Not Magic: Less is More

Product Story No. 24, August 4, 2009
Not Magic: Less is More
Energy Contracting – a Deal that Generates
Cost Savings and Protects the Environment
Financial scope was being squeezed long before the current financial crisis arose: Trade, industry, and the public sector are all complaining of shrinking budgets and reduced investment strength.
When implementing austerity programs, it is important not to
neglect one major (cost) factor—energy—because our stocks of
primary energy sources such as gas and oil will dwindle and push
up the cost of power. Investments in energy efficiency are therefore highly profitable. This is where energy contracting comes
in—and experienced energy contractors like Evonik New Energies
show how it works. The subsidiary of Essen‘s industrial giant
Evonik ranks among Germany‘s largest energy contracting companies and is one of those longest on the market.
Evonik Industries AG
Rellinghauser Straße 1–11
45128 Essen
Germany
Contact
Sandra Kühberger
phone +49 201 177-3007
fax +49 201 177-3030
[email protected]
Text and images available to download at
www.evonik.com
May be reproduced free of charge, provided
source is stated
Product Story No. 24, Page 2, August 4, 2009
Contracting is based on an idea by the Scottish inventor James
Watt (1736-1819). „We will let you have a steam engine free of
charge. We will install this and take over customer service for five
years. We guarantee you that the coal for the engine costs less
than you have to spend at present on fodder (energy) for the horses, which do the same work. And all we require of you is that
you give us a third of the money you save.“ James Watt‘s idea still
works today—and can even be considered a growth market.
There is currently a great deal of interest in this market because
potential customers wish to channel their investment resources,
which in some cases have been substantially diminished, into investment projects other than energy technology. This is according
to almost 30 percent of those surveyed for the study entitled „The
Market for Contracting in Germany up to 2010“ conducted by the
trend and market research institute trend:research.
KHS Group, which manufactures filtration and filling systems, started trying to avoid nonessential costs long before the current crisis
arose. Over seven years ago, the subsidiary of the Dortmund-based company Klöckner-Werke commissioned Evonik New Energies
GmbH to make its production facility in Bad Kreuznach energy
efficient. Located in the state of Rhineland-Palatinate, this facility
comprises twelve large-scale factory buildings and administrative
buildings.
In March 2002, Evonik took charge of heat supply and reorganized heat generation on the basis of a long-term contract.
Around EUR 1.3 million was spent on installing a new boiler
plant, upgrading the existing heat distribution network, mounting
130 new air heaters in the production halls, and building a solar
installation, among other things. KHS AG thus obtained a new
heat supply system that guar­antees highly reliable supply—tailored
to the company‘s individual needs and using state-of-the-art
technology. Impressive savings are achieved: The overall package
allows energy costs to be slashed by 35 percent and reduces
the installed output by 40 percent.
Product Story No. 24, Page 3, August 4, 2009
Word of such advantages gets around: The benefits of energy
contracting were also compelling for the nearby Michelin tire factory. With a workforce of around 1,600 and a production area
spanning 270,000 m², Germany‘s largest Michelin site is one of
the region‘s most important employers. Since 1966, flexible teams
have been manufacturing tires for passenger cars and small trucks,
as well as textile cord, among other things. In March 2005,
Evonik was commissioned to plan, finance, build, and run a new
energy control center integrating existing sections of the facility,
and to operate this center over the long run. The new facility concept for supplying the plant with power and process steam involved installing a steam turbine and a gas turbine with a downstream waste heat boiler, as well as building a new steam boiler.
Evonik invested EUR 10 million in the new facility, which came
onstream in November 2006.
Michelin was able to lower its energy costs
by 10 percent at its largest facility in
Germany, thanks to a contracting agreement
with Evonik New Energy. The environment
benefits as well. CO2 emissions fell by
7,000 metric tons per year.
The results are clear: Michelin has cut its energy costs by 10 percent per year and now has to purchase just 25 percent of its
power requirements through the public grid. CO2 emissions have
been reduced by 7,000 metric tons per year. Michelin is also
benefitting from the CO2 certificates it receives as a result.
Product Story No. 24, Page 4, August 4, 2009
“The cogeneration system has enabled Michelin in Bad Kreuznach
to further reduce its carbon footprint in keeping with our corporate values. At the same time, the cost savings help to safeguard
jobs in the region. The fact that we have placed our energy infrastructure in the hands of an expert partner like Evonik New Energies also frees us up to concentrate on our core business,” stresses
Klaus Konrath, head of energy supply at the Michelin site in Bad
Kreuznach.
Contracting is not just interesting for corporate clients from manu­
facturing industry, however; it also obtains points for its versatility:
Contracting providers are active in all areas of the energy supply
technology segment. Small boiler units for multi-family buildings
or municipal facilities are run in addition to decentralized thermal
power plants that supply power to entire industrial estates. Many
contractors have identified the opportunities presented by renewable energy sources and now also operate, for example, biomass
and biogas plants, frequently as cogeneration systems, to deliver
the energy produced to their customers. A variety of contracting
models may also be offered, depending on the customers‘ needs.
A growing market
The common denominator among customers is the desire to save
energy and reduce costs. Contracting therefore provides a wealth
of sales prospects. In Germany alone, around 1.4 million energy
facilities would be suitable for contracting purposes; some 500
companies are currently active in the market as service providers
or contractors. The annual market volume in the German contracting market exceeds EUR 3 billion. The largest market segment—
also in terms of the growth rate—is contracting for industrial cus­
tomers, which has a share of around EUR 1 billion. It is crucial to
take the needs of potential customers seriously because the possible advantages of a contracting solution—security of supply frequently guaranteed in the contract, higher liquidity due to external
financing, or even greater transparency of energy costs—sometimes meet with skepticism about becoming dependent on the
contractor.
Product Story No. 24, Page 5, August 4, 2009
Here, the contracting company can counter customers’ fears
through reliability, flexibility and—last but not least—good value
for money.
One of KHS AG‘s twelve factory buildings.
The new air heaters can be seen in the ceiling area.
Ralf Tabellion, who works in sales at Evonik New Energies and is
involved in the two projects in Bad Kreuznach, is aware of customers‘ possible misgivings and knows what makes a contracting
partnership work: “Mutual trust, the courage to forge a long-term
partnership, a concept that is individually tailored to customers‘
needs rather than a standard concept, and a broad-based preliminary analysis that uses reliable data—all this is indispensable. Then
good contracting is not magic!”
Conclusion
Energy efficiency is a pivotal issue, especially in times of economic
turmoil: Costs can be reduced, dependence on energy imports can
be lowered, and climate protection targets can be reached at the
same time.