKinsey and Company, 2007)—are described below. In addition, many studies have examined the potential for energy efficiency in individual manufacturing industries such as aluminum, chemicals, and paper; others have focused on the potential impact of specific technologies (such as membranes or combined heat and power [CHP]) or families of technologies (e.g., sensors and controls, fabrication and materials). Such cross-sectional studies are the subject of Section 4.3 (focusing on major energy-consuming industries) and Section 4.4 (focusing on crosscutting technologies and processes). Because they do not treat the industrial sector comprehensively, these studies do not enable a sector-wide estimation of economic energy efficiency potential. However, they provide valuable benchmarking of the two comprehensive studies discussed below. In addition, there are state-level and international assessments of industrial energy efficiency potential, which are also drawn on below.

4.2.1.1
U.S. Industrial-Sector Assessments

In the DOE-sponsored study Scenarios for a Clean Energy Future (CEF), prepared by the Interlaboratory Working Group on Energy-Efficient and Clean Energy Technologies (IWG), a portfolio of advanced policies3 was estimated to reduce energy consumption in the industrial sector by 16.6 percent relative to a business-as-usual (BAU) forecast, at no net cost to the economy (IWG, 2000; see also Brown et al., 2001, and Worrell and Price, 2001). The assumptions made in the study regarding cost-effectiveness are detailed in Box 4.1. The policies were assumed to be implemented in the year 2000; the 16.6 percent reduction was the difference between the BAU forecast for 2020 and the scenario trajectory

3

The effects of many policies for reducing energy use and greenhouse gas emissions from industry are modeled in Scenarios for a Clean Energy Future (IWG, 2000). These include industry-wide agreements to reduce greenhouse gas emissions, the expanded deployment and marketing of ENERGY STAR® buildings, the rapid expansion of industrial energy assessment programs, and a carbon cap-and-trade system.

Suggested Citation:"4 Energy Efficiency in industry." National Academy of Sciences, National Academy of Engineering, and National Research Council. 2010. Real Prospects for Energy Efficiency in the United States. Washington, DC: The National Academies Press. doi: 10.17226/12621.
×

BOX 4.1

Cost-Effectiveness of Industrial Energy Efficiency Investments

Investment decisions can be characterized by the internal rate of return (IRR), also called the hurdle rate, used to trigger an expenditure. The IRR involves a discounted cash flow analysis that is based on a firm’s cost of capital plus or minus a risk premium to reflect the project’s particular risk profile. McKinsey and Company (2007, 2008) assumes that investments with an IRR greater than 10 percent are cost-effective. In their studies, each investment opportunity is treated individually; no integrated analysis is conducted to determine whether investments in one technology might impact the economics of other investment options.

The CEF study, Scenarios for a Clean Energy Future (IWG, 2000), does not use a single hurdle rate. Rather, it draws on a variety of best-in-class modeling approaches that employ economic metrics seen as appropriate to particular sectors and technologies.

For example, in the buildings sector, the business-as-usual hurdle rate is assumed to be about 15 percent (in real terms). In the advanced scenario, the potential impact of individual policies on energy demand was assessed in detailed spreadsheets using lower discount rates (typically about 7 percent), reflecting the influence of supporting policies that remove barriers to the adoption of energy-efficient technologies. The hurdle rates and other parameters inside the buildings-sector modules of the National Energy Modeling System (NEMS; the energy modeling system used by the U.S. Department of Energy’s Energy Information Administration) were then changed so that the model replicates the energy savings calculated from the CEF spreadsheets (IWG, 2000).

In the industrial sector, the business-as-usual hurdle rate was generally assumed to be approximately 30 percent. In the advanced scenario, industrial subsectors were assessed using a hurdle rate of 15 percent to reflect the impact of the policy instruments that reduce transaction costs and financial risks. Combined heat and power (CHP) was modeled separately using Resource Dynamics Corporation’s DISPERSE model because of limitations of the NEMS model (IWG, 2000).

As a final step, the NEMS integration model was used to assess the full range of effects of the economy-wide technology and policy scenarios. The integration step allows technology trade-offs and allows the effects of changes in energy use in each sector to be taken into account in the energy-use patterns of other sectors (IWG, 2000).

in 2020 as defined by advanced policies. The annual energy cost savings from the advanced scenario was estimated to exceed the sum of the annualized policy implementation costs and the incremental technology investments. (See Box 4.2 for further description of the CEF study.)

Suggested Citation:"4 Energy Efficiency in industry." National Academy of Sciences, National Academy of Engineering, and National Research Council. 2010. Real Prospects for Energy Efficiency in the United States. Washington, DC: The National Academies Press. doi: 10.17226/12621.
×

BOX 4.2

The Scenarios for a Clean Energy Future Study

The study Scenarios for a Clean Energy Future (CEF; IWG, 2000) was conducted by scientists at five U.S. Department of Energy (DOE) national laboratories with more than $1 million in funding from the DOE and the U.S. Environmental Protection Agency. Published in November 2000, it involved a comprehensive analysis of U.S. technology and policy opportunities, using a combination of engineering-economic analysis and a modified version of the DOE Energy Information Administration’s National Energy Modeling System (CEF-NEMS). In the study the major sectors of the economy (buildings, industry, transportation, and electricity) were analyzed separately to identify the most cost-effective energy policy and technology alternatives for addressing multiple energy-related challenges facing the nation. Using CEF-NEMS, an integrated assessment of technology and policy options was produced. Seven supplemental studies are published in the CEF report’s 600-page appendix (e.g., an assessment of combined heat and power opportunities). The appendix also contains details of the engineering-economic analysis so as to enable full public disclosure and replication by others. The report had extensive peer review, including that of a blue-ribbon advisory committee, and the results were the subject of a special issue of Energy Policy published in 2001 (see Brown et al., 2001).

Taken from the Annual Energy Outlook 1999, the BAU forecast used in the CEF study (IWG, 2000) estimated that the U.S. industrial sector would require 41.2 quads of energy in 2020. In contrast, the advanced portfolio of policies (defined earlier in the CEF study and assumed implemented by 2020) produced a scenario with industry requiring only 34.3 quads of energy (saving 6.9 quads of energy, a 16.6 percent reduction). The 2008 EIA projection (EIA, 2008) forecasts a BAU industrial-sector consumption of only 34.3 quads of energy in 2020. Scaling the 16.6 percent savings estimate to this lower level of future baseline industrial energy consumption suggests a savings of 5.7 quads, or a possible policy-induced reduction in industrial energy use to 28.4 quads.4 These sector-wide

4

When the panel applies older estimates of percentage improvement to newer (and lower) BAU estimates of energy to estimate the absolute energy savings, it is possible to create double-counting even if there was no double-counting in the original estimate of percentage improvement. That is, some of the energy efficiency improvements in the original estimate may have become a part of the BAU forecast (partially explaining the reduction in the BAU). The panel expects this problem to be negligible or nonexistent, because new energy efficiency opportunities

Suggested Citation:"4 Energy Efficiency in industry." National Academy of Sciences, National Academy of Engineering, and National Research Council. 2010. Real Prospects for Energy Efficiency in the United States. Washington, DC: The National Academies Press. doi: 10.17226/12621.
×

savings estimates do not account for the possible efficiencies available from CHP systems, because at the time of the Annual Energy Outlook 1999, the model used by the EIA—the National Energy Modeling System—was unable to model CHP technology in an integrated manner.

The Scenarios for a Clean Energy Future study commissioned an off-line analysis of the economic energy-savings potential of new CHP under “advanced” policies. This assessment concluded that CHP could reduce the energy requirements of the industrial sector by 2.4 quads in 2020 (IWG, 2000; Lemar, 2001). Scaling this estimate to reflect the downward forecast of future industrial energy consumption suggests an economic savings potential of 2 quads.5 In combination with the sector’s other energy efficiency opportunities identified in the CEF study, this brings the total estimate of economic energy-savings potential to 7.7 quads, or 22.4 percent of the Annual Energy Outlook 2008 (EIA, 2008) forecasted consumption of 34.3 quads in 2020.

Building on the CEF study, on other assessments, and on original research, a more recent publication by McKinsey and Company (2007)6 concurred that U.S. industries have a significant opportunity for energy efficiency gains (Figure 4.3). Financially attractive investments (defined as those with internal rates of return [IRRs] of 10 percent or greater) are estimated to offer 3.9 quads in energy-usage reduction in 2020, compared with the business-as-usual forecast based on the reference case of the Annual Energy Outlook 2007 (EIA, 2007). These investments are estimated by McKinsey and Company (2007) to generate $30–$55 billion in increased earnings, before interest and taxes, by 2020; this earnings growth would, in turn, generate a $210–$385 billion increase in the market value of industrial companies. As shown in Figure 4.3, an additional 1.0 quad is identified by McKinsey and Company (2007) as “additional opportunities through driving R&D,” bringing the estimated energy efficiency potential in the industrial sector to 4.9

arise each year as infrastructure and equipment age and as new and improved technologies are introduced into the marketplace.

5

The EIA 1998 forecast of industrial energy consumption in 2020 was 41.2 quads, and the EIA 2008 forecast is 34.3. Multiplying 2.4 quads times the ratio of these two forecasts (0.83) results in the estimated 2.0 quad savings from the use of CHP.

6

The McKinsey and Company study has been widely criticized for ignoring adoption and transaction costs and the potential impacts on product attributes. For example, it does not include the cost of policy or program implementation, as is done in great detail in the CEF study (IWG, 2000; see Appendix E-1 of that study).

Suggested Citation:"4 Energy Efficiency in industry." National Academy of Sciences, National Academy of Engineering, and National Research Council. 2010. Real Prospects for Energy Efficiency in the United States. Washington, DC: The National Academies Press. doi: 10.17226/12621.
×
FIGURE 4.3 Summary of industrial energy efficiency opportunities through 2020 identified by McKinsey and Company.

FIGURE 4.3 Summary of industrial energy efficiency opportunities through 2020 identified by McKinsey and Company.

Note: GDP = gross domestic product; IRR = internal rate of return; R&D = research and development.

Source: McKinsey and Company, 2007.

quads. Lower-returning projects with positive IRRs below 10 percent are also acknowledged by McKinsey and Company.

Contained within the 3.9 quads of energy efficiency potential are several crosscutting energy-saving opportunities totaling 1.5 quads. CHP represents 46 percent of this opportunity (or 0.7 quad) and is characterized by McKinsey and Company (2007, p. 3) as “the leading cross-segment opportunity.” This estimate for CHP is considerably less than the 2.0 quad estimate from Scenarios for a Clean Energy Future (IWG, 2000). Because McKinsey and Company (2007) does not publish its background data, it is not possible to reconcile these two results. A recent National Research Council (NRC) study concluded that CHP economics are likely to improve in the near term through technology advancements and new niche applications for which CHP offers an economic advantage (NRC, 2007). Perhaps some of this future potential for CHP is included in the McKinsey and Company estimate of savings from new research and development (R&D) investments. There may also be differences in the more limited potential assigned to small (<5 MW) projects by McKinsey and Company (2007, p. 47) compared

Suggested Citation:"4 Energy Efficiency in industry." National Academy of Sciences, National Academy of Engineering, and National Research Council. 2010. Real Prospects for Energy Efficiency in the United States. Washington, DC: The National Academies Press. doi: 10.17226/12621.
×

with the CEF study and others (Pace Energy Project, 2002).7 An additional study by Bailey and Worrell (2005) provides estimates of the opportunity for “nontraditional” CHP technologies. It identifies 7.4 quads of potential savings relative to 2002 U.S. energy consumption. However, only 5 of the 19 technologies identified are related to CHP technologies (i.e., advanced cogeneration, steam-injected gas turbine, gas turbine process heater, gas turbine drying, and fuel cells), resulting in an estimated technical energy efficiency potential in industry of about 4.4 quads. This is comparable to the proposition examined by Shipley et al. (2008) that the United States could create a 20 percent generating capacity from CHP by the year 2030, which would lead to a fuel savings of 5.3 quads, or approximately half of the total energy currently consumed by U.S. households. The report also estimates that such an investment in CHP would create 1 million new green-collar jobs and $234 billion in new investments across the United States.

Table 4.4 summarizes the two studies’ estimates of energy-savings potential in various industrial subsectors. It also shows estimates from other U.S. studies and global estimates from the IEA (see Section 4.2.1.2 below). The CEF study estimates a large potential for economic energy savings in pulp and paper manufacturing (6.3 percent), iron and steel (15.4 percent), and cement (19.1 percent) (IWG, 2000, Table 5.8; Worrell and Price, 2001). Applying savings at these percentages to the latest BAU forecast of energy consumption in 2020 (based on the EIA, 2008) results in savings estimates of 0.14, 0.21, and 0.08 quad, respectively.

On a segment-by-segment basis, McKinsey and Company (2007) concluded that the largest untapped opportunities for U.S. industrial energy efficiency savings reside in pulp and paper and in iron and steel. Because of the limited documentation underpinning these estimates, the panel treats them as qualitatively instructive. Relative to the McKinsey and Company study, the CEF study estimates for the iron and steel and cement industries are similar, but the estimate for the pulp and paper industry is significantly lower.

Table 4.5 summarizes the savings estimates in a different way, showing the overall range of savings identified for each energy-intensive industry, and for industry as a whole, and the baseline for the analysis.

7

McKinsey and Company (2007, p. 47) postulates that “the economics of smaller facilities (<5 MW) are less attractive and offer diminished potential for additional energy savings beyond business as usual gains. Other issues with smaller CHP projects include: a) higher operating costs and lower heat rates; and b) high fixed costs (e.g., engineering, design, legal).”

Suggested Citation:"4 Energy Efficiency in industry." National Academy of Sciences, National Academy of Engineering, and National Research Council. 2010. Real Prospects for Energy Efficiency in the United States. Washington, DC: The National Academies Press. doi: 10.17226/12621.
×

TABLE 4.4 Economic Potential for Energy Efficiency Improvements in Industry in the Year 2020: Sector-wide and by Selected Subsectors and Technologies

 

Estimates for U.S. Industry

Global Estimates from IEA (2007) (%)

CEF Study (IWG, 2000) Scaled to AEO 2008 (quads)

McKinsey and Company (2008) (quads)

Other U.S. Studies (quads)

Petroleum refining

n.a.

0.3

0.61–1.21 to 1.40–3.28a

13–16

Pulp and paper

0.14b

0.6

0.37 to 0.85c

15–18

Iron and steel

0.21d

0.3

0.79e

9–18

Cement

0.08f

0.1

0.29g

28–33

Chemical manufacturing

n.a.

0.3

0.19h to 1.1i

13–16

Combined heat and power

2.0

0.7

4.4–6.8j

 

Total, industrial sector

7.7 (22.4%)

4.9 (14.3%)

 

18–26

Note: This table appeared in Lave (2009) before this report was completed. The data in Table 4.4 have been updated since the Lave (2009) article was published. CEF study, Scenarios for a Clean Energy Future (IWG, 2000); AEO 2008, Annual Energy Outlook 2008, with Projections to 2030 (EIA, 2008); n.a., not available.

aBased on a range of 10–20 percent savings (LBNL, 2005) to 23–54 percent savings (DOE, 2006b) from a baseline forecast of 6.08 quads.

b6.1 percent of the 2.31 quads of energy consumption forecast for the paper industry in 2020 by the Annual Energy Outlook 2008 (EIA, 2008).

cBased on 16 percent savings (Martin et al., 2000a) and 37 percent savings (DOE, 2006c) from the baseline forecast of 2.31 quads.

d15.4 percent of the 1.36 quads of energy consumption forecast for the iron and steel industry in 2020 by the Annual Energy Outlook 2008 (EIA, 2008).

eBased on 58 percent savings (AISI, 2005) from the baseline forecast of 1.36 quads.

f19.1 percent of the 0.43 quads of energy consumption forecast for the cement industry in 2020 by the Annual Energy Outlook 2008 (EIA, 2008).

gBased on 67 percent savings (Worrell and Galitsky, 2004) from the baseline forecast of 0.43 quads.

hNational Renewable Energy Laboratory, 2002.

iDOE, 2007.

jBailey and Worrell, 2005.

4.2.1.2
International Assessments

The Intergovernmental Panel on Climate Change (IPCC) came to conclusions similar to those of the CEF (IWG, 2000) and McKinsey and Company (2007) studies regarding the industries with the largest carbon-mitigation potentials worldwide. Specifically, the IPCC identified the steel, cement, and pulp and paper industries as having the largest potential for energy savings (IPCC, 2007).

