Energy and the Chemical Industry

In a previous post, I estimated that the Industrial sector consumes about a third of all energy used in the U.S. I ended with the results of a 2002 survey which identified which particular industries consumed the most energy. In this post I will do a detailed analysis of what was estimated to be the leading energy consumer in the industrial and manufacturing sector: the Chemical industry. The primary data source is a 2000 study from LBL.

Which Chemical products accounted for the most energy consumption in the Chemical industry? In the chart below, the Chemical sector refers to industries classified under SIC Code 28:


Ethylene and co-products:

In the petrochemical industry mostly relatively simple organic chemicals are produced such as ethylene, propylene and benzene. These chemicals (some through intermediates, e.g. mono vinyl chloride or styrene) form the building blocks for many products such as plastics, resins, fibers, detergents, etc. The single most energy-consuming step in the petrochemical industry is the steam cracking of hydrocarbon feedstocks to produce ethylene, propylene, butadiene and aromatics (benzene, toluene and xylenes).

The less petrochemicals we use, and the more we reuse, the less energy is consumed in the manufacturing of these chemical building blocks. Simple examples include cleaning, health and beauty products which have become available even in mainstream retailers.

Ammonia and Nitrogenous Fertilizer Industry:

The production of ammonia is the most energy intensive production step in the manufacture of fertilizers and other nitrogen containing products. In the U.S. ammonia is one of the major chemicals produced ... In the U.S. about 80% of the ammonia is used for fertilizer production, the remainder for a variety of products, mainly explosives and plastics. The most important fertilizers produced in the U.S. are ammonium nitrate (AN), nitric acid (NA), urea, compound fertilizers, and liquid ammonia. Ammonium sulfate (AS) is most commonly produced as a co-product of nylon manufacturing. ... The world fertilizer market grows slowly, due to growth especially in developing countries. The world market price of ammonia has been depressed since the late 1980’s due to cheap exports from producers in Central and eastern Europe and the former Soviet Union, limiting expansion in the Western World (especially Western-Europe).

In a future post, I will compare the energy demands of conventional and organic agriculture. Ignoring the health advantages cited by proponents of Organic food, we will see that the energy and environmental advantages of Organic agriculture are compelling.

Chlorine:

The major markets for chlorine are PVC (37%), inorganic chemicals (22%), other organic chemicals (17%), propylene oxide (7%), pulp and paper (6%), water treatment (6%), solvents (5%). The major markets for caustic are: pulp and paper (26%), soaps and detergents (9%), propylene oxide (9%), petroleum (8%), water treatment (6%), other organic chemicals (13%), inorganic chemicals (12%). ... The production of chlorine gas is an energy intensive chemical process requiring between 25-40 GJ (worldwide average) primary energy per tonne chlorine produced.

Avoiding PVC is a key component of Green Architecture. For a hilarious look into the role of PVC in homebuilding, check out the documentary Blue Vinyl -- a cult classic in the Green Building industry.

Energy Efficiency: Chemical Industry is highly inefficient it its use of energy.
The above energy consumption estimates, include the massive amount of energy lost during production/manufacturing processes:

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

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

... Energy management is a process, not a project. Sure, engineering hardware projects are part of the solution. But energy-smart behaviors, folded into standard operating procedure, represent about 30 percent of potential energy savings.

A detailed analysis (from a separate data source) yields the following interesting graph (the red bars represent energy losses):


I. Energy (in the form of fuel or electricity) is produced for Chemical plants. 27% is lost by the utilities during electricity generation or during the delivery of fuel and electricity.

II. 73% of total energy is delivered "to the fence" of chemical industries. Close to 27% more energy is lost, with the largest loss due to Energy Conversion ("energy is converted to motive energy used by motor drives, pumps, heat exchangers, etc.").

III. 47% total energy available for useful consumption. Another 3% is lost, primarily to space conditioning and heating.

IV. Only 44% of total energy is actually used for Industrial processes!

Conservation and efficiency on the part of homeowners and consumers is something we highlighted in an earlier post. Using the Chemical Industry as a case study, it appears that end-use efficiency is even more important in the industrial sector. Besides the environmental benefits and reasons, the potential financial savings are huge. Why wait for mandates to be imposed when end-use efficiency is such an obvious competitive advantage?

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Conservation: Red States, Blue States, and the Golden State

A friend of mine based overseas recently sent me an email:

I love the Red States/Blue States trend graph of electricity consumption that you have referenced a few times. Any idea what led to California diverging so dramatically starting in the 1970s? From the graph, it appears that the other states can benefit from adopting some of the policies that proved successful in the Golden State.

