Navigant Research Blog

Automation Gives Manufacturers an Energy Boost

— October 17, 2014

According to the U.S. Manufacturing Purchasing Managers’ Index, a measure developed by financial research firm Markit, manufacturing activity in the United States in September reached its highest point in more than 4 years.  Factory employment, though still well below pre-2008 levels, reached its highest level since March 2012.

U.S. manufacturers are getting a boost from low energy costs, driven primarily by the bonanza of low-cost natural gas (and, to a lesser extent, by distributed renewables, often onsite at plants).  But what’s going on inside U.S. plants is equally important.  Increased energy efficiency, enabled by a revolution in process automation technology, is also helping U.S. manufacturers compete with manufacturers that enjoy low-cost labor in developing countries, particularly China.

Excess No Longer Success

Since peaking around 1999, the primary energy use in the U.S. manufacturing sector has declined steadily, according to the American Council for an Energy-Efficient Economy, from about 35 quadrillion BTUs annually to less than 31 quads.  Energy intensity – the BTUs used per dollar value of shipments – has declined even more dramatically.

The shift is coming as a shock to old-line factory managers unused to calculating energy as a key metric of efficiency and productivity.  “No one ever got fired for purchasing a pump or a machine that’s too big for the job,” said Fred Discenzo, manager of R&D at Rockwell Automation, at a recent energy management conference in Akron, Ohio.  In manufacturing, “excess capacity has always been the safe option.”

Rockwell is among an emerging segment of technology vendors that is trying to change that, through what it calls “the connected enterprise.”  What that means is connecting the factory floor to the C-suite with far greater visibility and immediacy than before.  Another name for this change might be “extreme granularity.”  In the near future, energy use will be measured not at the factory or line or machine level, but at the individual process level, per unit of production: how much energy did it take to make this widget or valve or bag of ice, and where in the process can that energy use be optimized?

The Next Revolution

Advances in factory-floor networks, wireless sensors, virtualization, and monitoring equipment are enabling these improvements in manufacturing efficiency, energy conservation, and quality control.  These twinned revolutions – cleaner, cheaper, more distributed energy coming into the plant and sophisticated automation technology reducing energy intensity inside the plant – will result in changes that have far-reaching implications for the manufacturing sector, and for the economy.  “The new era of manufacturing will be marked by highly agile, networked enterprises that use information and analytics as skillfully as they employ talent and machinery to deliver products and services to diverse global markets,” concluded a 2012 McKinsey study entitled Manufacturing the Future.

At 32% of total energy consumption, industry uses more energy than any other sector of the U.S. economy.  Manufacturers that adapt to the new realities of energy, by changing the ways in which they source and use electricity, will be more competitive on the global stage – and could help usher in the new economic upswing that politicians and analysts have been dreaming of for years.

 

Hidden Meters Provide Visible Savings

— September 8, 2014

A fundamental challenge in commercial building energy management is in understanding where all the electrons are flowing.  Most buildings have a meter that will tell the facility or energy manager how much power is being consumed, and smart meters have contributed greatly to their insight (in some parts of the world, including the United States, groups of buildings share a meter).  And many, such as apartment buildings, have dedicated meters for each tenant.

But to find out how much power is consumed by tenants or equipment, a finer grain view is needed.  It sounds easy to simply deploy more meters or submeters, watch the data flow in, and manage accordingly.  But the barriers to additional submeters, including the cost of deployment and regulatory issues, are limiting their deployment.

Most large heating, ventilation, and air conditioning (HVAC) and other large equipment vendors now sell embedded energy meters with their equipment, making energy management for large systems possible, albeit more expensive.  Today, an alternative is on the rise, in the form of in-line circuit breaker meters.  These devices snap on to the feeder wires of the breakers, recording the power used inside the cable without interfering with it.  All of these companies are touting the fast and easy installation, along with the value of actionable data for facility managers.  These are compelling arguments, especially considering the vast amount of commercial space and the massive plug loads associated with them.

Thinking Inside the Box

A few companies use these innocuous looking grey boxes as the data source to manage energy, displacing the traditional meter and submeter streams and setting up an interesting set of partnerships along the way.   Pennsylvania-based E-Mon sells a line of circuit breaker submeters that capture power and can then communicate via Ethernet (or TIA-485-A) with an energy management system (EMS).  While E-Mon has its own software package, the company recently announced a partnership with Honeywell to use its Attune Energy Dashboard service.   Similarly, Panoramic Power formed a partnership with Lucid, joining its ConnectNow partner group.  Panoramic Power sells only energy services, not the devices themselves, and uses wireless as opposed to wired solutions.

Enertiv both sells devices and EMSs, using Ethernet to communicate with the EMS.  In late July, the New York City-based company received $750,000 in seed funding, indicating the interest in this space.  This interest is rubbing off on newcomer Bractlet.  The Austin-based company, receiver of venture capital and seed funding from Start-Up Chile, sees circuit-level data as a way to validate the upfront costs needed for building retrofits and a way for building and energy managers to measure the value of retrofits.

It’s a compelling business case.  When it comes to retrofits, the first question asked is, “What will this retrofit cost me?” Followed by, “How long will it take to recoup my investment?”  The last question is the most difficult: “How will I know if those savings are actually achieved?” Bractlet, along with its competitors in this emerging space, may have the right approach to answering those questions.

 

From Commonplace Materials, Shigeru Ban Creates Uncommon Shelters

— September 8, 2014

Japanese architect Shigeru Ban’s first museum in the United States opened last month in Aspen, Colorado.  An internationally renowned architect and the recipient of the 2014 Pritzker Prize, which is often referred to as architecture’s Nobel Prize, Ban is distinguished from his peers by his commitment to humanitarian work and sustainability.