Suggested Citation:"4 Energy Efficiency in industry." National Academy of Sciences, National Academy of Engineering, and National Research Council. 2010. Real Prospects for Energy Efficiency in the United States. Washington, DC: The National Academies Press. doi: 10.17226/12621.
×

TABLE 4.5 Summary of Estimated Cost-Effective Energy Savings in Industry Resulting from Improved Energy Efficiency (quads)

Industry

Energy Use in Industry

Savings over BAU in 2020a,b

2007

Business as Usual (BAU) Projection (AEO 2008 reference case)

2020

2030

Petroleum refining

4.39

6.07

7.27

0.3–3.28

 

Iron and steel

1.38

1.36

1.29

0.21–0.76

 

Cement

0.44

0.43

0.41

0.29

 

Chemical manufacturing

6.85

6.08

5.60

0.19–1.1

 

Pulp and paper

2.15

2.31

2.49

0.14–0.85

 

Total savings—all industries (including those not shown)

 

 

 

 

4.9–7.7c 14–22%

aBased on Table 4.4, which provides results from a review of studies for specific energy-using industries and for industry as a whole, and for industry-wide combined heat and power (CHP).

bSavings shown are for cost-effective technologies, defined as those providing an internal rate of return of at least 10 percent or exceeding a firm’s cost of capital by a risk premium.

cIncludes CHP systems, which contribute an estimated savings in 2020 of 0.7–6.8 quads.

Tracking Industrial Energy Efficiency and CO2Emissions (IEA, 2007), which estimates energy and carbon savings from the adoption of best-practice commercial technologies in manufacturing industries, suggests an overall level of energy-savings potential of 18–26 percent globally, with large-percentage savings from petroleum refining, pulp and paper, iron and steel, cement, and chemical manufacturing (see Table 4.4). It concluded that, on the basis of physically produced industrial output, Japan and Korea have the highest levels of manufacturing industry energy efficiency, followed by Europe and North America—levels that reflect differences in “natural resource endowments, national circumstances, energy prices, average age of plant, and energy and environmental policy measures” (IEA, 2007, p. 20).

Since the IEA’s estimated energy savings are global percentages, their applicability to the U.S. context is not exact. In particular, care is needed to avoid unrealistic assessments of the savings potential in older industrial plants as compared with new, state-of-the-art facilities. International comparisons, however, underscore the potential for efficiency upgrades by U.S. industry.

Suggested Citation:"4 Energy Efficiency in industry." National Academy of Sciences, National Academy of Engineering, and National Research Council. 2010. Real Prospects for Energy Efficiency in the United States. Washington, DC: The National Academies Press. doi: 10.17226/12621.
×
4.2.1.3
State Assessments

At least two states—New York and California—have conducted assessments of the economic potential for energy efficiency improvements in the industrial sector. These studies help to set parameters for estimation of economic energy efficiency potential at the national scale.

KEMA, Inc. (2006) provides an assessment of the electric and gas energy efficiency potential in existing industrial facilities in four California utility territories, focusing on the year 2016. With a base use of 32,800 GWh forecast for 2016, the study estimates that 4970 GWh of electricity use (i.e., 15.1 percent) could be eliminated by economic efficiency investments—that is, investments that are cost-competitive with supply-side options. For natural gas, 468 million therms of natural gas are forecast to be the magnitude of economic efficiency opportunity in the industrial sector, representing 13 percent of the base use of 3590 million therms in 2016. Figure 4.4 presents the two supply curves, which identify the least-expensive efficiency measures. The least-cost options are arrayed on the left side of the curve in ascending order based on levelized energy costs. The width of each line is proportional to the amount of energy that can be saved. KEMA (2006) concludes that pumping has the largest electric end-use savings potential, followed by compressed air and lighting. Similarly, boilers represent the largest source of natural gas savings potential, followed by process heating.

A similar potential for energy efficiency improvement is described in a 2003 assessment for New York State. According to Optimal Energy, Inc. (2003), the New York Energy Research and Development Authority (NYSERDA) forecasts that the industrial sector will require 33,100 GWh of electricity in the year 2022. Optimal Energy estimates that 5,000 GWh (15 percent) of this base use could be displaced by economic electricity-efficiency measures. The assessment did not evaluate natural gas or other energy-savings opportunities.

A combined heat and power market-potential study conducted by the NYSERDA identified over 5000 MW of installed CHP capacity at more than 210 sites in New York State. Close to 80 percent of this capacity is at industrial sites, represented by a few facilities that have large CHP systems (Pace Energy Project, 2002).

The New York study identified numerous commercial and emerging technologies that can be used for CHP—including the internal combustion engine, steam turbine, gas turbine, micro-turbine, and fuel cell—which constitute nearly 8500 MW of technical potential for new CHP at 26,000 sites. Near-term market-

Suggested Citation:"4 Energy Efficiency in industry." National Academy of Sciences, National Academy of Engineering, and National Research Council. 2010. Real Prospects for Energy Efficiency in the United States. Washington, DC: The National Academies Press. doi: 10.17226/12621.
×
FIGURE 4.4 Energy efficiency supply curves for California through 2016. The width of each portion of the curves is proportional to the amount of energy that can be saved. The fact that these two curves reach a maximum as the cost of efficiency options rises may simply reflect the limited set of technologies considered that have a marginal return on investment.

FIGURE 4.4 Energy efficiency supply curves for California through 2016. The width of each portion of the curves is proportional to the amount of energy that can be saved. The fact that these two curves reach a maximum as the cost of efficiency options rises may simply reflect the limited set of technologies considered that have a marginal return on investment.

Source: KEMA, 2006.

Suggested Citation:"4 Energy Efficiency in industry." National Academy of Sciences, National Academy of Engineering, and National Research Council. 2010. Real Prospects for Energy Efficiency in the United States. Washington, DC: The National Academies Press. doi: 10.17226/12621.
×

penetration forecasts range from 764 MW to nearly 2200 MW over the coming decade. Close to 74 percent of remaining capacity is below 5 MW and is located primarily at commercial and institutional facilities. Achieving this remaining potential depends on the degree to which many of the obstacles outline in Section 4.5 can be overcome.

4.2.1.4
Naturally Occurring Efficiency Improvement

The McKinsey and Company (2007) analysis assumes a significant amount of energy efficiency improvement in the BAU forecast, based on EIA modeling (see in Figure 4.3 the difference between the EIA baseline and the energy demand attributable to GDP growth). The naturally occurring improvement results from capital stock turnover of outdated technologies, as well as from cost reductions and performance improvements achieved from economies of scale and advances in science and technology. Thus, the level of energy efficiency improvement anticipated in the year 2020 relative to today could be large. For example, DOE (2004) identified 5.2 quads of cost-effective energy-savings opportunities from a range of end-uses in industrial energy systems, including steam generation, fired heaters, on-site power generation, motor systems, and facility heating, ventilation, and air-conditioning (HVAC), and lighting systems. More than 35 percent of this total opportunity (1.8 quads) was identified in waste-heat recovery, such as from gases and liquids in chemicals, petroleum, and forest products, including hot gas cleanup and the dehydration of liquid-waste streams. The second largest opportunity (1.4 quads) was identified in best practices in energy management and integration. These are the kinds of potential cost savings that EIA assumes will be absorbed in the BAU case. Relative to today’s energy efficiency practices, industrial energy efficiency improvements in 2020 could save considerably more energy than the 3.9 quads estimated by McKinsey and Company (2007), if the “naturally occurring” efficiency improvements are taken into account.

Looking to the midterm (2020–2035), a wide array of advanced industrial technologies could make significant contributions to reducing industrial energy consumption and CO2 emissions. Possible revolutionary changes include novel heat and power sources and systems and innovative concepts for new products and processes that take advantage of developments in nanotechnology and micro-manufacturing. Examples include the microwave processing of materials and nanoceramic coatings, which show great potential for boosting the efficiency of

Suggested Citation:"4 Energy Efficiency in industry." National Academy of Sciences, National Academy of Engineering, and National Research Council. 2010. Real Prospects for Energy Efficiency in the United States. Washington, DC: The National Academies Press. doi: 10.17226/12621.
×

industrial processes.8 In addition, advances in recycling (resource recovery and utilization)—for example, of aluminum—could reduce the energy intensities of U.S. industry. Many of these approaches provide other benefits as well, such as improved productivity and reduced waste streams.

4.2.2
The Role of Innovation

Most of the current dialogue focuses on new technology that lowers industry’s energy use. In some cases, more important energy savings come from adapting the new technology for use in other sectors. For example, developing a new generation of fuel cells may lead to greater savings in motor vehicles. Other possibilities include “on-demand” manufacturing that applies ink-jet printing systems to three-dimensional fabrication, or new plastics that double as integrated photovoltaic systems (Laitner and Brown, 2005). This role of industry in the development of emerging technologies highlights even greater energy savings than might be apparent from looking at industry’s own energy-use patterns alone. With the growing focus on corporate sustainability, industry is adopting a much broader view of its energy and environmental responsibilities, extending its concern to issues surrounding the sustainability of the products and services that it offers, and including the sustainability of its chain of suppliers. Wal-Mart, for example, has included indicators of energy sustainability in metrics used to select product and service providers.9 Accordingly, contractors that create minimal environmental impact are preferred.

4.3
OPPORTUNITIES FOR ENERGY EFFICIENCY IMPROVEMENTS IN FOUR MAJOR ENERGY-CONSUMING INDUSTRIES

In the chemical and petroleum refining, pulp and paper, iron and steel, and cement industries, numerous opportunities exist for energy efficiency improvements. These opportunities are characterized below in three timeframes: 5–10 years, 10–25 years, and beyond 25 years. For each industry, the size of the economic energy-savings opportunity is described, along with associated costs, performance

8

See http://cleantech.com/news/3476/ceramic-nanotechnology-delivers-efficiency.

9

Jim Stanway, Wal-Mart, personal communication, 2007.

Suggested Citation:"4 Energy Efficiency in industry." National Academy of Sciences, National Academy of Engineering, and National Research Council. 2010. Real Prospects for Energy Efficiency in the United States. Washington, DC: The National Academies Press. doi: 10.17226/12621.
×

improvements, and environmental impacts for each.10 In addition, the discussion characterizes the opportunity for expanding best practices through reinvigorated deployment programs or by removing governmental interventions that might inhibit private-sector funding. Finally, for each of the four major energy-consuming industries, promising R&D is identified that is likely to be required for these technologies to be ready for launch into the marketplace. In each case, government partnerships that might help prepare the technologies for widespread commercialization are noted.

4.3.1
Chemical Manufacturing and Petroleum Refining

The chemical industry manufactures an extensive array of organic and inorganic chemicals and materials. Raw materials include hydrocarbons from petroleum refining, mined chemicals and minerals, and even such animal and plant products as fats, seed oils, sugars, and timber. For energy sources the industry uses petroleum-based feedstocks, natural gas, coal, and electricity—and, to a lesser but growing extent, biomass.11 Products include thousands of bulk and fine organic and inorganic chemicals, polymers, agricultural chemicals, and fertilizers. Production levels are often in million- and billion-pound quantities but do extend to such high-value, low-volume products as pharmaceutical intermediates, specialty adhesives, and even perfume ingredients. Most large chemical companies are research intensive because of the continual need to generate new and improved products, to improve quality and yields, and to conform to environmental regulations.

Companies are often concentrated near petroleum refineries, around shipping ports, or in places where cheap hydroelectric power is available. Energy costs are almost always a major part of total costs, so the need for energy efficiency is great. For some energy-intensive products, energy for fuel and power needs and feedstocks account for up to 85 percent of total production costs. Reflecting higher fuel costs during 2007, the industry spent $73 billion on purchases of fuel and power and energy feedstocks. Overall, energy costs (including feedstock costs) represent 20 percent of production costs and 10 percent of the value of industry shipments (American Chemistry Council, 2008; U.S. Census Bureau, 2007).

The petroleum industry is similar to the chemical industry in its use of

10

A major issue for each industry is the input-output of material flows, including the consumption of conventional fuels as feedstocks (i.e., “nonfuel” uses). It is beyond the scope of this analysis to replicate or characterize such inputs and outputs of alternative production processes.

11

See http://www.chemicalvision2020.org/alt_feedstocks.html.

Suggested Citation:"4 Energy Efficiency in industry." National Academy of Sciences, National Academy of Engineering, and National Research Council. 2010. Real Prospects for Energy Efficiency in the United States. Washington, DC: The National Academies Press. doi: 10.17226/12621.
×

TABLE 4.6 Petroleum and Chemical Industry Energy Use, Selected Years from 1985 to 2002 (quads)

Year

Fuels

Purchased Electricity

Net Energy for Heat and Power

Feedstocksa

Total Net Energy Use

Electricity Lossesb

Total Primary Energy

Petroleum Refining Energy Use

(SIC 2911, NAICS 324110)

1985

2.46

0.11

2.57

2.45

5.02

0.23

5.25

1988

2.95

0.10

2.90

3.26

6.31

0.21

6.52

1991

2.79

0.10

2.89

2.87

5.76

0.21

5.97

1994

3.87

0.11

3.98

2.39

6.26

0.24

6.50

1998

3.48

0.12

3.48

3.75

7.13

0.21

7.34

2002

3.09

0.12

3.09

3.31

6.39

0.12

6.51

Chemical Industry Energy Use

(SIC 28, NAICS 325)

1985

1.78

0.43

1.35

3.57

0.90

4.46

1988

2.27

0.42

1.68

4.36

0.86

5.22

1991

2.25

0.44

2.36

5.05

0.91

5.97

1994

2.35

0.52

2.46

5.33

1.08

6.41

1998

3.70

0.58

2.77

6.06

0.99

7.05

2002

3.77

0.52

3.75

6.47

1.58

8.04

Note: SIC, Standard Industrial Classification; NIACS, North American Industry Classification System.

aPetroleum feedstock used to produce nonenergy products only (e.g., petrochemicals, lubricating oils, asphalt).

bElectricity losses incurred during the generation, transmission, and distribution of electricity are based on a conversion factor of 10,500 Btu/kWh.

Source: Based on data in select DOE reports, 1988–2005.

energy sources and process equipment, but it normally produces a limited range of refined hydrocarbon products in high volume for the transportation industry. Many refining companies have a bulk-chemical arm to manufacture a limited spectrum of high-volume organic chemicals and bulk-polymer intermediates that are natural extensions of their refining operations. Petroleum companies vary in research intensiveness, but they are generally less dependent on finding new products and processes than the chemical industry is.

For these industries, energy efficiency and product yield are generally key to profitability and emissions abatement. Table 4.6 shows U.S. energy consumption for these industries from 1985 through 2002 (EIA, 2002). As can be seen, energy use from year to year was somewhat erratic, but it generally increased. These changes reflect varying industrial production levels, changing product mixes, and

Suggested Citation:"4 Energy Efficiency in industry." National Academy of Sciences, National Academy of Engineering, and National Research Council. 2010. Real Prospects for Energy Efficiency in the United States. Washington, DC: The National Academies Press. doi: 10.17226/12621.
×

efficiency gains. For example, ExxonMobil achieved a 35 percent reduction in the energy intensity of its global refining and chemical operations from 1974 to 1999 and has identified a further 10–15 percent cost-effective energy-savings opportunity in all plants around the world (Expert Group on Energy Efficiency, 2007).

Benchmarking data indicate that most petroleum refineries can economically improve energy efficiency by 10–20 percent (LBNL, 2005), and analysis of individual refining processes indicate energy savings ranging from 23–54 percent (DOE, 2006b). Common technologies include high-temperature reactors, distillation columns for liquid-mixture separation, gas-separation technologies, corrosion-resistant metal- and ceramic-lined reactors, sophisticated process-control hardware and software, pumps of all types and sizes, steam generation, and many others. In the DOE (2006b) petroleum bandwidth study, the largest potential bandwidth savings are found in crude distillation, with savings of up to 54 percent of current average energy for atmospheric distillation (39 percent for vacuum distillation). Alkylation follows closely, with a potential bandwidth savings of 38 percent, and the remaining processes also exhibit significant potential for improving energy efficiencies. According to experts working in the field of petroleum refining and energy management, identifying plantwide energy savings of approximately 30 percent would be typical. However, these savings estimates are calculated on a relative basis. The absolute energy consumption of petroleum refineries in the United States must be adjusted to account for increasingly heavy crude slates over the coming years. When one adjusts for the use of heavier crude slates, the energy consumption of a refinery increases per equivalent amount of refined product.

