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Industrial Energy Efficiency: A Missed Opportunity in the Inflation Reduction Act of 2022


Industrial Energy Efficiency: A Missed Opportunity in the Inflation Reduction Act of 2022

Summary


The Inflation Reduction Act of 2022 represents the largest climate and energy investment in US history. However, it completely overlooks the importance of industrial energy efficiency, even though the industrial sector consumes 33% of the nation's primary energy. Decarbonizing this sector is crucial for meeting our climate goals, but it is often seen as a complex and complicated challenge due to diverse energy inputs, processes, and operations. With a well-defined path to reducing energy consumption in transportation, heating, and buildings, the industrial sector is poised to account for an increasingly larger share of total energy use in the future, making the need to address industrial energy efficiency even more critical.


Industrial energy efficiency is, on average, three times more cost-effective than new electricity generation, and promoting it can benefit everyone. This article discusses the costly mistake of excluding industrial energy efficiency from the Inflation Reduction Act and argues that incorporating efficiency measures can reduce storage needs for renewable energy, minimize long-duration storage, and support the establishment of a carbon-free energy system. Using industrial exhaust ventilation as an example, we demonstrate that on-demand industrial ventilation can save 66% of electricity compared to traditional systems.


We present case studies from Portland Community College's welding shop and Andersen Door Factory in Bayport, MN, where on-demand ventilation systems have achieved significant savings—84% at Portland Community College and 3.5 million kWh per year at Andersen Door Factory. In conclusion, industrial energy efficiency is a critical aspect of transitioning to a sustainable energy economy, and incorporating it into future policies is essential. Experts from other industrial energy efficiency fields can provide similar results to support these conclusions.



The Overlooked Importance of Industrial Energy Efficiency


The US government has set ambitious climate goals, aiming for a net-zero economy by 2050. Decarbonizing the industrial sector, which represents 33% of the nation's primary energy use, is crucial for achieving these objectives. Despite its significance as a major contributor to greenhouse gas emissions, industrial energy efficiency has been overlooked in the Inflation Reduction Act of 2022—the largest climate and energy investment in US history.


The Inflation Reduction Act allocates $128 billion for renewable energy and grid storage, $30 billion for nuclear power, $13 billion for electric vehicle incentives, $14 billion for residential energy efficiency upgrades, $22 billion for home energy supply improvements, and $37 billion for advanced manufacturing (totaling $244 billion). However, it provides no funding for industrial energy efficiency. This article examines this oversight and contends that industrial energy efficiency should be a central component of future policy initiatives.



The Role of Industrial Energy Efficiency in a Sustainable Energy Economy


Industrial energy efficiency plays a vital role in establishing a sustainable energy economy in the United States. On average, it is three times more cost-effective than creating new electricity generation, offering benefits to everyone. The National Renewable Energy Laboratory of the US Department of Energy (DOE) asserts that incorporating energy efficiency measures can significantly decrease the storage required to power the nation with 100% renewable energy. Reducing long-duration storage is crucial for achieving this goal in a cost-effective manner. By lowering the demand for renewable resources, decreasing storage needs, and cutting transmission expenses, energy efficiency ultimately supports the development of a carbon-free energy system.



Advocating for a Comprehensive Approach to Industrial Energy Efficiency


Ecogate champions the inclusion of industrial energy efficiency as a crucial element in the transition towards clean energy and carbon neutrality. By adopting energy-efficient technologies and practices in areas like industrial exhaust ventilation, significant savings in renewable resources, storage, and transmission costs can be achieved. Energy efficiency proves to be three times more cost-effective than generating new electricity and considerably more so compared to renewable energy with storage. We urge academia, technology companies, public decision-makers, businesses, cities, countries, and investors to support the shift towards industrial energy efficiency for the collective benefit of all.



Insights from Historical Energy Transitions and Their Implications


The shift from traditional energy sources to renewables is a critical issue that requires the concerted efforts of policymakers, researchers, and industry leaders. Vaclav Smil, a renowned professor emeritus and energy expert, notes that past global energy transitions took 50 to 60 years. For instance, the transition from wood to coal in the mid-18th century took around 60 years, with coal becoming the primary fuel by 1900. The shifts from coal to oil and then to natural gas also spanned 50 to 60 years each. While transitions in the modern era tend to happen faster, the move to clean energy and carbon neutrality is still estimated to take 50 to 60 years due to the substantial investment required.


Calculating the cost of this transition is complex, but to illustrate the magnitude, we can refer to Tesla's 2023 Master Plan [3], which estimates a cost equivalent to 10% of the GDP. Based on this, transitioning to a sustainable energy economy in the US would cost about $2,331 billion. The $244 billion provided by the Inflation Reduction Act of 2022 is just the beginning, and given the current political division in the US, we cannot expect similar government action in the near future.


