Energy Trends
        in Selected
 Manufacturing Sectors:
                 C7
Opportunities and Challenges
    1 for Environmentally Preferable
  EnergyJDutcomes      1    I
                     March
                     2007
 SectorStrategies

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     U.S. Environmental Protection Agency

                         Energy Trends
in Selected Manufacturing Sectors:
   Opportunities and Challenges for
          Environmentally Preferable
                     Energy Outcomes
                              Final Report

                                 March 2007
      Prepared for:
      U.S. Environmental Protection Agency
      Office of Policy, Economics, and Innovation
      Sector Strategies Division

      Prepared by:
      ICF International
      9300 Lee Highway
      Fairfax, VA 22031
      (703) 934-3000

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Table of Contents
List of Acronyms	v

Acknowledgements	vii

Executive Summary	ES-1

1.  Introduction	1-1
   1.1.    Objectives	1-1
   1.2.    Methodology	1-1
   1.3.    Organization of the Report	1-5

2.  Current Energy Consumption	2-1
   2.1.    U.S. Energy Overview	2-1
   2.2.    Sector Energy Overview	2-8
   2.3.    Environmental Context	2-24
   2.4.    Economic Context	2-32

3.  Sector Energy Scenarios	3-1
   3.1.    Alumina and Aluminum	3-4
   3.2.    Cement	3-12
   3.3.    Chemical Manufacturing	3-21
   3.4.    Food Manufacturing	3-31
   3.5.    Forest Products	3-39
   3.6.    Iron and Steel	3-53
   3.7.    Metal Casting	3-65
   3.8.    Metal Finishing	3-71
   3.9.    Motor Vehicle Manufacturing	3-77
   3.10.  Motor Vehicle Parts Manufacturing	3-83
   3.11.  Petroleum  Refining	3-88
   3.12.  Shipbuilding and Ship Repair	3-96

4.  Barriers to Environmentally Preferable Energy Outcomes	4-1
   4.1.    Overview of Barriers	4-1
   4.2.    Nonregulatory Barriers	4-1
   4.3.    Regulatory Barriers	4-4
   4.4.    Conclusion	4-9

5.  Policy Options	5-1
   5.1.    Internal Actions and Coordination	5-1
   5.2.    External Actions and Coordination	5-6
   5.3.    Conclusion	5-7

Appendix A: Energy  Projections	A-1
   A.1.   Clean Energy Future Scenarios	A-2
   A.2.   Annual Energy Outlook  Scenarios	A-4

References
U.S. Environmental Protection Agency                   i                                     March 2007

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                                      Table of Contents
List of Figures
Figure 1:    U.S. energy consumption trends 1970-2005: comparison of industrial, transportation,
           residential, and commercial end uses	2-1
Figure 2:    Natural gas consumption 1989-2005: comparison of industrial, residential, and
           commercial end uses	2-4
Figure 3:    Petroleum consumption 1989-2005: comparison of industrial, transportation,
           residential, and commercial end uses	2-5
Figure 4:    Coal consumption 1989-2005: comparison of industrial and non-industrial end uses 	2-5
Figure 5:    Purchased electricity consumption 1989-2005: comparison of industrial, residential,
           and commercial end uses	2-6
Figure 6:    Aluminum sector: energy-related CAP emissions	3-7
Figure 7:    Aluminum sector: CAP emissions by source category and fuel usage	3-8
Figure 8:    Cement sector: energy-related CAP emissions	3-15
Figure 9:    Cement sector: CAP emissions by source category and fuel usage	3-16
Figure 10:  Chemical sector: energy-related CAP emissions	3-25
Figure 11:  Chemical sector: CAP emissions by source category and fuel usage	3-26
Figure 12:  Food manufacturing sector: energy-related CAP emissions	3-34
Figure 13:  Food manufacturing sector: CAP emissions by source category and fuel usage	3-35
Figure 14:  Forest products sector: energy-related CAP emissions	3-44
Figure 15:  Forest products sector: CAP emissions by source category and fuel usage	3-46
Figure 16:  Iron and steel sector: energy-related CAP emissions	3-58
Figure 17:  Iron and steel sector: CAP  emissions by source category and fuel usage	3-59
Figure 18:  Metal casting sector: energy-related CAP emissions	3-67
Figure 19:  Metal casting sector: CAP emissions by source category and fuel usage	3-68
Figure 20:  Metal finishing sector: energy-related CAP emissions	3-73
Figure 21:  Metal finishing sector: CAP emissions by source category and fuel usage	3-74
Figure 22:  Motor vehicle manufacturing sector: energy-related CAP emissions	3-79
Figure 23:  Motor vehicle manufacturing sector: CAP emissions by source category and
           fuel usage	3-80
Figure 24:  Motor vehicle parts manufacturing sector: energy-related CAP emissions	3-85
Figure 25:  Motor vehicle parts manufacturing sector: CAP emissions by source category and
           fuel usage	3-86
Figure 26:  Petroleum refining sector: energy-related CAP emissions	3-91
Figure 27:  Petroleum refining sector: CAP emissions by source category and fuel usage	3-92
Figure 28:  Shipbuilding and ship repair sector: energy-related CAP emissions	3-97
Figure 29:  Shipbuilding and ship repair sector: CAP emissions by source category and fuel usage....3-98



List of Tables

Table 1: Sector opportunity assessment summary table	ES-4
Table 2: Manufacturing sectors addressed in this analysis	1-1
Table 3: Fraction of total energy demand met by fuel type in 2004: comparison of residential, commercial,
       industrial, and transportation end uses	2-3
Table 4: Sector energy consumption  and energy intensity in 2002	2-8
Table 5: Sector energy consumption  by fuel type in 2002  	2-10
Table 6: Sector fuel inputs as fraction of total energy requirements in 2002	2-11
Table 7: Sector fuel-switching potential in 2002: natural gas to alternate fuels	2-13
Table 8: Sector fuel-switching potential in 2002: coal to alternate fuels	2-14
Table 9: Sector energy intensity in 2002	2-16
Table 10: Sector energy use and loss footprint in 1998	2-20
Table 11: Commodity shipments by sector in 2002	2-23
Table 12: Health and environmental impacts of energy-related air pollutants	2-24
Table 13: Energy-related CAP emissions by sector in 2002	2-27
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                                      Table of Contents
Table 14: Energy-related CAP emissions by source category in 2002	2-29
Table 15: Comparison of 2002 data on energy-related CAP emissions, total energy consumption, and
       energy intensity by sector 	2-30
Table 16: Annual growth  in value added and value of shipments 1997-2004	2-32
Table 17: Overview of key economic characteristics by sector	2-34
Table 18: Current economic and energy data for the aluminum industry	3-5
Table 19: CEF reference case projections forthe aluminum industry	3-7
Table 20: Opportunity assessment forthe aluminum industry	3-9
Table 21: CEF advanced case projections forthe aluminum industry	3-10
Table 22: Current economic and energy data forthe cement industry	3-13
Table 23: CEF reference case projections forthe cement industry	3-15
Table 24: Opportunity assessment forthe cement industry	3-17
Table 25: CEF advanced case projections forthe cement industry	3-19
Table 26: Current economic and energy data forthe chemical manufacturing industry	3-22
Table 27: CEF reference case projections forthe bulk chemicals industry	3-24
Table 28: Opportunity assessment for the chemical manufacturing industry	3-27
Table 29: CEF advanced case projections forthe chemicals industry	3-29
Table 30: Current economic and energy data forthe food manufacturing industry	3-32
Table 31: CEF reference case projections forthe food manufacturing industry	3-33
Table 32: Opportunity assessment forthe food manufacturing industry	3-36
Table 33: CEF advanced case projections forthe food manufacturing  industry	3-37
Table 35: Current economic and energy data forthe pulp and paper industry	3-41
Table 36: Current economic and energy data forthe wood products industry	3-42
Table 37: CEF reference case projections forthe pulp and paper industry	3-43
Table 38: Opportunity assessment forthe forest products industry	3-47
Table 39: CEF advanced case projections forthe pulp and paper industry	3-50
Table 40: Current economic and energy data forthe iron and steel industry	3-55
Table 41: CEF reference case projections forthe iron and steel industry	3-58
Table 42: Opportunity assessment for integrated steelmaking	3-60
Table 43: Opportunity assessment for EAF steelmaking	3-62
Table 44: CEF advanced case projections forthe iron and steel  industry	3-63
Table 45: Current economic and energy data forthe metal casting industry	3-66
Table 46: Opportunity assessment forthe metal casting industry	3-68
Table 47: Current economic and energy data forthe metal finishing industry	3-72
Table 48: Opportunity assessment forthe metal finishing  industry	3-75
Table 49: Current economic and energy data forthe motor vehicle manufacturing industry	3-78
Table 50: Opportunity assessment forthe motor vehicle manufacturing industry	3-81
Table 51: Current economic and energy data forthe motor vehicle parts manufacturing industry	3-83
Table 52: Opportunity assessment forthe motor vehicle parts manufacturing industry	3-86
Table 53: Current economic and energy data forthe petroleum refining industry	3-88
Table 54: CEF reference case projections forthe petroleum refining industry	3-90
Table 55: Opportunity assessment forthe petroleum refining industry	3-92
Table 56: CEF advanced case projections forthe petroleum refining industry	3-94
Table 57: Current economic and energy data for the shipbuilding and ship repair industry	3-97
Table 58: Opportunity assessment for the shipbuilding and ship  repair industry	3-99
Table 59: Comparison of CEF industrial energy consumption projections through 2020: reference case
       and advanced case	A-2
Table 60: Qualitative representation of advanced energy policy impacts on CEF-NEMS model	A-3
Table 61: Comparison of AEO 2006 industrial energy consumption projections through 2020: reference
       case and high technology case	A-5
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List of Acronyms
 AA          Aluminum Association
 ACC         American Chemistry Council
 ACEEE      American Council for an Energy-Efficient Economy
 AE          Anode effects
 AEO         Annual Energy Outlook
 AGF         American Gas Foundation
 AF&PA      American Forest & Paper Association
 Al           Alternative ironmaking
 AISI         American Iron and Steel Institute
 APMA       Automotive Parts Manufacturers' Association of Canada
 ASM         Annual Survey of Manufacturers
 BART       Best Available Retrofit Technology
 BOF         Basic oxygen furnace
 BOH         Basic open hearth
 BPA         Bonneville Power Administration
 Btu          British thermal units
 CAA         Clean Air Act
 CAP         Criteria air pollutant
 CEF         Scenarios for a Clean Energy Future
 CEPA       Clean Energy Program Administrators
 CERCLA     Comprehensive Environmental Response, Compensation, and Liability Act
 CHP         Combined heat and power
 CKD         Cement kiln dust
 CO          Carbon monoxide
 CO2         Carbon dioxide
 CTL         Coal-to-liquids
 DG          Distributed generation
 DR          Demand response
 DOE         U.S. Department of Energy
 DOL         U.S. Department of Labor
 DOT         U.S. Department of Transportation
 DSW        Definition of solid waste
 EAF         Electric arc furnace
 EERE       Energy Efficiency and Renewable Energy (DOE)
 EIA          Energy Information Administration (DOE)
 EO          Executive  Order
 EPA         U.S. Environmental Protection Agency
 EPI          Environmental Performance Indicator
 FERC       Federal Energy Regulatory Commission
 FIRE         Food Industry Resource Efficiency
 GDP         Gross domestic product
 GHG         Greenhouse gas
 GTL         Gas-to-liquids
 HAP         Hazardous air pollutant
 HVAC       Heating, ventilating, and air conditioning
 IGCC        Integrated gasification combined cycle
 IOF          Industries  of the Future (DOE)
 IRS          Internal Revenue Service (U.S. Department of the Treasury)
 ISO          International Organization for Standardization
 ITP          Industrial Technologies Program (DOE)
 KBtu         Thousand Btu
 Ib           Pound
 LBNL        Lawrence  Berkeley National Laboratory
 LPG         Liquified petroleum gas
 MACT       Maximum Achievable Control Technology
 MBtu         Million Btu
 MECS       Manufacturing Energy Consumption Survey
 NAAQS      National Ambient Air Quality Standards
 NAICS       North American Industry Classification System
U.S. Environmental Protection Agency
March 2007

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                                         List of Acronyms
  NEI         National Emissions Inventory
  NEMS       National Energy Modeling System
  NESHAP     National Emission Standards for Hazardous Air Pollutants
  NGL         Natural gas liquids
  NH3         Ammonia
  NOx         Nitrogen oxides
  NPDES      National Pollutant Discharge Elimination System
  NSPS       New Source Performance Standards
  NSR         New Source Review
  O&M         Operations and maintenance
  OAQPS      Office of Air Quality Planning and Standards (EPA)
  OAR         Office of Air and Radiation (EPA)
  OEM         Original equipment manufacturer
  OPEI        Office of Policy, Economics, and Innovation (EPA)
  OSHA       Occupational Safety and Health Administration (DOL)
  OSW        Office of Solid Waste (EPA)
  PCA         Portland Cement Association
  PEL         Permissible exposure limit
  PFC         Perfluorocarbon
  PM          Particulate matter
  ppm         Parts per million (pollutant)
  PSD         Prevention of Significant Deterioration
  PURPA      Public Utility Regulatory Policies Act
  PV          Photovoltaic
  R&D         Research and development
  RCRA       Resource Conservation and Recovery Act
  RD&D       Research, development, and demonstration
  ROI         Return on investment
  RSE         Relative Standard Error
  RTO         Regenerative thermal oxidizer
  SCC         Source Classification Code (NEI)
  SGP         Strategic Goals Program
  SIC         Standard Industrial Classification
  SO2         Sulfur dioxide
  SOBOT      Saving One Barrel of Oil per Ton (AISI initiative)
  SOCMA      Synthetic Organic Chemical Manufacturers Association
  SOx         Sulfur oxides
  SPCC       Spill Prevention Countermeasures and Control
  SSD         Sector Strategies  Division (EPA)
  SSP         Sector Strategies  Program (EPA)
  STAC       State Technologies Advancement Collaborative
  TBtu         Trillion Btu
  TPY         Tons per year (emissions)
  USDA       U.S. Department of Agriculture
  USGS       U.S. Geological Survey (U.S. Department of the Interior)
  VAIP         Voluntary Aluminum Industrial Partnership
  VOC         Volatile organic compound
U.S. Environmental Protection Agency
VI
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Acknowledgements
We would like to thank the following organizations, their staff, and members for review and
comment on draft versions of this report:
      Aluminum Association
      Alliance of Automobile Manufacturers
      American Forest & Paper Association
      American Iron & Steel  Institute
      American Shipbuilding Association
      Energy Industries of Ohio
      Portland Cement Association
      Shipbuilders Council of America
      Synthetic Organic Chemical Manufacturers Association
      University of Michigan, Department of Mechanical Engineering
      U.S. Department of Energy
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                                                        12 Industrial Manufacturing Sectors
                                                            Examined in This Report

                                                    •   Alumina and aluminum
                                                    •   Cement
                                                    •   Chemical manufacturing
                                                    •   Food manufacturing
                                                    •   Forest products
                                                    •   I ran and steel
                                                    •   Metal casting
                                                    •   Metal finishing
                                                    •   Motor vehicle manufacturing
                                                    •   Motor vehicle parts manufacturing
                                                    •   Petroleum refining
                                                    •   Shipbuilding and ship repair
Executive Summary

Objective

The objective of this report is to assist the Sector
Strategies Division (SSD) of the U.S. Environmental
Protection Agency (EPA) in developing strategies to
promote environmentally preferable outcomes with
respect to energy consumption in 12 industrial
manufacturing sectors. For the purposes of this
analysis, environmentally preferable energy
outcomes are achieved by reductions in energy-
related air emissions through increased energy
efficiency (which reduces fuel consumption and
associated emissions) and/or transitioning to less
emissions-intensive energy sources. This analysis
focuses primarily on emissions of criteria air
pollutants (CAPs),  but it also includes some
projections of carbon dioxide (CO2) emissions. Other
air emissions, such as air toxics, and water and land
impacts are not included.

Across the 12 sectors, this analysis characterizes energy consumption within the context of
recent and expected future energy trends and provides a broad overview of the environmental
and economic context surrounding sector energy usage. Building on this overview, the analysis
provides sector-specific "base case" and "best case" energy scenarios, identifying opportunities
for promoting environmentally preferable energy outcomes as well as potential regulatory and
nonregulatory barriers to improved environmental outcomes. To address potential regulatory
barriers to investment in energy efficiency and clean energy technologies in these sectors, this
analysis proposes  a number of policy options that EPA could pursue—both internally at EPA
and externally in coordination with other agencies and stakeholders—to remove or reduce the
barriers.

Approach

Drawing upon the most recent publicly available data sources that address energy consumption
in these 12 industrial manufacturing sectors, as well as perspectives and insights provided
through interviews with internal and external stakeholders, this report provides a broad overview
of sector energy consumption, economic trends, and the environmental impacts of sector
energy consumption in terms of energy-related air emissions. In a summary of each sector, we
describe current energy trends and associated environmental impacts in terms of air emissions
of CAPs and carbon dioxide. We project how future energy trends and associated emissions
could be impacted by implementation of key opportunities for energy efficiency and clean
energy improvement. We then discuss the ways in which regulations and other nonregulatory
factors may create barriers to energy efficiency and clean energy improvement, providing
specific examples from the literature we reviewed and the stakeholder interviews we conducted.
Finally, we set forth several policy approaches that EPA could explore to address regulatory
barriers and promote environmentally preferable outcomes with respect to energy consumption
in these manufacturing sectors.
U.S. Environmental Protection Agency
                                          ES-1
March 2007

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                                    Executive Summary
Key Energy Trend Findings

This analysis produced the following overarching insights:

   •  Comprising the largest fraction of total U.S. energy demand, the industrial sector presents
      considerable opportunities for improving environmental performance through increased
      adoption of energy efficiency and clean energy technologies.

   •  Industrial energy use has been growing more slowly than energy use in the residential,
      commercial, and transportation sectors. This is because industry as a whole has become
      a smaller proportion of the economy, has shifted to less energy-intensive types of
      manufacturing, and has already implemented a number of energy-saving technologies.

   •  Under a business-as-usual energy scenario, aggregated energy consumption across
      many of the sectors3 addressed in this analysis is projected to increase by 20 percent
      from 2004 levels by 2020, and CO2 emissions are projected  to increase by 14 percent.1
      Faster growth is projected for onsite consumption of fossil fuels and renewable energy (a
      projected increase of 60 percent over the period) than for purchased electricity (a
      projected increase of 12 percent over the period).

   •  Rising energy costs and the pressures of global competition pose continuing challenges
      for industrial manufacturing sectors but also create an opportunity for energy efficiency to
      play an increasing role in helping businesses' competitive positions.

   •  The types of fuel used by industry have changed over time. During the last 50 years,
      industry has decreased direct coal use and increased natural gas use. Recent increases
      in both the price and price volatility of natural gas may interrupt these trends, although
      over the short term, most sectors are  not able to switch fuels easily. Industrial use of
      renewable fuels is growing, and is already higher than the use of renewable fuels in the
      residential, commercial, and transportation sectors.

   •  For each sector, this analysis compares energy-related CAP emissions with total CAP
      emissions, including those that result  from manufacturing processes. The primary CAP
      emissions resulting from energy use are sulfur dioxide and nitrogen oxides. In general, the
      largest sources of energy-related CAP emissions are external combustion boilers and
      manufacturing process equipment. Upstream emissions from electrical generating units
      that supply industrial energy users with purchased electricity are not included  in this
      analysis. Only onsite emissions resulting from energy use are included.

   •  Investment in  energy efficiency and clean  energy is fundamentally a business decision,
      and the success of strategies to promote environmentally preferable energy outcomes will
      depend primarily on the business case for such investments.

   •  Strategies for promoting energy efficiency and clean energy investment should be tailored
      to address sector-specific economic trends and characteristics such as
      declining/increasing  productivity, sensitivity to energy cost fluctuations, average firm size,
      the homo- or heterogeneity of manufacturing processes within the sector, and the sector's
      geographic distribution.
   The projections referenced here are contained in supplemental tables to the U.S. Department of Energy's Annual Energy
   Outlook 2006 and apply to aggregated energy consumption and carbon dioxide emissions across the following sectors:
   aluminum, cement, bulk chemicals, food manufacturing, iron and steel, metals-based durables (containing metal finishing),
   pulp and paper (part of forest products), and petroleum refining.
U.S. Environmental Protection Agency               ES-2                                  March 2007

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                                   Executive Summary
Key Opportunities for Environmentally Preferable Energy Outcomes

Our analysis focuses on five key opportunities for improved environmental performance with
respect to energy usage in industrial manufacturing sectors. Following is a brief definition of
each opportunity:13

   •  Cleaner fuels. Current fuel sources could be replaced with alternate fuels that have lower
     carbon and/or CAP emissions per unit of energy. This opportunity also includes self-
     generation of energy with renewable resources (biomass, solar, wind,  and geothermal).

   •  Combined heat and power (CHP). A form of distributed generation also referred to as
     "cogeneration," a CHP system increases energy efficiency through onsite production of
     thermal energy (typically steam) and electricity from a single fuel source.

   •  Equipment retrofit/replacement. Energy efficiency could be improved by retrofitting or
     replacing existing equipment used for onsite heat or power generation and distribution,
     manufacturing processes, or meeting facility requirements such as lighting and heating,
     ventilating, and air conditioning (HVAC).

