Energy as a Direct Cost

April 3, 2012
More companies are finding that folding energy into overhead is no longer necessary. Applications exist today for modeling energy usage in processing plants, and reaching across corporate networks to track energy as a direct cost of products. The energy savings can be enormous.

A fundamental tenet of process control is that you must be able to measure a variable before you can control it. So, given the volatility of energy costs these days, it’s no wonder that even energy producers like Valero Energy Corp. (, purportedly North America’s largest independent refiner and marketer of petroleum products, based in San Antonio, Tex., are investing in automation and software for measuring and analyzing their own energy consumption. Rather than burying energy as a fixed cost in overhead, these and other companies are using tools available today to treat energy as a direct cost of their products and services. With this information, they can manage their energy consumption as they would their raw materials, or any other factor of production.

The savings can be enormous, especially in the process industries where energy can be as much as 35 percent of operating costs. Valero, for example, reports that it cut its energy consumption by $120 million in the first year alone after tracking and analyzing its energy costs with the Manufacturing Integration and Intelligence (MII) application from SAP AG (, which has U.S. headquarters in Newtown Square, Pa. According to a spokesman, Valero saw a total project payback in less than one month from energy optimization.

Using a distributed network connecting the company’s 15 refineries and 10 ethanol plants across North America, MII collects and displays key performance indicators from 20,000 continuous data streams through SAP’s enterprise resource planning (ERP) software. The granularity of the data allows drilling down through the eight or so levels of the organization to view details on energy consumption at a specific location or process unit. Because the data is available in near real time, it is fresh enough for executives review the data every morning to make decisions.

Besides monitoring gas, steam and electricity usage, Valero Energy can also model the effect that proposed changes to its manufacturing process will have on specific operations. Consequently, the engineering staff can optimize operating parameters such as tank temperatures and pressures to lower total energy consumption.

Such visibility into energy consumption is the result of three trends, according to Scott Bolick, SAP’s vice president of sustainability solution management. First has been a greater use of meters among users to measure actual power consumption at the point of use. Because the technology has matured to the point where its cost of implementation has declined, users find justifying them much easier, especially as energy costs continue to rise.

>> Click here to read how companies can get paid to cut power consumption.

The second trend supporting greater visibility is the development of computing technology that can analyze thousands of metering data points in either real time or near real time. For an example, Bolick points to the Hana in-memory analytical technology that SAP introduced a few years ago as a combination of powerful software and SAP partner hardware used to power the MII application. By storing data in memory, rather than reading it from disk, the appliance processes and analyzes information much faster. “Analyses that used to require days or weeks to process now are possible to perform within seconds or minutes,” says Bolick. In a test that SAP conducted at a utility, the technology was able to search over 11 million customer records within a half second, he says.

The third trend is an evolution in the relationship between the utilities and industrial consumers. “It is no longer just about selling energy,” explains Bolick. “Utilities are becoming energy service providers that want to collaborate with their top commercial consumers in order to be able to balance the supply and demand and meet any regulatory constraints that they may have.”

From audit to model
Despite the rising interest in gathering data at the source, not everyone has meters measuring usage everywhere that such information would be useful. This is where an energy audit can help, argues Marc Leroux, marketing manager for collaborative production management at ABB Inc.’s Process Automation Div. ( in Wickliffe, Ohio. “An energy audit can identify the main users of energy in a facility and determine where you will get the biggest bang for your bucks spent on an accurate measurement program,” he says.

In the audits that ABB conducts, its strategy is first to provide an overview of the most important areas of consumption and then to add the ability to collect more detail as it makes sense over time. “We can identify where meters are already in place and where we might need to add a few more,” says Leroux. “More importantly, we can identify the areas where maybe you don’t have metering, but can get a fairly good approximation of usage based on information that is already available from your automation.”

A good example is motors and pumps. Because their operating characteristics are well known and control automation usually keeps track of when they are on and off, it is possible to write a subroutine that calculates the energy consumption of motors and pumps.

With the intelligence gained from these direct and indirect measurements, ABB’s consultants use the company’s Energy Management software to build a model of how manufacturing processes consume energy. As they do so, they map the consumption to the power company’s rate schedule. “Rates depend on how much you use and when you use it,” notes Leroux. “The schedule from any utility for rates for energy usage is typically several inches thick.”

With an accurate cost model in place, it is possible not only to compute the energy costs for each cost center, but also to look for ways to lower costs. For example, a user could plan things such as active peak shaving and adjust the production schedules to avoid incurring penalties in peak periods and take advantage of cheaper timeslots.

