Creating Competitive Advantages for West Virginia Industry

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“WORKSHOP ON IMPACTS OF HIGH AND VOLATILE ENERGY COSTS ON ENERGY INTENSIVE COMPANIES: COPING STRATEGIES AND FUTURE RESEARCH NEEDS”

This workshop was held at WVU on April 9, 10, 2008. It was jointly sponsored by the U.S. Department of Energy’s Industrial Technologies Program, the Alfred P. Sloan Foundation, the Council of Industrial Boiler Owners, The WVU College of Business and Economics, the WVU National Research Center for Coal and Energy, and the IOF-WV Program. The workshop agenda, power point presentations, and related articles may be accessed at http://iofwv.nrcce.wvu.edu. A few notes and quotes follow:

Dick Munson, Senior Vice President, Recycled Energy Development, LLC

In 2005, 69% of U.S. CO2 resulted from demands for electrical and thermal load. Two thirds of the input fuel value is wasted in much of conventional power generation. A winning strategy is to generate power near the load, avoiding transmission and generation inefficiencies. U.S. DOE/EPA estimates 200,000 MW potential for CHP in the U.S., approximately 20% of total U.S. demand. For example, 95 MW of electricity is produced from waste heat at the Arcelor Mittal plant near Chicago.

Ken Kern, Director, Office of Systems, Analysis and Planning, U.S. DOE National Energy Technology Laboratory

Use of coal is being questioned – only 4% of anticipated coal plants are being built. This has led to a severe workforce and skills shortage – lack of expertise to install plants. Over the last two years, China has put in 150 GW of coal-based power plants that demand 500 million tons of coal per year. They are now a net importer of coal.
Coal plus biomass is a good approach to reducing CO2 emissions.

Lester Lave, University Professor and Higgins Professor of Economics, Carnegie Mellon University

Higher prices may be the only way to improve energy efficiency in the U.S. Look at the EU - Denmark has twice the energy efficiency of U.S. There is a possible link between energy inefficiencies and decline in value of the dollar relative to the Euro, since European companies are more energy efficient than U.S. companies. California has held energy consumption constant for 30 years – they spend $700 million per year on conservation. We need to change the mindset in U.S.

Bob Bessette, President, Council of Industrial Boiler Owners

We need to remove barriers to industrial use of CHP. Using new plants as the standard when an older plant is upgraded is a disincentive for improving older plants. Giving CO2 credits for CHP is a good idea.

Jason Blumberg, McKinsey and Company, Inc

McKinsey undertook a year long study on industrial energy efficiency. Industrial energy efficiency improvements have the potential to keep energy growth below 2% per year. The U.S. will continue to have the lowest energy productivity among the developed regions, e.g., Japan and Europe, although more and more of our clients are looking at energy efficiency and its impact on reducing CO2 emissions.

Barry Phillips, Senior Vice President, Bayer MaterialScience, Bayer AG

The chemical sector is the largest industrial natural gas user. As natural gas goes, so goes the chemical industry – and it’s not going well. The U.S. chemical industry has lost approximately 188,000 jobs with 3 x increase in price of natural gas. It is very important to avoid legislating or requiring use of new energy technologies before the technology is ready – doing so can drive up the power industry to use more natural gas, driving up the price of fuels and feedstocks to the chemical industry.

Ravi Madhavan, Associate Professor, Joseph M. Katz Graduate School of Business, University of Pittsburgh

The steel industry accounts for approximately 19% energy use and 25% of CO2 due to U.S. manufacturing. The steel industry is profitable now – U.S. Steel profits in past two years exceed the sum of all previous profits. China’s iron ore supply is poor and their steel industry is fragmented, but is now consolidating.

Additional workshop notes and results continued in the next issue.