   •  Process improvement. Process improvement or optimization refers to either a wholesale
     process change that requires less energy for a similar level of manufacturing output or an
     adjustment to the manufacturing process that increases energy efficiency. The process
     improvement category also includes  implementation of best practices in energy
     management.

   •  Research and development (R&D). R&D could focus on developing new energy-efficient
     or clean energy technologies and processes that could be commercialized within the next
     one to two decades.

Nonregulatory  Barriers to  Environmentally Preferable Energy Outcomes

Several nonregulatory factors, including financial, technical, and institutional barriers, limit
broader application of the energy efficiency and clean energy technologies addressed in this
analysis, and hinder the achievement of environmentally preferable energy outcomes in
manufacturing industries:

   •  Financial barriers. Most of the energy consumed in the industrial sector is consumed  in a
     few basic industries that produce commodity products—such as steel, basic chemicals,
     petroleum products, and paper—that are subject to stiff domestic and international
     competition. Some of these industries have already seen major declines in the United
     States and are concerned about their future viability. These industries have little appetite
     for new capital investment at this time, unless it is likely to bolster their future success.
     Given scarce capital resources in general, the greatest investment priorities are typically
     for equipment that maintains or increases production and  product quality, or is necessary
     to meet regulatory requirements.  Discretionary investments for energy efficiency or clean
     energy projects must often compete with these higher-priority investments.

   •  Technical barriers. Some energy efficiency or clean energy opportunities are not well
     suited to a given industry's manufacturing process. In other cases,  process-related
     technical constraints affect the extent to which a given opportunity can be utilized.
b   Section 2.2.6 contains a more complete definition of each opportunity with important caveats.
U.S. Environmental Protection Agency               ES-3                                  March 2007

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                                   Executive Summary
   •  Institutional barriers. Energy is a small component of the cost of production in most
     industries. Only in the most energy-intensive industries—such as aluminum, cement,
     segments of the chemical manufacturing industry, iron and steel, metal casting, and pulp
     and paper—do energy costs represent more than 3 percent of the industry's annual value
     of shipments.0 This reality minimizes institutional  incentives to devote organizational
     resources to pursuing energy efficiency opportunities.

Regulatory Barriers to Environmentally Preferable Energy Outcomes

Regulations also may limit broader application of energy efficiency and clean energy
technologies and impede the achievement of environmentally preferable energy outcomes in
manufacturing industries. Given EPA's role in developing and coordinating regulations and
policies aimed at improving environmental performance, this analysis focuses on regulatory
barriers, describing four ways in which regulations—issued by EPA or other agencies—may
create  barriers to energy efficiency and clean energy improvement:

   •  Regulations may fail to fully reward the environmental benefits associated with an energy
     efficiency opportunity, which restricts the potential for businesses to evaluate energy
     efficiency on an equivalent basis with other  pollution control strategies such as add-on
     controls.

   •  Regulations may lack procedural flexibility that allows pursuit of energy efficiency or
     cleaner fuel opportunities, particularly in areas where permitting changes  are required to
     implement an opportunity.

   •  The rulemaking process may fail to fully consider the energy implications  of proposed
     regulations.

   •  Regulations or policies may contribute to unfavorable market conditions for energy
     efficiency or clean energy opportunities.

Sector Opportunity Assessment

For each sector, the report assesses the viability of the five key energy efficiency and clean
energy opportunities  discussed above, given the financial, technical, institutional and regulatory
barriers facing each sector. The analysis ranks the viability of each opportunity  as "low,"
"medium," or "high" based on a qualitative assessment of the  magnitude of relevant barriers,
rather than a quantitative assessment of energy-savings potential. Table 1 provides a summary
of the opportunity assessment rankings for each sector.

                    Table 1: Sector opportunity assessment summary table
                 Sector
                                                   Opportunities

Alumina and aluminum
Cement
Chemical manufacturing
Food manufacturing
Cleaner
Fuels
Low
Medium
Medium
Medium
Combined
Heat and
Power
Low
Low
High
High
Equipment
Retrofit/
Replacement
Medium
High
Medium
Medium
Process
Improvement
Medium
High
Medium
High
Research
and
Development
Medium
Medium
Medium
Medium
   See Table 9 for energy intensity metrics for each sector, including energy costs per dollar value of shipments.
U.S. Environmental Protection Agency
ES-4
March 2007

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                                   Executive Summary
                 Sector
                                                  Opportunities
Cleaner Combined Equipment
Fuels Heat and Retrofit/
Power Replacement
Forest products
Iron and steel
Integrated steelmaking
EAF steelmaking
Metal casting
Metal finishing
Motor vehicle manufacturing
Motor vehicle parts manufacturing
Petroleum refining
Shipbuilding and ship repair
Medium

Low
Low
Low
Low
Low
Low
Low
Low
Low

Medium
Low
Low
Medium
Low
Low
High
Low
Medium

Low
Low
Medium
Medium
Medium
Medium
Medium
High
Process
Improvement
High

Medium
Medium
Medium
High
High
High
Medium
High
Research
and
Development
High

High
High
Medium
Medium
Medium
Low
Medium
Low
A key observation from this table is that the viability of a given energy efficiency or clean energy
opportunity varies from sector to sector. In addition, for any given manufacturing facility the
viability of an opportunity will depend on facility-specific characteristics and operating conditions.

Additional findings from the sector opportunity assessment include the following:

   •   Cleaner fuels. Given the technical, financial, and regulatory constraints on fuel-switching,
      the extent of cleaner fuels opportunities is somewhat limited. However, renewable
      biomass fuels in the forest products industry, bio-waste in the food manufacturing
      industry, byproduct fuels in the chemical manufacturing industry, and waste fuels in the
      cement industry may represent opportunities for improved environmental performance as
      well as opportunities for reducing the cost of purchased energy for manufacturing
      industries.

   •   CHP. For sectors with high process thermal loads such as chemical manufacturing, food
      manufacturing, and petroleum refining, a key opportunity for reducing fuel use and
      associated CAP and CO2 emissions lies with onsite generation of thermal and electric
      energy. In sectors that already meet the majority of their thermal or electric energy
      requirements with CHP, like the forest products industry, future opportunities may be
      limited.

   •   Equipment retrofit/replacement. Reduced fuel use through increased boiler efficiency
      represents an opportunity to reduce energy-related emissions across multiple sectors, as
      boilers are among the largest sources of CAP and  CO2 emissions in the industries
      covered  in  this analysis. According to National Emissions Inventory (NEI) data, the sectors
      with the largest energy-related CAP emissions from boilers are forest products, chemical
      manufacturing, and food manufacturing.

   •   Process improvement. Sectors with relatively low energy use and associated emissions
      represent smaller areas of opportunity for energy-related environmental improvement. Key
      energy-savings opportunities in these sectors lie with implementation of best practices in
      energy management as well as with energy efficiency upgrades to electric motors and
      compressed air systems, facility lighting, and HVAC systems.
U.S. Environmental Protection Agency
ES-5
March 2007

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                                  Executive Summary
   •  R&D. Transformational technologies and processes can potentially yield substantial
     energy savings in sectors such as forest products and iron and steel. In forest products,
     technologies to reduce drying needs in papermaking,  improve fuel concentration in
     recovery boilers, and increase fuel efficiencies in lime kilns are among the most promising
     R&D opportunities. New technologies under development in iron and steel include molten
     oxide electrolysis, ironmaking by flash smelting using  hydrogen, and the paired straight
     hearth furnace.

Policy Options

Based on the evaluation of clean energy opportunities and the potential barriers to those
opportunities, as well as EPA's goal to promote environmentally preferable energy outcomes,
the report outlines policy options EPA could pursue to address regulatory barriers to energy
efficiency and clean energy investment. We offer the following policy options for discussion—
both internal to EPA and involving coordination with other agencies—noting that the Agency will
determine the definitive actions it intends to undertake:

   •  Develop and promote broader application of regulations that recognize the
     emission reductions resulting from increased energy efficiency. Create additional
     mechanisms for energy efficiency to serve as a pollution control strategy through the
     following regulatory approaches:

        Promoting broader use of output-based emissions  standards that account for CHP
        technology's thermal and electric energy output.

        Promoting broader use of output-based emissions  standards in regulations governing
        other combustion processes such as energy-generating and manufacturing process
        equipment.

   •  Increase procedural flexibility to promote environmentally preferable energy use.
     Address permit-related barriers to reducing energy-related emissions on a system-wide
     level through the following activities:
        Expanding flexible permitting opportunities that promote reductions in energy-related
        emissions as part of a pollution prevention strategy, including  developing a flexible
        permitting rule.
        Promoting broader recycling of wastes and process byproducts for energy recovery.

        Providing assistance to the regulated community as well as state and local  permitting
        authorities in support of efforts to increase procedural flexibility in environmental
        regulations, including technical guidance on evaluating energy-related environmental
        tradeoffs at a system-wide level.

   •  Promote broader consideration of energy implications of rulemakings. Review
     methodologies currently used to assess energy impacts during the rulemaking process,
     assess how program offices are interpreting/implementing these  provisions, and work
     across the Agency to develop a cohesive EPA position on how such impacts should be
     assessed and weighed against other Agency priorities.

   •  Promote the development of more favorable market conditions for energy efficiency
     and clean energy technologies. Strengthen policy support for energy efficiency  and
     clean energy technologies by conducting the following activities:

        Coordinating across federal agencies to support policies that promote the market
        viability of energy efficiency and clean energy technologies.
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                                  Executive Summary
        Offering additional grants to support clean energy applications in manufacturing
        industries.

        Analyzing the environmental impacts of utility demand response programs and working
        to promote clean energy technologies as a strategy to reduce electricity demand.

     Provide additional incentives and assistance through a sector-based approach.
     Promote environmentally preferable energy outcomes in manufacturing industries through
     the following mechanisms:

        Supporting energy efficiency and clean energy R&D opportunities through information-
        sharing and recognition of industry achievements.
        Providing information regarding financial incentives that are available to support energy
        efficiency and clean energy opportunities, particularly for small businesses.
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                                                               Chapter 1. Introduction
                                                      7.7   Objectives
                                                      1.2   Methodology
                                                      1.3   Organization of the Report
1.     Introduction

1.1    Objectives

EPA's Sector Strategies Division (SSD) within the
Office of Policy, Economics, and Innovation (OPEI)
commissioned this analysis to meet the following
objectives:

   •   Facilitate a general understanding of current
      energy usage and expected future energy
      consumption trends within 12 selected industrial
      manufacturing sectors.

   •   Assess where opportunities exist within these sectors to increase energy efficiency and use
      less emissions-intensive energy sources, resulting in improved environmental performance.

   •   Identify barriers to achieving improved environmental performance with respect to sector
      energy use, with a particular emphasis on regulatory barriers.

   •   Propose policy options EPA could pursue to address such regulatory barriers, promoting
      energy efficiency and less emissions-intensive energy sources in these 12 sectors.

It is important to note that this report is an analytical document and does not convey Agency decisions.
The report's findings and policy options are based on the available data used in this analysis.

1.2    Methodology

1.2.1 Sectors Addressed in This Analysis

Using North American Industry Classification System (NAICS) codes, 12 industrial
manufacturing sectors are addressed in this analysis, as shown in Table 2.

                  Table 2: Manufacturing sectors addressed in this analysis
Sector
Alumina and aluminum
Cement
Chemical manufacturing
Food manufacturing
Forest products'1
Iron and steel
Metal casting
Metal finishing
Motor vehicle manufacturing8
Motor vehicle parts manufacturing
Petroleum refining
Shipbuilding and ship repair
NAICS
3313
327310
325
311
321 , 322
331111
3315
332813
33611
3363
32411,324110
336611
d   Where data are available, this analysis provides detail on the two major subsectors of the forest products industry: pulp and
   paper and wood products.
e   Motor vehicle manufacturing (NAICS 33611) refers to automobile and light duty motor vehicle manufacturing and assembly.
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                                      Introduction
Eight of these sectors—cement, chemical manufacturing (specifically, paint and coatings and
specialty-batch chemicals), food manufacturing (specifically, agribusiness),  iron and steel,  metal
casting, metal finishing, forest products, and shipbuilding and ship repair—currently participate
in the Division's Sector Strategies Program, which uses collaborative partnerships to promote
widespread improvement in environmental performance with reduced administrative burden.
Together, these 12 sectors represent a broad cross-section of the industrial manufacturing
economy, and energy usage in these sectors constitutes a substantial fraction of total industrial
energy demand in the United States.  Energy-related environmental impacts include carbon
emissions that contribute to climate change and criteria air pollutant (CAP) emissions that
degrade local and regional air quality, potentially affecting attainment of National Ambient Air
Quality Standards under the Clean Air Act.

Assessing energy usage trends and associated environmental impacts, as well as the viability of
specific energy efficiency and clean energy opportunities, enables us to envision
environmentally preferable energy outcomes. Understanding the ways in which regulations and
statutes potentially create barriers to energy efficiency and clean energy investment suggests
policy options EPA could pursue to promote environmentally preferable energy outcomes.

1.2.2  Data Sources and Caveats

This analysis relies on the best available and most recent public data sources in the following
areas:

   • Historical and current energy consumption data:
        Annual Energy Review (2005): For an overview of U.S. and industrial energy
        consumption trends, we relied on the most recent annual report containing historical
        energy statistics from 1949 to the  present produced by the  U.S. Department of
        Energy's (DOE)  Energy  Information Administration (EIA).

        Manufacturing Energy Consumption Survey (MECS) (1998 and 2002): For detailed
        sector energy consumption data, including fuel use and energy intensity, we relied
        upon the two most recent issues of ElA's survey of manufacturing energy use, which is
        conducted every four years.

   • Energy-related emissions data:
        National Emissions Inventory (NEI) (2002):  Data runs were conducted using the NEI
        database (X\LLA/£/_CX\Pdataset), prepared by EPA's Emission Factor and Inventory
        group within the Office of Air Quality Planning and Standards, to produce sector-level
        data on energy-related emissions  of CAPs, including sulfur dioxide, nitrogen oxides,
        particulate matter, and volatile organic compounds.

        As NEI does not contain data on greenhouse gas (GHG) emissions, we also reference
        CO2 emissions projections from the Scenarios fora Clean Energy Future (CEF) report
        and DOE's most recent Annual Energy Outlook (AEO, described below under "Energy
        consumption projections"). Though EPA has compiled a  Greenhouse Gas Inventory
        (April 2006) that includes some of the sectors addressed in this analysis, we used DOE
        sources for carbon emissions because they entail projections of future carbon
        emissions under business-as-usual and environmentally preferable energy scenarios.

   • Economic data:

        Annual Survey of Manufacturers (2001 and 2004): U.S. Census Bureau data on
        economic production (in terms of value added and value of shipments) by sector were
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                                       Introduction
        obtained for the years 1997 to 2004. These sources also provided data on annual
        energy expenditures by sector.

        CenStats Databases, County Business Patterns (2004): Information on the total
        number of establishments in each sector was obtained from the Census Bureau's
        online searchable CenStats databases.

   • Energy consumption projections:
        Scenarios fora Clean Energy Future (2000): This CEF report was commissioned by
        DOE with research conducted by the Interlaboratory Working Group for Energy-
        Efficient and Clean Energy Technologies. We used the report's reference case and
        advanced energy case projections to illustrate how sector energy consumption trends
        might be different under what EPA considers an "environmentally preferable" energy
        scenario as compared to  a business-as-usual energy scenario/

        Annual Energy Outlook (2006): For an overview of expected future trends for industrial
        energy consumption and  associated CO2 emissions, as well as energy projections for
        specific sectors, we referenced ElA's most recent annual forecast of energy demand,
        supply, and prices through 2030. We also used the sector-specific projections of AEO
        2006 to identify areas where recent energy trends  may be expected to produce
        different outcomes than those projected by CEF in 2000.
        Natural Gas Outlook to 2020 (2005): This analysis was produced by the American Gas
        Foundation and contains  consumption projections for certain industrial sectors that are
        heavily dependent on natural gas.9

   • Energy efficiency and clean energy opportunities for industrial manufacturing
     industries:

        Trade associations: We consulted a number of online and hard copy materials
        produced by industry trade associations that describe technological and process
        opportunities for increasing energy efficiency.

        Voluntary programs: Industry commitments to environmental improvement with respect
        to energy use—particularly through federal public-private partnership programs such
        as Climate  VISION, which is supported by DOE, EPA, and the U.S. Departments of
        Transportation and Agriculture, and DOE's Industrial Technologies Program—were
        reviewed for information on emerging industrial energy-efficient and clean energy
        opportunities for energy-intensive sectors, including developing technologies.  Note that
        individual companies/facilities within each sector may also participate in other voluntary
        programs (e.g., ENERGY STAR, Performance Track, Climate Leaders, etc.); it was not
        the goal of  this paper to research and reflect those individual commitments.
        National laboratories: A number of national laboratory reports pertaining to industrial
        energy consumption were also reviewed and referenced in this analysis.
f    Clean Energy Future projections were available for 8 of the 12 sectors addressed in this analysis: alumina and aluminum,
    cement, chemical manufacturing, food manufacturing, forest products, iron and steel, metal casting, and petroleum refining.
9    Natural Gas Outlook projections were available for the following sectors: chemical manufacturing, food manufacturing, iron
    and steel, petroleum refining, and pulp and paper (within forest products).
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                                      Introduction
   •  Regulatory barriers to energy efficiency and clean energy improvement:
        Trade associations: We collected anecdotal information from the regulated community
        and reviewed industry trade association materials to identify key concerns with respect
        to federal, state, and local regulations that may pose barriers to energy efficiency or
        clean energy improvement.

        Government publications: We also reviewed several analyses produced by federal
        regulatory agencies, including EPA, and national laboratories that discuss potential
        regulatory barriers to energy efficiency or clean energy improvement.

Though our research involved a thorough review of the most commonly referenced, publicly
available information sources regarding energy consumption and associated environmental
impacts, as well as energy efficiency and clean energy opportunities for industrial manufacturing
sectors, this analysis did not involve an exhaustive literature search. Other important caveats
regarding the data sources used in this analysis include the following:

   •  Sectors included in this analysis are defined  according to the NAICS codes shown in
     Table 2. In some cases, the data sources consulted in this analysis do not align exactly
     with these sector definitions. In such instances, we use the closest available NAICS
     category to EPA's sector definition and note  such differences between EPA's and the
     source's sector definition in a footnote.

   •  Though the 2002 Manufacturing Energy Consumption Survey provides the most detailed
     data on sector energy consumption, energy prices have undergone major changes in the
     last four years, and the effects of such changes on sector energy consumption are not
     reflected in the 2002 MECS or other data sources used in this analysis.

   •  Scenarios fora Clean Energy Future provides the best available mechanism for
     illustrating how sector energy consumption might differ under an environmentally
     preferable energy scenario versus a business-as-usual scenario. At the same time, the
     study was produced in 2000 and thus does not reflect recent changes in economic
     production, energy prices, and technology advancements that affect industrial energy
     consumption.

   •  In this analysis, we seek to provide a structure for understanding the ways  in which
     regulations can potentially serve as barriers to energy efficiency and clean  energy
     improvement in industrial manufacturing sectors. Our research into regulatory barriers has
     focused on collecting anecdotal reports from the regulated community obtained through
     interviews with industry representatives and through a literature review, rather than a
     systematic survey approach.

   •  Our analysis of energy-related environmental impacts focuses primarily on a sector-by-
     sector assessment of potential  changes in energy-related air emissions that could occur
     under business-as-usual and environmentally preferable energy scenarios. The report
     uses energy-related CAP emissions from the NEI database (where available). It also
     includes a more general assessment of opportunities  to reduce GHG emissions, focusing
     on carbon dioxide. The report does not include emissions of hazardous air pollutants, or
     water or waste impacts resulting from energy use.

   •  The report first presents general trends in industrial energy consumption, and then current
     and future energy consumption and fuel use trends within each sector. It is important to
     note that this report  indicates the amount of purchased electricity used by each sector, but
     does not attempt to quantify indirect energy-related emissions resulting from the
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                                      Introduction
     production of electricity by offsite electrical generating units. In other words, the energy-
     related emissions discussed in this report refer only to onsite emissions at industrial
     facilities.

   •  The analysis focuses on fuel inputs for energy use only and does not address feedstock
     fuel use. While some figures in the report represent total energy consumption data, which
     includes fuels used as feedstocks (i.e., raw material inputs in the manufacturing process),
     feedstock energy inputs may or may not contribute to CAP and GHG emissions. As
     feedstock fuel use does not represent an opportunity for reducing the environmental
     impacts associated with energy consumption, the reports focuses on energy  inputs for fuel
     use only.

1.2.3  Organization of the Report

The major sections of this report are organized as follows, within "Insights" text boxes where
appropriate:

   •  Chapter 2, Current Energy Consumption, characterizes sector energy consumption within
     the context of U.S. energy demand, assessing sector energy requirements in terms of fuel
     inputs, energy intensity, and end use applications. In assessing how energy is used and
     lost in industrial manufacturing processes, the section identifies five key opportunities for
     improving environmental performance with respect to energy consumption—cleaner fuels,
     combined heat and power, equipment retrofit/replacement, process improvement, and
     research and development.  In addition, this section provides a broad overview of the
     environmental and economic context surrounding sector energy usage.

   •  Chapter 3, Sector Energy Scenarios, builds upon the overview of sector energy
     consumption, environmental impacts, and economic context developed in Chapter 2 and
     the energy projections described in Chapter 3 to develop "base case" and "best case"
     energy scenarios for each of the 12 sectors addressed in this analysis. The sections on
     each  sector include the following:
        A "situation assessment" that provides a general overview of the sector and describes
        key factors affecting sector energy use.