Numerous reports and studies are available that describe near-, intermediate-, and potentially longer-term technologies to increase energy efficiency (and decrease related carbon emissions) (Expert Group on Energy Efficiency, 2007; DOE, 2006b) for both the chemical and the petroleum-refining industries. Three recent studies provide a wide range of efficiency-potential estimates. On the low side is the estimate that 0.014 quad could be saved by five technologies included in the DOE (2006a) Chemical Bandwidth Study. These technologies are applicable to the production of ethylene, chlorine, ethylene oxide, ammonia, and terephthalic acid. On the high side is the estimate that 1.1 quads of potential energy could be saved (DOE, 2007a). This assessment is based on 16 DOE Industrial Technologies Program (ITP) portfolio technologies (0.58 quad of savings) and five additional R&D technologies from the Chemical Bandwidth Study (0.52 quad of savings). Clearly, the magnitude of energy efficiency improvement will tend to expand or

Suggested Citation:"4 Energy Efficiency in industry." National Academy of Sciences, National Academy of Engineering, and National Research Council. 2010. Real Prospects for Energy Efficiency in the United States. Washington, DC: The National Academies Press. doi: 10.17226/12621.
×

contract depending on the number of technologies that are considered. Interestingly, between these two extremes is an assessment based on a single type of technology and an estimated energy efficiency potential of 0.19 quad in the chemical industry today (DOE, 2002). This assessment is based on 12.4 percent of fuel-savings potential from steam system improvements.

As discussed in Box 4.3, in the chemical industry (as well as in petroleum refining), gaining even the so-called low-hanging fruit for increased energy efficiency faces significant obstacles. However, as is also pointed out, good management practices supported by the top levels of management aim to accomplish the savings over a reasonable time period.

One useful perspective on these risks can be seen in the NRC (2007) report Prospective Evaluation of Applied Energy Research and Development at DOE.12 Based on an examination of 22 high-payoff projects, the NRC panel found that great potential existed for energy and carbon-emissions reductions, but technical and market risks were generally quite high. From an individual company’s viewpoint, the decision to pursue any one of these technology developments could be too risky. This risk is often the reason that DOE partners with individual firms or groups of companies for technology development and demonstration.

While both the chemical and petroleum-refining industries are capable of prolonged and expensive R&D efforts for their own process improvements, advances in crosscutting technologies (such as process-control hardware and software, separation processes and equipment, and heat-management equipment) are often best accomplished by, or in collaboration with, vendors. While chemical and petroleum-refining companies typically develop process designs and specify the desired performance of technologies, they then purchase these technologies, thereby saving their R&D organizations for new-product development and specific process innovations.

In summary, the chemical and petroleum-refining industries have many similarities in raw materials, energy sources, process equipment and control, and the opportunity to achieve significant energy efficiency improvements. They differ in key ways centered around the breadth of product lines and the areas in which innovation will gain them a competitive advantage. Both purchase much of their process equipment and controls from specialty providers, which themselves carry out R&D to improve their offerings. Factors that can impede the use of technol-

12

See, in NRC (2007), the subsection, “Report of the Panel on DOE’s Chemical Industrial Technologies Program.

Suggested Citation:"4 Energy Efficiency in industry." National Academy of Sciences, National Academy of Engineering, and National Research Council. 2010. Real Prospects for Energy Efficiency in the United States. Washington, DC: The National Academies Press. doi: 10.17226/12621.
×

BOX 4.3

Barriers to Plucking Low-Hanging Energy Efficiency Opportunities

Many reports and studies have been written about the tremendous energy-savings opportunities that exist in U.S. energy-intensive industries (as outlined in Section 4.3 in this chapter). A large portion of these savings are often described as ready for the taking with little or no technical risk. As discussed throughout Section 4.3, these claims are true for the most part. So why doesn’t a given company move quickly to make the necessary investments, which often pay themselves back in a year or less? Why are these “sure thing” projects often spread out over years or even sometimes ignored? The answer is simple: competition for capital within a corporation and, in some situations, a lack of time and/or personnel to install the improvements.

The top management of a company is responsible for the health of the corporation. A critical component of this duty is the allocation of limited capital among marketing, sales, manufacturing, research and development, and other functions. Capital allocations are further split into new plant construction, plant improvements and maintenance, office building expansions, and so on. There is tremendous demand at all times for capital in a successful company. This allocation process, as with all the other allocations, is largely decided on the basis of business need. At any given time, more product may be more important than lower energy consumption. Safety and compliance are always the number one priority. So in a given year, there may not be money for energy efficiency.

But even if there is capital for energy efficiency improvements, other constraints exist. Most manufacturing plants have annual shutdowns for maintenance and other alterations. These are carefully planned, with all activities to be done in the shortest

ogy for energy efficiency improvements include the availability of the necessary capital, which must compete with other corporate needs, and, for specific innovations, the costs and risks associated with the marketplace. Generally speaking, both industries are endowed with strong technology and engineering organizations and are aware of the status of the technologies that they need for future improvements. Both, however, are careful in allocating R&D funds. As discussed above, the criteria for such expenditures are strongly influenced by payback times, potential gains in competitive advantage, and the projected timescales and technical and marketing risks for a given innovation.

As a result of these factors, typical industry practice regarding energy-intensive facilities such as large-scale distillation columns is to maintain and use them for as long as possible, primarily because of the large capital investment that

Suggested Citation:"4 Energy Efficiency in industry." National Academy of Sciences, National Academy of Engineering, and National Research Council. 2010. Real Prospects for Energy Efficiency in the United States. Washington, DC: The National Academies Press. doi: 10.17226/12621.
×

time possible. The object is to get up and running so that no product shortages will be created. This shutdown period is especially constraining in times of high product demand. If an energy efficiency improvement cannot be fit into the shutdown period, either because of a long implementation period or possibly a lack of available personnel, it may be passed over for the time being.

The discussion above in no way implies that energy efficiency, with its positive environmental impacts, always gets short shrift—quite the contrary. In energy-intensive industries such as chemical manufacturing, energy efficiency is often where the “big money” is. Well-run companies are usually aware of this and have implemented numerous “best practices” to ensure that they gain these savings as rapidly as possible.

The Dow Chemical Company management, for example, strives to commit its entire organization to energy efficiency in manufacturing (Fred Moore, Dow Chemical Company, December 2007). Top management sets aggressive, 10-year energy efficiency goals for each process. This adds up to a publicly stated energy efficiency goal for the company. To ensure that these goals are met, the company has put into place an energy management organization that is distributed throughout the business units, with reporting lines to the top of the company. Each business unit must have specific 10-year plans that show how it intends to accomplish its part of the company goal and the schedule for doing so. These individual plans consist of three 10-year subplans covering what will be done, what the unit would like to do, and what the unit needs in terms of innovation. Frequent reporting on progress in all three plans is required. Salary, bonus, and career progression are all linked to the goal. From 1994 to 2005, Dow’s programs achieved a 22 percent reduction in energy intensity. The company’s goal for the next 10 years is an additional 25 percent.

they represent. The consequence is that the motivation to replace them with more efficient equipment is often very low.

Three studies estimate the potential for energy savings in the chemical manufacturing industry. The highest estimate is 1.1 quads (18 percent) in 2020 (DOE, 2007a). The lowest, 0.19 quad (3 percent), comes from NREL (2002). The McKinsey and Company (2008) estimate falls within this range.

Three studies also provide estimates of energy-saving potential in the petroleum industry. The highest estimate is a range of 1.40 to 3.28 quads in 2020 (23 to 54 percent of projected energy consumption in this industry) published in a DOE (2006b) report. The lowest estimate, 0.3 quad in 2020 (5 percent), comes from McKinsey and Company (2008). An LBNL (2005) study provides an intermediate range of 0.61 to 1.21 quads saved in 2020 (10 to 20 percent).

Suggested Citation:"4 Energy Efficiency in industry." National Academy of Sciences, National Academy of Engineering, and National Research Council. 2010. Real Prospects for Energy Efficiency in the United States. Washington, DC: The National Academies Press. doi: 10.17226/12621.
×

4.3.2
Pulp and Paper Industry

Pulp and paper production, which constitutes a majority of the forest products industry, consumes about 2.4 quads of energy annually (Table 4.7). Drying and the recovery of chemicals are the most energy-intensive parts of the papermaking process. The pulp and paper sector of the forest products industry is both capital-and energy-intensive. Energy is the third-largest manufacturing cost for the forest and paper products industry (AFPA, 2007). According to the Energy Information Administration (EIA, 2004), the forest products industry consumed 3.3 quads of energy in 2004, placing it third after the chemical and petroleum-refining industries in terms of energy use. Paper and paperboard mills consume the most energy in the pulp and paper sector, and more than half of the energy source is derived from net steam (the sum of purchases, generation from renewables, net transfers, and other energy used to produce heat and power or as feedstock or raw material inputs) (EIA, 2002). Steam is needed mainly for paper drying, but it is also used for pulp digesting and other uses. In papermaking, drying is the largest energy consumer, requiring large amounts of steam and fuel for water evaporation (DOE, 2005a). Electricity is required in increasing quantities to run equipment such as pumps and fans and to light and cool buildings, among other uses.

TABLE 4.7 First Use of Energy for All Purposes in the Pulp and Paper Industry (Fuel and Nonfuel), in Primary Energy, 2002 (trillion Btu)

 

Net Electricitya

Residual and Distillate Fuel Oil

Natural Gas

LPG and NGL

Coal, Coke and Breeze

Otherb

Total

Total: Pulp and Paper Industry

223

113

504

6

240

1276

2363

Paper mills, except newsprint

78

51

206

1

143

523

1002

Paperboard mills

56

38

188

*

84

542

908

Pulp mills

5

w

24

*

w

175

224

Newsprint mills

38

w

16

*

w

27

94

Note: LPG = liquefied petroleum gas; NGL = natural gas liquid; “w” = data withheld to avoid disclosing data for individual establishments; * = estimates lower than 0.5 trillion Btu.

a“Net electricity” is defined as the sum of purchases, transfers in, and generation from noncombustible renewable resources, minus quantities sold and transferred out. It excludes electricity inputs from on-site cogeneration or generation from combustible fuels since that energy is counted under generating fuel such as coal.

b“Other” is defined as net steam (the sum of purchases, generation from renewables, and net transfers), and other energy used to produce heat and power or as feedstock/raw material inputs.

Source: EIA, 2002, Data Table 1.2.

Suggested Citation:"4 Energy Efficiency in industry." National Academy of Sciences, National Academy of Engineering, and National Research Council. 2010. Real Prospects for Energy Efficiency in the United States. Washington, DC: The National Academies Press. doi: 10.17226/12621.
×

Several energy-efficient methods of drying have been developed, many of which are cost-effective today. One of these, a systems approach, involves using waste heat from heat-generating processes, including from power generation and ethanol production, as the energy source for evaporation (Thorp and Murdoch-Thorp, 2008). These opportunities to recycle waste heat are only practical if the power production does not use condensing turbines (that is, if it is relatively inefficient), or if the ethanol distillation is conducted at relatively high temperature and pressures. Advanced water-removal technologies can also reduce energy use in drying and concentration processes substantially (DOE, 2005b). The Oak Ridge National Laboratory (ORNL) and BCA, Inc. (2005) estimated that membrane and advanced filtration methods could significantly reduce the total energy consumption of the pulp and paper industry. High-efficiency pulping technology that redirects green liquor to pretreat pulp and reduce lime kiln load and digester energy intensity is another energy-saving method for this industry (DOE, 2005b). Modern lime kilns are available with external dryer systems and modern internals, product coolers, and electrostatic precipitators (DOE, 2006c).13

In most kraft mills today, the black liquor produced from delignifying wood chips is burned in a large recovery boiler. Because of the high water content of the black liquor, its combustion is inefficient, and the possibility of electricity production from secondary steam production is limited by the steam’s low pressures. The gasification of black liquor not only allows efficient combustion but also enables the use of a gas turbine or a combined-cycle process with high electrical efficiency, thereby offering the potential for increasing the production of electricity within pulp mills. The surplus of energy from the pulp process also allows for the possible production of useful heat, fuels, and chemicals (that is, the operation of “bio-refineries”) (Worrell et al., 2004).

The Pulp and Paper Industry Energy Bandwidth Study concluded that applying current design practices for the most modern mills can reduce the energy consumption of the pulp and paper industry by 25.9 percent and that the implementation of advanced technologies could reduce mill energy consumption by even more (41 percent) (DOE, 2006c). Of course, it is unrealistic to assume that long-existing facilities can be easily upgraded to new, state-of-the-art facilities. The

13

Electrostatic precipitators (ESPs) are more energy-efficient than wet scrubbers are, because energy in ESPs is applied only to the particulate matter that is being collected, but in wet scrubbers, energy is applied directly to the fluid medium, thus consuming more energy (ANL, 1990).

Suggested Citation:"4 Energy Efficiency in industry." National Academy of Sciences, National Academy of Engineering, and National Research Council. 2010. Real Prospects for Energy Efficiency in the United States. Washington, DC: The National Academies Press. doi: 10.17226/12621.
×

BOX 4.4

Reducing Energy Consumption in the U.S. Pulp and Paper Industry

McKinsey and Company (2007) identified the following opportunities to reduce by 2020 the energy consumed in the U.S. pulp and paper industry:

 

100 percent = 0.60 quadrillion Btu (quads)

Papermaking

30 percent

(0.18)

Multiprocess improvements

17 percent

(0.10)

Steam efficiencies

17 percent

(0.10)

Fiber substitution

14 percent

(0.08)

Pulping

12 percent

(0.07)

Other process steps

11 percent

(0.07)

largest potential energy savings in the industry are estimated to be in paper drying, liquor evaporation, and lime kilns.

Similarly, the McKinsey and Company (2007) study for the DOE Industrial Technology Program indicates that the pulp and paper industry can reduce energy consumption by 25 percent (0.6 quad) by 2020 by accelerating the adoption of proven technologies and process improvements. As shown in Box 4.4, a majority of the savings is expected to come from papermaking, multiprocess improvements, steam efficiencies, and fiber substitution.

Martin et al. (2000a) studied the opportunities to improve energy efficiency in the U.S. pulp and paper industry. Their case study results indicate that the technical potential for primary energy savings amounts to 31 percent, without accounting for an increase in recycling. The cost-effective savings potential is 16 percent. When recycling is included, the technical potential increases to 37 percent and the cost-effective savings potential remains the same.

In sum, the estimates of cost-effective energy efficiency potential in 2020 range from a low of 6.1 percent from the CEF study (IWG, 2000) to a high of 37 percent (DOE, 2006c). This range includes the 16 percent estimate produced by Martin et al. (2000a) and the 26 percent estimate produced by McKinsey and Company (2007). Applying these savings estimates to the pulp and paper industry’s current consumption of approximately 2.31 quads annually results in a range of energy savings of 0.14 to 0.85 quad by the year 2020. Additional savings are possible from the use of combined heat and power technologies.

Suggested Citation:"4 Energy Efficiency in industry." National Academy of Sciences, National Academy of Engineering, and National Research Council. 2010. Real Prospects for Energy Efficiency in the United States. Washington, DC: The National Academies Press. doi: 10.17226/12621.
×

4.3.3
Iron and Steel Industry

Iron and steel manufacturing, the fourth-largest user of energy in the industrial sector, consumes 1.4–1.9 quads per year (RECS, 2004; EIA, 2007). The energy-use breakdown by fuel is as follows: natural gas, 28.7 percent; petroleum, 7.6 percent; coal, 49.3 percent; renewables, 0.5 percent; and purchased electricity, 13.9 percent. Direct-energy costs represent 5–15 percent of the total cost of making steel, with additional energy costs embedded in expenditures for raw materials. The role of the U.S. steel industry in world markets has been eroding over the past three decades with manufacturing moving offshore, particularly to Asia. Table 4.8 indicates that between 1997 and 2006, imports of iron and steel products increased from 41 million tons per year to 65 million tons per year. During the same time period, exports of iron and steel products increased from 7.8 million tons per year to 12.7 million tons per year.

Between 2002 and 2006, U.S. production of raw steel increased from 101 million to 109 million tons per year, while China’s annual production increased from 201 million to 462 million tons (WSA, 2008). Over the 10-year period from 1996 to 2005, steel production declined in the United States at an average annual rate of 0.1 percent, while growing at an annual rate of 1.2 percent in Japan and 12.1 percent in China.

U.S. industry consumes approximately 120 million tons of metallics to produce 100 million tons of steel. There are two basic methods for producing crude steel: the blast furnace and the basic oxygen furnace (BOF), which use mainly iron ore; and the electric arc furnace (EAF), which uses mainly reduced iron and pig iron. In 2006, integrated steelmakers produced roughly 43 percent of raw steel, while EAF operations produced the remaining 57 percent. For a detailed discussion of these processes, see recent reports by the IEA (2007) and Worrell and Neelis (2006).

Energy intensities for the two steel production methods vary substantially, reflecting the fact that the BOF produces new steel, whereas the EAF uses recycled steel. In 2003, BOFs required 19.55 million Btu/ton while EAFs required 5.26 million Btu/ton. In 2002, the same uses required 21.23 million and 5.23 million Btu/ton, respectively. The calculated minimum energy requirement for ore-based steelmaking is 8.5 million Btu/ton (Fruehan et al., 2000). In 2006, yield losses totaled 8 million tons. The losses occur in many different operations and appear as “home” scrap and waste oxides; integrated producers also lose a small percentage of coal and coke.

