Does American business have money to burn? You'd think so, if you looked closely at all the energy spent needlessly in factories and offices. These lost kilowatt-hours don't help turn out more widgets and don't make workers more productive or even more comfortable in their cubicles. Here are just three ways that companies could stop wasting power and get down to business.
Unlocking heat power. It takes a lot of heat to melt quartz rock into silicon. And at its 75-year-old West Virginia Alloys plant near Charleston, Globe Specialty Metals realized its furnace operations were being hampered by reliance on an inefficient coal plant and fluctuating hydroelectricity. The power woes were ironic, since the silicon made here is the basis for new clean energy—solar photovoltaic cells.
But company officials now are convinced there's a solution in the hot gas that blasts from its 2,000-degree furnaces every day. An innovative energy services company, Recycled Energy Development of Westmont, Ill., will invest $55 million in an upgrade that will capture the furnace heat at West Virginia Alloys and convert it into electricity—about 40 megawatts, or enough to power 25,000 homes.
Using no additional fuel, this recycled exhaust will now provide one third of the plant's power needs. That means the company will no longer have to furlough workers in the summer, when the hydroelectric runs low. In fact, the new power—which Globe will buy from red at a fixed price for 25 years—will be cheap enough that the company aims to open a sixth furnace and add 30 industrial jobs. "It will be one of the most efficient [silicon] facilities in the world," says Arden Sims, president of West Virginia Alloys.
Government studies show the United States throws away 200,000 megawatts of heat that could be turned into electricity—enough to replace 400 coal plants and nearly 20 percent of the nation's current electricity capacity. Less than 30 percent of the fuel energy burned at power plants now makes it to transmission lines to be delivered to customers as electricity. The rest is vented to the atmosphere as steam and heat. Recycled Energy Chairman Thomas Casten argues the heat is a lower-grade product that can be put to good use—as long as it doesn't have to travel far. The steam electric plants in many cities run on this principle. And during 30 years of doing business deals in combined heat and power, Casten, who has partnered with his son Sean for the past decade, has installed heat-capturing facilities at 250 industrial sites, including at General Motors and Coors Brewing.
But less than 8 percent of U.S. electricity is produced from heat, among the lowest penetration of the technology in the world. In contrast, Denmark has kept its energy consumption stable for 25 years while expanding its economy because 55 percent of its power is captured heat. Regulatory barriers make combined heat and power tough in the United States; for example, it's illegal in many states for industrial facilities to run transmission lines or sell the excess power they generate from heat.
But Recycled Energy aims to make a big push for heat-to-electric with $1.5 billion in funding from a Boston private-equity firm, Denham Capital Management—with West Virginia Alloys the first project under the deal.
Revving up better motors. Cement plants gobble energy, but one change can yield astounding savings. A leading Mexican cement firm, Cruz Azul, replaced two motors at a kiln near Mexico City with new variable-speed motors and saved enough electricity to power nearly 500 U.S. homes each year. Studies show similar reserves could be tapped from factories of all types around the world.
Motors are the largest single use of electricity in the U.S. economy, accounting for 65 percent of power consumed by industry and nearly one quarter of all electricity sold. Yet, these machines are wildly inefficient in the way they run pumps, fans, and other processes. Motors typically run at one speed—high—when most jobs require less force. "You don't just nail down the accelerator of your car and then use the brake to regulate the speed," says Peter Terwiesch, chief technology officer of the Zurich-based power firm ABB. "But in effect, that's what the process industries are doing."
ABB is the leading manufacturer of a variable-speed drive that allows plants to run motors at just the rate necessary for the job. The money saved on reduced energy use and increased productivity paid back Cruz Azul's investment within six months.
The energy-saving technology is installed in just 10 percent of motors worldwide, but sales are growing rapidly. One ABB customer is a community swimming pool in South Windsor, Conn., which last year installed variable-speed drive motors in the pumps that filter the water. By ramping down to 60 percent at night, the pool operators could keep the water clean and shave $7,000 a year from electricity bills—an investment expected to pay for itself in two summer seasons.
Breaking the landlord-tenant deadlock. In the evening, you can see the lights glowing, and energy burning, in empty offices across America. Inside, cold air keeps blowing down from the ceiling vents—often from aging, inefficient systems—long after the lawyers and bankers have headed home. But commercial building owners don't think chillers, boilers, and intelligent lighting and ventilation systems when they plan improvements. "What you see landlords spending money on are lobbies and elevators—what people see," says Steve Gossett Jr., whose six-year-old company, which he runs with his father, aims to attack one of the nation's most intractable forms of energy waste.
Experts say that commercial buildings, which account for a third of the nation's electricity use, could cut that figure by a third without forcing the people inside to break a sweat. But landlords have no incentive to spend money on energy-efficiency improvements, since they typically just pass bloated utility costs through to tenants. And tenants, who would be delighted to cut utility costs, don't have the authority to make capital improvements. It's a deadlock, but one that Gossett's company, Transcend Equity Development of Dallas, has a way to overcome.
Under unique agreements worked out with landlords, Transcend Equity invests in capital energy improvements and then earns its returns from the energy savings it is able to squeeze out of commercial real estate. For example, Transcend Equity was hired in 2004 by the private investors who owned a 1920s-era 10-story midrise on Elm Street in Dallas where Bank of America had its offices. Transcend Equity replaced five old railcar-size boilers with new efficient units as compact as refrigerators. Most significant, the company installed a building intelligence system, which controlled temperature, and efficient lighting.
For the $1.3 million investment, Transcend Equity was able to slash energy costs 39 percent. Its deals also shield landlords and their tenants against a portion of future energy rate increases. This has been a big factor in Maryland, where Transcend Equity's largest client, Corporate Office Properties Trust, has hired the firm to make $13 million in efficiency improvements to 24 buildings. Gossett expects to realize 30 percent savings; COPT won't see any increase on that portion of its utility bill, even though electricity rates are rising rapidly in Maryland. "The problem with real estate is the economic incentive to go green is very difficult," Gossett says. "We exist to build the business case for embracing efficiency."