My friend was referring to one of my favorite graphs, courtesy of The Economist, which illustrates the potential energy savings still available if we replicate some of California's policies across the country:


(To enlarge an image, click on it.) Amidst the tremendous interest in renewables, the importance of conservation and end-use efficiency frequently falls by the wayside. In a recent study by the Electric Power Research Institute (EPRI), end-use efficiency is projected to play a role comparable to renewables, in helping reduce CO2 emissions from electric power generation (WSJ.com, subscription required). EPRI is the research arm of the Electric Utilities. The graph below is their recent model of how CO2 emissions can be reduced to 1990 levels, by 2030:


Although these are numbers from the Electric Utilities, there is no doubt that end-use efficiency and conservation will be important pieces of any serious plan to reduce emissions. As we will see below, then California Governor Jerry Brown realized how a few simple initiatives designed to promote end-use efficiency, could dramatically halt the upward trend in per capita electricity consumption.

To come up with policies to encourage efficiency, a first step is to understand where we use the most energy. In order to approximate how a "typical" American household consumes energy, I turn to two goverment surveys (from 2001 and 2004). The Annual Buildings Energy Databook (from the DOE) has statistics on commercial and residential energy consumption, from all energy sources, including electricity, natural gas, fuel oil, etc.

Lighting (12%) is easy to address, and most countries have active programs in place. Compact Fluorescent Light Bulbs (CFL) use 2/3 less energy than a typical incandescent. The main concern with CFL's is that they contain a small amount of mercury. The Natural Resources Defense Council advises consumers that the amount of mercury in CFL's is less than the mercury needed to produce the additional electricity needed to power the equivalent incandescent.

In 2001, the Energy Information Administration (also from the DOE), released the results of a survey of residential electricity consumption:

Readers interested in regional averages can find them here. Using the 2001 survey, kitchen appliances accounted for over a quarter of household electricity consumption.

Refigerators and freezers consumed 64% of electricity attributed to Kitchen Appliances, or roughly 17% of total electricity consumption.

While solar panels may cost a homeowner $15K to $30K, switching over to the most efficient appliances costs less than $5K -- a more realistic sum for most families. Imagine if large numbers of households make this switch. In the 1970s policy-makers in California recognized the importance of electric appliances:

... In 1976, then-Gov. Jerry Brown was looking for a way to make good on his pledge to stop the construction of the proposed one-gigawatt Sundesert nuclear plant in Southern California. The answer turned out to be refrigerators - more-efficient refrigerators. Brown learned in a meeting with Rosenfeld that California's refrigerators were using the equivalent of five Sundesert plants. So the state adopted stringent appliance standards - before the federal government did - and staved off construction of the Sundesert plant. The change in California's refrigerators has saved energy equal to all the hydroelectric power produced nationwide, Rosenfeld said.

The U.S. eventually adopted national refrigeration standards, which are " ... saving more than 130,000 megawatts of electrical generating capacity".

California officials discovered that with the right public awareness campaigns, households will embrace conservation. What if the utility companies themselves are rewarded for promoting conservation?

Next, California adopted an innovative approach to utility regulation called decoupling so utilities' profits were no longer linked to simply increasing sales. California remains the only state to have adopted decoupling, though proposals are pending in seven states.

Decoupling effectively removes any disincentives, on the part of the utilities, to promote conservation:

... Here's how it works: Every few years, state regulators determine how much revenue utilities need to cover certain authorized costs. They then set electricity rates at a level that allows utilities to recover these costs, based on a forecast of sales. If actual sales are above or below this forecast, then revenues are "trued up." Over-collections are given back to consumers in the form of reduced rates, and under-collections are eliminated with modest rate increases (typically pennies a month for the average household). In 1982 California became the first state to adopt decoupling. The utility companies liked it, because it helped stabilize their financial health.

During the same period, policy makers realized the need for a comprehensive package of measures to encourage energy efficient buildings. In 1977, California introduced Title 24 (California Building Code), which mandated energy efficiency measures in all new construction:

Rosenfeld formed a group at LBL to create a computer program that modeled the energy performance of buildings. If you built, say, a 3,000-square-foot house in the mountains near Lake Tahoe and put in a big north-facing picture window, how much energy would it take to heat the house in January? What if the picture window faced south -- how much would that lower the heating bills? Now, plop the same house down in the Mojave Desert town of Barstow, California. What changes would you make to minimize the need for air-conditioning? Rosenfeld's program provided much more accurate answers, and was far more user-friendly, than a previous attempt at the same kind of modeling software.

... The commission estimated that buildings constructed under Title 24 -- and, therefore, designed using the Rosenfeld/DOE program -- eventually ramped up to energy savings of $5 billion a year. Other states followed California's lead, and Rosenfeld guesses that DOE-2 is now used in the design of 15 percent to 20 percent of all new buildings in the United States. More than 40 countries, from the northern climes of Canada and Switzerland to the tropics of Singapore, Thailand, and Indonesia, have also adopted the program.

Later events, including deregulation, prompted California officials to revisit these energy policies. The power crisis in 2001 convinced policy-makers that conservation programs needed to be strengthened, resulting in $2B of approved investments in end-use efficiency.

California's per capita electricity consumption has remained flat since the 1970s, while the national average continues its upward trend. Congress needs to take the policies that have worked in California and mandate it across the country. While climate change has Al Gore, conservation needs a celebrity advocate. We need one of the leading presidential candidates to start talking to Art Rosenfeld on a regular basis!

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