Suggested Citation:"4 Energy Efficiency in industry." National Academy of Sciences, National Academy of Engineering, and National Research Council. 2010. Real Prospects for Energy Efficiency in the United States. Washington, DC: The National Academies Press. doi: 10.17226/12621.
×

TABLE 4.8 Change in Imports and Exports of Iron and Steel Products Between 1997 and 2006

Products

1997 (thousand tons)

2006 (thousand tons)

Percent Change

Imports

 

 

 

Steel mill products

 

 

 

Ingots, blooms, billets, slabs, etc.

6,358

9,317

46.5

Wire rods

2,237

3,046

36.2

Structural shapes and pilings

1,141

1,146

0.5

Plates

2,939

3,416

16.2

Rails and accessories

238

352

47.9

Bars and tool steel

2,627

5,111

94.5

Pipe and tubing

3,030

7,545

149.0

Wire drawn

655

903

38.0

Tin mill products

638

749

17.4

Sheets and strips

11,294

13,686

21.2

Total steel mill products

31,157

45,273

45.3

Other steel products

3,233

6,941

114.7

Total steel products

34,389

52,214

51.8

Iron products and ferroalloys

6,659

13,110

96.9

Grand Total, Imports

41,048

65,324

59.1

Exports

 

 

 

Steel mill products

 

 

 

Ingots, blooms, billets, slabs, etc.

210

219

4.3

Wire rods

85

1,501

77.3

Structural shapes and pilings

481

892

85.7

Plates

780

1,806

131.7

Rails and accessories

92

164

77.6

Bars and tool steel

835

1,104

32.2

Pipe and tubing

1,352

1,489

10.1

Wire drawn

137

182

33.4

Tin mill products

410

240

−41.3

Sheets and strips

1,654

3,480

110.4

Total steel mill products

6,036

9,728

61.2

Other steel products

1,333

1,702

27.7

Total Steel Products

7,369

11,430

55.1

Iron products and ferroalloys

458

1,260

175.1

Grand Total, Exports

7,827

12,689

62.1

Source: Adapted from AISI, 2006.

Suggested Citation:"4 Energy Efficiency in industry." National Academy of Sciences, National Academy of Engineering, and National Research Council. 2010. Real Prospects for Energy Efficiency in the United States. Washington, DC: The National Academies Press. doi: 10.17226/12621.
×

Yield losses reduce the overall energy efficiency of steelmaking. The industry consumes about 18.1 million Btu/ton of product, including electricity generation and transmission and distribution losses—22 percent more than the practical minimum energy consumption of about 14 million Btu/ton. These energy losses, about 4 million Btu/ton, are a result of process efficiencies and the production energy embedded in the yield losses. The BOF process itself is not a major energy user. It is the inherent energy of the charge materials that impact the overall energy intensity of the steelmaking process. To produce hot rolled steel from iron ore takes almost five times as much energy per ton as making the same product from scrap steel, as the above energy intensities show. Scrap yields roughly half the steel made and consumed (but these two are not identical).

Prior to the 1990s, steelmaking in the United States was more energyintensive than that in Germany, Japan, and Korea. It appears that, although the energy intensity of the U.S. steel industry improved significantly between 1995 and 2005, it was still higher in 2005 than that in those three countries (Table 4.9): in 1995, the steel industry in the United States was 57 percent more energyintensive than that in Korea and about 22 percent more energy-intensive than that in Japan and in Germany. In 2005, the U.S. steel industry was still more energyintensive than Korea’s and about 6 percent more energy-intensive than Japan’s and Germany’s. The report Saving One Barrel of Oil per Ton states, for example, that “energy consumption in blast furnace ironmaking has decreased by more than 50 percent since 1950” (AISI, 2005). Yet blast furnace operation uses nearly 40 percent of all the energy consumed by the iron and steel industry. One means of improving the efficiency of blast furnace ironmaking has been by recovering blast

TABLE 4.9 International Comparison—Energy Intensity of the Iron and Steel Industry of Selected Countries

 

Energy Intensity, 1995 (Btu/tonne)

Energy Intensity, 2005 (Btu/tonne)

Percent Difference Compared with the U.S., 1995

Percent Difference Compared with the U.S., 2005

Germany

8,114

7,660

–22

–7

Japan

8,059

7,743

–23

–6

Korea

4,463

7,438

–57

–10

United States

10,418

8,246

0

0

Source: Data from International Energy Agency, online statistical database; World Steel Association, online database.

Suggested Citation:"4 Energy Efficiency in industry." National Academy of Sciences, National Academy of Engineering, and National Research Council. 2010. Real Prospects for Energy Efficiency in the United States. Washington, DC: The National Academies Press. doi: 10.17226/12621.
×

furnace gas and using it elsewhere in the overall production process. If this recovery is taken into the evaluation, the energy intensity of the blast furnace operation is said, by a representative of the steel industry, to be 12–14 million Btu/ton, and a total of 18–21 million Btu/ton total for finished goods. Over the past 20 years, the efficiency of iron and steel manufacturing in all countries has improved substantially, but the worldwide average has not improved much. This is due to the growth of iron and steel manufacturing in China, where the overall efficiency has not changed much. In China, there is a difference of about 20 percent between the average and the best plant due to the blast furnace size and the amount of heat recovery.

It is important to use caution in comparing countries because differences can be caused by the actual efficiency of production, the amount of recycled material used, the process (BOF versus EAF) employed, and the type of final product (Schipper, 2004). Efficiency depends on the size and age of the plant—larger and newer facilities are often more energy-efficient than older ones. Savings can occur over time as a result of changes within plants or in processes and from shifts to plants and processes that are more energy-efficient; differences in resources, prices, and other factors also matter. Schipper (2004) points out as an important caveat that processes that are efficient in one country could be significantly less so in another country.

To remain competitive, the U.S. iron and steel industry must become more resource efficient and less capital intensive. Figure 4.5 shows the energy con-

FIGURE 4.5 Energy consumption in the U.S. steel industry per ton of steel shipped, 1950–2006.

FIGURE 4.5 Energy consumption in the U.S. steel industry per ton of steel shipped, 1950–2006.

Source: DOE, 2008.

Suggested Citation:"4 Energy Efficiency in industry." National Academy of Sciences, National Academy of Engineering, and National Research Council. 2010. Real Prospects for Energy Efficiency in the United States. Washington, DC: The National Academies Press. doi: 10.17226/12621.
×

sumption per ton of steel shipped by U.S. industry from 1950 to 2006. Energy consumption per ton of steel has decreased 27 percent since 1990, while CO2 emissions decreased by 16 percent. For 2002–2005, energy intensity per ton of steel decreased by 12 percent. In 2005, the American Iron and Steel Institute (AISI) announced a goal of using 40 percent less energy per ton of steel in 2025 compared to what was being used in 2003 (AISI, 2005). According to AISI, only a small portion of this reduction could be obtained by the implementation of best practices; instead, major advances would require the development and implementation of “transformational technologies.” Some of the best opportunities (in terms of cost/benefit) include EAF melting advances, BOF slag heat recovery, the integration of refining functions, heat capture from EAF waste gas, and increased direct carbon injection. The majority of these technologies would be available before 2020 assuming continued technological R&D. With standard rates of stock turnover, one could expect these technological changes to be implemented in the midterm timeframe (2020–2035).

Fruehan (2008), in a study for DOE in partnership with the industry, analyzed various combinations of technologies—including the rotary hearth furnace (RHF); the CIRCOFER process, in which coal is charred and ore is partly metallized in a single first step, and then completed in a bubbling second step; and the RHF with a submerged arc furnace (SAF)—to determine whether combinations of proven technologies could enhance the overall process. Several revolutionary new steelmaking technologies—such as the use of hydrogen as an iron ore reductant or furnace fuel (under development), or electrolytic and/or biometallurgical-based iron and steel production (in the concept definition and development stage)—could be ready in the midterm (that is, between 2020 and 2035).

McKinsey and Company (2008) identified the iron and steel industry as one of the two (pulp and paper being the other) largest opportunities to reduce energy use in the industrial sector. Box 4.5 indicates that the iron and steel industry can reduce energy consumption by 0.3 quad (22 percent) by 2020 by accelerating the adoption of proven technologies and process improvements. These technologies are consistent with those mentioned above. Many of them have IRRs greater than 20 percent. The AISI (2005) study provides a higher estimate of energy efficiency potential—0.79 quad or 58 percent of the projected energy consumption in the iron and steel industry in 2020. The CEF study (IWG, 2000) estimates a potential of only 0.21 quad (15 percent) in 2020.

The barriers to implementing energy efficiency in the iron and steel industry are similar to those of the other energy-intensive industries: lack of sustained cor-

Suggested Citation:"4 Energy Efficiency in industry." National Academy of Sciences, National Academy of Engineering, and National Research Council. 2010. Real Prospects for Energy Efficiency in the United States. Washington, DC: The National Academies Press. doi: 10.17226/12621.
×

BOX 4.5

Reducing Energy Consumption in the U.S. Iron and Steel Industry

McKinsey and Company (2007) identified the following opportunities to reduce by 2020 the energy consumed in the U.S. iron and steel industry:

 

100 percent = 0.30 quadrillion Btu (quads)

Secondary casting

39 percent

(0.12)

Arc furnace processes

19 percent

(0.06)

Blast furnace processes

11 percent

(0.03)

Integrated casting

8 percent

(0.02)

Multiprocess improvements

10 percent

(0.03)

Other process steps

13 percent

(0.04)

porate interest, reduced levels of engineering research, low energy prices, and competition for capital, which are discussed in Section 4.5.

The steel industry has been in a challenging financial position for several decades. In the past 30 years, new alloys using thinner steel have led to 25 percent less steel use in cars. Steel has also lost market share to aluminum, composites, and plastics. Steel has become a commodity product, and profit margins continue to shrink. Over the next 20 to 30 years, steel may be replaced by carbon-fiberreinforced materials, especially as carbon nanotube materials develop. These may be at least as strong as steel and much lighter. Some have recommended that the steel industry focus on specialty steels for tools, stainless steel, or high-silicon steels, which might provide value-added exports and more economic benefits. This would require a focus on new technologies instead of incremental process improvements.14

4.3.4
Cement Industry

The cement industry is among the largest industrial energy consumers in the United States and the world, accounting for 5 percent of the energy used in the U.S. manufacturing sector, or 1.3 quads (EIA, 2002, Table 2a), and about 9 percent of global industrial energy use (IEA, 2007, p. 9). The industry also accounts

14

F. Harnack, United States Steel Corporation, personal communication, June 2008.

Suggested Citation:"4 Energy Efficiency in industry." National Academy of Sciences, National Academy of Engineering, and National Research Council. 2010. Real Prospects for Energy Efficiency in the United States. Washington, DC: The National Academies Press. doi: 10.17226/12621.
×

for about 5 percent of global anthropogenic CO2 emissions and 2 percent of anthropogenic CO2 emissions in the United States (Worrell et al., 2001, 2004).

The cement process involves three components: first, the mining and preparation of inputs, most importantly limestone (kiln feed preparation); second, the chemical reactions that produce clinker (clinker production); and third, the grinding of clinker with other additives to produce cement (finish grinding). The feed for older kilns is a slurry of inputs (the wet kiln process), while large new plants mix dry materials for introduction to the kiln. Energy use varies with the process and characteristics of the plant, but in general about 90 percent of the energy use and all of the fuel use occur in the manufacture of clinker in the kiln. The chemical process that converts limestone to lime, the key ingredient in clinker, produces roughly the same amount of CO2 gas as that generated by the energy use in its production for coal-fired kilns. Technologies that allow production of cement with a lower per ton share of clinker thus yield multiple benefits: savings in fuel consumption and reductions in greenhouse gas emissions of a factor of two or more above that associated with the energy efficiency alone.

In a wet kiln, the burners introduce heat at one end while at the other, “cool” end, the slurry is introduced and then dried (zone 1) and heated (zone 2). Calcining, or the conversion of calcium carbonate to lime, occurs in the third zone, at temperature of 750°C to 1000°C, followed by the sintering zone where a mix of chemicals is reacted to create clinker. The clinker is then cooled. In modern dry kilns the first zone is omitted, and the heating is done in a preheater tower, followed by a second calciner tower, so that a shorter kiln is employed only for the sintering stage (Figure 4.6).

Larger plants are more energy-efficient per ton, and the advanced processes are substantially more efficient. In the United States, energy efficiency varied from 6.2 million Btu/ton of clinker for smaller wet-kiln plants to 3.8 million Btu/ton of clinker for dry preheater-precalciner kilns (Table 4.10). Coal dominates fuel consumption in U.S. plants, although they utilize an increasing proportion of waste materials, used tires, and petroleum coke (Table 4.11).

Energy efficiency in the U.S. cement industry improved steadily during the 1970s and 1980s as wet kilns were replaced by more modern facilities (Figure 4.7). Energy efficiency deteriorated during the 1990s, rising by approximately 10 percent per ton, as both the fall in energy prices and the increased demand for cement caused some of the less efficient manufacturing units to be redeployed. As of 2000, the U.S. cement industry was among the least energyefficient of the cement industries in the world, using nearly 80 percent more

Suggested Citation:"4 Energy Efficiency in industry." National Academy of Sciences, National Academy of Engineering, and National Research Council. 2010. Real Prospects for Energy Efficiency in the United States. Washington, DC: The National Academies Press. doi: 10.17226/12621.
×
FIGURE 4.6 Diagram of functional zones for different cement kiln technologies. The feed for older (wet)kiln processes must first be dried.Modern dry-kiln feeds require little or no drying.

FIGURE 4.6 Diagram of functional zones for different cement kiln technologies. The feed for older (wet)kiln processes must first be dried.Modern dry-kiln feeds require little or no drying.

Source: van Oss, 2005.

TABLE 4.10 Energy Intensity,Major Cement Processes in the United States

Process

Primary Energy Use (million Btu/ton clinker)

Wet kilns <0.5 million tons/yr capacity

6.2

Wet kilns ≥0.5 million tons/yr capacity

5.6

Dry kilns <0.5 million tons/yr capacity

4.9

Dry kilns ≥0.5 million tons/yr capacity

4.1

Long dry kilns

5.1

Dry preheater kilns

4.1

Dry preheater-precalciner kilns

3.8

Source: van Oss, 2005.

Suggested Citation:"4 Energy Efficiency in industry." National Academy of Sciences, National Academy of Engineering, and National Research Council. 2010. Real Prospects for Energy Efficiency in the United States. Washington, DC: The National Academies Press. doi: 10.17226/12621.
×

energy in the production of clinker—the most energy-intensive ingredient in the final product—than was used in Japan, the world leader in energy efficiency, while also using 10 percent more clinker in the production of cement than was used in Japan (Table 4.12). Partly because Japan has severely limited domestic energy supplies, it has made huge investments in R&D to improve energy efficiency in order to reduce its dependency on foreign energy resources. The United States has not faced a comparable sense of urgency in the industrial sector.

As the apparent energy performance of other countries suggests, considerable technological opportunities exist to improve the energy efficiency of the U.S. cement industry. The Clean Energy Future study (IWG, 2000) estimated that a 19 percent improvement in energy efficiency was economically attractive, and the McKinsey and Company (2007) study concluded that a 21 percent improvement in energy use was feasible based on commercially available and commercially attractive technologies—with an estimated IRR of at least 10 percent. The details of the McKinsey and Company calculations are not available, but other sources suggest that while the McKinsey estimate may be optimistic, improvements are clearly feasible (Worrell et al., 2004). The panel first reviews the categories of potential improvements and then considers some issues that may arise in their adoption. This discussion is based on the estimates provided in Worrell et al. (2004).

Upgrading a kiln from wet to dry and from a long dry kiln to a preheater, precalciner kiln results in major energy efficiency gains but for a price that requires a payback period of at least 10 years. Worrell et al. (2004) conclude that these upgrades are attractive only when an old kiln needs to be replaced. However, they discuss a wide range of less drastic upgrades that yield commercially attractive benefits at each stage of the process.

At the first stage, Worrell et al. (2004) identify technologies with shortterm payback periods (less than 3 years) that yield only modest energy efficiency improvements for the dry kiln process, controls (savings up to 3 percent in the electricity used), and possibly blending and roller mills (payback periods not provided; total savings of up to 10 percent). Over half of the energy used at this stage, however, can be eliminated through available technologies with payback periods of more than 10 years. Key technologies are efficient conveyer systems of the dry kilns and high-efficiency classifiers for the wet kilns.

