Use corporate standards and procedures to promote sustainable energy efficiency

1(c) Kumana & Associates, 10-2009

Using Corporate Standards Using Corporate Standards and Procedures to Promoteand Procedures to Promote

Sustainable Energy Efficiency Sustainable Energy Efficiency Jimmy D Kumana

Kumana & Associates, Houston, [email protected]

Texas Chemical Council Annual EHS ConferenceGalveston, Tx (10 June, 2010)

2Kumana & Associates, Houston, Texas © 2010

OUTLINE

• Why Energy Efficiency S&Ps?

• Recommended Requirements

• Expected Benefits

• Case Studies



The Current Reality

• Plant energy inefficiency due mainly toPoor operating practices (company culture)Energy η not a factor during new plant design

• Energy retrofits generally difficult due to layout and poor economic payback

• Energy retrofits of industrial plants have found little support from Corporate Executives

• 25 years experience has conclusively shown that reliance on retrofits to improve industrial energy efficiency has not been effective


Reasons for Failure

• Economic incentives get trumped by other priorities, eg. capacity increase, regulatory compliance, executive bonuses, etc.

• Company procedures for approval of Retrofit projects are usually too much hassle

• The people who have the knowledge and desire (usually engineers) do not have the power

• The people who have the power (usually non-technical managers) do not have the right incentives – eg. slide 11



Proposed Solution

• Focus on building new plants for high energy efficiency, as we do for cars, appliances, etc.

• This may take a generation or two, but there is no other viable alternative.

• We have wasted 25 years, but better to start late than never

• To finesse Govt regulation and enforcement (as with cars, safety, and environmental issues), Corporate America should take the lead


New Project Execution – 5 Steps

• Business Planning

• Scope Development + Definition

• Engineering Design (FEED + Detailed)

• Construction

• Plant Startup and Operation

{ project funding approval }

Front-End Loading



Staged-Gate Concept for Capital Proj Mgmt

• IPA Institute (Ashburn, VA) provides a benchmarking service for effectiveness of capital projects

• Biggest reason for new project failure (defined as ROI << target) is poor completion of FEL2, due to time pressure or inadequate budget.

REF. IPA Newsletter, Vol 1, Issue 4 (Dec 2009), www.ipaInstitute.com


Early Decisions have Greatest Influence

FEED

ENGG DESTECHNOLGY

SELECTION, ECONOMICS, SCOPE DEFINITION

CONSTR



80% of long-term economics for a new process plant are locked in by the conceptual design stage of FEED

– when barely 2% of the engineeringbudget has been spent (< 0.2% of the total project budget)

Important Statistic

REF. CII survey data (2005?)


Ref = Construction Industry Institute

Proven Benefits of Early Optimization



Yet, few companies follow this Best Practice

• Corporate Inertia, and Perverse Incentives Sr. Mgmt may not be aware, esp. since almost none have a Process Engg backgroundProject Managers are rewarded only for under budget and within schedule; they view ad hoc Energy Optimization efforts by individual engineers on the project team as a threat to theseobjectives; eg. recent Horizon rig disaster

• No incentive for EPC companies to optimize energy efficiency if Client does not require it

• <5 EPC contractors worldwide maintain this capability in-house; so E-O* task would have to be sub-contracted out to specialist energy consultants (Not appealing)

* E-O = Energy Optimization


Major Tasks – FEED



Energy Efficiency governed by 2 of them

Usually bypassed


Role of Standards & Procedures (S&Ps)

• For effective conduct of business, it is essential that all employees work in alignment with corporate goals

• To ensure this, most reputable operating companies maintain corporate S&Ps:

MandatoryAdvisory

• In addition, there are published industry standards, eg. ANSI, ASME, IPA, etc



Strategy for New Plant Energy Efficiency

• Institutionalize Energy Efficiency designs

• S&Ps offer a convenient mechanism to influence how the company designs and builds new plants

Scope Definition stage – process technology selection should be integrated with site utilities

FEED stage – optimize flowsheet structure of (a) Heat Exchanger Network, and (b) Combined Heat and Power system


Optimizing Energy Eff: A 2-step procedure

• Define design concepts at Scope Definition (SD) stage using preliminary data from the process licensor, at a time when flowsheet changes have no impact on schedule.