        A "base case" energy scenario that describes (1) the expected future trend for sector
        energy consumption and (2) associated environmental impacts.
        A "best case" energy scenario that assesses (1) key opportunities for improving
        environmental performance with respect to sector energy consumption, (2) potential
        barriers to implementing  such opportunities, and (3) the ways in which  an
        environmentally preferable  energy scenario would differ from the "base case" scenario
        in terms of energy consumption and associated environmental impacts.

   •  Chapter 4, Barriers to Environmentally Preferable Energy Outcomes, provides an
     overview of financial, technical, institutional, and regulatory barriers to energy efficiency
     and clean energy improvement in industrial manufacturing sectors. In a focus on
     regulatory barriers, the chapter identifies key ways in which regulations can present
     barriers to investment in energy efficiency and clean energy opportunities.

   •  Chapter 5, Policy Options, sets forth possible actions EPA could take to address the
     regulatory barriers to energy efficiency and clean energy  improvement discussed in
     Chapter 4.

   •  Appendix A, Energy Projections, provides an overview of the energy projections employed
     to develop business-as-usual versus environmentally preferable energy scenarios for the
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                                        Introduction
      12 sectors considered in this analysis. The appendix highlights key similarities and
      differences between the projections and includes a brief discussion of expected future
      trends in industrial energy consumption.
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2.     Current Energy Consumption

2.1    U.S. Energy Overview
This section provides an overview of historical
industrial energy consumption and fuel use trends
within the larger context of U.S. energy demand,
comparing industrial trends with commercial and
residential energy consumption trends to illustrate key
points that distinguish industrial energy consumption
and fuel usage from that of other end use categories.
             Chapter 2. Current Energy Consumption
           2.1 U.S. Energy Overview
           2.2 Sector Energy Overview
           2.3 Environmental Context
           2.4 Economic Context
                                       Insights

During the past 35 years, the transition away from heavy industry and towards the commercial
and  service sectors has contributed  to slower energy consumption growth in the industrial
sector than in other sectors of the U.S. economy. At the same time, the industrial sector remains
the  largest  end  user  of energy,  and  reducing  energy  consumption  in  energy-intensive
manufacturing industries offers opportunities for improving environmental performance as well
as reducing operational costs in an increasingly competitive global marketplace.

2.1.1  Long-Term Energy Consumption Trends

A comprehensive overview of historical energy consumption trends from 1949 through 2005 is
provided in the Annual Energy Review compiled by the Energy Information Administration (EIA)
within the U.S. Department of Energy (DOE). Using data from the 2005 Annual Energy Review,
Figure 1 shows U.S. energy consumption trends since 1970 across the following end use
categories: industrial, transportation, residential, and commercial.

                   Figure 1: U.S. energy consumption trends 1970-2005:
        comparison of industrial, transportation, residential, and commercial end uses2
                                                                    -Residential
                                                                    -Commercial
                                                                    -Industrial
                                                                     Transportation
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                                  Current Energy Consumption
Total energy consumption across
all end uses has increased since
1970, but industrial energy
consumption has shown the
slowest growth over the period,
increasing at an annual rate of
0.35 percent from 1970 to 2004.h
Over the same period, total
commercial  energy consumption
has more than doubled, with an
annual growth rate of 2.1  percent,
and annual growth rates for
energy consumption in the
transportation and residential
sectors were 1.6 and 1.3  percent,
respectively. At the same time,
total industrial energy
consumption has remained
greater than total energy
consumption in the other  end use
categories.'  Industrial energy
consumption has also shown greater responsiveness to energy price increases than the other
categories, declining in 1975 and from 1980 to 1983 primarily in response to oil price spikes.3

The trend of relatively flat industrial energy consumption compared with other end use sectors is
primarily attributable to the U.S. economy's overall shift away from traditional manufacturing
industries towards the service and commercial sectors, and from energy-intensive industries
towards industries with lower energy intensity, as well as to energy efficiency improvements
within industrial manufacturing sectors.

2.1.2 Fuel Consumption  Trends

Table 3 presents the fraction of total energy  demand that is met by various energy sources and
fuel types for each end use sector: industrial, commercial,  residential, and transportation.j (Note
that according to the 2005 Annual Energy Review, energy inputs for electricity production are
approximately 50 percent coal, 19 percent nuclear,  16 percent natural gas, and 6 percent
hydroelectric. The remaining energy inputs for electric power generation include petroleum,
wood, waste, and  other renewables such as wind, solar, and geothermal.)4
               Energy Consumption Terminology
•   Delivered energy (also called "site energy") is the amount of energy
    consumed at the facility level (purchased electricity and fossil fuel
    inputs as well as onsite renewable energy generation). It does not
    include losses from offsite energy generation, transmission, and
    distribution. ElA's Manufacturing Energy Consumption Survey (MECS)
    data presented in this report are in terms of delivered energy
    consumption.
•   Primary energyrefers to energy consumed onsite plus the total
    amount of fuels used to generate energy offsite (i.e., by the electric
    power generating sector). Thus, it includes energy losses from offsite
    energy generation, transmission, and distribution.
•   Total energyIs primary energy plus the amount of energy consumed
    by the electricity-generating sector to meet its own energy needs,
    which is allocated to the end use sectors (industrial, commercial, and
    residential). Energy consumption data from ElA's Annual Energy
    Review \r\ Section 2.1.1 are in total  energy terms.
Source: DOE, Indicators of Energy Intensity in the  United States.
Available at http://intensityindicators.pnl.gov/terms_definitions.stm#economy.
    As indicated in the Energy Consumption Terminology sidebar, Annual Energy Review data are presented in total energy
    terms. As ElA's 2005 data were preliminary at the time this report was written, 2004 data were used to calculate end use
    fractions of total U.S. energy consumption. Annual increases are the calculated average growth rate over the period.
    Delivered energy consumption by the transportation sector recently surpassed industrial delivered energy consumption.
    Percentages were calculated using 2004 total energy consumption data.
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                                Current Energy Consumption
               Table 3: Fraction of total energy demand met by fuel type in 2004:
         comparison of residential, commercial, industrial, and transportation end uses5

Industrial
Commercial
Residential
Transportation
Electricity
33.5%
76.2%
66.8%
0.3%
Coal
6.1%
0.6%
0.1%
0.0%
Coal Coke
0.4%
0.0%
0.0%
0.0%
Natural Gas
25.6%
18.2%
23.6%
2.2%
Petroleum
29.3%
4.3%
7.3%
96.5%
Renewable
5.0%
0.8%
2.3%
1.0%
TOTAI_k
99.9%
100.1%
100.1%
100.0%
It is important to note the following characteristics that distinguish industrial energy usage from
that of other end use sectors, particularly residential and commercial energy consumption:

   •   Electricity. The industrial sector is relatively less dependent on purchased electricity than
      the commercial and residential sectors, in part because industry produces a greater
      fraction of its own power through direct fuel inputs and, for some industries, through
      cogeneration. A form of cogeneration is combined heat and power (CHP), which produces
      thermal and electric energy from a single fuel source. CHP is a key energy efficiency
      opportunity for sectors with high process thermal and electricity loads (see Section 2.2.6),
      particularly the chemical manufacturing, food manufacturing, forest products, and
      petroleum refining sectors.'

   •   Coal. Though still an important fuel source for some industries, coal use by the industrial
      sector has declined steadily since 1950 (when it was the largest fraction of industrial fuel
      inputs) to a relatively small fraction of industrial fuel inputs today.6 Over the same period,
      coal use in electric power generation has grown rapidly (currently supplying more than 50
      percent of energy inputs for electric power generation), and thus represents an important,
      though indirect, source of energy for all three end use categories except transportation,
      particularly the commercial and  residential sectors.

   •   Natural gas. For the industrial sector,  natural gas represents a larger fraction of total
      energy consumption than for other sectors, and industry  is the largest end user of natural
      gas (see Figure 2 on page 2-4). Consequently, increasing natural gas prices  are of
      particular concern for U.S. industry. In addition to fuel use, natural gas is also an important
      raw material in industries such as  chemical manufacturing and petroleum refining.

   •   Petroleum. Petroleum also represents a larger fraction of industrial energy inputs than it
      does for the commercial and residential sectors, and petroleum consumption by industry
      has increased steadily since 1950—only slightly slower than the rate of increase in the
      transportation sector.7 However, a large fraction of industrial petroleum consumption is not
      for fuel use, but rather as raw material in industries like petroleum refining and chemical
      manufacturing. Off-road transportation in the mining, agriculture, and construction sectors
      represents another substantial component of industrial petroleum use. It is also important
      to note that the industrial petroleum consumption data in Table 3 do not capture petroleum
      inputs for offsite transportation of manufactured goods, as these energy inputs are
      included under the transportation sector. Though not considered in  depth in this analysis,
    For each row, sum of all columns may not equal 100% due to independent rounding.
    Additional sector-level data for onsite generation of electricity, including cogeneration and renewable power generation, is
    available through MECS tables 11.3 and 11.4, available at
    http://www.eia.doe.gov/emeu/mecs/mecs2002/data02/excel/table113_02.xls.
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                               Current Energy Consumption
     fuels used in freight shipping represent an important energy input for manufacturing
     industries.

   •  Renewables. The industrial sector is the largest user of renewable fuels, in part due to
     the extensive use of biomass fuels in the forest products industry. As is the case for coal,
     renewable energy is also represented in electricity supplied by utilities, meeting
     approximately 9 percent of the country's electric power supply, primarily through
     hydro power.

Focusing on more recent historical trends (1989 to 2005), and comparing industrial fuel
consumption with fuel consumption in the other major end use categories, Figure 2 through
Figure  5 present consumption trends for natural gas, petroleum, coal, and electricity,
respectively. Trends are presented for the three main end use categories—industrial,
residential, and commercial—with the following exceptions: (1) the coal consumption graph,
Figure  4, compares three primary industrial uses of coal with all non-industrial end uses; and (2)
the petroleum consumption graph, Figure 3, also includes the consumption trend for
transportation end uses.

                       Figure 2: Natural gas consumption  1989-2005:
                comparison of industrial, residential, and commercial end uses8
             12,000
                                                                        -Residential

                                                                        -Commercial

                                                                        -Industrial
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                                    Current Energy Consumption
                            Figure 3: Petroleum consumption 1989-2005:
          comparison of industrial, transportation, residential, and commercial end uses9
               35,000
               30,000


               25,000
                     II

               20,000


               15,000


               10,000
                     i !

                5,000
                            f   f  r   f  f  M  f   f  f  f
                                                          ^N    «a*    ^
                                -Residential
                                -Commercial
                                -Industrial
                                 Transportation
                               Figure 4: Coal consumption 1989-2005:
                      comparison of industrial and non-industrial end uses
                            10 m


10,000 -
1,000 j
3
100 -
10 -


\^





N'b^AOjN'b^
^ ^ ^ N# ^ rj? rj? <$>



.
A Industrial Coke
A Industrial Other
X Non-Industrial
    "Industrial coke" represents coal inputs used by industrial coke plants. "Industrial CHP" contains coal inputs for CHP
    applications and a small number of electricity-only coal plants. "Industrial Other" contains all other coal inputs in industrial
    applications.
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                                Current Energy Consumption
                    Figure 5: Purchased electricity consumption 1989-2005:
                comparison of industrial, residential, and commercial end uses
                              11
                                                                           -Residential

                                                                           -Commercial

                                                                           -Industrial
As this analysis is concerned with energy usage trends within 12 industrial manufacturing
sectors, the preceding graphs highlight several important points regarding macro-level industrial
energy consumption trends:

   •  The industrial sector consumes more natural gas than other sectors, but industrial gas
      consumption trends are also more volatile than for other sectors. In some cases, price
      volatility in the natural gas market has contributed to decreasing industrial output as
      natural gas-dependent industries reduce production in response to escalating energy
      costs.12 For example, approximately 50 percent of U.S.  methanol production capacity and
      40 percent of ammonia production capacity were idled in response to increasing natural
      gas prices after 2000.13

   •  Industrial petroleum consumption is second  only to transportation consumption, increasing
      at 1.3 percent annually from 1989 to 2004. However, as mentioned previously a
      substantial fraction of industrial petroleum consumption  is not for fuel  use but rather as a
      raw material in specific industries." Off-road  transportation in the mining, agriculture, and
      construction sectors  represents another substantial component of industrial petroleum
      use.

   •  Industrial coal consumption has fallen 2 percent annually from 1989 to 2004.  Growth in
      non-industrial coal use is attributable to expansion of coal use for electric power
      generation, which has increased steadily since 1950.14

   •  Residential and commercial consumption of purchased  electricity exceeded industrial
      consumption in the mid 1990s. Industrial electricity consumption has remained  fairly
      steady, growing at an annual rate just under 0.4 percent from 1989 to 2004.
    EIA petroleum consumption data include feedstock use. According to 2004 data, 35 percent of industrial petroleum
    consumption was categorized as "other petroleum," which is defined as: "Pentanes plus petrochemical feedstocks, still gas
    (refinery gas), waxes, and miscellaneous products. Beginning in 1964, [other petroleum] also includes special naphthas.
    Beginning in 1983, [other petroleum] also includes crude oil burned as fuel."
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                              Current Energy Consumption
It is important to note that as the figures in this section are based on total energy consumption
data, they include energy used as feedstocks or raw material inputs in the manufacturing
process. Although some  manufacturing industries have minimal feedstock energy use, fuels are
an important raw material for certain industries. For example, natural gas and petroleum
feedstocks are critical to  chemical manufacturing and petroleum refining, and both coal and
coke are important feedstocks used in iron and steel production. However, feedstock energy
inputs may or may not contribute to criteria air pollutant (CAP) and greenhouse gas (GHG)
emissions, depending on the specific process in which the feedstock is used, and whether the
potential emissions are embedded in  the final product. In addition, feedstock inputs do not
represent an opportunity for reducing the environmental impacts associated with energy
consumption. As the objective of this  report is to support the development of strategies for
reducing CAP and GHG  emissions stemming from energy consumption, the remainder of this
analysis focuses on energy inputs for fuel use only and does not address feedstock energy  use.
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                                Current Energy Consumption
2.2   Sector Energy Overview
                                         Insights
To  develop  effective sector-level energy management strategies  for  promoting  preferred
environmental outcomes, it is  important to understand  multiple energy usage characteristics:
total  energy usage,  fuel  mix,  energy intensity, and   the  relative  magnitude of  end  use
applications of energy.
2.2.1  Delivered Energy
Within the constraints of data availability (as noted in table footnotes), Table 4 presents in
descending order each sector's energy consumption and energy intensity data compiled in
ElA's most recent (2002) MECS, which is produced every four years. While the 2002 MECS is
the most recent and comprehensive data set addressing energy consumption across the
sectors considered in this analysis,  it is important to note that energy trends since 2002—most
notably price increases for petroleum-based fuels and natural gas—have affected energy
consumption across these sectors.  Current energy consumption in some sectors (e.g., iron  and
steel, forest products, and some components of the chemical manufacturing industry) is likely to
be lower than 2002 values as production has declined in light of energy cost trends and other
economic factors.

Energy consumption data represent annual fuel-related energy inputs. Energy intensity is the
ratio of fuel-related energy consumption to economic production in terms of dollar value of
shipments and  will be discussed in  greater detail in Section 2.2.4.
               Table 4: Sector energy consumption and energy intensity in 2002
                                                                          15
NAICS
325
324110
322
331111
311
336
327310
332
321
3313
3315
Sector
Chemical manufacturing
Petroleum refining
Pulp and paper (within forest products)
Iron and steel
Food manufacturing
Transportation equipment0
Cement
Fabricated metal products'1
Wood products (within forest products)
Alumina and aluminum
Metal castingq
Energy Consumption
(TBtu)
3,769
3,086
2,361
1,455
1,116
424
409
387
375
351
157
Energy Consumption per
Dollar Value of Shipments
(thousand Btu (KBtu))
8.5
16.1
15.2
27.8
2.6
0.7
56.0
1.7
4.2
12.2
5.6
   As MECS does not contain sector-level data for motor vehicle manufacturing (NAICS 33611), motor vehicle parts
   manufacturing (NAICS 3363), or shipbuilding and ship repair (NAICS 336611), in Table 4 through Table 8 these three
   sectors are represented by the larger NAICS category, transportation equipment (NAICS 336).
   As MECS does not contain sector-level data for metal finishing (NAICS 332813), in Table 4 through Table 8 this sector is
   represented by the larger NAICS category, fabricated metal products (NAICS 332).
   MECS data refer to NAICS 3315 as "foundries."
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                               Current Energy Consumption
In general, the sectors shown in Table 4 with the largest energy requirements are also highly
energy-intensive, as is the case for petroleum refining, pulp and paper, and iron and steel.
However, some less energy-intensive sectors such as food manufacturing also have substantial
energy requirements.

   •  Energy-intensive industries generally seek to control energy costs by investing in energy
      efficiency to the degree possible within capital constraints and competition with other uses
      for capital. It is possible that the easiest energy efficiency opportunities have already been
      exploited by these industries/ but the business case for energy efficiency improvement is
      also more clear-cut when energy represents a relatively larger fraction of production costs.

   •  For less energy-intensive industries with high energy usage, multifaceted energy
      efficiency strategies may be needed due to the wider range in energy end uses within
      these sectors and typically fewer business incentives to control energy costs through
      increased energy efficiency.
Energy consumption and energy intensity data do not present the full picture of sector energy
use and associated emissions. In assessing the environmental impacts associated with energy
consumption, fuel mix is of particular importance, as will be discussed in following sections. In
addition, some sectors have unique energy consumption characteristics that distinguish them
from other manufacturing industries, which also  have implications in terms of energy-related
emissions. For example, the forest products industry (pulp and  paper and wood products) meets
more than half of its energy requirements with renewable  biomass fuels that are  manufacturing
process byproducts. A strategic approach to promoting energy efficiency within the industrial
sector would ideally address the largest end users of energy but also consider energy intensity
and other energy usage factors such as fuel mix.

2.2.2 Energy Consumption by Fuel Type

In addition to affecting energy-related air emissions, fuel mix is  also important in  terms of
understanding how sectors may respond to changing fuel prices. Table 5 presents MECS 2002
data on annual fuel inputs by sector (energy use as fuel only, not including feedstock energy
inputs). Table 6 presents the same data as a fraction of each sector's total fuel energy
consumption, with the two largest fuel input fractions highlighted in  gray. For comparison
purposes in both tables, the line "All Industrial Codes with Figures"  provides total fuel usage for
all industries included in the MECS survey, including those sectors that are the subject of this
analysis.
   A recent paper published by the American Council for an Energy-Efficient Economy, Ripe for the Picking: Have We
   Exhausted the Low-Hanging Fruit in the Industrial Sector?offers a detailed discussion of whether all easy energy efficiency
   opportunities have already been exploited for the industrial sector. Available at http://aceee.org/.
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                                       Current Energy Consumption
                     Table 5: Sector energy consumption by fuel type in 2002
                                                                                     16 s t
NAICS
Sector
All Industrial Codes with Figures
325
324110
322
331 1 1 1
311
336
327310
332
321
3313
3315
Chemical manufacturing
Petroleum refining
Pulp and paper (within forest
products)
Iron and steel
Food manufacturing
Transportation equipment
Cement
Fabricated metal products
Wood products (within forest
products)
Alumina and aluminum
Metal casting
Total
(TBtu)u
16,276
3,769
3,086
2,361
1,455
1,116
424
409
387
375
351
157
Net
Electricity"
(TBtu)
2,839
522
121
223
184
230
172
43
161
72
193
54
Residual
Fuel Oil
(TBtu)
211
43
21
100
1
13
6
1
Q
1


Distillate
Fuel Oil
(TBtu)
142
14
5
13
10
19
3
6
6
10
1
1
Nat. Gas
(TBtu)
5,794
1,678
821
504
388
575
203
21
209
57
130
77
LPG &
NGL"
(TBtu)
103
37
20
6

5
4

3
5
1
1
Coal
(TBtu)
1,182
314
1
234
36
184
8
236
1
1
0
1
Coke&
Breeze
(TBtu)
574
1
0
4
526
1
0
8
Q
0

23
Other*
(TBtu)
5,431
1,158
2,097
1,276
311
90
28
95
2
229
26

    In Tables 4 through 7 that report MECS data, we have used the "missing data" symbols used in MECS data tables. MECS
    defines these symbols as follows: *=estimate less than 0.5; W=Withheld to avoid disclosing data for individual
    establishments; and Q=Withheld because Relative Standard Error (RSE) is greater than 50 percent.
    As noted by EIA, double-counting of fuel inputs may occur when the thermal energy content of an energy input is not
    completely consumed for the production of heat, power, or electricity generation. These residual energy leftovers may be
    subsequently consumed for fuel purposes (for example, in steel manufacturing, blast furnace gas may be recovered as a
    byproduct from coke and other inputs that were not completely consumed and used as fuel). In such cases, fuel
    consumption estimates will be inflated.
    Total column may not equal the sum of rows for one or more of the following reasons: (1) data on individual fuel inputs may
    be withheld for reasons noted in previous footnote; or (2) independent rounding of fuel input data.
    "Net electricity" value is obtained by summing electricity purchases, transfers in, and generation from noncombustible
    renewables, and subtracting quantities of electricity transferred and sold. Thus, it provides a rough approximation of
    purchased power.
    Liquefied petroleum gases (LPG) and natural gas liquids (NGL).
    "Other" includes net steam (the sum of purchases, generation from renewables, and net transfers) and other energy that
    respondents indicated was used to produce heat and power.
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                                Current Energy Consumption
           Table 6: Sector fuel inputs as fraction of total energy requirements in 2002
                                                                               17
NAICS
All Indust
325
324110
322
331111
311
336
327310
332
321
3313
3315
Sector
ial Codes with Figures
Chemical manufacturing
Petroleum refining
Pulp and paper (within forest
products)
Iron and steel
Food manufacturing
Transportation equipment
Cement
Fabricated metal products
Wood products (within forest
products)
Alumina and aluminum
Metal casting
Total*
100.0%
99.9%
100.0%
100.0%
100.1%
100.1%
100.0%
100.2%
98.7%
100.0%
100.0%
100.0%
Net
Electricity
17.4%
13.8%
3.9%
9.4%
12.6%
20.6%
40.6%
10.5%
41.6%
19.2%
55.0%
34.4%
Residual
Fuel Oil
1 .3%
1.1%
0.7%
4.2%
0.1%
1.2%
1.4%
0.2%
Q
0.3%