Short-payback options in clinker production include advanced control systems, combustion improvements, indirect firing, and the optimization of components such as the heat shell. Although opportunities vary with specific

Suggested Citation:"4 Energy Efficiency in industry." National Academy of Sciences, National Academy of Engineering, and National Research Council. 2010. Real Prospects for Energy Efficiency in the United States. Washington, DC: The National Academies Press. doi: 10.17226/12621.
×

TABLE 4.11 Source of Fuel and Electricity Consumption by the U.S. Cement Industry in 2000

Fuel

Quantity

Fraction of Contributed Heat and Total Energy

Heat (%)

Total Energy (%)

Coal

10.1 (million metric tons)

67

60

Coke, petcoke

1.8 (million metric tons)

14

13

Natural gas

338.3 (million cubic meters)

3

3

Fuel oils

123.7 (million liters)

1

1

Used tires

0.4 (million metric tons)

3

3

Solid wastes

1.0 (million metric tons)

6

5

Liquid wastes

929.1 (million liters)

6

5

Electricity

12.6 (billion kilowatt-hours)

nil

10

Note: Average unit consumption of energy (fuel and energy consumed reflect the U.S. mix of wet and dry kilns; values likely would differ in countries operating a different mix of technologies):

• Electricity—143.9 kilowatt-hours per metric ton of cement,

• Heat—4.7 million Btu (1 million Btu = 1.055056 gigajoules) per metric ton of clinker,

• Total energy (includes electricity)—4.9 million Btu per metric ton of cement.

Source: van Oss, 2005, p. 29; data from U.S. Geological Survey’s annual survey of U.S. plants.

FIGURE 4.7 Primary energy intensity of U.S. cement and clinker production, 1970–1999. Energy intensity is expressed in million Btu per ton, higher heating value.

FIGURE 4.7 Primary energy intensity of U.S. cement and clinker production, 1970–1999. Energy intensity is expressed in million Btu per ton, higher heating value.

Source: Worrell and Galitsky, 2004.

Suggested Citation:"4 Energy Efficiency in industry." National Academy of Sciences, National Academy of Engineering, and National Research Council. 2010. Real Prospects for Energy Efficiency in the United States. Washington, DC: The National Academies Press. doi: 10.17226/12621.
×

TABLE 4.12 Cement Industry Intensities, 1990 and 2000, and Mid-1990s Clinkers Factors, by World Region and Subregion (Primary Energy)

A. Cement Industry Energy Intensities by Region and Subregion

Region Energy Intensities

Subregion Energy Intensities

Region Name

MJ per kg Clinker

Subregion Name

MJ per kg Clinker

1990

2000

1990

2000

I. North America

5.47

5.45

1. United States

5.50

5.50

 

 

 

2. Canada

5.20

4.95

II. Western Europe

4.14

4.04

3. Western Europe

4.14

4.04

III. Asia

4.75

4.50

4. Japan

3.10

3.10

 

 

 

5. Australia and New Zealand

4.28

4.08

 

 

 

6. China

5.20

4.71

 

 

 

7. Southeast Asia

5.14

4.65

 

 

 

8. Republic of Korea

4.47

4.05

 

 

 

9. India

5.20

4.71

IV. Eastern Europe

5.58

5.42

10. Former Soviet Union

5.52

5.52

 

 

 

11. Other Eastern Europe

5.74

5.20

V. South and Latin America

4.95

4.48

12. South and Latin America

4.95

4.48

VI. Middle East and Africa

5.08

4.83

13. Africa

5.00

4.75

 

 

 

14. Middle East

5.17

4.92

B. Cement Industry Mid-1990s Clinker Factors by Region and Subregion

Region Unit-based Emissions

Subregion Unit-based Emissions

Region Name

Factor, kg CO2/kg Cement

Subregion Name

Factor, kg CO2/kg Cement

I. North America

0.88

1. United States

0.88

 

 

2. Canada

0.88

II. Western Europe

0.82

3. Western Europe

0.81

III. Asia

0.85

4. Japan

0.80

 

 

5. Australia and New Zealand

0.84

 

 

6. China

0.83

 

 

7. Southeast Asia

0.91

 

 

8. Republic of Korea

0.96

 

 

9. India

0.89

IV. Eastern Europe

0.83

10. Former Soviet Union

0.83

 

 

11. Other Eastern Europe

0.83

V. South and Latin America

0.84

12. South and Latin America

0.84

VI. Middle East and Africa

0.89

13. Africa

0.87

 

 

14. Middle East

0.89

Source: Battelle, 2002, substudy 8, p. 5.

Suggested Citation:"4 Energy Efficiency in industry." National Academy of Sciences, National Academy of Engineering, and National Research Council. 2010. Real Prospects for Energy Efficiency in the United States. Washington, DC: The National Academies Press. doi: 10.17226/12621.
×

plants, the combination of these activities appears to yield an improvement in energy use on the order of 10 percent. Recovering heat from the cooling stage yields substantial savings. If the heat is used for power generation, it can save up to half of the electricity used in the clinker process. Heat-recovery opportunities, however, are closely tied to the basic structure of the kiln: an advantage of the preheater, precalciner kilns is that waste heat is used in the first two stages. Thus, taking full advantage of the heat-recovery savings may require other major upgrades.

For the last (grinding) stage, technologies with short-payback periods yield modest improvements. Significant electricity savings are available from high-pressure roller presses, but these have payback periods of more than 10 years.

The most attractive and available technologies derive from changing the chemistry of the cement to reduce the need for calcination, thereby decreasing the high share of clinker characteristic of U.S. production. Blended cements include higher proportions of other cementitious materials, such as fly ash. Steel slag, which is already calcined, is an alternative to limestone for the production of clinker. The availability of these inputs and their probable price if they are used more widely in cement production raise concerns about how broadly they can penetrate the U.S. market. Worrell et al. (2004) identify potential energy savings of up to 20 percent from the deployment of blended cement technologies. Avoiding the production of clinker yields a double benefit in reduced CO2 emissions because both chemical production and energy use are avoided.

Advanced technologies with a potential to further improve energy efficiency and reduce carbon emissions include a fluidized bed kiln, advanced comminution technologies, and the substitution of mineral polymers for clinker (Worrell et al., 2004). The Battelle (2002) study concludes that non-limestone-based binders may yield a reduction of 30 percent in CO2 emissions. Additional advanced technologies aimed at reduction of CO2 emissions include hybrid cement-energy plants, which are currently being investigated in the United States, and carbon capture and storage technology.15

15

Cement plants present a much better carbon capture and storage opportunity than do advanced coal plants. Mitsubishi is currently designing carbon capture and storage technology suitable for advanced coal electric generating plants with an emission stream that is 12–15 percent CO2. Cement plants, alternatively, have emission streams with 30 percent CO2 content (Battelle, 2002). Current production of cement in the United States results in about 0.85 kg CO2 per kilogram of cement. Thus, a carbon tax of $50 per tonne of CO2 would increase the cost of a tonne of cement by $12.00, making the carbon tax one of the largest components in the cost of cement

Suggested Citation:"4 Energy Efficiency in industry." National Academy of Sciences, National Academy of Engineering, and National Research Council. 2010. Real Prospects for Energy Efficiency in the United States. Washington, DC: The National Academies Press. doi: 10.17226/12621.
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Why have U.S. firms not adopted these technologies, and why do they significantly lag foreign firms? One component is simply the age of the installed plant. As discussed above, the major savings come with new plants and are routine in the facilities in countries whose capacities have grown rapidly in the past decade. U.S. consumption of cement increased during the 1990s, but by 2006 imports accounted for 20 percent of sales, so investment in new facilities has not mirrored the increase in demand.

Replacing an older, wet-kiln facility with a new, more energy-efficient drykiln facility raises challenges in the United States that may not be present in developing countries and may in part explain the vintage of domestic plants. Cement facilities are colocated by limestone quarries. A major upgrade, or new plant, has a very long depreciation period. Before undertaking such an investment, a company would typically want adequate limestone supplies for 50 years of operation. In many cases, this would mean that the desired location for a new dry-kiln plant would be at a different location from the older, wet-kiln plant. Permitting and meeting other requirements (e.g., environmental requirements and public hearings) at a new site can be extraordinarily difficult, time-consuming, and expensive, and such requirements indeed change the relative economics of maintaining the old, inefficient facility versus investing in a modern, efficient plant. McKinsey and Company (2008) identified regulatory restrictions as the major reason for the U.S. industry’s apparent lack of new investment.

A second regulatory issue concerns the use of blended cements. The federal government has recently issued standards for blended cement, but widespread application requires actions by state standards boards. The existence of complex state and federal building codes and the expense of updating the codes are credited with slowing the introduction of blended cements that include a lower fraction of clinker. Regulatory restrictions and protracted government permitting and approval processes may be at the root of slow approval for the use of these cements. Alternatively, U.S. firms may not be eager to open the market to foreign manufacturers with greater experience and stronger track records than domestic sources possess.

In addition to regulatory restrictions, another component is plausibly the competitive environment in the industry. Until recently, import prices have only

(Battelle, 2002). It should be noted that carbon capture and storage technology requires substantial energy itself, so that its deployment would confer a significant energy efficiency penalty in the production of cement.

Suggested Citation:"4 Energy Efficiency in industry." National Academy of Sciences, National Academy of Engineering, and National Research Council. 2010. Real Prospects for Energy Efficiency in the United States. Washington, DC: The National Academies Press. doi: 10.17226/12621.
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weakly pressured U.S. firms. Notwithstanding the North American Free Trade Agreement (NAFTA), antidumping tariffs protected domestic producers from low-priced Mexican imports until 2006, while transportation costs moderated competition from Asia. Over the past 20 years, foreign firms—most notably the Mexican firm CEMEX—have become major shareholders in more than 80 percent of U.S. domestic cement plants. With the change in ownership and the need for major reconstruction following the devastating hurricane season of 2005, political support in the United States for antidumping tariffs has waned.

If the tariffs are relaxed, foreign firms will face a choice: upgrade the plants in the United States or increase imports. Which option they choose, and the health of the domestic industry, may depend on opportunities to expand operations in the United States, including the ability to site new facilities in new locations.

Three studies have estimated the potential for energy savings in the cement industry. The highest estimated savings, by Worrell et al. (2004), is 0.29 quad, or 67 percent of projected energy consumption in 2020.16 The CEF study (IWG, 2000) estimated the potential savings at 0.08 quad (19 percent), and McKinsey and Company (2008) estimated it at 0.1 quad (23 percent) in 2020.

4.4
CROSSCUTTING TECHNOLOGIES FOR IMPROVED ENERGY EFFICIENCY

One way to consider the potential impact of technological improvement in the industrial sector is to examine key crosscutting technologies that play a dominant role. These include combined heat and power systems, catalysis, pumps, motor and drive systems, design tools, and computational and other approaches to optimizing operations and maintenance (O&M). The obvious targets are the most energy-consuming processes. Separation processes, especially heat-driven separations, are a class of such energy-intensive processes, and these are discussed in some detail. Other high-temperature processes are also potentially capable of improvement. In addition, there are numerous examples of technology

16

Based on an energy intensity of 4.61 million Btu/ton for wet-kiln processes and 2.89 million Btu/ton for dry-kiln processes, and a total production of 23.2 million tons of wet-process cement and 62.8 million tons of dry-process cement.

Suggested Citation:"4 Energy Efficiency in industry." National Academy of Sciences, National Academy of Engineering, and National Research Council. 2010. Real Prospects for Energy Efficiency in the United States. Washington, DC: The National Academies Press. doi: 10.17226/12621.
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developments in which the impact on energy use is an indirect or a secondary consequence—for example, in sensor development and process controls.

To illustrate how industries are and could be improving the efficiency of their operations, the panel describes several specific examples of crosscutting technologies, including some that are already being introduced but that may have much greater application, some that are still in the development stage, and a brief mention of the fundamental manner in which energy efficiency may be approached to achieve changes not yet associated with specific devices.

The following seven subsections summarize these crosscutting technologies.

4.4.1
Combined Heat and Power

Combined heat and power units transform a fuel (generally natural gas) into electricity and then use the hot waste gas stream for processes such as space and hot-water heating or industrial and commercial processes. Large, central-station generators use only about one-third of the energy in the fuel to produce electricity, and the rest must be dispersed with cooling towers or transferred to rivers, lakes, or the ocean. By capturing and converting waste heat, CHP systems achieve effective electrical efficiencies of 50–80 percent (Casten and Ayres, 2007; Lovins, 2007). For applications in which there is a large demand for low-temperature steam, such as spray drying, CHP units can be nearly 100 percent efficient.

CHP facilities have been commonly established in energy-intensive industries such as food processing, pulp and paper, chemicals, metals, and oil refining. The levels of penetration of this technology depend on the availability and prices of natural gas as well as government policies. European countries, such as Finland and Denmark, are among the leaders in terms of installed CHP capacity, with 30–50 percent of their total electricity generated through CHP technologies. The Danish CHP success story is based on a package of strategies that evolved after the First Heat Supply Law was introduced in 1979. This law included planning regulations and financial incentives that worked together to create desirable market conditions for CHP (IEA, 2009).

For commercial and industrial installations that buy electricity and also use large quantities of natural gas for process heating, CHP could double energy efficiency and cut costs by half. Installations such as steel-rolling mills and paper mills could reap large benefits from CHP. Commercial installations such as hospitals and hotels could also benefit from CHP.

Suggested Citation:"4 Energy Efficiency in industry." National Academy of Sciences, National Academy of Engineering, and National Research Council. 2010. Real Prospects for Energy Efficiency in the United States. Washington, DC: The National Academies Press. doi: 10.17226/12621.
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CHP offers two additional benefits. Since the electricity is generated onsite, there may be no need for transmission and distribution lines, thus saving the expense of building and operating the lines and also eliminating the 6–10 percent loss of electricity during transmission and distribution (King, 2006; Casten and Ayres, 2007). A much larger benefit for some customers is that generating electricity on-site eliminates the possibility of power disruptions from transmission or distribution line problems. Having a CHP unit backed up by central-station power gives much more reliable power. In this case, however, lines must be sized to accommodate peak power, and hence little capital would be saved on the network connection.

Despite the efficiency gains that it offers, CHP has been limited in its development owing to a variety of regulatory, structural, and economic factors, including local restrictions on air emissions; backup energy fees (i.e., for standby power) charged by utilities; costs associated with site-specific engineering and design; difficulty in obtaining a suitable natural gas supply contract; restrictions on selling electrical power to the grid; and the challenges of obtaining permits and meeting safety regulations. For small CHP installations, these barriers can be prohibitive (Sovacool and Hirsch, 2007).

A CHP system is normally sized to provide the heat needed at a facility. In general, the CHP unit generates less power than the facility needs, at least at peak times. When the facility seeks to buy power from the utility, it is charged a significant backup fee, since it is assumed that the CHP customer will be adding to peak load. The utility might also charge a standby fee, arguing that it must have reserve generation available in case the CHP unit stops operating. Insofar as the utility does incur extra costs due to the CHP unit, the CHP unit should pay. However, the costs should be assessed on the basis of how the CHP unit is operated and when it wants backup power. Similarly, the CHP unit ought to be paid the savings to the utility when it sells electricity to the system.

Within the commercial, institutional and industrial markets, engineering and plant staff may be resistant to CHP projects owing to limited familiarity, lack of internal coordination, concern over greater regulatory oversight, and competition for capital funding. Despite CHP’s overall air emission benefits, modifications to a plant’s industrial exhaust system may trigger federal or state review of the plant’s air permits, which can inhibit some plant managers from pursuing CHP.

The three most critical technical challenges facing the market for CHP are that (1) original equipment manufacturers need to develop better prime movers

Suggested Citation:"4 Energy Efficiency in industry." National Academy of Sciences, National Academy of Engineering, and National Research Council. 2010. Real Prospects for Energy Efficiency in the United States. Washington, DC: The National Academies Press. doi: 10.17226/12621.
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(more efficient, cleaner, more reliable, more durable, and lower-cost systems); (2) original equipment manufacturers or aftermarket assemblers need to develop packaged CHP systems that facilitate plug-and-play installation; and (3) project developers need to demonstrate practical applications that can be replicated into “cookie-cutter” installations that yield attractive pricing for customers while maintaining acceptable profit margins for the technology vendors.

The potential for CHP is greatest in areas that have high electricity prices (tied to natural gas prices), availability natural gas, and large industrial and commercial thermal loads—most characteristic of the northeastern and southwestern United States. In the northeastern United States, natural gas is often used to fuel the marginal central power plant (i.e., the last unit turned on to supply demand) and sites’ process and space-heating needs. Since the deployment of CHP often displaces natural gas used for process heat, water and space heating, and electricity generation, CHP can actually lower natural gas demand while lowering cost.

The best candidate sites for CHP have coincident need for electric and thermal energy. Large-scale CHP, such as at district energy campuses, can be efficient and cost-effective in the right setting and has already been implemented at many attractive sites.

