Renewable energy is gaining more attention from industry as questions of energy supply reliability, quality, costs and environmental impact gain management attention. Renewable energy is a tiny fraction of the total energy used by industry, but it’s a rapidly growing fraction, and we can expect to see it accelerate in size and importance.
What renewable energy choices are available for industry now and in the near future? What motivates industry leaders to implement renewable energy projects and buy energy from renewable sources? To answer these questions, let’s explore what renewable energy means in the first place.What is renewable energy?
Renewable energy is more than electricity, though electric power generation is the sole focus of the Renewable Portfolio Standards of the 29 U.S. states that have set targets (See www.eere.energy.gov/states/maps/renewable_portfolio_states.cfm). A more complete view of renewable energy includes several concepts.
Primary energy sources that create no new greenhouse gases: The most obvious definition of renewable energy is a source of energy that is, for all practical purposes, eternal in nature, and produces no greenhouse gases in use. Electricity generated by wind, sun, tides and rivers, and heating derived from the sun are the most obvious examples. These forms are universally accepted as renewable, despite some debate about other environmental effects of each form. Examples include California Portland Cement’s long-term contract to buy wind-generated electricity to run its facilities.
However, even in this most obvious category, state governments have different legalistic interpretations. New York considers electricity from large dams to be renewable; California and the European Union don’t.
Primary energy sources with significantly reduced greenhouse gas: More controversially, there’s a range of energy sources that aren't really eternal in nature, but offer radically reduced greenhouse gas emission. Using methane from landfills to generate heat or electricity is clearly in this group. It captures emissions of raw methane, which is about 20 times more aggressive as a greenhouse gas than carbon-dioxide, and generates useful heat and electricity. The extensive use of landfill gases in BMW’s Kentucky plant is a good example of this approach to renewable energy in action.
A moment of reflection raises the question whether it makes more sense to capture energy from waste with direct burning and avoid the landfill completely. It would be even more rational to reduce the amount of waste in the first place. Despite these considerations, most states recognize landfill gas recovery as renewable energy, and almost none allow use of demolition or municipal waste as a fuel, forcing these into landfills with a low probability of long-term methane recovery.
A similar debate surrounds the use of various forms of biomass as energy sources. Biomass fuel is derived from plants, which in their recent growing phase have absorbed carbon dioxide that is then emitted during combustion with a neutral effect. When the biomass is readily available, typically as a manufacturing or agricultural byproduct, significant greenhouse gas and cost reductions might be available. The way German furniture manufacturer Hukla uses its wood waste to generate electricity and heat typifies the technology.
Biomass becomes controversial as a renewable energy source when the plants are grown specifically as an energy crop. Corn-based ethanol and rapeseed (canola) or palm oil biodiesel are having the unintended effect of pushing up food prices. And. when fertilizer, refining and transportation are taken into account, the net greenhouse reductions often are very small. Despite these growing concerns, such as were expressed recently by the European Commission, most jurisdictions still regard biofuels as renewable transport fuel - a view that may well change.
United Parcel Service (UPS) has a flexible approach to trying alternative fuels, and recognizesthey’ll play a significant role in the future, but with a high level of regulatory and technological uncertainties. This debate opened up the possibly of fuel made from algae, which might offer the potential to produce low-cost biodiesel with substantial reductions in greenhouse gas emissions.
In the same general area of debate is low-temperature ground-effect heating and cooling, which uses the temperature differential between the ground and the air, typically to provide some heating in the winter and cooling in the summer. It involves large underground piping networks constructed below or alongside buildings with heat-exchange fluid pumped through them. The costs and the greenhouse gas reductions are project-specific, depending on the heating and cooling demands and the cost of electricity. In general, this has limited value for industrial process environments but might be a sensible alternative for offices and similar buildings.
Available sources that produce no new greenhouse gases: Heat recovery is an enormous available source of energy that, when used effectively , produces no new greenhouse gas. Every industrial and commercial process wastes heat, the disposal of which frequently requires the use of even more energy.
Anytime we make electricity by burning a fossil fuel, vast amounts of heat are afrequently discarded byproduct. It’s not typically classified as renewable energy by most jurisdictions, but in many ways heat recovery shares the characteristics of most accepted renewable energy sources. It’s immediately available in vast quantities, and using it causes no increase in greenhouse gas emissions. By some estimates, the energy wasted as heat in generating electricity in the United States is the largest potentially carbon-free energy source on the planet.
Some companies have recognized this and are systematically designing their processes and electrical supplies to maximize the use of recovered heat. BASF’s “Verbund” chemical plant concept is a well-documented example of this thinking. Industries with much smaller processes than BASF can gain similar benefits by teaming with other plants. The Friesenheimer Insel industrial park near Mannheim, Germany is a good example of gaining benefits by cooperation.
It’s interesting to see the range of choices evolving in Germany, a major market that’s been implementing a reasonably consistent renewable energy strategy for the past 15 years to 20 years (Figure 1).
In Germany, biomass-based sources represent much larger percentages of the renewable pie than some of the higher-visibility technologies.
The larger role of wind, hydro and biomass of various forms relative to solar and geothermal solutions is a pretty good indicator of the relative economics and environmental impact. And Germany’s has photovoltaic incentives are among the most aggressive in the world.
The obvious remaining renewable energy source readily available anywhere on earth, with zero greenhouse gas emissions, that is cheap to capture and cost-free to operate is, of course, energy efficiency. Tempting as it is to include this as usually the cleanest and cheapest energy source, conservation is beyond the scope of an article on energy sources commonly referred to as renewable.