Since 1994, Ban and a team of volunteers have responded to a number of disasters worldwide with innovative architectural solutions.  They constructed relief housing in response to the 1999 earthquake in Turkey, to Hurricane Katrina in 2005, and to the 2011 earthquake and tsunami in Japan.  Ban uses inexpensive, often recycled materials to construct innovative shelters in an economically and environmentally sustainable way.  These structures dispel preconceived notions of the aesthetics of disaster relief shelters with their simple, clean designs.

In Onagawa, Japan, Ban converted old shipping containers into housing for people who lost their homes in the 2011 disaster.  The earthquake and flooding left little flat land, which Ban addressed by stacking the shipping containers to make three level multi-family units.   One of Ban’s earliest projects was in response to the 1994 civil war in Rwanda that left millions homeless.  Ban worked with the United Nations High Commissioner for Refugees (UNHCR) to develop refugee shelters, using low-cost paper tubes as an alternative to wood in an area that had suffered rapid deforestation.

Minimalism in a Time of Excess

What makes Ban’s work particularly interesting from an energy standpoint is his dedication to using locally and sustainably sourced materials.  The new Aspen Art Museum is constructed from materials ranging from paper tubes to beer crates, and all the wood involved in the project was sustainably sourced.  Fellow architects have called Ban a “socially responsible” or “socially conscious” architect who prizes sustainability above all.  But despite Ban’s focus on reusing materials and minimizing waste, he rejects labels such as green and eco-friendly.

Although Ban is the best-known philanthropic architect, lesser-known builders and organizations are working in a similar capacity, creating a small but growing movement.  For example, the U.K. charity Architecture Sans Frontières, emulating the model pioneered by Doctors without Borders, is spreading sustainable architecture and responsibly built environments to marginalized or impoverished communities around the world.  In the United States, the organization Make it Right, created after Hurricane Katrina, enlists architects who donate their time to create cradle to cradle homes that produce more energy than they consume.  Natural disasters, political turmoil, and war will continue to displace people from their homes, and the innovative architectural designs by Ban and others can help keep them from crowded and unsanitary refugee camps.

 

As Commodity Prices Slide, Big Miners Seek a Sustainable Strategy

— August 22, 2014

Navigant Research’s report, Renewable Energy in the Mining Industry, summed up the state of the global mining business: “In the last decade, increased demand from countries such as China and other emerging economies pushed the price of many metals and minerals upward, which stimulated investment in the mining industry. More recently, the global economic downturn and the collapse in a number of metal and mined commodity prices forced the mining industry to scale back investment into new mine sites, reduce operating mine lives, and scale back their investment into more capital expenditure-heavy renewable energy.”

Since that report was published in the fourth quarter of last year, commodity prices have stumbled further, and the pressures on mining giants like Rio Tinto, BHP Billiton, and Vale Brazil have intensified.

On the surface, so to speak, it’s a great time to be an extractive company with worldwide operations in iron, copper, coal, and other minerals that are essential to the functioning of the modern industrialized economy.  The rise of China and India has created a seemingly bottomless well of demand, particularly for iron ore for steelmaking; technological advancements have cut the costs of large-scale mining operations (while eliminating thousands of well-paying jobs); and governments in places desperate for economic growth, such as Mongolia and Sub-Saharan Africa, have proven pliant to the demands of multinational mining corporations.

The Bottom of the Well

Rio Tinto’s profits in the first half of 2014 doubled from the same period a year before.  BHP Billiton made $13.4 billion in profits in the 12 months leading up to June 2014.  Brazil’s Vale, the world’s largest producer of iron ore, reported second quarter profits of $1.43 billion – slightly below Wall Street estimates but still a healthy increase over the year before.

A closer look, though, shows that big miners are playing a risky and ultimately unsustainable game.  The term of fashion in the mining industry today is “de-diversification” as mining companies sell off low-margin mines that they invested in during the commodities boom of 2002-2008, before the global financial systems crashed and growth in China ground almost to a halt.  To keep profits up, the companies are slashing costs and adding new production – a short-term strategy that could spell long-term disaster.

Rio Tinto’s results “showed that the strategy of carving into costs while ramping up volumes that are being pursued by the major miners has worked to offset commodity price declines,” wrote Stephen Bartholomeusz in the Australian business publication, Business Spectator.  “The key question – worth billions of dollars – is whether it will continue to work.”

Twilight in the Mines

Ultimately, the dilemma facing miners of low-margin commodities like iron and coal is that as economies like China’s and India’s develop, they need less basic stuff.  It takes less iron to make an iPhone than it does to assemble an airliner.  Despite slowing demand, Vale plans to double its exports of iron ore to China over the next 5 years.  Pumping more iron and coal into markets that need less of them is not a winning strategy over the long run.  Goldman Sachs analysts have estimated that the rate of growth in the supply of iron ore is 3 times the rate of growth in demand.  That’s a recipe for a glut and a price crash.  Already, iron prices are on a downward slide.

Asian iron ore spot prices have fallen 31% this year, according to Reuters, and “the consensus is that they will remain below $100 for the foreseeable future as big miners such as BHP, Anglo-Australian rival Rio Tinto and Brazil’s Vale ramp up output even as Chinese demand growth weakens.”

As with coal, iron ore could be entering a downward spiral that could overwhelm the major miners as they narrow their focuses:  “Iron ore risks becoming another coal,” remarked Reuters’ commodities columnist Clyde Russell, “where miners pursue output gains in order to lower costs, but in the end the resulting supply surplus just depresses prices even more, resulting in a no-win situation for producers.”

Like the coal era, the age of iron and steel is nearing its twilight.  That’s not good if you’re a multinational mining outfit.

 

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