Today, solar and wind generation are the most cost-effective sources of electricity, and most new investments are directed towards them. To support this lengthy and expensive transition, it is crucial to adopt a long-term perspective and develop sustainable policies and strategies that incorporate industrial energy efficiency. By learning from the past, we can facilitate a smoother transition to a cleaner, more sustainable future. However, at present, the US seems to be falling short in adopting such an approach.



Examining Industrial Exhaust Ventilation as an Energy Efficiency Solution


We examine industrial exhaust ventilation as an example of how industrial energy efficiency can greatly decrease electricity usage. Traditional ventilation systems for dust, mist, and fume exhaust operate continuously for all factory machines, regardless of whether they are in use or not (it’s like leaving the lights on in every room of a house even when unoccupied, FIGURE 1). On the other hand, an on-demand dust/fume/mist collection system uses a gate at each workstation to close ventilation when the workstation is not generating dust/mist/fume (FIGURE 2).


The variable frequency drive adjusts the fan speed to match system requirements, and the control computer's primary function is to maintain safe minimum transport air velocities per NFPA (National Fire Prevention Association) standards 664 and 652. According to the Affinity Laws (fan laws), even a minor reduction in fan air volume (by closing gates at inactive workstations) substantially decreases the required fan power. For instance, a 30% reduction in air volume results in 66% electricity savings compared to full air volume. In this case, the laws of physics work in our favor.


Our research indicates that the Average Workstation Utilization in most industries is below 50% of shift time [4]. This is mainly due to workflow organization and the fact that each machine needs to be loaded with material, unloaded, programmed, cleaned, and sometimes maintained, resulting in relatively low active utilization.


Traditional Industrial Exhaust Ventilation System
FIGURE 1: Traditional Industrial Exhaust Ventilation System

On-Demand Energy-Saving Exhaust Ventilation System
FIGURE 2: On-Demand Energy-Saving Exhaust Ventilation System

The Tangible Benefits of Implementing On-demand Ventilation


Industrial energy efficiency is a vital focus for achieving a sustainable future. As an expert in industrial exhaust ventilation, I can vouch for the impact that implementing just one aspect of energy efficiency can have. Traditional ventilation systems in the industry operate by providing ventilation to all machines all the time, regardless of whether they are active or not, leading to significant energy waste. In contrast, on-demand dust, fume, and mist collection systems utilize automatic gates and variable frequency drives to close ventilation to inactive workstations, resulting in substantial electricity savings.


For instance, a small-scale project at Portland Community College's welding shop decreased electricity usage by 115,343 kWh in one year by employing an on-demand ventilation system. Although this might not seem like a huge amount of electricity, it represents an 84% savings compared to traditional exhaust ventilation.


An example of a large-scale project is Andersen Door Factory in Bayport, MN, which saves 3.5 million kWh of electricity annually by using an on-demand ventilation (dust collection) system. Implementing on-demand ventilation systems in the industry not only leads to significant energy savings but also translates into cost savings for the company. At an average industrial electricity cost of $0.1 per kWh, this amounts to $350,000 in savings per year. With such savings, the investment required to install and operate an on-demand ventilation system can be recouped relatively quickly: the return on investment for this project is 3.3 years. However, most corporations prefer a return on investment of two years or less. Initially, projects in Minnesota, where Andersen Door Factory is located, were supported by Xcel Energy incentives, but lately, industrial energy efficiency incentives seem to be dwindling.



Cost Comparison: Industrial Energy Efficiency vs Renewable Energy Generation


The cost of implementing renewable energy sources, such as wind turbines and solar panels in the USA, is substantial, with an average expense of $2,000,000 per 1 MW of generation capacity. To replace the electricity savings at Andersen Door Factory, we would need approximately 500 kW of electricity generation. Given that the utilization of US wind turbines is 34% (according to the Department of Energy), we would need a $3,000,000 investment. Furthermore, long-term battery storage is necessary to store the generated energy for days without wind (or solar).


The current cost of 1 MWh of installed battery storage is roughly $300,000. For instance, Tesla recommends eight times the generation of storage capacity. As a result, the total investment for storage amounts to $1,200,000. Consequently, the combined investment in renewable electricity generation and storage is $4,200,000.


In contrast, upgrading the exhaust ventilation system to an on-demand system requires an investment of $1,140,000 to achieve the mentioned energy savings, eliminating the need for the above-calculated electricity generation and storage.


The cost comparison between these two approaches shows that industrial energy efficiency is 3.7 times less expensive (Figure 3).


In this example, we are not considering that reduced demand also implies lower demand for transmission lines. This underscores the importance of considering energy-efficient solutions like on-demand exhaust ventilation upgrades in addition to renewable energy sources to achieve sustainability goals while being economically feasible.