*
Distillate
Fuel Oil
0.9%
0.4%
0.2%
0.6%
0.7%
1.7%
0.7%
1.5%
1.6%
2.7%
0.3%
0.6%
Nat. Gas
35.6%
44.5%
26.6%
21.3%
26.7%
51.5%
47.9%
5.1%
54.0%
15.2%
37.0%
49.0%
LPG &
NGL
0.6%
1.0%
0.6%
0.3%

0.4%
0.9%

0.8%
1.3%
0.3%
0.6%
Coal
7.3%
8.3%
0.0%
9.9%
2.5%
16.5%
1.9%
57.7%
0.3%
0.3%
0.0%
0.6%
Coke&
Breeze
3.5%
0.0%
0.0%
0.2%
36.2%
0.1%
0.0%
2.0%
Q
0.0%

14.6%
Other
33.4%
30.7%
68.0%
54.0%
21.4%
8.1%
6.6%
23.2%
0.5%
61.1%
7.4%
*
As indicated by the "All Industrial Codes with Figures" data, the sectors shown in the above
tables account for approximately 85 percent of all industrial energy consumption reported to
MECS in 2002. The five sectors with the largest energy requirements—chemical manufacturing,
petroleum refining,  pulp and paper, iron and steel, and food manufacturing—represent more
than 70 percent of all industrial energy consumption reported in the 2002 MECS. The following
points are important to note about fuel consumption by these industrial manufacturing sectors:

   •  The composition of the "other" category varies from sector to sector. For chemical
      manufacturing,  "other" fuels include petroleum-derived byproduct gases and solids, woody
      materials, hydrogen, and waste materials.18 For petroleum refining, "other" fuels consist
      primarily of fuel gas generated in the refining  process. For forest products (pulp and paper
      and wood products), "other" fuels are primarily biomass—black liquor, pulping liquor, and
      wood residues and byproducts—used to generate renewable energy. For iron and steel,
      the "other" category is largely composed of byproduct fuels such as coke oven gas and
      blast furnace gas (coal-based in origin).19 For the cement industry,  "other" includes
      petroleum coke as well as waste materials that are incinerated for fuel, such as old tires
      and municipal solid waste.20

   •  Petroleum consumption is detailed in three fuel categories: residual fuel oil, distillate fuel
      oil, and LPG/NGL (which contains both liquefied  petroleum gas and natural gas liquids).
      Petroleum fuel inputs are relatively small for the sectors considered in this analysis (less
      than 3 percent of total fuel consumption shown in Table 5). Some additional petroleum
      inputs are contained in  the "other" category. For petroleum refining and chemical
      manufacturing,  these petroleum-based fuels are  byproduct fuels. For cement and
    Total column may not equal 100 percent for one or more of the following reasons: (1) for sectors that exported energy
    produced on site, it was not possible to subtract exported energy from fuel inputs, because MECS does not indicate which
    fuel was used to produce the exported energy (chemical manufacturing and iron and steel report energy shipments); (2)
    data on individual fuel inputs may be withheld for reasons noted in previous footnotes; or (3) independent rounding of fuel
    input data.
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                               Current Energy Consumption
     aluminum, these fuels are petroleum coke. (Table 3 indicated that petroleum accounts for
     roughly 30 percent of total industrial energy consumption, but the majority of these inputs
     are used as feedstocks or for off-road transportation in sectors such as mining and
     construction, as mentioned in Section 2.1.2.)

   •  Natural gas meets a substantial fraction of energy demand for nine of the sectors listed in
     the previous tables—an indication of the overall importance of natural gas to industrial
     manufacturing sectors. Accordingly, manufacturing industries are particularly sensitive to
     fluctuations in the price of natural gas.

   •  For sectors with substantial coal consumption, the majority of coal inputs are used to
     power boilers and  process equipment with large thermal energy requirements such  as
     cement kilns.

   •  Energy-related emissions associated with offsite electric power generation occur at the
     generating source (usually an electric utility), which  means that for sectors where
     purchased electricity represents a large component of energy consumption (such as
     aluminum, food manufacturing, metal casting, metal finishing, motor vehicle
     manufacturing, and motor vehicle parts manufacturing), substantial energy-related
     emissions occur outside the facility.

It is important to understand which fuel inputs represent the largest fraction of an industry's
energy demand in order to anticipate expected responses to rising energy costs, and it is  also
critical to understand the constraints on an industry's capacity to shift from one energy source to
another. Fuel-switching potential is discussed in the following Section 2.2.3.  Possible future fuel-
switching trends under "base case" and "best case" energy scenarios for each sector will  be
discussed in Chapter 3.

2.2.3  Fuel-Switching Potential

From an environmental perspective, one concern is that as natural gas prices increase,
industries will switch away from natural gas towards more emissions-intensive energy sources
such as coal. In the converse, environmentally preferable energy scenarios could involve
switching from emissions-intensive energy sources such as coal toward less emissions-
intensive energy sources. It is important to note that natural gas prices are sufficiently high at
the present time that most facilities that can readily use coal or an alternative fuel are already
using it. For existing facilities, switching from coal to natural gas is very difficult to justify on a
cost basis, and promoting such fuel-switching is politically sensitive from a policy perspective.

There are considerable constraints on an industrial facility's ability to engage in fuel-switching,
including technical constraints, regulatory constraints, and supply constraints.21 Fuel-switching
ability also varies according to fuel type. For example, it is easier to switch from natural gas to
petroleum than from natural gas to coal. On the technical side, switching from natural gas to
coal  requires major changes to fuel handling equipment and boilers. On the regulatory side, if a
facility is permitted for natural gas, switching to coal would trigger New Source Review under
the Clean Air Act. Supply constraints  relate to the cost and availability of fuel substitutes, which
vary according to the location of the facility in relation to fuel transportation infrastructure.
Supply constraints reduce the magnitude of environmentally preferable switching potential (e.g.,
from coal to natural gas) as natural gas supply infrastructure may be unable  to reliably meet the
fuel requirements of large industrial applications, as well as the potential for environmentally
detrimental fuel-switching due to transportation infrastructure constraints affecting coal.

The MECS survey instrument asks respondents to indicate the amount of six major fuel inputs
that could potentially be  switched (within 30 days of the switching decision) to an alternate fuel
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                                 Current Energy Consumption
given constraints imposed by existing equipment configurations and legal obligations such as
binding supply contracts and environmental regulations.2 Based on these survey responses,
Table 7 summarizes data from the 2002 MECS on each sector's potential to switch from natural
gas to one of seven alternate fuel sources, and Table 8 summarizes similar data for coal. (Data
do not include fuels consumed as feedstock.) In each Table, the first three columns show the
fraction of each sector's fuel consumption that could be switched to an alternate fuel source, as
well as the fraction that is non-switchable, and the fraction that was unreported as either
switchable or non-switchable. The remaining columns show the percentage of the switchable
fuel fraction that could be met by each of the alternate fuels. (Note that there is double-counting
in the alternate fuels columns—for example, a portion of the natural gas fraction could be
switched to either distillate or residual fuel oil—so the sum of the alternate fuels columns will not
equal 100 percent.)
As we have done with other  tables using MECS data, for comparison purposes we also report the
totals for all industries included in the MECS survey, including those sectors that are the subject of
this analysis. These data appear in the lines entitled "All  Industrial Codes with Figures."
         Table 7: Sector fuel-switching potential in 2002: natural gas to alternate fuels
                                                                                   22 aa

NAICS Sector
Natural Gas Switching Potential
Non-
Switchable Switchable
Fraction Fraction
Non- Electric
Reported Receipts
Fraction bb
Alternate Fuels That Could Be Substituted for Natural Gas
(shown as percentage of switchable fraction)
Distillate Residual Coke &
Fuel Oil Fuel Oil LPG Coal Breeze Other"

All Industrial Codes with Figures
3313
327310
325
332
311
331111
3315
324110
322
336
321
Alumina and aluminum
Cement
Chemical manufacturing
Fabricated metal products
Food manufacturing
Iron and steel
Metal casting
Petroleum refining
Pulp and paper (within
forest products)
Transportation equipment
Wood products (within
forest products)
19%
9%
29%
10%
Q
28%
12%
20%
18%
32%
18%
20%

63%
77%
62%
64%
57%
53%
78%
68%
64%
58%
64%
68%

18%
14%
10%
26%
43%
19%
10%
12%
18%
10%
18%
13%

10%

17%
9%

13%

13%
8%
16%
11%
9%

38%
27%
17%
45%

45%
11%
13%
19%
45%
33%
27%

22%
9%
33%
32%

26%
62%

5%
35%
17%
9%

34%
64%
17%
13%
Q
41%
Q
73%
58%
9%
42%
36%

4%
0%
67%
Q
Q
1%
13%


5%
11%


0%
0%
17%
0%


4%






7%

17%
7%
Q
Q
9%

27%
4%

27%
    Fora detailed description of MECS approach and assumptions related to defining fuel-switching capability, see
    http://www.eia.doe.gov/emeu/mecs/mecs2002/methodology_02/meth_02.html#cfsc.
    In Tables 4 through 7 that report MECS data, we have used the "missing data" symbols used in MECS data tables. MECS
    defines these symbols as follows: *=estimate less than 0.5; W=Withheld to avoid disclosing data for individual
    establishments; and Q=Withheld because Relative Standard Error (RSE) is greater than 50 percent.
    "Electric receipts" includes quantities of purchased electric power and has not been adjusted to account for any quantities
    that might have been resold or transferred out. It does not include electricity generated onsite.
    "Other" includes all other types of fuel that respondents indicated could have been consumed and not otherwise listed.
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                                 Current Energy Consumption
             Table 8: Sector fuel-switching potential in 2002: coal to alternate fuels
                                                                               23
                              Coal Switching Potential
                                                          Alternate Fuels That Could Be Substituted for Coal
                                                           (shown as percentage of switchable fraction)

NAICS
All Industr
3313
327310
325
332
311
331111
3315
324110
322
336
321

Sector
al Codes with Figures
Alumina and aluminum
Cement
Chemical manufacturing
Fabricated metal products
Food manufacturing
Iron and steel
Metal casting
Petroleum refining
Pulp and paper (within forest
products)
Transportation equipment
Wood products (within forest
products)

Switchable
Fraction
30%
0%
51%
36%
0%
20%
3%
0%
W
23%
W
W

Non-
Switchable
Fraction
58%
0%
45%
62%
100%
80%
97%
100%
W
37%
W
W

Non-
Reported
Fraction
12%
100%
3%
2%
0%
0%
0%
0%
W
40%
W
W

Electric
Receipts
dd
3%
0%
W
1%
0%
0%
0%
0%
0%
10%
4%
0%

Natural
Gas
80%
0%
91%
82%
0%
83%
40%
0%
W
57%
94%
W

Distillate
Fuel Oil
18%
0%
W
14%
0%
Q
0%
0%
W
28%
14%
0%

Residual
Fuel Oil
17%
0%
W
11%
0%
13%
0%
0%
0%
38%
0%
0%

LPG
4%
0%
4%
0%
0%
19%
0%
0%
0%
W
1%
W

Other
6%
0%
8%
W
0%
0%
60%
0%
0%
10%
1%
0%
In terms of sectors switching from natural gas to alternate fuel inputs, Table 7 illustrates the
following points:

   •  In  all cases, the non-switchable fraction is larger than the switchable fraction, indicating
      the importance of the aforementioned constraints to fuel-switching (technical, regulatory,
      and supply constraints).

   •  In  general, there is greater potential for sectors to replace natural gas inputs with
      petroleum fuel inputs (distillate and residual fuel oil, as well as  LPG), and relatively less
      potential to replace natural gas with purchased electricity or coal.

   •  For sectors with the largest natural gas consumption (chemical manufacturing, food
      manufacturing, petroleum refining, and pulp and paper, as shown in Table 5), there is a
      wide range in ability to switch from natural gas to other fuels. The chemicals sector, which
      has the highest  natural gas consumption, has a particularly low switchable fraction.

In terms of switching from coal  to alternate fuel inputs, Table 8 illustrates the following points:

   •  In  all cases except cement, the non-switchable fraction is larger than the switchable fraction.

   •  Natural gas has the greatest potential as a substitute for coal, which would lead to  a
      decrease in energy-related emissions. However, factors such as the substantially higher
      cost of natural gas and constraints imposed by natural gas supply infrastructure  limit the
      viability of this opportunity for energy-related  environmental  improvement.
dd   "Electric receipts" includes quantities of purchased electric power and has not been adjusted to account for any quantities
    that might have been resold or transferred out.
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                               Current Energy Consumption
   •  For the four sectors with the largest coal consumption (cement, chemical manufacturing,
      iron and steel, and pulp and paper, as shown in Table 5), there is again a wide range in
      the potential for switching to alternate fuel sources. In particular, iron and steel has limited
      ability to switch away from coal consumption, which is why the industry is interested in the
      development of technologies that reduce the emissions-intensity of coal consumption.24

2.2.4 Energy Intensity

As mentioned previously, energy intensity is the ratio of energy consumed as fuel (i.e., not
including energy feedstocks) to economic production. Energy-intensive industries may be more
receptive to efforts to increase energy efficiency due to the economic impacts associated with
rising fuel input costs. Energy intensity can be measured in terms of energy consumption per
volume of production (physical  energy intensity) or in terms of energy consumption per dollar
value of output (economic energy intensity). In this report, we primarily use metrics of economic
energy intensity, supplementing with physical energy intensity metrics where data are available.
It is important to note that economic energy intensity is affected both by energy consumption
and the value of the product, which contributes to the magnitude of difference in energy intensity
between  many basic manufacturing industries versus finished product manufacturing industries.
For example, a ton of steel or cement has a much lower economic value than a ton of integrated
circuits or finished consumer goods. Because steel or cement production have both a lower
economic value and a higher energy input, the energy intensity of these basic manufacturing
industries is higher than many industries producing finished goods.

MECS presents several ratios of manufacturing energy consumption to economic production; the
most useful are energy consumption per dollar of value added and energy consumption per dollar
value of shipments.ee "Dollar of value added" represents the net economic output, or gross
economic output less the value of purchased inputs. This measure of manufacturing activity is
derived by subtracting the cost of  materials, supplies, containers, fuel, purchased electricity, and
contract work from the value of shipments (products manufactured plus receipts for services
rendered). "Dollar value of shipments" represents the gross economic value of product shipments,
including the cost of inputs, and thus does not provide as refined a measurement of an industry's
reliance on  energy inputs for economic productivity. Value added is considered to be the best
metric for comparing the relative economic importance of manufacturing among industries and
geographic areas. However, as the key energy projections referenced in this report—ElA's Annual
Energy Outlook, the Clean Energy Future report, and the American Gas Foundation's Natural Gas
Outlook to 2020—all employ gross value of shipments as an economic metric, we primarily use
value of shipments for the purposes of this analysis.

For each sector, Table 9 presents 2002 MECS data on energy consumption per economic
output. As a benchmark, the energy consumption per economic output ratios are aggregated for
all industrial sectors addressed in the MECS survey (listed as "All Industrial Codes with
Figures")." MECS calculates energy intensity based on energy consumed as a fuel, and the
ratios do not include fuels consumed as feedstocks.

As MECS does not contain data for four of the sectors considered in this analysis (metal
finishing, motor vehicle manufacturing, motor vehicle parts manufacturing, and shipbuilding and
    In the 2002 MECS, EIA uses economic data from the U.S. Census Bureau's 2002 Economic Census, Manufacturing -
    Industry Series.
    EIA favors use of a MECS-weighted value of shipments in calculating ratios used in this table in order to minimize any
    sample peculiarities that may impact both consumption and value of shipments. This may result in deviations from
    intensities calculated using unweighted MECS energy consumption data.
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                                 Current Energy Consumption
ship repair), for all sectors we have included 2002 Census Bureau data from the Annual Survey
of Manufacturers on costs of purchased energy per dollar of value added and per dollar of value
of shipments as an approximation of energy intensity. For these metrics, the benchmark is the
average for all manufacturing industries (NAICS 31-33).
                          Table 9: Sector energy intensity in 2002
                                                               25 26
                                           Energy          Energy
                                        Consumption per    Consumption per    Energy Cost per     Energy Cost per
                                         Dollar of Value      Dollar Value of      Dollar of Value     Dollar Value of
                                         Added (KBtu)     Shipments (KBtu)     Added (share)    Shipments (share)
All Industrial Codes with Figures (benchmark)
                                                  8.9
                                                               4.2
                                                                            3.7%
                                                                                          1.8%
                                     Higher than benchmark
324110
327310
331111
3313
322
325
321
3315
332813
Petroleum refining
Cement
Iron and steel"
Alumina and aluminum
Pulp and paper (within forest products)
Chemical manufacturing
Wood products (within forest products)
Metal casting
Metal finishing™
116.3
95.5
66.5
34.3
31.1
15.3
10.6
10.3
NA
16.1
56.0
27.8
12.2
15.2
8.5
4.2
5.6
NA
21.0%
24.5%
20.4%
21.0%
8.8%
5.4%
4.7%
8.0%
6.7%
3.1%
15.1%
8.0%
6.9%
4.3%
3.0%
1.9%
4.6%
4.0%
                                      Lower than benchmark
311
332
3363
33661 1
Food manufacturing
Fabricated metal products
Motor vehicle parts manufacturing
Shipbuilding and ship repair
6.0
3.0
NA
NA
2.6
1.7
NA
NA
3.3%
2.7%
2.1%
1.2%
1.5%
1.5%
0.9%
0.8%
         Motor vehicle manufacturing"
It is important to note that the MECS energy intensity data are based on delivered energy
consumption rather than primary energy consumption. Thus, it does not account for energy
losses in the generation, transmission, and distribution of electric power (for additional detail,
see the Energy Losses in Purchased Electricity sidebar in Section 2.2.5). This means that for a
given energy requirement and a given dollar value of output, a sector that derives its process
energy from direct combustion of natural gas onsite could have the same delivered energy
intensity as one that receives process energy from purchased power. In reality, however, the
electric power-dependent sector is more energy intensive from a system-wide perspective
because of the losses associated with electric power generation, transmission, and distribution.
To some degree the two energy cost columns in Table 9 (energy cost per dollar of value added
and energy cost per dollar value of shipments)  provide a closer approximation of primary energy
intensity, since electric power is more costly on a Btu basis than energy produced from direct
fuel inputs onsite.
99   Census Bureau data are for the larger NAICS category, iron and steel and ferroalloy manufacturing (NAICS 33111).
hh   Census Bureau data are for the larger NAICS category, coating, engraving, heat treating, and allied activities (NAICS
    33281).
"    Census Bureau data refer to NAICS 33611 as "automobile and light duty motor vehicle manufacturing."
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                              Current Energy Consumption
Of the five sectors with the greatest annual energy requirements—chemical manufacturing,
petroleum refining,  pulp and paper,  iron and steel, and food manufacturing—all but food
manufacturing are more energy-intensive than the industrial manufacturing benchmark.
However, comparing sector energy  consumption with energy intensity highlights some important
distinctions:

   •  Though the chemicals sector has the greatest energy consumption, it not the most energy
     intensive.

   •  The aluminum industry is highly energy intensive but uses far less energy than the five
     sectors with the highest energy consumption, in part due to the comparatively smaller size
     of the aluminum industry.

   •  The food manufacturing industry ranks fifth in terms of total energy usage (see Table 4),
     but it has a lower energy intensity than the industry benchmark.

These results indicate the importance of using multiple metrics to characterize sector energy
usage. The energy intensity ratios shown in Table 9 are also important because they indicate an
industry's expected sensitivity to fluctuations in fuel  prices.

   •  Increasing energy costs are likely to have the greatest impact on industries with higher
     energy costs  per dollar of value added and per dollar value of shipments than the
     manufacturing industry benchmark—particularly petroleum refining, cement,  aluminum,
     and iron and steel.

   •  Despite the fact that the aggregated energy requirements of the food manufacturing
     industry are large, energy costs represent a relatively small fraction of economic output
     (lower than the manufacturing industry benchmark), which likely accounts for the fact that
     this sector has not historically engaged in energy efficiency efforts to the same degree as
     highly  energy-intensive manufacturing industries.