Estimates of the cost-effective energy-savings potential with use of CHP nationwide range from 0.7 quad (based on McKinsey and Company, 2007) to 7.4 quads (based on Bailey and Worrell, 2005). The latter estimate includes nontraditional CHP technology opportunities such as the use of energy that is typically discarded from pressure-release vents or from the burning and flaring of waste streams, the use of gas turbines that are more complex than traditional ones, and the use of flue gases from CHP plants to power a furnace. The estimated potential savings of 7.4 quads includes an estimated 0.6 quad of opportunities outside the industrial sector, reducing the industrial-sector estimate by Bailey and Worrell (2005) to about 6.8 quads. An additional 2.4 quads of savings opportunities in the 6.8 quad total is associated with nontraditional equipment for recycling energy, including black liquor gasification and landfill gas recovery. Removing these 2.4 quads results in the range of 4.4–6.8 quads shown in Table 4.4. A third, intermediate estimate based on the CEF study (IWG, 2000) is that CHP could cost-effectively expand the energy savings by 2.0 quads (Lemar, 2001).

Suggested Citation:"4 Energy Efficiency in industry." National Academy of Sciences, National Academy of Engineering, and National Research Council. 2010. Real Prospects for Energy Efficiency in the United States. Washington, DC: The National Academies Press. doi: 10.17226/12621.
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4.4.2
High-Temperature and Separation Processes

Many industrial processes involve high temperatures, and some separation processes have thermal efficiencies as low as 6 percent, making separation processes an attractive target for improving U.S. industry’s energy efficiency. The energy used for separations totals about 4.5 quads per year, or 47 percent of all the energy used in manufacturing. Both distillation and membrane separation are described below to illustrate current and potential innovations that might reduce the energy intensity and total energy use of U.S. industry.

The petroleum industry consumes about 60 percent of the 2.4 quads of energy used each year in all industrial distillation processes. The distillation of chemicals and petroleum uses about 53 percent of the total energy used for industrial separations and is the largest energy-consuming process in industry. (Drying uses 20 percent less energy, and evaporation uses 60 percent less.) But distillation can be improved. Technologies that can significantly reduce the energy used in distillation processes include, for example, latent heat integration, multiple-effect distillation, and solution-thermodynamics-altering azeotropic or extractive distillation.

Other improvements include introducing heat exchangers along the distillation column, which can improve energy efficiency by about 25 percent. Analyzed and developed over about two decades, this process could be put into practice now (Jimenez et al., 2004; Mullins and Berry, 1984; Orlov and Berry, 1991; Schaller et al., 2001). Although in its fully optimized form this approach would probably be practical only with the construction of altogether new columns, side reboilers are one currently used approximation of this process.

Considerable attention has recently been paid to the development of separation processes based on membranes of many different kinds and on other porous materials. Membranes that separate different gases are particularly promising as means to improve energy efficiency. All membranes do need to be replaced from time to time, an aspect that must be included in assessments of their net utility (Martin et al., 2000b).

The ORNL and BCA, Inc. (2005) report Materials for Separation Technologies: Energy and Emission Reduction Opportunities identifies ways to reduce by about 240 trillion Btu/year (5 percent) the 4500 trillion Btu/year used for separations by U.S. industry, and it does not include improvements in distillation.

Material methods, notably membrane and micro- and nanoparticle separa-

Suggested Citation:"4 Energy Efficiency in industry." National Academy of Sciences, National Academy of Engineering, and National Research Council. 2010. Real Prospects for Energy Efficiency in the United States. Washington, DC: The National Academies Press. doi: 10.17226/12621.
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tion methods, offer tantalizing possibilities. The challenges are in developing materials and methods with high throughput, high selectivity, low energy requirements, resistance to fouling, durability, and affordable costs. The ORNL and BCA, Inc. (2005) report emphasizes the importance of developing metrics for evaluation of the potential methods. According to that report, membrane separation is the most widely applicable of all technologies for reducing the energy of separation processes in the petroleum, chemical, and forest products industries (Nenoff et al., 2006; Banerjee et al., 2008). Zeolites are one of the kinds of materials that can achieve separations without requiring direct heat. However, the zeolite approach leaves the capturing material with the target material attached, so some removal process must be available if that material is valuable, or, if the material is considered a contaminant, either it must be removed or the used zeolite must be replaced and hence must have low cost.

Membranes can function to remove unwanted substances or to recover valuable material. For example, Amalgamated Research, Inc., and the Idaho National Laboratory are trying to develop a three-stage separation system for extracting valuable biomass products, and a project at the University of New South Wales, Australia, is working to develop a membrane for desalination (Chapman et al., 2004). Reported earlier at the 1995 Abu Dhabi Conference on Desalination (IDA, 1995) was a membrane desalination process in which water, heated to about 80°C, is reduced under pressure and passes as vapor through a membrane of polytetrafluoroethylene (PTFE: Teflon). Those proposing this membrane distillation process emphasize that the heat driving it may be waste heat or solar heat. Besides desalination, one of the most active areas of membrane development addresses the separation of hydrogen by capturing other substances in the membrane.

Still another membrane-based process for desalination is reverse osmosis, a process in which pressure is applied to the saline water, driving water molecules through the membrane, moving them opposite to the direction in which they would diffuse in the absence of the pressure. A variety of organic materials such as cellulose acetate, nylon, and polyamide have been used for reverse osmosis membranes. The reverse osmosis process developed for seawater by Energy Recovery, Inc. (ERI), is said to use 1.7 kWh per cubic meter of purified water produced. By including a pressure exchanging device with the reverse osmosis apparatus, ERI uses up to 60 percent less energy than is used in conventional reverse osmosis systems. Approximately 30 percent of the total cost of desalination is the cost of the required energy; the total cost of newly desalinated seawater falls between $3 and

Suggested Citation:"4 Energy Efficiency in industry." National Academy of Sciences, National Academy of Engineering, and National Research Council. 2010. Real Prospects for Energy Efficiency in the United States. Washington, DC: The National Academies Press. doi: 10.17226/12621.
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$8 per 1000 gallons, so the cost of the energy would be between about $1 and less than $3 for that amount of product.17 Electric fields are also used to drive membrane separation processes to remove ionic substances from water.

Membranes may be made of organic materials for relatively low temperature processes or of inorganic materials such as ceramics for high-temperature use. Some membranes are composed of both organic and inorganic materials. Some are made of metals—for example, palladium or palladium alloy—especially for hydrogen separation; RTI Corporation is active in this area. Polymeric membranes, the largest class, may also become important energy-efficient means for purifying hydrogen (Lin et al., 2006). Membranes are currently used successfully to separate light hydrocarbons as well as hydrogen from gas streams being used as fuel; the separated light hydrocarbons in many cases have industrial uses with a value considerably higher than that of the original fuel.

The market for membranes is growing rapidly. In 1999, it was more than $1 billion and was predicted to reach $3 billion by 2008. The energy savings in the chemical industries alone has been estimated at about 95 trillion Btu/year by 2025, a reduction of about 2.5 percent in the total energy consumption by those industries (Worrell et al., 2004).

The principal inhibitors to the adoption of membrane separation methods are a lack of selectivity, the limited range of conditions under which they can function (organic materials typically must be used between 45°C and 60°C and at a pH of 4–10), fragility and lack of durability, and cost. The use of ceramic or mixed-composition membranes is one of the most active approaches to address these limitations.

Combining membrane separation with distillation in a hybrid system is another approach under development. Typically, the distillation step provides a first-stage, partial separation, and the refinement is done with membranes.

4.4.3
Fabrication and Materials

Advanced materials are an important enabling technology for all sectors of the economy: industry, buildings, and transportation. The industrial sector needs advanced materials that resist corrosion, degradation, and deformation at high temperatures and pressures; inferential sensors, controls, and automation, with

Suggested Citation:"4 Energy Efficiency in industry." National Academy of Sciences, National Academy of Engineering, and National Research Council. 2010. Real Prospects for Energy Efficiency in the United States. Washington, DC: The National Academies Press. doi: 10.17226/12621.
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real-time nondestructive sensing and monitoring; and new computational techniques for modeling and simulating chemical pathways and advanced processes. The development and implementation of new materials can lead to the increased energy efficiency and decreased environmental impact of U.S. industrial systems. New materials may be developed to make processes more efficient: for example, membranes for separation, or to substitute less energy-intensive materials to provide specific properties and services such as composites and nanomaterials for structural applications in place of steel.

The U.S. Department of Energy (DOE) has conducted an industrial materials development program for more than 20 years in the Office of Industrial Technology Program. This has been in collaboration with industrial firms, universities, and national laboratories. Materials-related opportunities are also discussed in Section 4.4.2 and in Section 4.4.4. The materials portfolio has three focus areas: materials for degradation resistance, with an emphasis on materials that are ultrahard and low-friction; materials for energy systems, with an emphasis on advanced refractories and thermal insulators for waste-energy recovery and reuse; and materials for separations, with an emphasis on membrane materials development. In its fiscal year (FY) 2009 budget submission, the DOE estimates potential energy savings from these programs in the year 2020 of 103 trillion Btu and carbon savings of 1.5 million metric tons of carbon equivalent. One needs to be cautious in applying these savings numbers so as not to double count when they are implemented in a specific industrial sector.

Examples of current efforts include the following:

  • Nanocoatings for high-efficiency industrial hydraulic and tooling systems: Widespread use of new superhard coatings will increase energy efficiency through diminished friction loss and increased seal reliability in hydraulic pumps. Additional savings are possible through extending the lifetime of optimum cutting performance in machine tooling. Increased system reliability with decreased downtime and replacement costs might provide economic benefits. Environmental benefits include reduced pollutant leakage through pump seals and reduced emissions due to energy efficiency. Degradation-resistant nanocoatings of several borides are being developed.

  • New material systems, including super stainless steels, low-cost titanium, and magnesium are being developed. New super stainless steels have comparable cost and creep resistance to state-of-the-art advanced

Suggested Citation:"4 Energy Efficiency in industry." National Academy of Sciences, National Academy of Engineering, and National Research Council. 2010. Real Prospects for Energy Efficiency in the United States. Washington, DC: The National Academies Press. doi: 10.17226/12621.
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austenitic stainless steels, but they have the potential for higher operating temperatures (up to 800–900°C) and durability under aggressive oxidizing conditions at a fraction of the cost. This represents a new class of heat-resistant alloys, because no alumina-forming, iron-based alloys with properties suitable for structural use above 600°C exist.

  • Novel refractory materials for high-temperature, high-alkaline environments would be applied to boilers, furnaces, and gasifiers for use in the aluminum, chemical, forest products, and glass industries.

  • Fiber-reinforced aerogel-based pipe insulation systems for industrial steam pipes would improve the high-temperature performance, durability, and life of aerogel materials. This insulation would be manufactured in blanket forms and have long-term water resistance. In addition to industrial steam pipes, this material could be applied to other components such as process heating lines, removable lids and covers, prejacketed insulation, and coker panels.

  • Hierarchical nanoceramics for industrial process sensors are being developed in order to recover energy and water from industrial waste and process streams. An array of nanoceramic gas sensors for real-time burner balancing could increase combustion efficiency by at least 0.5 percent and be applicable to many processes.

Examples of the successfully demonstrated use of advanced materials include the following:

  • An advanced heating system for high-performance aluminum forgings (Figure 4.8) that

    • Uses an optimized combination of radiant and convection heating for processing materials,

    • Decreases energy consumption by a factor of three,

    • Reduces heating times by an order of magnitude, and

    • Produces high-performance forgings with improved tensile and fatigue properties.

Field testing of the system in a full-scale production setup demonstrated a cost savings of 40–50 percent owing to reduced energy consumption, increased throughput, and improved consistency in the process and product:

Suggested Citation:"4 Energy Efficiency in industry." National Academy of Sciences, National Academy of Engineering, and National Research Council. 2010. Real Prospects for Energy Efficiency in the United States. Washington, DC: The National Academies Press. doi: 10.17226/12621.
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FIGURE 4.8 Continuous-belt infrared furnace for high-performance aluminum forgings. Testing of this system at Queen City Forging Company confirmed that it is more than three times more energy-efficient than current convection furnaces in preheating aluminum billets. It also provides grain refinement that enhances fatigue properties. Infrared preheated and forged components have been shown to last two times longer than conventionally preheated forgings.

FIGURE 4.8 Continuous-belt infrared furnace for high-performance aluminum forgings. Testing of this system at Queen City Forging Company confirmed that it is more than three times more energy-efficient than current convection furnaces in preheating aluminum billets. It also provides grain refinement that enhances fatigue properties. Infrared preheated and forged components have been shown to last two times longer than conventionally preheated forgings.

Source: DOE/EERE, 2005.

  • Nickel aluminides for rolls in reheat furnaces made possible

    • The development of manufacturing procedures that enabled production of 115 nickel aluminide rolls for installation and testing,

    • The processing of more than 215,000 tons of steel during a 26-month period, and the elimination of more than 70 furnace shutdowns,

Suggested Citation:"4 Energy Efficiency in industry." National Academy of Sciences, National Academy of Engineering, and National Research Council. 2010. Real Prospects for Energy Efficiency in the United States. Washington, DC: The National Academies Press. doi: 10.17226/12621.
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  • An increase in both yield and product quality owing to the elimination of rolling-related downgrading of steel, and

  • An increase of 35 percent in furnace energy efficiency.

Most of the materials that are currently in the R&D stage, such as those five listed above as examples of current efforts, will not be introduced in significant quantities until after 2020. Those that have been technically demonstrated successfully may be implemented within the next 10 years. To introduce a new material, particularly when substituting it for an existing material, the new material needs to be better than what it is replacing with regard to performance and cost. It often takes 10–20 years from “discovery” to have widespread impact in the marketplace. Part of the timeframe is the requirement to develop a database including the mechanical properties, performance results, life, and other characteristics so that designers will be comfortable using the new material. The nickel aluminides mentioned above, which increased furnace efficiency by an estimated 35 percent, have been under development since the mid-1980s and are just beginning to enter the marketplace in any significant amount. The development of new materials takes sustained funding, often from both the public and the private sector.

New fabrication processes are those crosscutting processes that support several energy-intensive industrial processes. The approach is to develop technologies that will improve yields per unit of energy cost for multiple elements of the manufacturing supply chain and will reduce waste and/or improve energy efficiency while demonstrating air- and water-neutral production methods. This is a relatively new focus for DOE, with areas of emphasis including the following: net and near-net design and manufacturing; advanced casting, forming, joining, and assembly; integrated predictive manufacturing and energy-efficient materials handling and plant operations; the engineering of functional materials and coatings; and nanomanufacturing, which would enable the mass production and application of nanoscale materials, structures, devices, and systems.

The U.S. materials and fabrication industries face the same competitive pressures as those facing the specific energy-intensive industries. There is strong cost and technology competition from foreign producers. The U.S. companies need to be at the cutting edge of developing and deploying new material to remain competitive.

Suggested Citation:"4 Energy Efficiency in industry." National Academy of Sciences, National Academy of Engineering, and National Research Council. 2010. Real Prospects for Energy Efficiency in the United States. Washington, DC: The National Academies Press. doi: 10.17226/12621.
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4.4.4
Sensors and Process Controls

Much of the sensor development applicable to improved energy efficiency in the United States is conducted by DOE’s Industrial Technologies Program (ITP), often in collaboration with industrial firms. In 2004 the sensors program had as a goal a reduction of energy use by 12 trillion Btu/year. Five components make up the program: Advanced Sensor Technologies, Next Generation Control and Automation, Improved Information Processing, Robotics, and Affordable Wireless Technologies. The adoption of these technologies would lead to highly automated processes with efficient, intelligent feedback control through continuous monitoring and diagnosis. DOE’s approach involves automated monitoring to gather data, automated data analysis, automated feedback and control, and effective communication among the components. Sensors are used for inferential controls, real-time and nondestructive sensing and monitoring, wireless technology, and distributed intelligence. A goal is to have controls for plant production available by 2017.

There are many novel sensors for a wide range of applications. Of these, many are specialized for very specific tasks. In the papermaking industry, a fiberoptic sensor measures paper basis weight to improve wet-end control in papermaking and to make paper of a uniform basis weight and higher quality. It minimizes energy requirements. Another noncontacting laser sensor measures shear strength and bending stiffness by tracking the rate of propagation of ultrasonic shock waves in the paper. It is claimed that this device could save the U.S. paper industry approximately $200 million annually in energy costs.18

New kinds of sensors employ a variety of technologies that in the past were usually associated with individual measurements rather than with monitoring. For example, an X-ray diffraction sensor developed under the ITP allows online monitoring of the composition, specifically the phase, of steel as it is being manufactured. The sensor detects grain structure, orientation, and size, and it can measure stress as well. As the approach is developed, this monitoring technology may well be useful in the manufacture of aluminum, paper products, cement, semiconductors, pharmaceuticals, and ceramics as well. The power requirements are low, there are no moving parts, and the devices are insensitive to changes in position or temperature and to vibration.