>> Click here to read about the U.S. Government's $2 billion investment in energy efficiency projects.

In Finland, the Helsinki Region Environmental Services Authority ( has begun using this approach at its Viikinmäki wastewater-treatment plant, one of two such plants in the authority’s wastewater unit. Although wastewater treatment is an energy-intensive process in general, pumps are particularly high consumers of energy. Consequently, the first phase of installing ABB’s Energy Management system at Viikinmäki was to monitor the equipment at the plant’s discharge water pumping station, which it does through OPC connections to the pertinent sources of data.

“We also want to analyze the air supply for the aeration process and the compressors that we use,” says Kari Reinikainen, maintenance manager for the authority’s wastewater unit. “In the future, we’ll be bringing the wastewater pumping stations into the project.”

As the project expands beyond the discharge stations, ABB’s Energy Management will give Reinikainen and his colleagues the means to analyze process data so they can identify ways to enhance energy efficiency. “The system will give us more information about how we use energy,” says Reinikainen. “We can identify what needs to be repaired or replaced simply by looking at the machines and equipment that we have.” The modeling and analysis tools will also help them to look for ways to optimize operating procedures.

Recycling wasted energy
This kind of visibility into energy utilization of a process, line, or machine gives plant managers the intelligence that they need for making the changes necessary to boost efficiency. “They can use cheaper power by scheduling production or product mix when energy is least expensive, such as during off-peak hours,” offers Cliff Whitehead, manager of business development at Milwaukee-based Rockwell Automation Inc. ( “They also can take advantage of more efficient equipment or design processes; for example, reusing waste heat in their processes.”

This latter course of action is essentially what the Marina Thermal Facility ( in Atlantic City did when it sought help from Energenic LLC (, a sister company based in Mays Landing, N.J. that designs and builds cogeneration systems. Marina Thermal wanted a cogeneration system to capture the heat that would otherwise be wasted during electricity production and to put it work by providing heat to a nearby casino-hotel complex and other customers.

“We were looking for a way to reduce our costs of production and use one fuel source, natural gas, to make two forms of energy—electricity and heat for hot water,” explains Stephen Poniatowicz , senior vice president of Marina Energy LLC, owner of Marina Thermal and co-owner of Energenic. The goal was to reduce the amount of electricity and natural gas that the thermal facility would have to buy from third parties.

Because the facility was already using a controls network based on Allen-Bradley ControlLogix programmable automation controllers, Marina Thermal also involved Rockwell Automation to make the necessary upgrades to its power and energy management systems. The automation vendor’s PowerMonitor 3000 collects power quality data, as well as providing harmonics analyses, high-speed data recording, and submetering. Meanwhile, its RSEnergyMetrix energy management software collects operations data from more than 300 points throughout the plant and distributes information via its web-based communications features.

“Thanks to the system upgrade, we can access real-time and historical information to get the insight we need to make critical business decisions,” reports Poniatowicz. As a result, not only has the thermal facility been able to cut its overall costs by 15 percent and reduce its reliance on fuel from third parties by 40 percent, but it also produces more energy than it did before. What more incentive is necessary to track energy as treat it as a direct cost?

About the Author

James R. Koelsch, contributing writer | Contributing Editor

Since Jim Koelsch graduated from college with a bachelor’s degree in chemical engineering, he has spent more than 35 years reporting on various kinds of manufacturing technology. His publishing experience includes stints as a staff editor on Production Engineering (later called Automation) at Penton Publishing and as editor of Manufacturing Engineering at the Society of Manufacturing Engineers. After moving to freelance writing in 1997, Jim has contributed to many other media sites, foremost among them has been Automation World, which has been benefiting from his insights since 2004.

Sponsored Recommendations

Put the Plant Floor in Your Pocket with Ignition Perspective

Build mobile-responsive HTML applications that run natively on any screen.

Ignition: Industrial-Strength System Security and Stability

Ignition is built on a solid, unified architecture and proven, industrial-grade security technology, which is why industrial organizations all over the world have been trusting...

Iron Foundry Gains Competitive Edge & Increases Efficiency with Innovative Technology

With help from Artek, Ferroloy implemented Ignition to digitally transform their disconnected foundry through efficient data collection and analysis while integrating the new ...

Empowering Data Center Growth: Leveraging Ignition for Scalability and Efficiency

Data center growth has exploded over the past decade. Initially driven by organizations moving their computer assets to the cloud, this trend has only accelerated. With the rise...