When we discuss the economic context for energy usage in Section 2.4, the energy cost and
energy intensity ratios are the metrics we use to rank the sectors in terms of sensitivity to
energy costs (see Table 17).
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                                Current Energy Consumption
2.2.5  The Manufacturing Energy System
For manufacturing industries, including the 12 sectors considered in this analysis, the major
stages of energy use include the following:27

   •  Energy generation:
         Fossil fuels are the  largest energy inputs in manufacturing and may be used in central
         plants to generate electricity, steam, or CHP, or used directly to power manufacturing
         process systems.11
         Purchased electric power is another important
         energy input that is generated offsite by
         electric utilities and transmitted to the facility.
         Energy may also be supplied by renewable
         energy sources onsite. Though the renewable
         fraction is small for most sectors, in the forest
         products industry more than half of the
         sector's energy requirements are provided
         through onsite power generation using
         renewable biomass fuels.
   Energy Losses in Purchased Electricity
Electric power generation is associated with
substantial energy losses, particularly for fossil
fuel-fired power plants. The magnitude of such
losses varies greatly according to factors such
as fuel inputs and age of equipment. Electric
power transmission and distribution are
associated with smaller energy losses.
Aggregated across the national grid, the energy
loss fraction is 67.5 percent of total electric
energy, meaning that delivered electricity
consumption represents just over 30 percent of
         _.     ,   ,             ,   ....   ,                 total energy inputs for electric power generation.
         Though a less commonly utilized energy
         source than purchased fuels or electricity,
         some industrial plants also purchase steam and/or chilled water.

   •  Energy transmission/distribution: Within the facility, energy transmission/distribution
      systems include piping for steam, hot water, chilled water, cooling water, compressed air,
      steam condensate return, and chilled water return piping, fuel piping, and wires for electric
      power transmission.

   •  Energy end uses:

         Facility-related energy requirements include lighting, heating, ventilating, and air
         conditioning (HVAC), and  office equipment, and typically comprise a relatively small
         fraction of manufacturing energy use.

         Equipment  energy use includes direct energy inputs for process heating, cooling, and
         electrochemical transformation, as well  as indirect energy inputs for machine drives
         that operate pumps, compressors, fans, blowers, conveyors, and mixers. Common
         processes used in industrial manufacturing applications include separation, melting,
         drying, mixing, grinding, forming, and waste handling.

Each stage of the manufacturing energy system—energy generation, transmission/distribution,
and use—is associated with energy losses. Substantial offsite energy losses are associated
with electric generation (see previous sidebar, Energy Losses in Purchased Electricity), and
these losses are represented by the difference between primary and delivered energy
consumption. In the  manufacturing energy system, several categories of losses  represent
general areas of opportunity for increased energy efficiency:28
    Fossil fuels are also used as manufacturing feedstocks (raw materials) by some sectors, but feedstock fuel use is not
    included in DOE's manufacturing energy footprint diagrams that are discussed in this section.
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                               Current Energy Consumption
   •  Energy generation losses:
        External generation losses are most significant for electric power generation,
        transmission, and distribution, but for any given manufacturing facility the external loss
        fraction will vary according to the efficiency of local sources of electric power
        generation. (As an average for the entire national grid, DOE assumes the efficiency of
        utility power generation and transmission is 32.5 percent, meaning that associated
        energy losses are assumed to be 67.5 percent).29 A small amount of loss also occurs
        with fuel transport (approximately 3 percent of total fuel energy). Facilities can reduce
        offsite energy losses through more efficient use of purchased electricity, and to some
        degree by replacing purchased electricity with onsite electricity generation, which is
        also associated with energy losses.
        Onsite generation losses occur in central energy generation applications such as
        steam plants, power plants, and CHP  plants. Losses from boilers vary widely due to
        equipment age, fuel type, and maintenance, and range from 10 to 45 percent.30 More
        efficient generating processes such as CHP are associated with lower internal
        generation losses.

   •  Onsite energy transmission/distribution losses: Within the facility, energy is lost in fuel
     and electricity distribution lines, as well as steam pipes, traps, and valves.  The magnitude
     of such losses ranges from 3 to 40 percent, but the largest losses are typically in steam
     pipes (20  percent) with smaller losses associated with fuel transmission lines and  electric
     wires (3 percent).31

   •  Equipment energy losses: Energy is also lost due to inefficiencies in the wide range of
     equipment used for preprocess and manufacturing process activities:  motors, mechanical
     drives, process heaters and coolers, etc.  Again, there is a wide range in how much energy
     is typically lost from  such equipment. Compressors typically lose as much  as 80 percent
     of energy inputs, pumps and fans typically lose 35 to 45 percent, and  motors lose  5 to 10
     percent.32

DOE's Industrial Technologies Program (ITP) has compiled a set of energy  use  and loss
footprints for many of the sectors considered in this analysis, as well as an aggregated footprint
for U.S. manufacturing industries (energy consumption data used  in this analysis were from the
1998 MECS).33  In Table 10, we examine three  energy loss categories as a fraction of each
industry's primary energy requirements: (1) external losses (losses in energy generation,
transmission, and distribution) associated with  purchased electricity and fossil fuel inputs; (2)
onsite generation, transmission, and distribution losses (generation losses from  thermal and
electric generating equipment, as well as losses from pipes, valves, steam traps, and electric
and fuel transmission lines occurring within the facility); and (3) equipment losses (losses from
preprocess energy conversion equipment such as heat exchangers, condensers, heat pumps,
machine drives, pumps, and motors). We also examine two energy end use categories as a
fraction of each industry's primary energy requirements: (1) process energy consumption
(energy used in the manufacturing process) and (2) facilities energy use (energy used for
lighting, HVAC,  etc.).
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                                  Current Energy Consumption
                     Table 10: Sector energy use and loss footprint in 1998
                                                                         34
NAICS
3313
327310
325
332
311,312
321 , 322
33111
3315
324110
336
Sector
Alumina and aluminum
Cement
Chemical manufacturing
Fabricated metal products"
Food & beverage manufacturing
Forest products"1"1
Iron, steel, and ferroalloy™
Metal casting00
Petroleum refining
Transportation equipment??
External
Generation/
Transmission
Losses
54%
20%
27%
46%
31%
19%
19%
37%
9%
46%
Onsite
Generation/
Transmission
Losses
3%
3%
14%
3%
14%
25%
4%
3%
12%
6%
Energy
Conversion
Equipment
Losses"
13%
14%
13%
11%
10%
12%
14%
9%
13%
10%
Process Energy
Consumption
28%
63%
44%
28%
39%
42%
60%
41%
64%
22%
Facilities
Energy Use
1%
0.5%
2%
12%
5%
2%
3%
10%
1%
16%
The energy use and loss footprints illustrate important differences in the way these sectors use
energy:

   •  Due to the magnitude of energy losses associated with electricity generation,
      transmission, and distribution, electricity-dependent sectors such as aluminum, fabricated
      metal products (the larger NAICS category that includes metal finishing), and
      transportation equipment have high external generation/transmission losses.

   •  The magnitude of onsite generation and transmission losses in the chemical
      manufacturing, food manufacturing, forest products, and petroleum refining industries is
      attributable to the fact that these sectors meet a larger fraction of their energy needs with
      onsite generation. Given the magnitude of associate energy losses, boilers and other
      onsite energy generating equipment represent a key area for energy efficiency
      improvement.

   •  The relatively small process energy fraction for less energy-intensive sectors like
      fabricated metal  products and transportation equipment suggests that energy efficiency
      opportunities are likely to lie in a number of  areas, in addition to process-related
      improvements.
    DOE addresses energy use and losses by energy conversion equipment (preprocess) and process equipment separately
    but does not attempt to quantify process energy losses, primarily because energy conversion equipment and process
    equipment are frequently integrated, making it difficult to distinguish preprocess from process energy losses.
    Metal finishing (NAICS 332183) is included in the larger NAICS category, fabricated metal products (NAICS 332).
    Forest products includes the wood products (NAICS 321) and pulp and paper (NAICS 322) sectors.
    Iron and steel mills (NAICS 331111) is included in the larger category for iron, steel, and ferroalloy manufacturing (NAICS
    33111).
    DOE refers to NAICS 3315 as "foundries."
    Motor vehicle assembly (NAICS 33611), motor vehicle parts manufacturing (NAICS 3363), and shipbuilding and ship repair
    (NAICS 336611) are included in the larger NAICS category, transportation equipment (NAICS 336).
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                              Current Energy Consumption
2.2.6  Energy Efficiency and Clean Energy Opportunities

In the sector summaries contained in Chapter 3, we focus on five primary opportunities for
reducing the environmental impact of energy use—primarily air emissions of GHGs and CAPs.
These opportunities promote environmentally preferable energy outcomes by reducing energy-
related air emissions through increased energy efficiency (which reduces fuel consumption and
associated emissions) and/or transitioning to less emissions-intensive energy sources.

   •  Cleaner fuels. These opportunities involve replacing fuel inputs with alternate fuel inputs
     that  produce lower GHG and/or CAP emissions for the same amount of energy in terms of
      Btus (e.g., natural gas in place of coal). This category also includes onsite renewable
     electricity generation using biomass, wind, solar, or geothermal power. Two clarifying
     points need to be made. First, in general there is no perfect hierarchy of what constitutes
     a "cleaner" fuel across all applications, as emissions will vary according to plant-specific
     factors such as equipment age and pollution control  mechanisms. Second, also note that
     "alternate fuels," such as waste fuels used in cement kilns, may or may not be cleaner
     than what they are replacing depending on unit-specific characteristics.

   • Increased CHP. Combined heat and power applications  increase energy efficiency by
     producing heat (typically steam) and power (electricity) from a  single fuel source—a form
     of cogeneration.  Some CHP systems are engineered to provide electricity, hot water, and
     chilled water as well, depending on the needs of the particular industry. Common fuel
     inputs for CHP include coal, natural gas, biomass, and fuel oil. CHP is a form of
     distributed generation, as electricity is generated at the facility  level rather than by an
     electric utility, and thus is associated with lower levels of  transmission and distribution
     losses than purchased electricity. Conventional generation of electric power also wastes
     much of the heat generated in electricity production (which CHP uses), and conventional
     thermal energy generation often misses an easy opportunity to generate electric power.
     As a result, CHP systems have efficiencies exceeding 70 percent.  CHP systems
     achieving efficiencies exceeding 80 percent  are frequent, and some highly integrated
     systems have been shown to reach levels in excess of 90 percent. CHP represents a
     substantial efficiency improvement compared with a state-of-the-art central plant that
     offers maximum  system fuel efficiency for delivered power in the range of 55 to 60
     percent.35

   • Equipment retrofit/replacement. Energy efficiency can  be increased by retrofitting or
     replacing existing equipment used for onsite heat or power generation and distribution,
     manufacturing processes, or to meet facility  requirements such as  lighting or HVAC. Many
     of the sectors considered in this report have substantial onsite capacity for generating
     electric and thermal energy, and upgrades to such equipment can  reduce energy losses.
     Given the magnitude of industrial process energy requirements, retrofitting or replacing
     existing process equipment offers the potential for substantial increases in energy
     efficiency, and thus a reduction in energy-related emissions per unit of manufacturing
     output. Equipment is most likely to be replaced at the end of its full service life,  because
     new highly capital-intensive equipment purchases usually cannot be justified on the basis
     of energy savings alone. Also, equipment replacement often entails substantial time
     requirements for design, engineering,  building, installing, and commissioning. Installing
     new process equipment typically involves building a new process line rather than shutting
     down operating equipment, and this constraint requires that the facility have sufficient
     space available to support the new line. As full equipment replacement often faces these
     types of hurdles, retrofitting may be a  more viable opportunity in many cases. Retrofitting
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                              Current Energy Consumption
     or replacing facility equipment such as lighting and HVAC system components may also
     be easier to achieve from an operational and capital standpoint.

   •  Process improvement. This term encompasses a broad range of opportunities for
     increasing energy efficiency and reducing energy-related emissions, some of which are
     major capital-intensive changes and some of which are relatively minor low-cost
     improvements. Capital-intensive opportunities entail wholesale process changes such as
     the transition from wet to dry kilns in cement manufacturing, or from the blast furnace and
     coke plant to direct iron ore reduction in steelmaking. (Note that in cases where process
     changes require installation of new equipment, such opportunities could also be classified
     as "equipment replacement," but we have made an effort to differentiate these wholesale
     process-related changes from other types of equipment upgrades). Less capital-intensive
     opportunities are primarily geared towards implementing energy management best
     practices or adjusting existing  processes to improve energy efficiency and/or achieve
     other environmental benefits such  as waste minimization. Examples include reducing
     waste treatment energy requirements through increased recycling of process materials
     and scheduling production activities to reduce equipment idling time.

   •  Research and development (R&D). As noted earlier, a number of sectors participate in
     DOE's IIP  and/or other R&D efforts in order to develop and commercialize higher-
     efficiency technologies and processes. These projects represent typically longer-term
     energy efficiency opportunities.

In some cases, exploiting one  or more of these opportunities may produce an environmental
quality improvement in some respects, and an environmental quality reduction  in other areas.
For example, reducing inputs of purchased electricity in favor of natural gas may reduce energy-
related emissions at the electric generation level and improve the overall efficiency of energy
use (because direct natural gas inputs at the facility level are associated with lower energy
losses than purchased electricity), but may lead to an increase in energy-related emissions at
the facility level. In the Environmental Implications section of each sector summary (see Chapter
3), we seek to identify such tradeoffs to the extent possible.

2.2.7  Transportation Energy Consumption

This analysis focuses on energy use and energy efficiency opportunities at manufacturing
facilities and does not address in detail transportation energy requirements, which are
substantial for many sectors with respect to freight shipping. Though it was not possible to
obtain annual data on product shipments for all sectors, Table 11 summarizes commodity
shipping data for some of the sectors covered in this analysis. The commodities shown in the
table represent more than half of all  U.S. commodity shipments in 2002. The food
manufacturing sector is particularly intensive in terms of transportation energy requirements.
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                                         Current Energy Consumption
                            Table 11: Commodity shipments by sector in 2002
                                                                                       36
                                      Commodity
                        All commodities
                        Food
                        Petroleum and coal products
                        Chemicals
                        Wood products
                        Paper

                        Iron and steel
                        Fabricated metal productsrr
                        Transportation equipment
                        Remaining commodity shipments
          Ton miles
          (millions)™
                                                                      3,137,898
                                                                       678,263
                                                                       265,684
                                                                       268,560
                                                                        42,680
                                                                      1,472,601
                                                                                  % of Total
                                                                                       100.0%
                                                                                        21.6
                                                                                         8.5%
                                                                                         2.2%
    A ton mile is a unit of freight transportation that is derived by multiplying the distance the freight is hauled in miles by the
    weight of the shipment in tons. (See DOE's Energy Efficiency Glossary a(
    http://www.eia.doe.gov/emeu/efficiency/ee_gloss.htm.)
    Metal finishing (NAICS 332183) is included in the larger NAICS category, fabricated metal products (NAICS 332).
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                                 Current Energy Consumption
2.3   Environmental Context
                                           Insights
National Emissions Inventory (NEI) data on energy-related emissions of criteria air pollutants by
the sectors considered in this analysis show that sulfur dioxide and nitrogen oxides comprise the
largest fraction of energy-related emissions.ss Though not represented in NEI emissions data,
energy use also contributes to emissions of the GHG carbon dioxide (CO2), which is an important
contributor to global climate change.  Key opportunities for reducing energy-related emissions lie
with energy efficiency upgrades to external combustion boilers and process equipment.
2.3.1  Sources and Impacts of Energy-Related Air Emissions
Our assessment of the environmental effects of sector energy use focuses on air emissions.
Energy-related air emissions sources include the following:

   •  Stationary source emissions, for the purposes of this analysis, include those that occur at
      the manufacturing facility from fuels consumed onsite to generate electric or thermal
      energy, as well as fuels required to power manufacturing process equipment, and offsite
      emissions from electric power generation that meets the purchased electricity fraction of
      manufacturing energy requirements.

   •  Mobile source emissions are primarily associated with freight shipping. We do not seek to
      quantify sector-related mobile source emissions  for the purposes of this analysis.
Table 12 summarizes the health and environmental impacts associated with the primary energy-
related  air pollutants considered in this analysis.
          Table 12: Health and environmental impacts of energy-related air pollutants
                                                                                   37
         Pollutant
                              Health Impact
                             Environmental Impact
Carbon dioxide (CO2)
Carbon monoxide (CO)
Nitrogen oxides (NOx)
Particulate matter (PM)
Sulfur dioxide (SO2)
None
Reduces blood's capacity for carrying oxygen to
body cells and tissues; is particularly damaging
for people with impaired cardiovascular and lung
function
Causes lung damage and respiratory illness
Causes respiratory system irritation and illness;
causes lung damage
Causes respiratory illness and may lead to lung
damage
Greenhouse gas that contributes to global
warming
A greenhouse gas precursor that contributes to
the formation of methane and carbon dioxide in
the atmosphere38
Contributes to acid rain that degrades soil and
water quality; forms acid aerosols that reduce
visibility; contributes to fine particulates and
ozone
Forms haze that reduces visibility
Contributes to acid rain that degrades soil and
water quality; forms acid aerosols that reduce
visibility; contributes to fine particulates
         Volatile organic compounds
         (VOCs)
Causes respiratory illnesses including asthma;
irritates eyes and respiratory system; some VOCs
may cause cancer
Reacts with nitrogen oxides to form ozone; some
VOCs damage vegetation
         Ozone (ground-level)"
                              Causes respiratory illnesses including asthma;
                              irritates eyes and respiratory system
                             Forms smog that reduces visibility; damages
                             vegetation
33   NEI data also show substantial energy-related carbon monoxide (CO) emissions, but as CO does not typically represent a
    large component of combustion-related emissions from stationary sources, NEI data may overstate such emissions and thus
    we devote minimal discussion to emissions of CO.
tt   This analysis is not able to quantify ground-level ozone resulting from sector energy consumption, though VOC and NOx
    emissions that contribute to ozone formation are reported in Section 2.3.2 and at the sector level in Chapter 3.
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                              Current Energy Consumption
In manufacturing industries, the majority of energy-related emissions of CAPs are attributable to
combustion processes. Sulfur dioxide emissions mostly result from combustion of sulfur-
containing fuels, primarily coal. Nitrogen oxides are also products of combustion, but emissions
do not vary as much by fuel type as SO2 emissions. Particulate matter can be ash and dust
resulting from the combustion of coal or heavy oil, or very fine particulates (PM2.s), which are
largely composed of aerosols formed by nitrogen oxide and sulfur dioxide emissions. Carbon
monoxide is a product of incomplete combustion, but the largest source is vehicles, with
stationary sources typically contributing a smaller part of the inventory. Volatile organic
compounds (VOCs) can also result from incomplete combustion, but the largest energy-related
components are fugitive emissions from fuel storage tanks  and pipelines, and combustion-
related vehicle emissions. The largest components of energy-related CAP emissions from the
industrial sector are SO2, NOx, and larger particulates from combustion of coal. Excepting
emissions from off-road vehicles, VOCs and CO emissions from combustion are a much smaller
fraction of total energy-related emissions.

More than half of the U.S. population lives in counties that are in non-attainment for ozone
and/or particulate matter National Ambient Air Quality Standards (NAAQS).39 Energy-related
emissions of NOx and VOCs contribute to ground-level ozone formation, and SO2 emissions
contribute to PM formation. Thus, reducing energy-related CAP emissions by industrial sources
is an important component of ongoing efforts to achieve NAAQS.

Another critical environmental impact of energy use is emissions of the GHG  carbon dioxide,
which also results from fuel combustion processes and is an important contributor to global
climate change.  (Other GHGs, such  as methane, also contribute to global climate change, but
as energy-related sources of these GHGs are not substantial, we focus primarily on CO2
emissions in this analysis.) Such emissions do not impact regional air quality, but CO2 is
persistent in the upper atmosphere, trapping infrared radiation from the earth's surface and
contributing to increases in the earth's temperature.

Though this analysis focuses primarily on CAP and GHG emissions, energy consumption also
contributes to emissions of other hazardous air pollutants (HAPs), including mercury. In
addition, this analysis does not attempt to quantify energy-related impacts on soil and water
quality.

2.3.2 Approach Used to Assess Energy-Related Air Emissions

In our assessment of environmental  impacts resulting from sector energy consumption, this
analysis focuses on CAP emissions, as well  as two pollutants that contribute to the formation of
CAPs: VOCs  and ammonia (NH3). (Ammonia is a very minor component of energy-related
emissions, but is included in this analysis as it is one of the pollutants represented in the NEI
data set.) We collectively refer to emissions of these pollutants as CAPs. In addition to the
overview of energy-related CAP emissions across all sectors contained in Section 2.3.3, the
sector summaries in  Chapter 3 present a more detailed description of energy-related CAP
emissions for each sector, using data from NEI.

EPA's NEI is a national database of CAP and HAP emissions based on data from numerous
state, tribal, and local air pollution control agencies; industry-submitted data; data from other
EPA databases; as well as emissions estimates. State and local emissions inventories are
submitted to EPA once every three years for most point sources contained in NEI. This analysis
uses the Draft 2002 NEI data, as the Final 2002 data are not currently available at the level  of
detail required for this analysis.
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                              Current Energy Consumption
In the NEI database, point source emissions are associated with industry classification codes
(NAICS or Standard Industrial Classification (SIC) codes) as are the 12 sectors addressed in
this analysis. It is important to note that emissions stemming from the generation of purchased
energy (primarily electricity, but also other non-fuel sources of energy such as steam that may
be purchased by industrial manufacturing sectors) are attributed to the generating source, not
the purchasing entity. Therefore, emissions for any given sector will not include emissions from
purchased energy. Recognizing this omission will be particularly important for electricity-
dependent sectors, as noted in  the sector summaries in Chapter 3.