Laser sensors are finding many applications. A laser sensor system developed by an energy research company to measure the constituents in a melt has

Suggested Citation:"4 Energy Efficiency in industry." National Academy of Sciences, National Academy of Engineering, and National Research Council. 2010. Real Prospects for Energy Efficiency in the United States. Washington, DC: The National Academies Press. doi: 10.17226/12621.
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been tested successfully by an aluminum manufacturer and could be used in other industries such as glass and steel manufacturing. Developed with support from DOE’s Office of Energy Efficiency and Renewable Energy, the system has already been licensed and marketed, and sales have been made. Another laser sensor, using a tunable diode, detects temperature, nitrogen oxides, and carbon monoxide in furnace environments. Meant to optimize combustion processes, this system has been applied to a steel reheat furnace and an aluminum reverberatory furnace and might be applied in electric arc steelmaking furnaces as well. Another fiber-optic sensor measures the temperature profile of molten glass, up to depths of about 6 inches. Such profiles are critical for the precise temperature control necessary to shape manufactured objects such as bowls and jars, flat window glass, blown glass for lightbulbs, and fiberglass for insulation.

An important area in which efficient sensors are also being developed and used is in lighting. Reductions of 20–25 percent in lighting costs are claimed for systems that reduce voltage and current for fluorescent lighting (Globalight). Wal-Mart is using sensors to control lighting levels as one of its energy efficiency efforts.

Monitoring of gases in flow processes is another area in which new sensors are finding application. Pennsylvania State University, with technology from the Sandia National Laboratories, developed a solid-state sensor for monitoring hydrogen in gas streams that can operate over a range from 0.5 to 99 percent hydrogen. Hundreds of such units are now in use. In 2006, three Argonne National Laboratory scientists developed the fastest commercially producible hydrogen sensor, with its most probable near-term use in hydrogen-powered vehicles. The detector is made of nanoparticles of siloxane and palladium. The signal is the change, with hydrogen, of the resistivity of the nanobeads of the sensing material.

The monitoring of liquids offers many opportunities. Emerson Process Management has developed an energy-efficient pH meter to monitor boiler water, steam condensate, boiler feedwater, and other such fluids. This is based on replacing a diffusion junction with a very precise, very small capillary, to allow small amounts of fluid to flow without serious restriction. A detector has been developed to predict the flooding of distillation columns. This feature will allow increases of 2–5 percent in throughput.

Wireless networking for sensor systems is under very active development. The Wireless Industrial Networking Alliance is one vehicle stimulating such work. The DOE sponsored the publication in 2002 of Industrial Wireless Tech-

Suggested Citation:"4 Energy Efficiency in industry." National Academy of Sciences, National Academy of Engineering, and National Research Council. 2010. Real Prospects for Energy Efficiency in the United States. Washington, DC: The National Academies Press. doi: 10.17226/12621.
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nology for the 21st Century (DOE, 2002) to review the state of the art and project its future.

The ITP sponsored its sixth annual conference in Rosemont, Illinois, on June 9–11, 2008, to review its research portfolio on sensors and automation. Topics covered included a microgas analyzer, imaging of surfaces for hot rolled steel bars, infrared temperature sensors, ultrasonic distance sensors, noncontacting speed measurement, digital sensor signals, the use of vibration power to supply the energy needed for sensor networks, and a variety of examinations of wireless sensor networks. The past project portfolio reviews in this program give an overview, through numerous samples, of advances in sensor methods whose development is supported by the DOE.

4.4.5
Steam and Process Heating

Process heating improvements and process and design enhancements can improve quality, reduce waste, reduce the intensity of material use, and increase in-process material recycling. Industrial facilities can eliminate some energy-intensive steps by implementing direct manufacturing processes, thereby reducing energy use, avoiding emissions, and enhancing productivity. This potential is vividly illustrated by the Save Energy Now assessments run by the ITP.

Save Energy Now was created to help reduce energy consumption at industrial process sites in the wake of Hurricane Katrina. It initially focused on steam and process heat in a select group of 200 of the nation’s largest manufacturing facilities (there are about 6800 manufacturing facilities that use more than 1 trillion Btu annually) because these two areas make up about 74 percent of natural gas consumption in manufacturing. Facilities (companies) applied through an online process from November 2005 to January 2006; several requirements were set for applicant companies. Those facilities that did not make it into the 200 to receive assessments were still offered software or technical support from an industrial savings expert.

The Save Energy Now assessments at the participating industrial plants included the identification of ways to reduce natural gas use in steam and process heat as well as the on-site training of appropriate personnel to use the Save Energy Now software. Focused, rapid (lasting 3 days), and designed to closely involve plant personnel to achieve buy-in and capacity building for future in-house assessments, these assessments yielded an average of 8.8 percent energy savings annually with a payback in less than 2 years for most changes. In summary:

Suggested Citation:"4 Energy Efficiency in industry." National Academy of Sciences, National Academy of Engineering, and National Research Council. 2010. Real Prospects for Energy Efficiency in the United States. Washington, DC: The National Academies Press. doi: 10.17226/12621.
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By the end of 2006, DOE had completed all 200 of the promised assessments, identifying potential natural gas savings of more than 50 trillion Btu and energy cost savings of about $500 million. These savings, if fully implemented, could reduce CO2 emissions by 4.04 million metric tons annually. These results, along with the fact that a large percentage of U.S. energy is used by a relatively small number of very large plants, clearly suggest that assessments are an expedient and cost-effective way to affect large amounts of energy use. (Wright et al., 2007, pp. i-ii)

The program was extended and expanded by ITP to include 250 facilities in 2007 and to focus on pumping, compressed air, and fan systems in addition to the main thrust of steam and process heat.

Save Energy Now built on what ITP was already doing:

  • Plant-wide assessments. From 1999 through 2005, ITP conducted 49 of these (at a 50 percent cost-share basis). Each of these systematic assessments of plant-wide operations addressed a variety of generic and industry-specific technology areas and identified methods for optimizing plant processes.

  • Industrial assessment centers (IACs). Currently, IACs are located at 27 universities, which conduct free assessments for small- to midsize facilities. Assessors include trained engineers and students. Over the past 20 years, the program has resulted in a database of information on nearly 100,000 cost-saving opportunities identified for industry as the result of 13,500 assessments. These assessments have saved IAC clients an average of more than $55,000 per year for each assessment, with paybacks typically averaging a year or less.

  • Best-practices decision software tools. ITP has developed a suite of software-based decision tools to help industrial plant personnel identify energy efficiency improvements for plant process and utility systems. These are available free of charge and can be downloaded from the DOE’s Web site.

  • Best-practices end-user training. ITP provides daylong, year-round training on key areas to focus efforts for reducing energy waste in industrial processes. More than 10,000 people have attended these training sessions.

  • Best-practices specialist qualification training. ITP has also instituted a training program that certifies individuals as experts on a particular

Suggested Citation:"4 Energy Efficiency in industry." National Academy of Sciences, National Academy of Engineering, and National Research Council. 2010. Real Prospects for Energy Efficiency in the United States. Washington, DC: The National Academies Press. doi: 10.17226/12621.
×

area of decision software (i.e. steam, process heat, pump); 460 people have been certified in this way.

  • Collaborative targeted assessments. From 2001 through 2005, ITP conducted on-site training and assessments at 85 facilities. These assessments followed end-user training for plant personnel.

Figures 4.9 and 4.10, for steam and for process heat, respectively, show the average cost and payback for a select set of energy-saving actions.

On the supply side, industry can self-generate clean, high-efficiency power and steam and can create products and by-products that can serve as cleanburning fuels. The sector can also make greater use of coordinated systems that

FIGURE 4.9 Top-10 energy-saving actions for industrial steam systems. Shown are the estimated savings in industrial energy costs identified by the DOE’s Save Energy Now assessments in 2006. Most of the savings had estimated payback periods of less than 2 years.

FIGURE 4.9 Top-10 energy-saving actions for industrial steam systems. Shown are the estimated savings in industrial energy costs identified by the DOE’s Save Energy Now assessments in 2006. Most of the savings had estimated payback periods of less than 2 years.

Source: Wright et al., 2007.

Suggested Citation:"4 Energy Efficiency in industry." National Academy of Sciences, National Academy of Engineering, and National Research Council. 2010. Real Prospects for Energy Efficiency in the United States. Washington, DC: The National Academies Press. doi: 10.17226/12621.
×
FIGURE 4.10 Top-10 energy-saving actions for industrial process heating systems. Shown are the estimated savings in industrial energy costs identified by the DOE’s Save Energy Now assessments in 2006. Most of the savings had estimated payback periods of less than 2 years.

FIGURE 4.10 Top-10 energy-saving actions for industrial process heating systems. Shown are the estimated savings in industrial energy costs identified by the DOE’s Save Energy Now assessments in 2006. Most of the savings had estimated payback periods of less than 2 years.

Source: Wright et al., 2007.

more efficiently use distributed-energy generation, combined heat and power, and heat integration.

Of these energy efficiency concepts, a number have been identified as suitable for near-term commercialization and deployment. Improvements are possible in steam boilers, direct-fired process heaters, and motor-driven systems, such as pumping and compressed air systems. For example, high-efficiency, low-NOx-emission burners such as radiation stabilized burners, forced internal recirculation burners, ultralow-NOx burners, and UltraBlue burners have improved efficiency over conventional burners. Real-time, continuous emissions monitors are available to measure common compounds as well as ones that are not typically measured, such as formaldehyde or ammonia, to better control overall operations. Many of

Suggested Citation:"4 Energy Efficiency in industry." National Academy of Sciences, National Academy of Engineering, and National Research Council. 2010. Real Prospects for Energy Efficiency in the United States. Washington, DC: The National Academies Press. doi: 10.17226/12621.
×

these newer technologies have shown success in a limited number of commercial applications. Other near-term opportunities for increasing energy efficiency exist through the adoption of best energy-management practices; the adoption of more modern and efficient power- and steam-generating systems; integrated approaches that combine cooling, heating, and power needs; and the capture and use of waste heat. One example of a near-term opportunity is isothermal melting—a revolutionary aluminum melting technology with a continuous-flow system using an immersion heater that converts electricity to melting energy with 98 percent efficiency (Figure 4.11).

R&D opportunities suggest the possibility of further energy efficiency improvements to industrial steam and process heating. The development of ultrahigh-efficiency boilers, in particular, could offer considerable efficiency gains over today’s state-of-the-art boilers. These boilers employ a combination of advanced technologies such as high-efficiency burners (for example, forced internal recirculation burners, or ultralow-NOx burners), heat-recovery components, and advanced sensors and controls, to achieve high efficiency and low levels of NOx and CO2 emissions. The first demonstration of a prototype industrial “super

FIGURE 4.11 Process improvement example: isothermal melting of aluminum. Most aluminum is melted in furnaces, which use radiant heating as the dominant heat transfer mechanism and have poor thermal efficiency. Isothermal melting of aluminum involves the use of immersion heaters in multiple heating bays, allowing electricity to be converted to heat that is conducted directly to the molten metal.

FIGURE 4.11 Process improvement example: isothermal melting of aluminum. Most aluminum is melted in furnaces, which use radiant heating as the dominant heat transfer mechanism and have poor thermal efficiency. Isothermal melting of aluminum involves the use of immersion heaters in multiple heating bays, allowing electricity to be converted to heat that is conducted directly to the molten metal.

Source: DOE/EERE, 2007.

Suggested Citation:"4 Energy Efficiency in industry." National Academy of Sciences, National Academy of Engineering, and National Research Council. 2010. Real Prospects for Energy Efficiency in the United States. Washington, DC: The National Academies Press. doi: 10.17226/12621.
×

boiler” has a projected payback of less than 2 years and is saving thousands of dollars in energy costs annually (Wright et al., 2007).

4.4.6
Basic Approaches from Thermodynamics

One approach that has already been very useful for some processes—such as the optimized distillation column described previously—is a general optimization procedure that can be carried out for virtually any process for which a thermodynamic description is available. Specifically, the use of optimal control analyses can sometimes reveal ways to introduce as control variables some of the quantities that may have been treated only as passive, secondary variables in the evolution of a process. The temperature profile of a distillation column is one example.

The modern application of basic thermodynamics to the optimization of real processes is described by Sieniutycz and Salamon (1990) and Berry et al. (1999). Such approaches describe, for example, means to optimize drying processes and solar-driven heat engines, active heat insulation, and adsorption-desorption processes. However, these are descriptions at a rather abstract level. In terms of real devices, there needs to be a bridge between this level of analysis and the design of testable operating systems.

4.4.7
Electric Motors and Drive Systems

Electric motors make up the largest single category of electricity end-use in the U.S. economy. They also offer considerable opportunity for electricity savings, especially in the industrial sector.

Based on an inventory of motor systems conducted in 1998 (Xenergy, Inc., 1998), it is estimated that industrial motor energy use could be reduced by 11–18 percent if facility managers undertook all cost-effective applications of mature, proven efficiency technologies and practices. Specifically, the implementation of all well-established motor system energy efficiency measures and practices that meet reasonable investment criteria could yield annual energy savings of 75–122 billion kWh. Many motor system efficiency improvements yield benefits in addition to energy cost reductions. The benefits include improved control over production processes, reduction in waste materials, and improved environmental compliance. This full energy efficiency potential cannot be captured all at once, since it would require roughly 10 percent of total new capital expenditures by all manufacturers (Xenergy, Inc., 1998).

Motor efficiency upgrades, improved methods of rewinding failed motors,

Suggested Citation:"4 Energy Efficiency in industry." National Academy of Sciences, National Academy of Engineering, and National Research Council. 2010. Real Prospects for Energy Efficiency in the United States. Washington, DC: The National Academies Press. doi: 10.17226/12621.
×

and system efficiency improvements are all important sources of possible energy savings, but they vary in terms of the effort required. Most motor efficiency upgrades can be achieved fairly easily by selecting the most efficient available motor for the application at hand. System efficiency measures, however, often require a significant amount of expertise and effort on the part of industrial end users and their vendors to identify, design, implement, and maintain the upgraded systems. It is estimated that replacement of 80 percent of the current population of 1- to 200-horsepower motors will take 15–20 years (Xenergy, Inc., 1998). The challenge for government and utility efficiency programs is to assist in accelerating the pace of replacement.

A next generation of motor and drive improvements is also on the horizon, including motors with high-temperature superconducting materials. These advances are expected to be cost competitive in the midterm (i.e., in 2020 or later). Superconductors can be used to increase the magnetic field in a motor, thereby dramatically reducing motor size, weight, and energy losses. Cost and performance improvements are still needed, including reductions in the cost of cool superconducting materials.

4.5
BARRIERS TO DEPLOYMENT AND USE

The broader application of industrial technologies that are available for deployment is impeded by barriers such as the relative high risk and costs associated with new industrial technology, a lack of specialized knowledge relating to energy-efficient improvements, and an inadequate flow of information. These barriers and several others are discussed below. (See also Box 4.3.)

Companies must consider the technical risks of adopting a new industrial technology. Uncertainties about the benefits and impacts of new technology on existing product lines can be significant. Small technology changes, particularly in large, integrated process plants, can lead to major changes in process and product performance. In today’s manufacturing environment with “24/7” operations, reliability and operational risks represent major concerns for industry when adopting new technologies. These perceived technical risks result in the more lengthy and larger-scale field testing of new technologies, more stringent investment criteria, and a slower pace of technology diffusion.

The conservatism about adopting new technologies is not unique to energy-saving technologies. For example, American steel companies continued to build

Suggested Citation:"4 Energy Efficiency in industry." National Academy of Sciences, National Academy of Engineering, and National Research Council. 2010. Real Prospects for Energy Efficiency in the United States. Washington, DC: The National Academies Press. doi: 10.17226/12621.
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open-hearth furnaces after World War II, despite the demonstration of superior basic oxygen furnaces. The old technology was familiar and the new technology was a risk. Most energy savings come in through new processes and improved products rather than as a result of investments focused on saving energy. The energy savings is one benefit from the new technology, and usually the most important benefit. Since energy costs are typically small relative to the costs of materials, labor, and plant and equipment, they usually are not the factor driving new investments.

Relatively high initial costs for industrial energy efficiency improvements can be an impediment to investments. New energy-efficient technologies often have longer payback periods than traditional equipment has, and they represent a more serious financial risk, since there is greater uncertainty in future energy prices. This aspect of risk slows technological change and can result in suboptimal choices. Moreover, the interest rates available for efficiency purchases are often much higher than the utility’s cost of capital for new electricity-generating plants. Faced with uncertainty about future fuel prices, decision makers may simply avoid investments in new energy systems that require higher initial costs. Because changes in processes affect future cash flows—and often for long periods of time—it would be appropriate for plant managers to look at the net present value of discounted future cash flows rather than to focus on payback periods. A payback period does not properly account for the time value of money or risk, whereas net present value (if properly used) can account for both, as well as provide an accurate rate of return.