• Interactive optimization of HEN/CHP design as soon as the preliminary flowsheets and HMBs are developed, usually at ~30% FEED stage.



What is meant by “Optimization”?

• Correct economic trade-off between capital and energy costs, subject to constraints of safety, reliability, sustainability, etc.

• The Optimum is both site-specific and time-dependent:

Optimum for China is NOT optimum for USAOptimum for 1987 is NOT optimum for 2010


E-O* Study Objectives at Scope Def stage

• The principal objective is to compare different combinations of alternative process technologies on an integrated basis, rather than to compare the competing technologies on a standalone basis. The optimum combination of individually sub-optimal designs can often be superior to the combination of individually optimized standalonedesigns. It is the synergy between standalone designs that we seek to exploit, from which the benefits derive.

• A second major objective is to identify 2 or 3 optional designs for the Combined Heat and Power (CHP) system. This is accomplished by determining the energy targets for site process units with a sufficiently high degree of accuracy and confidence, using the techniques of Pinch Analysis, solely from the process flow diagrams (PFDs) and heat/material balances (HMB) without having to do detailed design. The Total-Site Source-Sink curves should be used to evaluate CHP options.

• Study should be undertaken for all projects with energy use > $2 MM/y> $2 MM/y




E-O* Study Workscope at Scope Def stage

• Optimum selection of Process Technology combination for that site

• Matching the process utility requirements (in terms of steam & cooling temp levels) to existing site, and modifying CHP system configuration to suit

• Identify issues that need to be investigated further during follow-on FEED package optimization study



LP

MP

HPHP

MP

LP Sink

Fuel+

+

LP

MPHPHP

MP

LP

Source

Fuel

+

LLP LLP

IP

+

+

Power generationincreased

Reduction in fuelconsumption

EXISTING

OPTIMIZED

Total-site CHP Optimization



Critically important clauses for SD S&P

• The corporate energy group should be included in the Business Planning Process, especially Process Technology and Licensor Selection, from start to finish

• Process Technology Licensors should be required to submit proposed flowsheet and HMB in order to be considered (with confidentiality agreement)

• “Grant-back” clause in typical License Contract should be replaced by “Reverse-licensing” clause


E-O* Study Objectives at FEED stage

• HEN design (Pinch Analysis, incl. consideration of piping costs, fouling, and Utility capital costs)

• CHP system design (including cogeneration and driver selection)

• Correct selection of number and size for energy consuming/converting equipment (pumps, compressors, boilers, turbines, etc) operating in parallel

• Evaluation of ASDs (process perspective)




Recommended clauses for FEED S&P

• Capital projects involving addition of or modifications to industrial processes with combined fuel and power consumption >> $2 MM /yr$2 MM /yrshall be optimized for the efficient use of thermal and electrical energy

• For purposes of the energy study, an industrial process is defined as one that includes fired heaters, boilers, pumps, compressors, steam turbines, or gas turbines. Non-industrial facilities such as buildings, roads, warehouses, storage depots, and non-process operations such as IT or instrumentation upgrades are excluded.

• The technical approach and workscope for the energy study should address all of the following issues, as applicable:

Process Integration, using Pinch Analysis techniques

Equipment Load Management policies

Driver Selection (viz. motor vs turbine, hi-eff vs low-eff motors, ASDs)


CRITICALLY Important Clauses

• In order to prevent conflict of interest, the study should be conducted by a qualified independent third party from the Owner’s Approved Energy Consultants list, and NOTNOTby the engineering design contractor or the process licensor.

• The energy optimization study should be done interactively with the Corporate Energy group, and final report must be approved by them before design can be finalized.