   • CAP emissions in NEI are associated with several levels of source classification codes
     (SCC) that indicate the detailed source of each CAP emission data point. SCCs are
     associated with emissions from all source categories (point, area, and mobile). For the
     purposes of this analysis, more than  1,000 SCCs were identified as being "energy-related"
     from the list of 9,865 SCCs. Energy-related CAP emissions include emissions from
     combustion processes, such as those SCCs listed in the following general source
     categories:

        External combustion boilers
        Internal combustion engines

        Stationary source fuel  combustion

   • Energy-related CAP emissions also include emissions from the use of fuels for energy in
     industrial processes (such as process heaters) and emissions from the storage  of fuels.

   • All other CAP emissions include process-related CAP emissions not related to fuel
     combustion, emissions where it was unclear from the SCC whether they are energy-
     related (such as SCC descriptions "Not Specified," "Not Defined," "Not Classified,"
     "Miscellaneous," "General," or "All Processes"), and sector emissions that are not
     associated with an SCC.

   • In Chapter 3, the figures showing NEI data on energy-related CAP emissions include the
     following:
        Energy-related CAP emissions: Compares energy-related CAP emissions with all other
        CAP emissions.

        Emissions by criteria air pollutant: Shows the fraction of total energy-related CAP
        emissions represented by each CAP.
        Emissions by source category: Shows energy-related CAP emissions by the most
        general available source category (e.g., external combustion boilers, internal
        combustion engines, and industrial processes).
        Emissions by fuel type: Shows energy-related  CAP emissions that source from the use
        of a fuel (e.g., distillate oil or natural gas). It also aggregates emissions of combustion
        byproducts (e.g., exothermic) or handling fuels (e.g., coal handling and storage) as
        "Unknown."

As NEI data do not capture CO2 emissions, we include  CO2 emissions estimates and
projections from ElA's 2006 Annual Energy Outlook and the  Clean Energy Future report, which
address eight of the sectors included in this analysis. We address projected CO2 emissions
under our "base case" and "best case" energy scenarios in Chapter 3.
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                               Current Energy Consumption
2.3.3  Stationary Source Emissions

Table 13 presents NEI data on annual energy-related CAP emissions by sector (units are tons
per year (TRY)).
                  Table 13: Energy-related CAP emissions by sector in 2002
                                                                      ,40
NAICS
3313
327310
325
311
331111
332813
3315
33611
3363
324110
322
321
33661 1
Total
Sector
Alumina and aluminum
Cement
Chemical manufacturing
Food manufacturing
Iron and steel
Metal finishing
Metal casting
Motor vehicle manufacturing
Motor vehicle parts manufacturing
Petroleum refining
Pulp and paper (within forest
products)
Wood products (within forest
products)
Shipbuilding and ship repair

CO
(TPY)UU
6,776
15,674
213,176
70,848
125,574
11
1,790
2,456
201
46,942
195,218
101,106
186
779,958
NOx
(TPY)
13,036
11,636
220,183
73,073
45,779
28
2,295
3,720
492
117,470
184,514
26,369
866
699,461
PM10
(TPY)
474
668
10,510
7,218
6,858
1
150
167
26
8,738
17,617
17,271
90
69,788
S02
(TPY)
51,176
12,943
279,403
90,203
43,589
70
759
2,235
9
108,189
303,285
3,658
1,150
896,669
NH3
(TPY)
40
3
4,474
860
1,543
0
24
27
8
1,366
1,215
90
6
9,656
VOC
(TPY)
1,234
553
11,377
5,522
4,465
1
207
196
131
16,133
19,099
34,791
121
93,830
All
Energy-
Related
CAP
(TPY)
72,736
41 ,477
739,123
247,724
227,808
111
5,225
8,801
867
298,838
720,948
183,285
2,419
2,549,362
All CAP
Emissions
(TPY)
538,841
544,501
1,536,183
395,289
850,644
374
72,645
48,761
7,778
788,985
1,173,568
289,727
5,520
6,252,816
As noted in Section 2.3.2, the NEI data presented in Table 13 represent energy-related
emissions that occur at the facility level but do not capture emissions associated with the
generation and transmission of purchased electricity. For electricity-dependent sectors such as
aluminum, the magnitude of such emissions is likely to be substantial but also vary depending
upon the energy inputs used to generate electricity at the utility level (for example, hydroelectric
generation is considerably less emissions-intensive than coal-powered generation, and many
aluminum manufacturing facilities are located in the Pacific Northwest, which has extensive
hydropower resources).

Data presented in the table above raise the following points regarding energy-related CAP
emissions:

   •  Sulfur dioxide (35 percent) and nitrogen oxides (27 percent) represent the  largest fraction
     of energy-related CAP emissions. Increasing energy efficiency or promoting a cleaner fuel
     mix in these sectors is likely to have the greatest impact on emissions of these pollutants.
     (According to NEI data, carbon monoxide, a product of incomplete combustion, also
     represents a substantial fraction (31  percent) of energy-related CAP emissions, but NEI
     data errors may contribute to an overstatement of CO emissions, as they are not typically
uu  As CO does not typically represent a large component of combustion-related emissions from stationary sources, NEI data may
   overstate such emissions and thus we devote minimal discussion to emissions of CO.
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                              Current Energy Consumption
     a very large component of combustion-related emissions from stationary sources.
     Therefore, we devote minimal discussion to CO emissions.)

   •  Energy-related CAP emissions are a function of total energy consumption, fuel mix,
     process energy requirements, and equipment type. Thus, there are many factors that
     determine whether a sector's energy-related CAP emissions are higher or lower than any
     other sector.

   •  Between sectors there is wide variation in the fraction of total CAP emissions that is
     classified as energy-related—from 8 percent to 63 percent of total CAP emissions. Total
     CAP emissions also range widely due to industry-specific factors inherent to the
     manufacturing process, such as the magnitude of process heating requirements. Thus, it
     is not necessarily meaningful to compare the energy-related CAP fractions across sectors,
     especially since NEI data do not include indirect emissions from offsite electricity
     generation, which is a substantial component of energy use in sectors such as aluminum,
     metal finishing, motor vehicle manufacturing, etc.

   •  The fraction of energy-related CAP emissions also depends on unique characteristics of
     sector energy use. For example, in food manufacturing, pulp and paper, and wood
     products, energy-related CAP emissions comprise more than 60 percent of total CAP
     emissions. This result is in large part due to the magnitude of onsite power generation in
     these sectors, which in  itself may represent an environmentally preferable energy
     strategy. For example, in the forest products industry (pulp and paper and wood
     products), a large fraction of the sector's energy requirements are met with onsite
     generation of electric and thermal energy using biomass fuels that are byproducts of the
     manufacturing process. Increased use of such renewable biomass fuels would reduce
     energy losses associated with offsite electricity generation, transmission,  and distribution
     (see Section 3.5).

   •  Energy efficiency and clean energy improvement in the sectors with the greatest energy-
     related CAP emissions  (chemical manufacturing, food manufacturing, forest products, iron
     and steel, and petroleum refining) offer the greatest potential  for reducing the
     environmental impact of sector energy use.

Table 14 presents NEI data on the sources of energy-related CAP emissions presented in  Table
13. External combustion boilers have multiple applications in industrial manufacturing facilities,
including central power generation, steam generation, process heating, and space heating.
Industrial process emissions include emissions from direct fuel combustion in the manufacturing
process, such as from fuel-fired equipment. The internal combustion engine category includes
central power generation applications such as turbines and reciprocating engines. The
petroleum and solvent evaporation category includes emissions from equipment like heaters
used in coating operations. The "other" category includes all miscellaneous sources that are
associated with energy-related CAP emissions, such as emissions from other combustion
processes (e.g., fires).
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                               Current Energy Consumption
             Table 14: Energy-related CAP emissions by source category in 2002
                                                                          ,41
NAICS
Sector
External
Combustion
Boilers
Industrial
Processes
Internal
Combustion
Engines
Petroleum
and Solvent
Evaporation
Other
TOTAL™
3313
327310
325
311
331111
332813
3315
33611
3363
324110
322
321
33661 1
Total
Alumina and aluminum
Cement
Chemical manufacturing
Food manufacturing
Iron and steel
Metal finishing
Metal casting
Motor vehicle manufacturing
Motor vehicle parts manufacturing^
Petroleum refining
Pulp and paper (within forest products)
Wood products (within forest products)
Shipbuilding and ship repair

82%
16%
60%
94%
59%
90%
49%
74%
17%
51%
95%
88%
71%
75%
18%
82%
33%
3%
41%
8%
39%
8%
6%
37%
4%
12%
1%
21%
0%
2%
6%
3%
0%
2%
11%
9%
77%
10%
1%
0%
27%
3%
0%
0%
0%
0%
0%
0%
1%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0.3%
0.2%
0%
0%
0%
8.9%
1%
2%
0%
0.5%
1%
0.4%
100%
100%
99%
100%
100%
100%
100%
100%
101%
100%
100%
101%
100%
100%
Several points are important to note regarding the data contained in Table 14:

   •  It may not be possible to make definitive distinctions between some of these source
      categories,  particularly the industrial processes category and the boiler and engine
      categories.  NEI data are based on facility reporting, modeling, and estimates, where there
      may be inconsistencies in how sources of energy-related emissions are categorized. For
      example, fuel combustion related to process heating could be categorized as an industrial
      process energy use or defined under the external combustion boiler category.

   •  For a given sector, the primary source of energy-related CAP emissions depends primarily
      on industry-specific factors inherent to the manufacturing process.

   •  In general, the primary opportunities for reducing energy-related CAP emissions lie with
      external combustion boilers and process equipment, with boilers comprising the largest
      source of emissions in most industries. Process equipment dominates energy-related
      CAP emissions in a few key industries including cement kilns, fluid process heaters in the
      chemical  and petroleum refining industries, and fired systems such as furnaces, metal
      melters, and heaters in iron and steel.

Additional detail on energy-related emissions of carbon and  CAPs is provided in the sector
summaries in Chapter 3.
w  Rows may not sum to 100% due to independent rounding.
ww  The high fraction of energy-related CAP emissions from internal combustion engines is the result of an NEI data reporting
   error, as noted in Section 3.10.
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                               Current Energy Consumption
2.3.4  Comparison of Energy Consumption Characteristics

To continue our characterization of sector energy consumption from Section 2.2 and gain insight
into how energy consumption and energy intensity  relate to CAP emissions, Table 15 ranks the
sectors on the basis of three metrics: total energy-related CAP emissions, total energy
consumption, and energy intensity.

             Table 15: Comparison of 2002 data on energy-related CAP emissions,
                total energy consumption, and energy intensity by sector42 43 44
                                    Emissions
                                                   Energy Consum ption
                                                                        Energy Intensity
NAICS
Code
Total Energy-
Related CAP
Emissions
Sector (TRY)
Rank
Total Energy
Consumption
(TBtu) Rank
Energy
Consumption per
Dollar Value of
Shipments (KBtu)
Rank
325
322
324110
311
331111
321
3313
327310
33611
3315
33661 1
3363
332813
Chemical manufacturing
Pulp and paper
Petroleum refining
Food manufacturing
Iron and steel
Wood products
Alumina and aluminum
Cement
Motor vehicle manufacturing™
Metal casting
Shipbuilding and ship repair
Motor vehicle parts manufacturing
Metal finishing
739,123
720,948
298,838
247,724
227,808
183,285
72,736
41,477
8,801
5,225
2,419
867
111
1
2
3
4
5
6
7
8
9
10
11
12
13
6,465
2,363
6,391
1,123
1,308
377
473
409
429
165
429
429
NA
1
3
2
5
4
9
6
8
7
10
7
7
NA
8.5
15.2
16.1
2.6
27.8
4.2
12.2
56.0
0.7
5.6
0.7
0.7
NA
6
4
3
9
2
8
5
1
10
7
10
10
NA
The following points are evident from the comparison of sector rankings in terms of energy-
related CAP emissions, total energy consumption, and energy intensity as shown in Table 14:

   •  There is a good degree of correlation between energy-related CAP emissions and total
     energy consumption for most sectors, with the important caveat that for sectors with
     substantial purchased electricity requirements (e.g., aluminum,  metal casting, metal
     finishing, motor vehicle manufacturing, motor vehicle parts manufacturing, and
     shipbuilding and  ship repair), NEI data underestimate energy-related CAP emissions by
     attributing emissions associated with electric power generation  to the generating sources
     rather than to the purchasing entity.

   •  There is less consistent correlation between energy intensity (energy consumption per
     value of economic output) and energy-related CAP emissions. For most sectors, the
     emissions ranking is either equivalent (within one point) to the energy intensity ranking or
   As MECS does not contain sector-level data for motor vehicle manufacturing (NAICS 33611), motor vehicle parts
   manufacturing (NAICS 3363), or shipbuilding and ship repair (NAICS 336611), energy consumption and energy intensity
   data for these three sectors are for the larger NAICS category, transportation equipment (NAICS 336).
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                                 Current Energy Consumption
      at least two points higher. For three sectors—aluminum, cement,yy and iron and steel—the
      energy intensity ranking is two or more points higher than the energy-related emissions
      ranking. In the case of aluminum, this result may be partly attributable to the fact that NEI
      data do not include emissions associated with purchased electricity. Still, the lack of
      correlation between energy intensity and energy-related CAP emissions suggests that in
      terms of reducing the environmental impacts of sector energy use, focusing on the most
      energy-intensive sectors may not produce the environmentally preferable outcome.
    For the cement industry, the majority of the sector's energy requirements and associated emissions result from the thermo-
    reduction of limestone, clay, and sand. Given the high energy requirements of this process, and the fact that NEI data for
    the cement industry only classify 8% of the sector's total CAP emissions as "energy-related," it appears likely that NEI data
    misclassify some energy-related CAP emissions as non-energy-related.
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                               Current Energy Consumption
2.4   Economic Context
                                         Insights
Sector-based strategies for promoting energy efficiency and clean energy investment may be
required due to  varying  economic  trends  (i.e.,  declining  or increasing production  and
profitability),  as well as  characteristics  such  as the  industry's  sensitivity to  energy  cost
fluctuations, average firm size, the homo- or heterogeneity of manufacturing processes within
the sector, and the sector's geographic distribution.
2.4.1  Economic Production

A sector's economic production trends have important implications for energy management
strategies. For example, industries undergoing growth in production may be less capital-
restricted than sectors with declining production and may also be receptive to efforts to improve
their competitive edge through increased management of energy costs. Moreover, growing
sectors are adding capacity, which provides the most cost-effective opportunity to install more
efficient equipment. Targeting energy efficiency efforts on industries with high energy intensity,
high total energy use, and high economic growth is one obvious strategy for improving
environmental performance. Table 16 presents recent economic trends for sectors considered
in this analysis in terms of the annual change in value added and value of shipments from 1997
to 2004. To distinguish more recent from longer-term trends, the table also presents the annual
rate of change in these metrics from 2000 to 2004.zz
          Table 16: Annual growth in value added and value of shipments 1997-2004'
                                                                              45
NAICS
324110
3366
311
327310
325
321
331111
332813
3363
322
33611
3313
3315
Sector
Petroleum refining
Shipbuilding and ship repair
Food manufacturing
Cement
Chemical manufacturing
Wood products (within forest products)
Iron and steel333
Metal finishing
Motor vehicle parts manufacturing
Pulp and paper (within forest products)
Motor vehicle manufacturing
Alumina and aluminum
Metal casting
Annual Change in Value Added
1997-2004
5.4%
2.7%
2.5%
2.2%
1.9%
1.8%
1.1%
0.1%
0.0%
-1.2%
-2.2%
-2.9%
-3.2%
2000 - 2004
6.3%
5.4%
2.5%
1.2%
3.7%
2.5%
8.3%
-1.2%
-2.2%
-3.6%
1.9%
-2.3%
-5.4%
Annual Change in Value of Shipments
1997-2004
6.6%
1.8%
0.8%
1.5%
1.5%
0.3%
1.7%
-0.3%
-0.1%
-1.6%
0.3%
-2.4%
-2.4%
2000 - 2004
5.0%
2.4%
1.8%
1.6%
1.8%
0.2%
6.1%
-2.0%
-2.3%
-4.0%
0.1%
-2.2%
-3.7%
zz   Census Bureau data were converted to inflation-adjusted 2000 dollars before annual growth rates were calculated.
aaa  Economic data are for the larger NAICS category of iron, steel, and ferroalloy manufacturing (NAICS 33111).
bbb  Economic data are for the larger NAICS category of coating, engraving, and heat treating (NAICS 33281).
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                              Current Energy Consumption
Though presenting annual rates of change is the simplest way to capture long-term trends, this
approach masks interannual variation, which is particularly worth noting for certain sectors:

   •  Though iron and steel and ferroalloy manufacturing shows growth in value added and
     value of shipments over the period, both metrics actually declined from 1997 to 2003
     during a period of industry restructuring. From 2003 to 2004 value added jumped by more
     than 70 percent and value of shipments jumped by more than 45 percent. This turnaround
     was primarily due to a dramatic increase in the price of steel prices driven by surging
     demand for raw materials in Asian countries like China,  India, South Korea, and
     Thailand,46 and by the strengthened financial position of the industry post-restructuring.

   •  For shipbuilding and ship repair, value added and value of shipments grew relatively
     slowly from 1997 to 2001, then value added increased by almost 30 percent and value of
     shipments jumped by 6 percent from 2001 to 2002.

   •  Motor vehicle manufacturing, motor vehicle parts manufacturing, and metal finishing show
     relatively larger degrees of interannual variation.

Sectors showing economic growth trends include the following:

   •  Chemical  manufacturing, cement, and petroleum refining are energy-intensive industries
     with consistent growth in economic output. Petroleum refining shows more interannual
     variation than the other two sectors but also shows the strongest growth trend over the
     time period. The sector's strong economic position is in  part due to an industry turnaround
     after considerable consolidation occurred in the 1990s.

   •  Food manufacturing is a less energy-intensive sector that shows consistent economic
     growth. Wood products also shows growth over the timeframes considered but had
     greater interannual variation than food manufacturing due primarily to changes in demand
     for construction materials.

Sectors with declining economic trends include the following:

   •  Aluminum, metal casting, and pulp and paper are energy-intensive industries with
     declining economic trends, and thus are likely to face substantial capital constraints that
     affect decision-making about energy efficiency  and clean energy investments.

2.4.2  Sector Composition

Other economic factors may be considered in developing sector-based strategies for promoting
investment in energy efficiency and clean energy opportunities, including whether a sector
consists of many small firms or a few large ones; whether a sector is geographically
concentrated or dispersed across the country; and as discussed previously, whether energy
costs comprise a relatively larger or smaller fraction of production costs. Designing policies
aimed at increasing energy efficiency within a sector  may be relatively simpler when a sector
consists of a small number of large players with similar manufacturing processes, or is
concentrated in  a limited number of geographic regions. Communicating to a large number of
small firms is more labor-intensive, and such industries may be less influenced by the best
practices of industry leaders.  In addition, sectors that encompass a broad range of
manufacturing processes (the chemicals industry is one example) might not be well served by a
homogeneous policy approach to  promoting energy efficiency and clean energy investment.

We characterize each sector in terms of the relative number of firms in the industry, the average
size of firms comprising the industry, and whether the sector is geographically dispersed across
the country or concentrated in specific regions. Table 17 summarizes these attributes for the
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                                      Current Energy Consumption
sectors included in this analysis; sector-specific write-ups in Chapter 3 provide additional
information to support these characterizations.