Comparing Cost of Electricity Generation with Industrial Energy Efficiency
FIGURE 3: Comparing Cost of Electricity Generation with Industrial Energy Efficiency

These examples demonstrate the enormous potential of on-demand ventilation systems to reduce energy consumption and the carbon footprint in the industry.



The Untapped Potential of Industrial Exhaust Ventilation in the US


In the above example, we can see that industrial exhaust ventilation is 3.7 times more cost-effective compared to new renewable electricity generation with battery storage. The question is, how significant is this energy-saving opportunity in the US? According to the US Department of Energy, 23% of the US electricity is consumed by AC electrical motors (including the fans for industrial exhaust ventilation). Based on our statistics, approximately 4.6% of the consumption is used for industrial exhaust ventilation, which represents 189,428 million kWh per year. Considering an average electricity saving of 66%, the overall savings by on-demand ventilation systems amount to 125,022 million kWh per year (Table 1).


Table 1: Industrial Exhaust Ventilation Savings Opportunity in the US

Total US Electricity consumption (2020)

4,118,000

million

kWh/year

Industrial electric motors consumption is 23% of total consumption per Department of Energy

947,140

million

kWh/year

​Industrial Ventilation motors are ~4.6% of AC of total consumption

189,428

million

kWh/year

Average savings by on demand ventilation systems

66%

​If all US industrial ventilation systems will be updated to on demand systems savings would be

125,022

million

kWh/year



Conclusion


The crucial paradigm shift to clean energy and carbon neutrality is underway, and industrial energy efficiency can play a vital role in this transition. It reduces the need for renewable resources, minimizes storage requirements, and cuts transmission costs. Energy efficiency is three times or more cost-effective than generating new renewable energy with storage. Industrial exhaust ventilation, which uses the largest motors in factories and runs throughout entire shifts, presents a tremendous opportunity for substantial savings, as it is used in a high percentage of factories. As the pathways to reducing energy consumption in transportation, heating, and buildings become increasingly clear, the industrial sector will inevitably account for a larger percentage of total energy use. This underscores the ever-growing importance of addressing industrial energy efficiency in our pursuit of a sustainable future. Both federal and state support for industrial energy efficiency will benefit us all.



Q&A

Q: What is the Inflation Reduction Act of 2022?

A: The Inflation Reduction Act of 2022 is the largest climate and energy investment in US history. It allocates $244 billion for various sectors, such as renewable energy, grid storage, nuclear power, electric vehicles, residential energy efficiency, home energy supply improvements, and advanced manufacturing. However, it does not provide any funding for industrial energy efficiency.


Q: What percentage of the nation's primary energy does the industrial sector consume?

A: The industrial sector consumes 33% of the nation's primary energy.


Q: How does industrial energy efficiency compare to new electricity generation in terms of cost-effectiveness?

A: On average, industrial energy efficiency is three times more cost-effective than new electricity generation.


Q: What is on-demand industrial ventilation, and how does it save energy?

A: On-demand industrial ventilation is a system that adjusts ventilation based on the activity of workstations in a facility. It uses gates to close ventilation when a workstation is not generating dust, mist, or fume, resulting in reduced fan power and significant electricity savings. For example, a 30% reduction in air volume can lead to 66% electricity savings compared to full air volume.


Q: How does the cost of implementing industrial energy efficiency compare to the cost of renewable energy generation and storage?

A: Industrial energy efficiency is 3.7 times less expensive than renewable energy generation with battery storage. For example, upgrading an exhaust ventilation system to an on-demand system costs $1,140,000, while investing in renewable electricity generation and storage for the same energy savings requires a $4,200,000 investment.


Q: What is the overall potential electricity savings in the US by implementing on-demand ventilation systems?

A: By implementing on-demand ventilation systems, the overall potential electricity savings in the US amount to 125,022 million kWh per year.


Q: Why is it important to address industrial energy efficiency in the pursuit of a sustainable future?

A: Addressing industrial energy efficiency is essential because it reduces the demand for renewable resources, minimizes storage requirements, cuts transmission costs, and is more cost-effective than generating new renewable energy with storage. As pathways for reducing energy consumption in transportation, heating, and buildings become clearer, the industrial sector will account for a larger percentage of total energy use, making industrial energy efficiency even more critical.



References

1. Optimal strategies for a cost-effective and reliable 100% renewable electric grid, Journal of Renewable and Sustainable Energy 13, 066301 (2021)

2. Office of Energy Efficiency and Renewable Energy, EERE News March 2, 2023

3. Tesla Master Plan of 2023, presented during Investor Day in March 2023

4. Industrial Ventilation Statistics Ales Litomisky 2005, IETC 2006, New Orleans



Authors

Ales Litomisky, David Vera

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