• 15 - 40% reduction in Energy costs

• 5 - 20% Capital cost savings potential

• Schedule compression

Expected Benefits of Energy Optimization


• YES

• HOW ?When process-process heat transfer goes up by X, proces-utility heat transfer duty goes down by 2XReduction in total Q can dominate effect of reduced overall CMTDCap cost savings from smaller boiler and cooling tower offsets increase in HEN cost

Explained on next 3 slides

Energy and Capital Savings ??



Qcold

Qhot

Tem

p

Heat Load

Qhot & Qcold are theenergy targets

NO HEAT RECOVERY – ENERGY SUPPLIED BY UTILITIES ONLY

ZERO CAP $ for HEN, MAX CAP $ for CHP SYSTEM

Energy Targets using CCs – 1


Qcold

Qhot

Tem

p

Heat Load

Qhot & Qcold are theenergy targets

∆T at PINCH is the KEY

WITH HEAT RECOVERY – ENERGY REQD FROM UTILITIES IS LESS

HIGHER CAP$ for HEN, LOWER CAP $ for CHP SYSTEM

Energy Targets using CCs – 2



Objective function for E-O

• Capital costs must include not only HX, but piping + utilities (eg. boilers, cooling tower, heaters, refrig systems, etc)

• Capital offsets must be applied, if applicable (eg, for reduced Elec Grid load, Env compliance)

• Use marginal energy prices, not average• Include GHG emission reduction credits• Use appropriate ROI value


Project Evaluation Issues

• Risk-adjusted hurdle rates (components)• Risk-adjusted Capex contingency factors• Environmental credits (cap & trade)• Capital cost off-sets• Express savings as Btu/kwh, as well as $• Use opportunity cost, not production cost• Classify energy projects as combined Maintain

Business + Economic + Environmental (not Economics alone)



• Normal Case: compression by 1-2 months

• Worst case: No compression

(Assuming that E-O work is managed and conducted competently)

Impact on Project Schedule


• By being able to order long-lead Utility equipment 4-8 weeks earlier

• Potentially one less PFD revision

Shortened? How?



7 MONTHS

Typical FEED Schedule without E-O

Process and Utilities design done sequentially


5.5 MONTHS

Typically 6 weeks shorter to Long-Lead Item orders

Shortened FEED Schedule with E-O



MUST be performed under Owner’s supervision

Recommended Best Practice Flowchart


• Select from Approved Vendor List

• NOT the Engg Design contractors

Owner’s responsibility to choose Consultant and ensure Quality of the E-O study

Critically important to specify individual consultant names in the contract

Who Should do these Studies?



Phase 2 study (FEED)

• 1-2 man-months from Proj Mgmt team for admin and meetings

• 2-3 man-months from Corp Energy Group for consultant supervision and project review (incl. travel and meetings)

Phase 1 study (SD)

• 1-2 man-months from Project Planning group admin and meetings

• 2-3 man-months from Corp Energy Group for consultant supervision and project review (incl. travel and meetings)

MORE

Requirement for Owner’s Tech Manpower


• $50-100 K (each)

• Phase 1 Study (SD)6-8 calendar weeks

• Phase 2 study (FEED)6-9 calendar weeks for initial design1-2 man-months for revisions and design review meetings over duration of FEED

Typical Cost and Duration



Pervasive Myths concerning energy efficiency, eg.Improving energy efficiency always increases capital cost.Improving energy efficiency always increases schedule.

The 2-step approach to defining the optimal process design works extremely well if done right.

Best Practice:• Right time to evaluate/introduce new concepts is during SD

(using preliminary data) to change the process flowsheet at a time when such changes have minimal or no impact on schedule.

• The final design should be optimized during FEED, after the the basic flowsheets and HMBs have been better defined.

Summary


Two case Studies

• During S-D stage - success story(lessons learned = what to do)

• During FEED stage - failure story(lessons learned = what to avoid)



Case Study 1 – Scope Definition stage

• Evaluate feasibility of converting existing HDS to Deep Desulfurizing process rather than add new unit.