                    Table 17: Overview of key economic characteristics by sector
NAICS
3313
32731 0
325
311
331111
3315
33281 1
33611
3363
324110
322
3366
321
Sector
Alumina and aluminum
Cement
Chemical manufacturing
Food manufacturing
Iron and steel999
Metal casting
Metal finishing1"
Motor vehicle manufacturing
Motor vehicle parts
manufacturing
Petroleum refining
Pulp and paper (within forest
products)
Shipbuilding and ship repair
Wood products (within forest
products)
Economic
Production Trend
Declining
Increasing
Increasing
Increasing
Increasing
Declining
Mixed
Mixed
Mixed
Increasing
Declining
Increasing
Increasing
Relative Firm
Number
Few
Few
Many
Many
Few
Many
Many
Few
Many
Few
Few
Few
Few
Relative Firm
Size
Large
Large
Small/Large000
Large
Large
Small
Small
Large
Small/Medium
Large
Large
Large
Large
Geographic
Distribution
Concentrated
Concentrated
Dispersed
Dispersed
Concentrated
Concentrated
Concentrated
Concentrated
Dispersed
Concentrated
Concentrated
Concentrated
Concentrated
Energy Cost
Sensitivity000
High
High
High
Low
High
High
High
Low
Low
High
High999
High
High
ccc  The energy cost sensitivity rating is primarily based on whether the industry rated higher or lower than the manufacturing
    industries' benchmark for energy cost per dollar of value added shown in Table 9.
ddd  Certain segments of the chemical manufacturing industry, such as specialty-batch chemicals, are dominated by smaller
    firms, while others, such as commodity chemicals, are dominated by larger firms.
eee  The economic trend assessment for the iron and steel sector is based on Census Bureau data for a larger NAICS category:
    Iron and steel and ferroalloy manufacturing (NAICS 33111).
fff   The economic trend assessment for the metal finishing sector is based on Census Bureau data for a larger NAICS category:
    Coating, engraving, heat treating, and allied activities (NAICS 33281).
999  Though the forest products industry (pulp and paper and wood products) is energy intensive, it is important to note that more
    than half of its energy requirements are met by manufacturing byproducts (biomass). The industry has increased utilization
    of its biomass resources, reducing the impact of rising costs for purchased energy.
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3.    Sector Energy Scenarios
                       Insights
Each of the 12 sectors addressed in this analysis has
implemented  various  energy   efficiency  and   clean
energy improvements that are  reflected in their  "base
case"  assessments.  Many  have committed to further
energy intensity reductions through one or more public-
private partnerships,  including  Climate VISION.  There
are  continued  energy  efficiency and  clean  energy
opportunities for  each  sector,  both through  existing
technologies   and    in  the   development  of   new
technologies and processes.
                    Chapter 3. Sector Energy Scenarios
                  3.1   Alumina and Aluminum
                  3.2   Cement
                  3.3   Chemical Manufacturing
                  3.4   Food Manufacturing
                  3.5   Forest Products
                  3.6   Iron and Steel
                  3.7   Metal Casting
                  3.8   Metal Finishing
                  3.9   Motor Vehicle Manufacturing
                  3.10  Motor Vehicle Parts Manufacturing
                  3.11  Petroleum Refining
                  3.12  Shipbuilding and Ship Repair
Drawing on current energy consumption data and industry
trends, as well as future energy consumption projections
made in  two reports produced by the U.S.  Department of Energy (DOE), Scenarios fora Clean
Energy Future (CEF) and ElA's 2006 Annual Energy Outlook (AEO 2006), Chapter 3 develops
"base case" and "best case" energy scenarios for the  12 sectors addressed in this analysis.
Each sector summary is composed of the
following elements:

  •   Base Case Scenario:
         Situation Assessment Discusses
         high-level trends affecting sector
         energy use, including economic
         production, geographic distribution,
         investments in energy efficiency
         and/or clean fuels, and voluntary
         commitments  to energy efficiency
         and/or greenhouse gas (GHG)
         reduction.
         Expected Future Trends: Assesses
         business-as-usual energy
         consumption trends in terms of fuel
         use and energy intensity through
         2020. For the  eight sectors modeled
         in DOE's National Energy Modeling
         System (NEMS)—aluminum,
         cement, chemicals, food, forest
         products,  iron  and steel, metal
         finishing,hhh and petroleum refining—
         the trends assessment includes
                   CEF Projections
   We have included CEF reference case and advanced
   energy projections for sector energy consumption to
   facilitate the assessment of possible fuel-switching trends
   under business-as-usual and environmentally preferable
   energy scenarios. However, in several cases CEF energy
   consumption data differ significantly from 2002
   Manufacturing Energy Consumption Survey (MECS) data
   presented in Chapter 2 and from information industry
   representatives have provided regarding current energy
   consumption. Such differences may be due to a number of
   factors, most importantly the age of the CEF study
   (published in 2000 and using energy consumption data
   from 1998) and differences in how sectors are defined. (To
   the extent possible, we have noted how CEF sector
   definitions differ from EPA/North American Industrial
   Classification Code (NAICS) definitions in footnotes.) Thus,
   we place greater emphasis on relative energy consumption
   and fuel mix changes under the CEF scenarios, rather than
   absolute energy consumption values. In addition, we
   include AEO 2006 projections in the base case scenarios to
   identify areas where recent energy trends may be likely to
   produce substantially different future outcomes than those
   projected by CEF in 2000.
hhh  Projections are for the larger NAICS category, fabricated metal products (NAICS 332).
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                                 Sector Energy Scenarios
        reference case (i.e., "business-as-usual") energy consumption projections made in the
        CEF report and AEO 2006.

        Environmental Implications: Discusses National Emissions Inventory (NEI) data on
        current energy-related criteria air pollutant (CAP) emissions and carbon dioxide
        emissions projections from AEO 2006. Reviews how expected future energy trends are
        likely to affect energy-related emissions.

  •   Best Case Scenario:

        Opportunities: Evaluates the viability of each of the five energy efficiency and clean
        energy opportunities discussed in Section 2.2.6: cleaner fuels, increased combined
        heat and power (CHP), equipment retrofit/replacement, process improvement, and
        research and development (R&D). For each
sector, the viability of each opportunity is
rated "low," "medium," or "high" based on
conclusions drawn from the reference
material reviewed in connection with this
analysis. It is important to note that such
rankings are a qualitative (and necessarily     r^Tcetcasefhndanad™fnced;;nergycasfe'
  ..  T.  x           .  ,..    .  .....    ,       which captures the impact of a wide range of
subjective) assessment of the viability of             K         K            a
        each opportunity based on research
        conducted, rather than a quantitative           r  ,          ....    .  .   ,  .,
                                ^                     For the purposes of this analysis, absolute
        assessment of energy-savings potential.
        Where applicable, regulatory and other
        barriers to implementing the opportunities
        are discussed.                                Reporting the CEF projections in Chapter 3
        Optimal Future Trends: Assesses likely
        changes from the base case scenario that
        would occur under an environmentally          il comPares with a "base case"ene™scenaria
                                                     Why Compare the CEF Reference Case and
                                                           Advanced Case Projections?
                                                    The industrial manufacturing chapter of the CEF
                                                    study provides sector-level energy consumption
                                                    projections under both a business-as-usual
                                            policies to promote environmentally preferable
                                            energy outcomes.
                                            changes in energy consumption (as projected by
                                            CEF) are less important than relative differences
                                            between the two scenarios.
                                            allows us to envision how a "best case" energy
                                            scenario might look at the sector level, and how
        preferable energy scenario (i.e., increased
        energy efficiency and/or cleaner fuels) in terms of fuel mix, energy intensity, and
        energy consumption changes that effect energy-related criteria air pollutants and
        carbon emissions. For the eight sectors modeled in NEMS, this section also
        summarizes CEF advanced case projections.
        Environmental Implications: Discusses how the environmentally preferable energy
        scenario differs from the business-as-usual scenario in terms of CAP and GHG (carbon
        dioxide) emissions.

  •   Other Reference Materials Consulted:
        Lists additional data sources and  reference materials used in this analysis.
Appendix A provides an overview of the energy consumption projections used in this analysis
(CEF and AEO 2006), methodologies and  assumptions, and a brief overview of similarities and
differences between the two projections. On the whole, because it employs more recent energy
consumption and economic data, AEO 2006 produces a more realistic projection for the
business-as-usual scenario. However, we  include the CEF projections for two primary reasons:
(1) AEO 2006 does not provide sufficient sector-level detail for its "high technology" case to
allow development of an advanced energy scenario that could be compared with the reference
case; and (2) CEF projections are a closer approximation of a "best case" scenario because
they produce a slower rate of increase in industrial energy  consumption and a faster decrease
in industrial energy intensity than the AEO 2006 high technology case.
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                                Sector Energy Scenarios
The CEF advanced case projections are based on six policy elements that promote more
aggressive energy efficiency and clean energy improvement through: (1) expanded voluntary
federal programs such as the CHP Challenge and ENERGY STAR; (2) expanded federal
informational programs such as energy assessments and equipment labeling; (3) expanded
investment-enabling programs  such as state grant programs, utility incentive programs, and tax
rebates and credits; (4) mandatory efficiency standards for motors; (5) expanded federal
demonstration and R&D programs; and  (6) a domestic carbon emissions trading program.
Arguably even more aggressive policies could be envisioned under a "best case" energy
scenario. However, we have not found other analyses that provide detailed sector-level energy
consumption projections under comparable business-as-usual and environmentally preferable
energy scenarios for the industries featured in this analysis.
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                     Sector Energy Scenarios: Alumina and Aluminum
3.1    Alumina and Aluminum

3.1.1  Base Case Scenario

Situation Assessment
The U.S. Geological Survey (USGS) reports that
bauxite is the only raw material used on a
commercial scale in the United States in the
production of alumina and aluminum (NAICS
3313).  As a general rule, four tons of dried
bauxite is required to produce two tons of
alumina, which in turn provides one ton of
primary aluminum metal (NAICS 331312). As
reported in USGS Mineral Commodity
Summaries 2006, in 2005:
        Recent Sector Trends Informing the Base Case

      Number of facilities: -i-
      Domestic production: -i-
      Value of shipments: -i-
      Avg. energy consumption/kg Al produced: -i-

      Major fuel sources: Electricity & natural gas

      Current economic and energy consumption data are
      summarized in Table 18 on page 3-5.
   •  Nearly all of the bauxite consumed in this
     country was imported; more than 90 percent was converted to alumina at domestic
     refineries located in Louisiana and Texas.

   •  Of the total alumina used domestically, about 90 percent went to primary aluminum
     smelters.

   •  Six companies operated 15 primary aluminum smelters at about two-thirds of rated or
     engineered capacity; another four smelters were idle. All modern primary aluminum
     smelting plants employ the "Hall-Heroult" process to reduce alumina to aluminum through
     electrolysis.47

Data for 2005 mark a decline in production capacity since 2000, a year in which USGS reported
that 12 U.S. companies operated 23 primary aluminum smelters across the country.  The
reduction in U.S. aluminum production and capacity since 2000 is in large part due to energy
pricing pressures, particularly in the Pacific Northwest, where the majority of aluminum smelters
are located. The aluminum industry showed a decline in value added and value of shipments
between 1997 and 2004 (see Table 18).

In 2001, electricity prices soared in response to the combination of high temperatures which
increased energy demand, and reduced hydroelectric power generation brought on by
historically low snow packs and regulations mandating the spill of water to aid salmon migration.
These high prices meant it was more economical for several Pacific Northwest smelters (which
accounted for over 40 percent of U.S. primary production capacity) to stop production and sell
back their power (which was on low-cost, fixed price contracts) to the power authority. These
low-cost electricity contracts were a result of the Northwest Power Act of 1980, which ensured
that Pacific Northwest smelters would obtain their power from Bonneville Power Administration
(BPA) at preferential prices. Recently BPA, which controls about half of the power marketed in
the region, announced it would discontinue all electricity service at preferential prices;
consequently, many of the smelters operating in this  region  have remained  closed. Continued
high energy market prices have prevented the restart of many of these smelters, which were
some of the oldest and, therefore, most energy-intensive operations in the United States.48 In
2002 energy costs represented approximately 21 percent of the industry's value added and
around 7 percent of the industry's value of shipments49 (see Table 9).

The industry-wide average energy consumption per kilogram of aluminum production has
generally declined in recent years through a number of factors: (1) the closure of older, more
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                      Sector Energy Scenarios: Alumina and Aluminum
energy-intensive "Soderberg" smelters in the Pacific Northwest; and (2) the implementation of
best management energy efficiency practices, including (a) improvements in the molten cryolite
chemical bath composition; (b) improved training of cell operators and monitoring to reduce
anode effects (AE);  (c) use of improved, computerized cell control systems and other process
controls to prevent AE; and (d) installation of alumina point feed systems.50 As is the case with
other capital-intensive industries, replacing older equipment/processes with state-of-the-art
equipment/processes holds potential for energy efficiency improvement.51 In 2000, typical
energy consumption achieved by operating smelters was between 13 kWh/kg of Al for state-of-
the-art facilities (e.g., point feed pre-bake) to 20 kWh/kg of Al for older Soderberg smelters
(many of which were located in the Pacific Northwest and have now been shut down).
                                     52
Aluminum recycling also has an impact on sector energy use, as production from recycled
aluminum requires only five  percent of the energy required for primary ore production.53
Recycling one kilogram of aluminum can save up to 14 kilowatt hours of electricity.

Robert Strieter at the Aluminum Association (AA) noted that for primary aluminum production,
there are no air-related policy issues that prevent the implementation of measures to increase
energy efficiency. However,  Best Available Retrofit Technology (BART) requirements to address
regional haze (e.g., installation of sulfur dioxide scrubbers) may exert capital expenditure
pressures on primary aluminum producers. Similarly, implementing heat recovery technologies
in remelt furnaces to meet Maximum Achievable Control Technology (MACT) requirements may
also exert capital expenditure pressures on secondary production (recycling) operations.

Table 18 summarizes current economic trend and energy consumption data originally presented
in Chapter 2.

             Table 18: Current economic and energy data for the aluminum industry

                                    Economic Production Trends
                         Annual Change in   Annual Change in   Annual Change in   Annual Change in
                           Value Added       Value Added    Value of Shipments  Value of Shipments
                            1997-2004       2000-2004       1997-2004        2000-2004
                             -2.9%
-2.3%
-2.4%
-2.2%
                                      Energy Intensity in 2002
Energy Energy






Consumption per Consumption per Energy Cost per
Dollar of Value Dollar Value of Dollar of Value
Added Shipments
(thousand Btu) (thousand Btu)
34.3
12.2
Added
(share)
21.0%

Energy Cost per
Dollar Value of
Shipments
(share)
6.9%
                      Primary Fuel Inputs as Fraction of Total Energy Supply in 2002 (fuel use only)




Net Electricity
55%
Natural Gas
37%
Other
7%
                          Fuel-Switching Potential in 2002: Natural Gas to Alternate Fuels
Switchable fraction of natural gas inputs



Fraction of natural gas inputs that could be
met by alternate fuels
LPG
64%
9%
Fuel Oil
36%
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                        Sector Energy Scenarios: Alumina and Aluminum
Expected Future Trends
Though the industry may undertake
energy efficiency improvements to
control production costs, the recent
closures of the most inefficient smelters
and plant-level improvements
undertaken in response to electricity
price increases may mean that
additional efficiency gains may be
relatively more capital intensive. An
additional challenge is posed by the
industry's trend of declining economic
production. As noted  in CEF:
"Stagnating markets are poor theaters
for innovation and investment, and
instead rely on already depreciated
equipment to maintain low production
costs."54 Given these factors, the
implementation rate of further efficiency
improvements is likely to be slow.

The data examined in this analysis do
not show a fuel-switching trend in
response to increases in energy price—
the primary response has been to shut
down the most energy-intensive
facilities,  as discussed above. Under the
business-as-usual scenario, CEF
projects the aluminum industry energy
consumption  to be dominated by
purchased electricity and natural gas,
and economic energy intensity (energy
consumption  per dollar value of output)
to decrease at the rate of 0.9 percent
per year."1
               Voluntary Commitments

The U.S. Aluminum Association (AA) and its members
participating in Climate VISION have committed to a direct
carbon intensity reduction in carbon and perfluorocarbon (RFC)
emissions from the carbon anode consumption process that
occurs in primary aluminum reduction. As large industrial energy
consumers, primary aluminum producers also agree to continue
their efforts to reduce indirect carbon emissions through
continued energy efficiency improvements. See
http://www.climatevision.gov/sectors/aluminum/index.html.

This commitment builds on the efforts of the Voluntary Aluminum
Industrial Partnership (VAIP), a program that EPA has had with
the industry since 1995. VAIP reduced PFC emissions by more
than 45 percent in 2000 compared to the industry's 1990
baseline. VAIP's 2010 target is a 53 percent total  carbon
equivalent reduction from these sources from 1990 levels.3 This
new commitment equates to an additional direct carbon-intensity
reduction of 25 percent since 2000. See
http://www.epa.gov/highgwp/aluminum-pfc/.

The aluminum sector also participates in DOE's Industries of the
Future (IOF)/lndustrial Technologies Program (ITP) as an
"Energy Intensive Industry." ITP's goals for all energy intensive
sectors include the following:

•   Between 2002 and 2020, contribute to a 30 percent
    decrease in energy intensity.
•   Between 2002 and 2010, commercialize more than 10
    industrial energy efficiency technologies through research,
    development & demonstration (RD&D) partnerships.
AA targets a 2020 goal to meet or exceed 11 kWh/kg of Al
through technological and process improvements, such as inert
anode, wetted cathodes, and non-Hall-Heroult processes. See
http://www.eere.energY.gov/industry/aluminum/.
Though energy consumption is projected to decrease across all fuel categories, the largest
decrease is projected for natural gas (26 percent decline from 1997-2020), with a smaller
decrease projected for delivered electricity (16 percent).

CEF reference case projections for the aluminum industry are summarized in Table 19.
Economic assumptions underlying these projections are that production will grow slowly at the
rate of 0.2 percent per year, with the value of the industry's output increasing at the same rate.
    Aluminum is one of the sectors for which CEF made adjustments to the NEMS model used to produce AEO 1999. However,
    CEF projections are for the primary aluminum industry (NAICS 331312), a sub-set of aluminum and alumina (NAICS 3313).
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                      Sector Energy Scenarios: Alumina and Aluminum
              Table 19: CEF reference case projections for the aluminum industry
                                1997 Reference Case
                                                              2020 Reference Case
                           Consumption
                                    Percentage
Consumption
Percentage
VHuau u" Dlu'
Natural gas
Delivered electricity
Total
0.081
0.183
0.264

31%
69%
100%
0.060
0.153
0.213
Annual % change in economic energy intensity (energy consumption per dollar value of output)

28%
72%
100%
-0.9%
        Overall % change in energy use (1997-2020)
                                                                         -19%
In an effort to assess the impact of recent trends that may have affected aluminum industry
energy consumption since the CEF report was produced, we also examined reference case
energy consumption projections produced in connection with ElA's Annual Energy Outlook 2006
(AEO 2006), which also uses the NEMS model but incorporates more recent energy and
economic data. AEO 2006 data provide more detailed fuel consumption data than CEF and give
a better indication of how high electricity prices in the Pacific Northwest have affected sector
energy consumption—namely, indicating increased reliance on natural gas and other fossil fuel
inputs at the expense of purchased electricity. According to AEO 2006, in 2004 the aluminum
industry's fuel mix was 47 percent purchased electricity and 34 percent natural gas, with
petroleum (11 percent, mainly petroleum coke) and coal (8 percent) comprising the remaining
fractions. From 2004 to 2020, AEO 2006 projects the sector's energy consumption to fall by 11
percent.  Natural gas and coal consumption remains static over the period, while purchased
electricity falls by 18 percent and petroleum coke consumption falls by 24 percent.  In 2020,
electricity is projected to meet 43 percent of the sector's energy needs, compared with 38
percent for natural gas.

Environmental Implications
                  Figure 6: Aluminum sector: energy-related CAP emissions
                  Aluminum Sector:
                  NB CAP Emissions
                  (Total: 536,000 tons)
                              All other*
Source: Draft 2002 NB
* Includes emissions from unspecified sources; may include
additional energy-related emissions.
                                                         Aluminum Sector:
                                                  Energy-Related CAP Em issions by Pollutant
                                                         (Total: 73,000 tons)

                                                                 VOC
                                                                             NOX
                                                                             18%
                                                   Source: Draft 2002 NB
Figure 6 compares NEI data on energy-related CAP emissions with non-energy-related CAP
emissions for the aluminum sector. According to the figure, energy-related CAP emissions are a
relatively small fraction of total emissions; however, NEI data attribute emissions from the
generation of purchased  energy to the generating source, not the purchasing entity. Therefore,
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                      Sector Energy Scenarios: Alumina and Aluminum
energy-related emissions from an electricity-dependent sector like aluminum will be
underestimated. Hydroelectric power—a cleaner form of electricity generation than fossil fuel—
has historically met a substantial fraction of the sector's purchased electricity requirements.

According to NEI data on emissions by fuel usage (shown below in Figure 7),  18 percent of the
energy-related CAP emissions shown in Figure
6 are from natural gas consumption, and 78
percent are from coal consumption. Coal
                                                S02 and NOX emissions contribute to respiratory illness
                                                and may cause lung damage. Emissions also
                                                contribute to acid rain, ground-level ozone, and
                                                reduced visibility.
meets a relatively small fraction of the sector's
energy needs (less than 0.1 percent of total
fuel inputs according to MECS, and
approximately 8 percent according to AEO
2006), where natural gas comprises around 30
percent. Thus, the figures demonstrate the
emissions intensity of coal inputs as compared with natural gas.

         Figure 7: Aluminum sector: CAP emissions by source category and fuel usage
                                                   Effects of Energy-Related CAP Emissions
                  Aluminum Sector:
           Energy-Related CAP Em issions by Source
                  (Total: 73,000 tons)
      Source: Draft 2002 NB
                                                              Aluminum Sector:
                                                         Energy-Related CAP Em issions by Fuel
                                                              (Total: 73,000 tons)

                                                                       Natural Gas
                                                                         18%
                                                                            By-product
                                                                           /- Coke Mfg.
                                                                              2%
                                                                           \ Unknow n
                                                                               1%

                                                                             Distillate Oil
                                                                               1%
                                                  Source: Draft 2002 NEI
Figure 7 presents NEI data on the source categories for energy-related CAP emissions shown
in Figure 6, as well as emissions by fuel usage. The data suggest that coal-fired external
combustion boilers are the source of the majority of energy-related CAP emissions recorded in
NEI. However, given the relatively small coal fraction as a percentage of total fuel inputs for the
sector, such boilers are likely only in use at a small number of facilities. According to NEI data,
key opportunities for reducing the environmental impacts of sector energy use lie with efficiency
improvements to external combustion boilers. Opportunities for emissions reduction also lie in
the area of process improvement, as industrial processes contribute to 18 percent of energy-
related CAP emissions. In one DOE/ITP example, during electrolysis more than 45 percent of
energy inputs are lost as heat from the cathode and anode. At the same time, onsite energy-
related CAP emissions are small compared with other sectors considered in this analysis—
73,000 tons per year compared with more than 700,000 tons per year for the chemical
manufacturing industry.

