Over the past generation, energy has been a defining issue of our economy. Fluctuations in price and availability of energy have a significant impact on corporate profitability, and the unpredictability of the energy markets are a common source of worry for corporate leaders who have to manage energy supplies.
Manufacturers are particularly susceptible to the vagaries of energy supply and price. They need reliable access to the power and fuel that’s required to run their operations, and they need to be able to pay relatively stable prices to assure that energy costs don’t undermine profits. Manufacturers, more than most, rely on energy, and the uncertainty that has characterized energy markets in recent years has taken a toll.
Fortunately, manufacturers don’t have to remain hostage to the price and availability fluctuations of the energy markets. They can take control, producing their own power and meeting their thermal needs with Independent Energy Districts.
Independent Energy Districts are small power plants that are located within the facility’s campus. They are sized to meet the specific energy needs of the businesses they serve, and they can be configured to operate on most fuel sources, including oil, natural gas, propane, or biofuels. They also provide a remarkable degree of flexibility because if the fuel source that’s being used experiences a spike in price or availability shortages, Independent Energy Districts can be reconfigured to burn a different fuel.
Today, natural gas is a particularly attractive fuel because it combines affordability with availability and sustainability. Furthermore, natural gas prices are expected to stay table for the next decade or more. While natural gas is, admittedly, a fossil fuel, it is much cleaner-burning than oil and coal, and has less environmental impact. Over the next generation, natural gas will serve as the essential “bridge fuel” that will help America transition from fossil fuels to renewables.
Technology advances permiting the exploration of new domestic shale gas plays has resulted in significantly less expensive natural gas supplies, and promises to continue to provide low-cost natural gas for decades to come. The financial implications of the shale gas plays for manufacturers can’t be overstated. Because natural gas costs are so much lower—as little as 1/6th of the cost of oil (on a wholesale pricing basis)—Independent Energy Districts that operate on natural gas have potential payback periods as low as a few years.
Natural gas offers flexibility because it is available in several forms. The most common, of course, is as pipeline gas. For manufacturers that have direct access to local gas distribution systems, pipeline natural gas can be the perfect fuel choice for an Independent Energy District. The gas is drawn directly from those pipelines, which are typically provided by local utilities, and used to meet the thermal loads and produce the power that’s needed for the particular facility.
For manufacturers that don’t have convenient access to pipelines, there are two alternatives, liquefied natural gas (LNG) and compressed natural gas (CNG), which can offer effective “portable pipelines” options. In essence, they permit manufacturers to create their own pipelines.
LNG is natural gas that has been cooled to minus 260 degrees Fahrenheit. This condenses the gas into a liquid and takes up to 600 times less space than in its gaseous state, making it more practical to transport over long distances. Also, when natural gas is liquefied, most of the common impurities—sulfur, carbon dioxide, mercury, and heavier hydrocarbons—are removed, which makes LNG a very clean and reliable fuel for cooling, heating, and power generation.
Utilizing LNG as a primary fuel source requires specific infrastructure, including insulated storage tanks, vaporization systems to convert the LNG back to a gas form so it can be burned, and off-load pumps to transfer the LNG transport contents to storage tanks. Service pipes are also required to convey the vaporized LNG from storage to the end-use equipment. Also, because the liquefaction process removes the odorant present in the pipeline gas, an odorant injection system must also be installed downstream of the heaters and pipelines to make it possible to detect any natural gas leaks.
Another potentially useful source of fuel for Independent Energy Districts is CNG. CNG is highly compressed natural gas that is produced by compressing natural gas to approximately 3,600 psig, which permits it to be stored and transported in container trucks. CNG can be purchased from independent suppliers or gas utilities, who deliver the gas in special tube trailers.
Like LNG, CNG facilities require their own infrastructure. A “mother” station (or compressor station) must be located where the CNG tube trailers can be loaded, and is managed by the CNG supplier. Additionally, a decompression—or “daughter”—station provides tube trailer off-load bays equipped with heaters to warm gas during the de-pressurization from 3,600 psig to the customer’s desired working pressure (typically around 50 to 100 psig). The off-load system is customized equipment that is also provided by the CNG supplier. Finally, a piping system is required. The piping system connects the daughter station to the rest of the apparatus, and distributes the natural gas that is used throughout the Independent Energy District’s network.
While the creation of the infrastructure required to develop an Independent Energy District can necessitate a significant up-front capital expenditure, those costs can be recouped very quickly—in as little as a couple of years. Since Independent Energy Districts are designed to operate for many years, they can deliver significant cost savings to manufacturers for an extended period.
Mike Nicoloro is senior vice president and Joan Fontaine is vice president at Sanborn, Head & Associates, Inc. in Concord. Together, they manage Sanborn Head’s Energy division. Mike Nicoloro can be reached at firstname.lastname@example.org and Joan Fontaine can be reached at email@example.com.