• Debottleneck capacity pinches in:• Reactor Feed Heater• Stripper feed heater / reboiler• Hydrogen compressor

European Refinery Revamp (1999)


Methodology

• Conceptual Process Design performed using early licensor information (incl. HMB), obtained during bidding stage

• Existing plant data and process modeling used to fill in the gaps of missing data

• Energy concepts defined (Use of compact exchanger, hot separator, CHP, etc)

• Each Licensor was advised of results and asked to consider/incorporate into final bid



Existing Plant Flowsheet

Off gas

Naphtha

Process Water toEffluent

DSGOFeed

Off gas

Make-upHydrogen

F-8503

Reboiler bottlenecked athigher capacity

Charge heater thermally andhydraulically bottlenecked at

higher capacity

Pressure drop in highpressure circuit

More reactor capacityrequired

More hydrogen requiredCompressor limitations

REF. Petela and Moore, “Optimizing Energy Efficiency in Refinery Revamps and New Unit Designs”, 2004


E-O study proposal #1: Packinox vs S&T

With S&T Exchangers, Energy Saving = 49%; With Compact Exchangers, Energy Saving = 75%

Courtesy of AspenTech, UK



E-O study proposal #2: Process Mods

Off gas

Naphtha

Process Water toEffluent

DSGO

Feed

Off gas

Make-upHydrogen

F-8503

SteamGeneration

Increased heatrecovery into

feeddebottlenecks

heaterPackinox

exchangerreduces ∆P

Introduce H2downstream of heater

to reduce ∆P

Hot Separator willreduce ∆P in HPcircuit and also

increase feed temp tostripper: reduce

reboiler load

Novel reactor designsreduce catalystinventory and

hydrogen demand

Courtesy of AspenTech, UK


Benefits

• Energy Savings worth $1 million/year (Net importer of energy converted to net exporter)

• Capital cost reduction > $1 million compared to original proposed revamp design due to:

Reduced pressure drop in high pressure circuit - smaller H2 compressorReduced heat duty on charge heater and reboiler - no furnace modifications.

• No adverse impact on overall project schedule



Unexpected (but Not Surprising) Finding

• Before Optimization, Licensor A was better than Licensor B.

• After Optimization, Licensor B was better than Licensor A.

Counter-Intuitive Results are not Unusual, and only possible if Energy Consultant is Independent


Case Study 2 – FEED (2005)

• Crude oil Processing facility, mid-east• FEED contractor = well-known company, UK• Owner’s S&P required E-O study at FEED stage,

and approval by corporate engineering energy group

• E-O study was conducted by FEED contractor, who declared that their design was perfect

• Owner’s corp energy group found analysis to be deficient, and unacceptable

• Objections of corp energy group were over-ruled by Owner’s PM team in interest of “schedule”



Reasons for Failure

• Company’s S&P for FEED did not specify that the EO study must be done by an independent third party, selected from approved vendor list

• S&P gave discretion to PM team whether to accept corp energy group’s assessment of EO study results (Advisory vs Mandatory)

• PM team regarded the requirement for E-O as another nuisance they had to comply with

• Budget set aside for EO study was inadequate• EO study had not been properly worked into the

project schedule


Key to Success

Culture ChangeCulture Change: Value Improving Practices such as timely Energy Optimization must be seen as opportunities to improve resource utilization efficiency.

Commitment, not just Compliance



0%

20%

40%

60%

80%

100%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Cor

p E

nerg

y E

ffici

ency

Inde

x

ActualPotentialTarget

Actual Operation

Optimized Operation

Projected Performance

Gap

Energy Efficiency Index =Actual Energy Cost

Energy Cost at Baseline Efficiency

Results for a mid-east NOC (as of 2007) ...


In Conclusion …

COMPLIANCECOMPLIANCE

ALIGNMENTALIGNMENT

STEWARDSHIPSTEWARDSHIP

ECONOMICSECONOMICS



Thank YouThank You


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Use corporate standards and procedures to promote sustainable energy efficiency