External benefits and costs are difficult to value quantitatively, and this inhibits industrial plant managers from investing in greenhouse gas mitigation and other pollution-abatement measures. Companies generally do so only when the investments are offset by lower energy or raw material costs or other cost benefits. External environmental benefits (e.g., benefits to society) are not usually considered in evaluating energy efficiency investments. Although they typically introduce innovations to the industrial sector, suppliers may be reluctant to expend resources in developing technologies for reducing greenhouse gas emissions, unless they have an assured market. On top of the typical risks posed by competing companies and products, uncertain demand can tip the scale toward unacceptable risk for potential financiers.

Distorted price signals also skew the demand for electricity in today’s retail markets. While time-of-use pricing is available for many major industrial customers, electricity rates generally do not reflect the real-time costs of electricity

Suggested Citation:"4 Energy Efficiency in industry." National Academy of Sciences, National Academy of Engineering, and National Research Council. 2010. Real Prospects for Energy Efficiency in the United States. Washington, DC: The National Academies Press. doi: 10.17226/12621.
×

production, which can vary by a factor of ten over a single day. Most customers in traditionally regulated markets buy electricity under time-invariant prices that are set months or years ahead of actual use. As a result, current market structures actually block price signals from reaching customers (Cowart, 2001, p. vii), such that consumers are unable to respond to the price volatility of wholesale electricity. Time-of-use pricing would encourage industrial customers to use energy more efficiently during periods when prices are high. According to Goldman (2006), 2700 commercial and industrial customers were enrolled in time-of-use pricing programs in 2003, representing 11,000 MW. Three programs in the Southeast (TVA, Duke Power, and Georgia Power) accounted for 80 percent of these participants, most of which used large amounts of energy. Thus, there would appear to be considerable room for expanding time-of-use pricing programs to other regions and to smaller enterprises.

Lack of specialized knowledge related to energy-efficient technologies and their relative benefits is an impediment to adoption. Industrial managers can be overwhelmed by the numerous products and programs that tout energy efficiency, especially in the absence of in-house energy experts, and may find it risky to rely on third-party information to guide investments. Energy consulting firms often lack the industry-specific knowledge to provide accurate energy and operational cost assessments, and many industrial operations do not have in-house engineering resources to sort through or analyze the information.

According to Neal Elliott, associate director for research at the American Council for an Energy Efficient Economy, “The number one issue with increasing end-use efficiency is the shortage of qualified energy managers and analysts” (Brown et al., 2008, p. 22). Business managers in commercial and industrial sectors are facing knowledge barriers, but commercial managers are more likely to adopt new technologies because the main efficiency improvements are related to common technologies, such as lighting and air-conditioning. Industrial plants often use very specific energy-consuming technologies that do not include off-the-shelf improvements. In addition, industrial sectors may distrust such companies as energy services companies (ESCOs), which specialize in energy efficiency technologies, because these companies do not have industry-specific knowledge as a basis for providing accurate estimates to the manager (Brown et al., 2008).

Incomplete and imperfect information is an impediment to the diffusion of energy-efficient industrial technologies and practices, such as CHP systems, materials substitution, recycling, and changes in manufacture and design. This barrier is exacerbated by the high transaction costs for obtaining reliable information

Suggested Citation:"4 Energy Efficiency in industry." National Academy of Sciences, National Academy of Engineering, and National Research Council. 2010. Real Prospects for Energy Efficiency in the United States. Washington, DC: The National Academies Press. doi: 10.17226/12621.
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(Worrell and Biermans, 2005). Researching new technology and collecting other relevant information consume precious time and resources, especially for small firms, and many industries prefer to expend human and financial capital on other investment priorities. In some cases, industrial managers and decision makers are simply not aware of energy efficiency opportunities and low-cost ways to implement them.

This barrier is made more onerous by the limited government collection and analysis of energy use in the industrial sector. Consider, for example, the Manufacturing Energy Consumption Survey (MECS), a widely used publication that is published every 4 years by the DOE’s Energy Information Administration (EIA). In it, one can find the fuel breakdown of the petroleum industry, but there is no estimation of how much energy is used in distillation columns or other separations. By contrast, for buildings, the EIA’s Residential Energy Consumption Survey, Buildings Energy Data Book, and other such publications—many of which appear annually—contain substantially more detailed statistics than those available for manufacturing. More frequent and comprehensive collection and publication of such data and analyses are needed.

Investments in industrial energy efficiency technologies are hindered by market risks caused by uncertainty about future electricity and natural gas prices and unpredictable long-term product demand.

The high cost of capital and constrained credit markets are also significant barriers to energy efficiency improvements in industry. New technologies have to compete for financial and technical resources against projects that achieve other company goals and against familiar technologies. Financial constraints can hinder the diffusion of technologies within industries; a technology may not spread across its potential market owing to the constraints of expected adopters, which do not all have the same ability to raise capital (Canepa and Stoneman, 2004). In addition, if the technology involved is new to the market in question, even if it is well demonstrated elsewhere, the problem of raising capital may be further exacerbated.

Capital market barriers can inhibit efficiency purchases. Although, in theory, firms might be expected to borrow capital any time that a profitable investment opportunity presents itself, in practice firms often ration capital—that is, they impose internal limits on capital investment. The result is that mandatory investments (e.g., required by environmental or health regulations) and those that are most central to the firms’ product line often are made first. Projects to increase

Suggested Citation:"4 Energy Efficiency in industry." National Academy of Sciences, National Academy of Engineering, and National Research Council. 2010. Real Prospects for Energy Efficiency in the United States. Washington, DC: The National Academies Press. doi: 10.17226/12621.
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capacity or bring new products to the market typically have priority over energy cost-cutting investments.19

In the United States, firms can face fiscal policies unfavorable to investments in end-use efficiency. The current federal tax code discourages capital investments in general, as opposed to the direct expensing of energy costs. More specifically, tax credits designed to encourage technology adoption are limited by alternative minimum tax rules, tax credit ceilings, and limited tax credit carryover to following years; these limitations prevent the credits from being used to their full potential by qualified companies. Furthermore, outdated tax depreciation rules require firms to depreciate energy efficiency investments over a longer period of time than many other investments (e.g., only 5 years for a new data center), making these investments less cost-effective than other investment options (Brown and Chandler, 2008). This is partly because energy-efficient products have long depreciable lives, such as 15 years for a new motor or a new industrial boiler. An illustration of the consequence of these depreciation rules is that a new backup generator would be depreciated over 3 years, whereas a CHP system would be depreciated over 20 years. The CHP system would provide both reliability and energy efficiency; the backup generator, however, provides reliability at the expense of energy efficiency and clean air. This is another case of legislation lagging behind (and inhibiting) technological progress. Federal depreciation schedules were put into place more than two decades ago as part of the IRS Reform Act of 1986 (P.L. 99-514), and they have not kept up with technological innovations. A modification of depreciation schedules would remove a significant barrier to industrial efficiency investments, but it would require legislative action (Brooks et al., 2006).

Regulatory barriers can also inhibit energy-saving improvements at industrial facilities. For example, as part of the 1977 Clean Air Act Amendments (P.L. 95-95; 91 Stat. 685), Congress established the New Source Review (NSR) program and modified it in the 1990 amendments, but it exempted old coal plants and industrial facilities from the New Source Performance Standards (NSPS) intended to promote the use of the best air pollution control technologies, taking into account the cost of such technology and any other non–air quality, health, and environmental impact and energy requirements. However, investment in an upgrade could trigger an NSR, and the threat of such a review has prevented many upgrades. NSR thus imposes pollution controls where they are least needed

19

Sergio Dias, Northwest Energy Efficiency Alliance, personal communication, November 8, 2006.

Suggested Citation:"4 Energy Efficiency in industry." National Academy of Sciences, National Academy of Engineering, and National Research Council. 2010. Real Prospects for Energy Efficiency in the United States. Washington, DC: The National Academies Press. doi: 10.17226/12621.
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and artificially inflates the value of the dirtiest plants. Altogether, these effects have led some critics to question whether the NSR program and the NSPS have resulted in higher levels of pollution than would have occurred in the absence of regulation (Brown and Chandler, 2008).

4.6
THE BUSINESS CASE FOR ENERGY EFFICIENCY

Other than subsidies, regulation, and supporting public policies, what might motivate industry to improve its energy efficiency? What are the most important leverage points for motivating efficiency improvements? Some of the most important of these drivers are described below.

  • Rising energy prices. The sustained pain of rising oil, coal, natural gas, and electricity prices is motivating a renewed interest in energy efficiency. To remain competitive, industry must find ways to reduce its energy consumption, and higher energy costs can make efficiency investments more cost-competitive. Of course, the cost of efficiency investments can also rise with energy costs (perhaps lagged by a few years). Thus, the excitement over finally being able to justify an alternative-fuel or energy-reduction project because of recent energy cost increases is often dampened by the discovery of an accompanying rise in the cost of equipment and materials.

  • Environmental concerns and regulations. Many states are allowing industry to use energy efficiency to qualify for NOx and SO2 offsets in non-attainment zones. With a lowering of acceptable ozone concentrations, many additional counties in the United States are going to be in non-attainment. Title IV SO2 allowances are now trading at less than $100/ton, and NOx is trading at less than $1000/ton. At higher prices, these allowances could provide a lucrative stream of payments for many industrial efficiency investments.20 Most energy policy analysts forecast

20

The average weighted price for a ton of SO2 in 2009 was $69.74 (http://www.epa.gov/airmarkt/trading/2009/09summary.html). The average price for a ton of NOx in March 2009 was roughly $625/ton (seasonal) (http://www.ferc.gov/market-oversight/othr-mkts/emiss-allow/othr-emns-no-so-pr.pdf).

Suggested Citation:"4 Energy Efficiency in industry." National Academy of Sciences, National Academy of Engineering, and National Research Council. 2010. Real Prospects for Energy Efficiency in the United States. Washington, DC: The National Academies Press. doi: 10.17226/12621.
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that there will be tradable allowances for CO2 sometime in the next several years.

  • Demand charges and demand-response incentives. The ability of industry to cut peak electric loads is a motivator for utilities to incentivize demand response (shifting loads to off-peak periods) in industry. Industrial energy efficiency measures that reduce energy demand (or slow its growth) can also help utilities meet energy needs, so promoting such savings can be in the utilities’ interest. In combination with peak-load pricing for electricity, energy efficiency and demand response can be a lucrative enterprise for industrial customers.

  • Collateral benefits. Secondary or collateral benefits such as increased productivity, improved product quality, reduced labor costs, and enhanced reliability are often strong drivers for energy efficiency improvements (Worrell et al., 2003). This was illustrated effectively in Cool Companies: How the Best Companies Boost Profit and Productivity by Cutting Greenhouse Gas Emissions (Romm, 1999), which describes the many ways that corporations have benefited from increasing the energy efficiency of their operations.

  • International competition. If a company cannot sell its products because of the cost of the energy needed to produce them relative to the costs of domestic or international competitors, attention may turn to energy efficiency improvements in the manufacturing process.

  • Corporate sustainability. Voluntarily reducing greenhouse gas emissions and implementing climate change mitigation strategies offer ways to boost shareholder and investor confidence, profit from future legislation, access new markets, lower insurance costs, avoid liability, offer competitive benefits, and prevent and prepare for physical and market damage caused by further climate impact. Almost all of the Fortune 500 companies are publishing corporate responsibility reports. Many companies are setting energy efficiency goals (e.g., Johnson and Johnson, BP, Exxon, Dupont). Similarly, ISO 14000 certification informs the public about the nature of the production processes and is being required by DOE, Dow, and others.

  • Shareholder activism, good corporate governance, and reputation management are other potential drivers of energy efficiency in industry. ENERGY STAR® designations and other government programs that recognize outstanding environmental performance by corporate

Suggested Citation:"4 Energy Efficiency in industry." National Academy of Sciences, National Academy of Engineering, and National Research Council. 2010. Real Prospects for Energy Efficiency in the United States. Washington, DC: The National Academies Press. doi: 10.17226/12621.
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America have proven to be strong motivators of resource and energy conservation.

  • Insurance access and costs, legal compliance, and concerns regarding fiduciary duty are additional business case drivers for managing greenhouse gas emission reductions through energy efficiency (Natural Edge Project, 2005).

4.7
FINDINGS

The following findings derive from the panel’s analysis of industrial efficiency summarized in this chapter.

I.1

Independent studies using different approaches agree that the economic potential for improved energy efficiency in industry is large. Of the 34.3 quads of energy forecasted to be consumed by U.S. industry in 2020 (EIA, 2008), 14–22 percent could be saved through cost-effective energy efficiency improvements (those with an internal rate of return of at least 10 percent or that exceed a company’s cost of capital by a risk premium). These innovations would save 4.9–7.7 quads annually by 2020.

I.2

Additional efficiency investments could become cost-competitive through energy RD&D. Enabling and crosscutting technologies, such as advanced sensors and controls, microwave processing of materials, nanoceramic coatings, and high-temperature membrane separation, can provide efficiency gains in many industries as well as throughout the energy system—for example, in vehicles, feedstock conversion, and electricity transmission and distribution.

I.3

Industry has experienced a significant shift to offshore manufacturing of components and products. If the net energy embodied in imports and exports is taken into account, the energy consumption attributable to industry would be increased by 5 quads.

I.4

Energy-intensive industries such as aluminum, steel, and chemicals have devoted considerable resources to increasing their energy efficiency. For many other industries, energy represents 10 percent or less of costs and is not a priority. Energy efficiency investments compete for human and financial resources with other goals such as increased production, improved productivity, introduction of new products, and compliance

Suggested Citation:"4 Energy Efficiency in industry." National Academy of Sciences, National Academy of Engineering, and National Research Council. 2010. Real Prospects for Energy Efficiency in the United States. Washington, DC: The National Academies Press. doi: 10.17226/12621.
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with environment, safety, and health requirements. Outdated capital depreciation schedules, backup fees for combined heat and power systems, and other policies also hamper energy efficiency investment.

I.5

More detailed data, collected more frequently, are needed to better assess the status of and prospects for energy efficiency in industry. Proprietary concerns will have to be addressed to achieve this.

I.6

Drivers for energy efficiency in industry include rising and volatile energy prices, intense competitive pressure to lower costs, and an increased focus on corporate sustainability.

4.8
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AISI (American Iron and Steel Institute). 2005. Saving One Barrel of Oil per Ton. Washington, D.C.: AISI. October.

AISI. 2006. Annual Statistical Report. Washington, D.C.: AISI.

American Chemistry Council. 2008. Guide to the Business of Chemistry. Available at http://www.americanchemistry.com/store/detail.aspx?ID=243.

ANL (Argonne National Laboratory). 1990. Environmental Consequences of, and Control Processes for, Energy Technologies. Pollution Technology Review Series, No. 181. Norwich, N.Y.: William Andrew.

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Banerjee, R., A. Phan, B. Wang, C. Knobler, H. Furukawa, M. O’Keeffe, and O.M. Yaghi. 2008. High-throughput synthesis of zeolitic imidazolate frameworks and application to CO2 capture. Science 319:939-943.

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Suggested Citation:"4 Energy Efficiency in industry." National Academy of Sciences, National Academy of Engineering, and National Research Council. 2010. Real Prospects for Energy Efficiency in the United States. Washington, DC: The National Academies Press. doi: 10.17226/12621.
×

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Suggested Citation:"4 Energy Efficiency in industry." National Academy of Sciences, National Academy of Engineering, and National Research Council. 2010. Real Prospects for Energy Efficiency in the United States. Washington, DC: The National Academies Press. doi: 10.17226/12621.
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Suggested Citation:"4 Energy Efficiency in industry." National Academy of Sciences, National Academy of Engineering, and National Research Council. 2010. Real Prospects for Energy Efficiency in the United States. Washington, DC: The National Academies Press. doi: 10.17226/12621.
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Next: 5 Overarching Findings and Lessons Learned from Federal and State Energy Efficiency Policies and Programs »
Real Prospects for Energy Efficiency in the United States Get This Book
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America's economy and lifestyles have been shaped by the low prices and availability of energy. In the last decade, however, the prices of oil, natural gas, and coal have increased dramatically, leaving consumers and the industrial and service sectors looking for ways to reduce energy use. To achieve greater energy efficiency, we need technology, more informed consumers and producers, and investments in more energy-efficient industrial processes, businesses, residences, and transportation.

As part of the America's Energy Future project, Real Prospects for Energy Efficiency in the United States examines the potential for reducing energy demand through improving efficiency by using existing technologies, technologies developed but not yet utilized widely, and prospective technologies. The book evaluates technologies based on their estimated times to initial commercial deployment, and provides an analysis of costs, barriers, and research needs. This quantitative characterization of technologies will guide policy makers toward planning the future of energy use in America. This book will also have much to offer to industry leaders, investors, environmentalists, and others looking for a practical diagnosis of energy efficiency possibilities.

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