How renewable energy competes
On the surface, most of the alternative energy sources appear to deliver desirable outcomes compared to traditional energy supplies. Alternatives can be less costly, reduce greenhouse gas emissions, improve supply quality or reliability, or offer some combination of these. However, as the title of this article suggests, the reality is very often that these apparent benefits have a hard time competing with the low cost, convenience and reliability of traditional supplies.
For this reason, it’s important for a company to have a clear understanding of why it wants to implement renewable energy solutions. This must be accompanied by clear measures of success that are rigorously tracked. A vague sense that it’s the right thing to do, or everyone else is doing it so it must be good, aren’t sufficiently sound reasons to proceed. A badly thought-out renewable energy project that fails to deliver any obvious benefits will become a rationalization for not trying again.
The choice of solution depends on the reasoning. Consider some of the reasons and how they might affect the choice of renewable energy option.
Advertising and public relations: Many projects are started for these reasons, and fail because other justifications are used to disguise the main purpose. Projects with obvious visibility, such as windmills and solar panels, tend to be favored, often with poor outcomes on costs and even on environmental results. If the goal of PR is honestly recognized, the combined challenge of delivering superior technical or economic performance while still fulfilling the primary PR goal might stimulate creativity. There are excellent examples of creative customer and community displays associated with less visible but more effective solutions, such as combined heat and power, biomass, efficiency and selected renewables.
Reducing carbon footprint: Clearly, one of the main reasons to implement renewable energy supply is to reduce the company’s greenhouse gas emissions. There’s one basic hurdle in the Unites States: How can we measure the value when there’s neither a predictable financial gain nor a clear regulatory requirement? The only way is to set clear numerical targets and hold people accountable for them through compensation and other mechanisms. Phantom carbon pricing is a common approach, valuing carbon reductions at somewhere between $10 and $50 per metric ton. Under this approach, the small premium for “green electricity” for a plant in a coal-heavy system no longer looks like a penalty, but like phantom cost avoidance.
Reducing direct energy costs: Implementing renewable supplies simply as a direct replacement for traditional sources rarely delivers rapid energy cost savings, which immediately raises demands for subsidies of some kind or project cancellation. However, the economics of renewable energy change completely when they’re a part of a totally integrated approach that combines efficiency, heat recovery and renewable alternatives. Depending on tariff structures and weather, renewables can come into their own as a mechanism to reduce peak rates.
Part of the reduction in overall energy costs can come from public support incentives. In the industrial world, smart solutions usually are those that make pretty good sense anyway, meet the desired objectives, and the incentive is added value that’s the makeweight in the final analysis. Currently, most state energy office and similar incentives are heavily focused on single-technology solutions, and aren’t well structured to provide incentives that foster integrated efficiency/heat recovery/renewable solutions. That’s the bad news -- the good news is that well designed integrated approaches generally are attractive enough to stand on their own.
Reducing process material or energy waste: Many industries produce combustible byproducts or large amounts of unused heat. These fit well into appropriately designed renewable energy approaches. If the primary objective is to reduce waste, then the metrics should include things like avoided land fill costs, potential avoidance of carbon charges, use of waste instead of fuel and so on. The most common mistake is to consider the waste to be “free” instead of a valuable resource and fail to capture the full potential.
Reducing the community’s material or energy waste: Cities already have significant supplies of an essentially renewable, mainly biomass fuel with a pretty high calorific value, called municipal waste. Increasingly, energy-consuming industries with a large carbon footprint and high energy price risks are looking at this fuel. First among these is the cement industry, replacing expensive high-carbon fuel and being paid to take low-carbon waste. A few factories even close the loop and deliver waste heat back to the communities for other uses such as district energy, further reducing the amount of primary fuel and greenhouse gas emissions. The key to success here is to consolidate the benefits of multiple players into renewable energy planning and design mutually beneficial operating and cost-sharing approaches, and track the consolidated benefits.
Reducing future energy price risks: Enormous uncertainty exists about the future costs of natural gas, coal and electricity from traditional suppliers, and a realistic strategy can be implementing renewable energy as a means of managing risk by diversifying sources. If this is the primary motivation, investment evaluations will be based on a range of future probabilities of pricing for traditional supplies, and the value will be judged as much on the avoidance of risk and operating costs volatility as on current operating cost.
Reducing future carbon regulation risks: One of the biggest uncertainties surrounding energy use in the United States is uncertainty over the shape and costs of future regulation to reduce greenhouse gases. The probabilities range from minor adjustments on today’s status quo to draconian measures having significant effects on cost and availability. Under this span of probabilities, renewable energy and efficiency are natural approaches to manage the uncertainty. Again, the value will be seen as risk avoidance rather hitting specific cost targets.
As an example, Toyota decided that the best way to deal with this uncertainty is to eliminate the carbon emissions is plants cause. Renewables, along with efficiency, heat recovery and green electricity sourcing feature significantly in this approach.
Make it real
The future is clear in broad strokes: Conventional energy supplies will become more expensive and increasingly scarce, and climate change regulation in some form will continue to be a major factor. Companies can expect customers, shareholders and the community at large to want to understand how the risks surrounding energy are being managed, and visible successful renewable strategies will be a key part.
Renewable energy projects will be successful when they stand on their merits when measured against clear goals with clearly prioritized and encompassing targets well beyond immediate operating cost. They will be more successful when integrated with long-term efficiency, heat recovery and cogeneration.
Peter Garforth is principal of Garforth International LLC, Toledo, Ohio. E-mail him at [email protected].