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Generate Savings, Protect Production

Brian Reinke

A number of foundries are being paid by their electric utility, if they can be flexible in times of severe strain on the electric grid. These foundries agree to reduce electric consumption by prearranged amounts when called upon by the utility; in turn the foundry is paid in relation to exactly how much they lowered their consumption from the grid during the required period.

In general, these are known as demand response programs. Many different programs exist, each with their own rules.  Many foundries have found this to be a new revenue stream, earning them many thousands of dollars.  

As an example, one AFS Corporate Member has participated for years in a demand response program offered by their electric utility. Their average annual electric cost savings from using their own electric generators (when needed), is about $300,000 per year. Cost of operating and maintaining these somewhat older generators is around $200,000 per year, resulting in a net annual revenue of $100,000. Added to these tangible cost savings are the intangible benefits of assured production, uninterrupted delivery schedules, etc. In this example, the maximum number of hours that the utility can request a reduction in electric demand, from a company participating in the demand response program, is 150 hours for the entire year.

ROIThird-party companies specialize in helping organizations qualify for, enroll and participate in these demand response programs. The AFS Energy Solutions Program utilizes several of these.  Such specialty companies also provide services to monitor participation in the program and to ensure foundries are paid what they deserve. They also may offer additional products and services. Many foundries have used such third-party organizations to register and participate in demand response programs.

The demand response arena can change quickly. Programs recently have seen significant changes. If you participate in a demand response program, and you want to continue to receive these benefits, check to ensure you get renewed properly—before your renewal date. Most programs require you to renew each year.

If you don’t get renewed, many utilities require you wait for the next program year to apply again. Don’t miss out due to a simple clerical error. Good third-party specialists will ensure you are properly enrolled each year and you are getting the full value for participating in the demand response program.  

Exciting new additions are becoming available to help your ability to participate in these programs.  One such addition is called Asset-Backed Demand Response. Basically, this is when one or more electric generators are installed at your plant so you can create your own electricity when your utility requests you to lower demand.  

Newer generators have fewer emissions and operate more quietly, with many now using natural gas as a fuel source. Having your own generator also protects you from utility blackouts, storm damage, etc., and gives you the ability to use your generator to avoid peak-time electric rates, which are typically highest during the day.

The ROI of such onsite generation assets can be surprisingly short, especially if you are able to participate in a demand response program. One AFS member in Ontario, Canada, recently was considering installing a generator because of the crippling cost of electric rates there. When I inquired about his situation with one of my AFS Energy Solutions Program resources, I learned that if he qualified for the demand response program offered by his utility, the utility would likely pay for the entire cost of the generator, as well as paying regular program benefits!

If you are interested in exploring the potential demand response benefits for your foundry, send a copy of your most recent electric bill to energysolutions@afsinc.org. AFS Energy Solutions Program resources will check at no charge to see if a demand response program exists with your utility, and if you would qualify. We would then prepare a complimentary proposal for you to review costs and estimated ROI.

Onsite generation capability can be a significant component of your risk management portfolio, helping you to minimize costs as well as maintain production schedules.

Click here to see this story as it appears in the May 2019 issue of Modern Casting.