At a system-wide level, the sector's declining energy consumption trend will reduce energy-
related CAP emissions. AEO 2006 projections indicate that sector energy use is shifting
somewhat from the utility (purchased electricity) to the facility level (fossil fuels) in terms of the
relative contribution of various fuel  inputs to total energy consumption. However, AEO 2006
does not project any substantial increases in fossil fuel consumption that would increase
energy-related CAP emissions at the facility level, with natural gas and coal consumption
remaining relatively static, and petroleum coke consumption declining. At the utility level, the
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                      Sector Energy Scenarios: Alumina and Aluminum
expected decrease in purchased electricity requirements would decrease energy-related CAP
emissions, particularly given the magnitude of energy losses associated with electric power
generation, transmission, and distribution.

As NEI data do not include carbon dioxide emissions, we use carbon dioxide emissions
estimates from AEO 2006, which totaled 46.5 million metric tons in 2004,  including emissions
associated with offsite electricity generation. (Additional carbon emissions arise from anode
consumption, but such emissions are not considered energy related.) In line with the expected
decrease in total energy consumption, AEO 2006 projects that the aluminum industry's carbon
dioxide emissions will decline at the annual rate of 1 percent per year, reaching 38.6 million
metric tons by 2020.

3.1.2 Best Case Scenario

Opportunities
Table 20 ranks the viability of five primary opportunities for improving environmental
performance with respect to energy use (Low, Medium, or High). A brief assessment of the
ranking is also provided, including potential barriers.

                 Table 20: Opportunity assessment for the aluminum industry
Opportunity
Cleaner fuels
Increased CHP
Equipment retrofit/
replacement
Process
improvement
R&D

Ranking
Low
Low
Medium
Medium
Medium

Assessment (including potential barriers)
Due to the sector's dependence on purchased electricity, the environmental impact of energy
inputs will follow regional trends for electric generation. There may be some opportunity for
clean fuels improvement through increased use of renewable energy, either at the facility
level or in electric generation. However, much of the industry is concentrated in the
Northwest where electricity generation is already largely hydroelectric.
The aluminum industry has not invested in CHP to an extensive degree, perhaps due to cost
considerations and regulatory uncertainties as well as technical constraints (for example, if
the electricity load is significantly larger than the thermal load, there might not be sufficient
waste heat to generate sufficient amounts of power). However, DOE's Industries of the
Future Program identified CHP as an area for further research and demonstration projects to
determine viability.55 New CHP installations also face barriers in terms of utility
interconnection requirements if electricity production is expected to exceed onsite demand,
and also from NSR/PSD permitting.56
For capital-intensive industries, CEF predicts that the largest efficiency gains will come from
replacement of old equipment with state-of-the-art equipment. 57 Installation of alumina point
feed systems is a currently available technological retrofit that improves energy efficiency.
However, the industry's economic circumstances (declining production and pressure from
foreign competition) are an important constraint on capital investment.
There are multiple process-related energy-savings opportunities currently available such as
increased waste reduction and recycling, improvements in molten cryolite chemical bath
composition, and improved process controls and monitoring. The frequency and duration of
anode effects (spikes in voltage caused by changes in the chemical composition of the
electrolytic bath) may be reduced through operator training as well as process control
improvements, improving energy efficiency and reducing PFC emissions.58
The aluminum sector has developed mission statements and roadmaps for crucial R&D
priority efforts as part of its efforts with DOE/IOF; see
httDV/www.eere.enerav.aov/industrv/aluminum/. The theoretical minimum enerav
consumption in aluminum primary production via electrolysis is 5.99 kWh/kg of Al
produced.59 A number of technologies and processes that would substantially reduce sector
energy consumption have a long R&D history and are still a long way from commercial
implementation, including inert anode and wettable cathodes as replacements for carbon
anodes and cathodes in existing Hall-Heroult processes (theoretical energy savings would
be achieved through the combined use of inert anode and wettable cathodes), as well as
technologies that would replace the Hall-Heroult process in its entirety, such as carbothermic
and kaolinite reduction processes.60
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                       Sector Energy Scenarios: Alumina and Aluminum
 Opportunity
Ranking
Assessment (including potential barriers)
                           The sector has identified technical, cost, and institutional barriers to full-scale implementation
                           and is also concerned that implementing wettable cathodes would require replacement of
                           existing carbon pot-lining, a listed hazardous waste under the Resource Conservation and
                           Recovery Act (RCRA).
Optimal Future Trends
CEF does not project a major shift in the aluminum sector's fuel mix under its advanced energy
scenario, with energy consumption decreasing by roughly 29 percent across all fuel types. (As
indicated previously, more recent projections in AEO 2006 indicate that a relatively greater share
of energy requirements will be met by natural gas and a relatively smaller share met by purchased
electricity. However, as AEO 2006 does not provide sector-specific data for its advanced energy
scenario, we refer only to CEF data in this section.) Energy intensity is projected to decrease at a
greater annual rate than  under the base case scenario, primarily through faster replacement of
aging equipment with energy-efficient equipment, and accelerated implementation of promising
new technologies such as inert anodes and wettable cathodes. Under the advanced energy
scenario, CEF projects total aluminum sector energy use to fall by 29 percent from 1997 levels by
2020, compared with a 19 percent reduction in the base case scenario.

As with CEF's projections for all sectors, economic assumptions are the same under the
advanced case scenario as the reference case (growth in production and value of output at 0.2
percent per year). (See Appendix A-2 of the CEF report for more detailed descriptions of CEF's
modeling assumptions under the business-as-usual and advanced energy scenarios.) Table  21
summarizes the CEF advanced case projections for the aluminum industry.

              Table 21:  CEF advanced case projections for the aluminum industry
                                 1997 Advanced Case
                                                               2020 Advanced Case

Natural gas
Delivered electricity
Total
Consumption
(quadrillion Btu)«
0.081
0.184
0.265
Percentage
31%
69%
100%
Consumption
(quadrillion Btu)
0.058
0.129
0.187
Annual % change in energy intensity (energy consumption per dollar value of output)
Percentage
31%
69%
100%
-1.5%
         Overall % change in energy use (1997-2020)
                                                                -29%
Environmental Implications

The greatest environmental benefits from increased energy efficiency in the aluminum industry
occur outside the facility at the electric power generation level, due to the reductions in
purchased electricity and also the reduced carbon intensity of electric generation under CEF's
advanced scenario. Under the advanced energy scenario, CEF projects that the aluminum
industry will achieve a 51 percent reduction in 1997 carbon emissions levels by 2020. As carbon
    As is the case with several sectors addressed in the CEF analysis, there are slight differences between 1997 fuel
    consumption data in the reference and advanced cases. We could find no explanation for such differences in the CEF
    analysis, but it could be that CEF made modifications to the base year (1997) parameters under the advanced case as
    compared with the reference case.
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                        Sector Energy Scenarios: Alumina and Aluminum
projections are based on primary energy consumption rather than delivered energy
consumption, this decrease is larger than the sector's projected decrease in delivered energy
consumption due to the energy losses associated with electric power generation, transmission,
and distribution.
At the same time, it is important to note that electric power generation losses are largest for
fossil fuel-fired plants, and thus effects on energy-related CAP and carbon emissions would vary
depending upon local sources of  power. Still, given the geographic concentration of the
aluminum industry, CAP emissions reductions are more likely to be concentrated with
associated benefits to regional air quality. The benefits of GHG emissions reductions occur on a
global level.

At the facility level,  reduced GHG and CAP emissions would be achieved through reductions in
consumption of natural  gas, coal, and petroleum coke. NEI  data suggest that reductions in
sector energy  consumption through efficiency and clean energy improvement will have the
greatest effect on emissions of sulfur dioxide and nitrogen oxides.

3.1.3  Other Reference Materials Consulted
Personal communication with Robert Strieter, Vice President, Environmental, Health and Safety, Aluminum Association. March
1,2006.
The Aluminum Association, Inc. Energy Policy Position. Internet source. Available at
http://www.aluminum.org/Content/NavigationMenu/The_lndustry/Government_Policy/Energy/Energy.htm\.
U.S. Department of Energy.  Energy and Environmental Profile of the U.S. Aluminum Industry. July 1997. Available at
http://www.eere.energy.gov/industry/aluminum/pdfs/aluminum.pdf.
U.S. Department of Energy.  Aluminum Industry of the Future. November 1998.
U.S. Environmental Protection Agency. National Emissions Inventory. 2002.
U.S. Environmental Protection Agency. Voluntary Aluminum Industrial Partnership. Internet source. (Updated March 8, 2006).
Available at http://www.epa.gov/highgwp/aluminum-pfc/resources.html.
U.S. Geological Survey. Mineral Commodity Summaries: Bauxite and Alumina,  and Aluminum. 2001. Available at
http://minerals.er.usgs.gov/minerals/pubs/mcs/2001/mcs2001.pdf.
U.S. Geological Survey. Mineral Commodity Summaries: Bauxite and Alumina,  and Aluminum. 2006. Available at
http://minerals.er.usgs.gov/minerals/pubs/mcs/2006/mcs2006.pdf.
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                            Sector Energy Scenarios: Cement
                                                Recent Sector Trends Informing the Base Case

                                              Number of facilities: Virtually unchanged
                                              Domestic production: t
                                              Value of shipments: t
                                              Avg. energy consumption/ton of cement produced: -i-

                                              Major fuel sources: Coal & petroleum coke

                                              Current economic and energy consumption data are
                                              summarized in Table 22 on page 3-13.
3.2    Cement

3.2.1  Base Case Scenario

Situation Assessment
Cement manufacturing (NAICS 327310)
requires the thermochemical processing (i.e.,
pyroprocessing) of substantial amounts of
limestone, clay, and sand in huge kilns at very
high and sustained temperatures to produce
an intermediate product called clinker. Clinker
is then ground up with a small quantity of gypsum to create portland cement, which is used as a
binding agent in virtually all concrete.

Kilns can employ either wet or dry processes. The wet process was developed to improve the
chemical uniformity of the raw materials, which was a deficiency in original dry kiln designs.
Technological improvements in the grinding of raw materials have improved the chemical
uniformity of the clinker, which has enabled producers to return to the dry process and benefit
from its lower energy consumption. On average, wet process operations use 34 percent more
energy per ton of production than dry process operations.61 No new wet kilns have been built in
the United States since 1975,62 and approximately 80 percent of U.S. cement production
capacity now relies on the dry process technology.63

While 39 companies operate 115 cement plants in 36 states,64 cement production is somewhat
concentrated geographically, with six states—Texas, California, Pennsylvania, Missouri,
Michigan, and Alabama, in descending order—accounting for approximately 50 percent of
production  in 2005.65 From 1997 to 2004 the cement industry showed economic growth in terms
of value added and total value of shipments (see Table 22), mainly in response to a strong
construction market. Most of the U.S. demand for cement is met by domestic production.
Operating at maximum capacity, in 2004 U.S. facilities produced 95 million metric tons of
cement, an increase of 2 percent over 2003.66 Although a slowdown of the U.S. economy is
expected, industry experts predict cement consumption in 2006 to reach 129.6 million tons, an
increase of 2.3 percent compared with 2005 levels, extending a three-year period of continual
growth. Additional growth in cement consumption of 1.2 percent is forecasted for  2007.67 To
meet increasing demand, U.S. cement manufacturers have announced plans to increase
production  capacity by 15 percent (nearly 15 million tons) by 2010.68

The cement industry currently participates in EPA's Sector Strategies Program.

The cement industry is highly dependent on emissions-intensive energy sources:  coal (60
percent of fuel inputs in 2004) and petroleum coke (16 percent).69 In recent years, the sector
has shown  increased use of lower-cost waste fuels (primarily tires and used motor oil), and
slight decreases in the use of natural gas and coal.70 In 2002, 15 plants used waste oil, and 40
plants in 23 states used scrap tires; solvents, unrecyclable plastics, and other waste materials
were also used as fuels.71 Cement kiln dust (CKD) is routinely recycled  to the kilns, which also
can burn a  variety of waste fuels (e.g., scrap tires, used motor oil, and paint wastes) and
alternative raw materials such as foundry sand, slags, and coal combustion fly ash.72 Energy
intensity (as measured in  terms of energy use per ton of cement production) fell by 7 percent
from 2001 to 2004.73

As is the case with other capital-intensive industries, replacing old equipment with state-of-the-
art equipment holds potential for energy efficiency improvement.74 Options include replacing wet
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                               Sector Energy Scenarios: Cement
process kilns with new dry process kilns, adding multistage suspension preheaters (i.e., a
cyclone) or shaft preheaters, and using high-pressure roller mills and horizontal roller mills in
place of ball mills as a grinding technology. In 2006, a cement industry Energy Performance
Indicator (EPI) was developed by EPA's ENERGY STAR Industrial Focus program in
cooperation with the Portland Cement Association (PCA) and with technical support from the
Argonne National Laboratory. EPI scores the energy efficiency of a single cement plant and
allows the plant to  compare its performance to that of the entire industry.  The tool is intended to
help cement plant operators identify opportunities to improve energy efficiency, reduce GHG
emissions, conserve conventional energy supplies, and reduce production costs.75

Table 22 summarizes current economic trend and energy consumption data originally presented
in Chapter 2.

               Table 22: Current economic and energy data for the cement industry

                                      Economic Production Trends
                           Annual Change in   Annual Change in   Annual Change in   Annual Change in
                             Value Added       Value Added    Value of Shipments   Value of Shipments


1997-2004
2.2%
2000-2004
1.2%
1997-2004
1.5%
2000-2004
1.6%
                                        Energy Intensity in 2002



Energy Energy
Consumption per Consumption per Energy Cost per Energy Cost per
Dollar of Value Dollar Value of Dollar of Value Dollar Value of
Added
(thousand Btu)
95.5
Shipments
(thousand Btu)
56.0
Added
(share)
24.5%
Shipments
(share)
15.1%
                       Primary Fuel Inputs as Fraction of Total Energy Supply in 2002 (fuel use only)
Coal
58%
Other™
23%
Net Electricity
11%
Natural Gas
5%
Coke & Breeze
2%
                           Fuel-Switching Potential in 2002: Natural Gas to Alternate Fuels
                                            Switchable fraction of natural gas inputs
                                                                           29%


Fraction of natural gas inputs that could be
met by alternate fuels
Coal
67%
Fuel Oil
50%
LPG
17%
                             Fuel-Switching Potential in 2002: Coal to Alternate Fuels
                                                                           51%


Fraction of coal inputs that could be met by
alternate fuels
Natural Gas
91%
Other
8%
LPG
4%
kkk  "Other" includes petroleum coke as well as waste materials that are incinerated for fuel.
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                               Sector Energy Scenarios: Cement
Expected Future Trends
Cement is one of three sectors (along
with paper and steel) for which CEF made
detailed parameter modifications to the
NEMS model used to produce AEO 99.
Modifications included adjustments to
baseline energy intensities and rates for
annual improvements in energy intensity,
which were adjusted to reflect best-
available sector-specific research.

Under the reference case scenario, CEF
projects the cement industry's fuel mix to
be dominated by coal, as it is today."1
Economic energy intensity (energy
consumption per dollar value of output) is
projected to decrease very slightly at the
rate of 0.1 percent per year,  and overall
energy consumption is  projected to
decline by 2 percent from 1997 to 2020.
CEF's analysis  suggests that as  long as
fuel  prices remain low, facilities will have
little incentive to invest  in capital-intensive
upgrades of existing facilities, and
increases in energy efficiency will primarily be achieved through the retirement of old plants with
wet  kiln capacity and the construction of new plants with dry kiln capacity. Increased energy
efficiency in cement kilns will result in reduced coal consumption.

CEF's reference case projections for the cement industry are based on the assumptions that
production will grow at 1 percent per year, and value of output will grow at 1.1 percent per year.
The sector's declining energy intensity is thus a function both of slow rates of decline in energy
consumption and faster rates of increase in economic production. CEF also assumes that wet
process clinker production will decline at 2.2 percent per year, comprising 13 percent of total
production by 2020.

CEF projections support the expectation of incremental efficiency improvement for the cement
industry, rather than large-scale efficiency gains, and are summarized in  Table 23.
               Voluntary Commitments

Under its Climate VISION commitment, PCA seeks to achieve a
10 percent reduction in 1990-level carbon dioxide emissions per
ton of cementitious product produced or sold by 2020. The
industry will achieve this goal and foster further reductions by
end users of cement products through the implementation of a
three-part strategy to: (1) improve energy efficiency by
upgrading plants with state-of-the-art equipment; (2) improve
product formulation to reduce energy of production and minimize
the use of natural resources; and (3) conduct research and
develop new applications for cement and concrete that improve
energy efficiency and durability. Efficiency improvement from the
first two elements of this plan will contribute to achieving the 10
percent reduction goal. While reductions from the product
application element will not count towards the goal, the carbon
dioxide reduction benefits of cement and concrete use could be
even more significant than those achieved through
manufacturing and product formulation. The U.S. cement
industry has also adopted a voluntary target of a 60 percent
reduction (from a 1990 baseline) in the amount of CKD disposed
per ton of clinker produced by 2020. See
http://www.climatevision.aov/sectors/cement/index.html.
    According to USGS data presented in the 2006 Sector Strategies Performance Report, 16% of the sector's energy supply
    was met by petroleum coke, which is a slightly larger fraction than is represented by data used in the CEF analysis.
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                              Sector Energy Scenarios: Cement
               Table 23: CEF reference case projections for the cement industry
                                 1997 Reference Case
                                                              2020 Reference Case
                           Consumption
Percentage
Consumption
Percentage

Petroleum
Natural gas
Coal
Delivered electricity
Total
0.036
0.018
0.315
0.030
0.399
9%
5%
79%
8%
100%
0.033
0.014
0.313
0.031
0.391
Annual % change in energy intensity (energy consumption per dollar value of output)

8%
4%
80%
8%
100%
-0.1%
        Overall % change in energy use (1997-2020)
                                     -2.0%
In an effort to assess the impact of recent trends that may have affected cement industry energy
consumption since the CEF report was produced, we also examined reference case energy
consumption projections produced in connection with ElA's Annual Energy Outlook 2006 (AEO
2006), which also uses the NEMS model but incorporates more recent energy and economic
data. Where CEF projects a slight decline in sector energy consumption, AEO 2006 projects
that sector energy consumption will increase by 10 percent from 2004 to 2020, driven by annual
growth in the industry's value of shipments of 2.1 percent per year. However, energy intensity
(energy consumption per dollar value of output) is expected to decrease at the rate of 0.7
percent per year—a faster rate of decline than projected by CEF. Though all fuel inputs are
projected to increase, AEO 2006 projects the largest increases for natural gas and purchased
electricity. Still, by 2020 AEO 2006 projects no  substantial change in the overall fuel mix, with
coal meeting 60 percent of the sector's energy  demand and petroleum (mainly petroleum coke)
meeting 23 percent (these fractions are similar to MECS energy consumption data from 2002).

Environmental Implications
                    Figure 8:  Cement sector: energy-related CAP emissions
                   Cement Sector:
                  NB CAPBnissions
                  (Total: 545,000 tons)
      Source: Draft 2002 NB
      * Includes emissions from unspecified sources; may include
      additional energy-related emissions.
                      Cement Sector:
              Energy-Related CAP Em issions by Pollutant
                     (Total: 41,000 tons)
                      S02
                      31%
                                                                        VOC
                  NOX
                  28%
         Source: Draft 2002 NB
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                             Sector Energy Scenarios: Cement
                                                     Effects of Energy-Related CAP Emissions

                                                 S02 and NOX emissions contribute to respiratory illness
                                                 and may cause lung damage. Emissions also
                                                 contribute to acid rain, ground-level ozone, and
                                                 reduced visibility.
Figure 8 compares NEI data on energy-related
CAP emissions with non-energy-related CAP
emissions for the cement sector. Although NEI
data attribute emissions from electric power
generation to the generating source rather than
the purchasing entity, because purchased
electricity comprises a small fraction of the
cement sector's  energy requirements, NEI data provide a relatively complete picture of the
industry's energy-related CAP emissions. However, the ratio of energy-related CAP emissions
to total CAP emissions appears smaller than expected for an energy-intensive sector. As noted
in Section 2.3.3, the majority of the sector's energy requirements and associated emissions
result from the thermoreduction of limestone, clay, and sand in a process that uses coal both as
a fuel and a feedstock. Given that NEI data for the cement industry only classify 8 percent of the
sector's total CAP emissions as "energy-related," it appears likely that NEI data misclassify
some CAP emissions resulting from this process as non-energy-related.

According to NEI data, 66 percent of the sector's energy-related CAP emissions are due to coal
consumption (see Figure 9). As a result, sulfur dioxide and nitrogen oxides (both linked to coal
combustion) are fairly equal contributors to energy-related CAP emissions. (As noted  in Section
2.3.3, NEI data on carbon monoxide emissions appear higher than would be expected for
stationary sources, so we  do not address carbon monoxide data in our assessment of CAP
emissions for each sector.)

          Figure 9: Cement sector: CAP emissions by source category and fuel usage
                   Cement Sector:
           Energy-Related CAP Em issions by Source
                  (Total: 41,000 tons)
             External
            Combustion
             Boilers
              16%
             Internal
            Combustion
             Engines
              2%


      Source: Draft 2002 NB
                             Industrial
                            Recesses
                                                               Cement Sector:
                                                        Energy-Related CAP Emissions by Fuel
                                                               (Total: 41,000 tons)
                                                            Coal
                                                                          Natural Gas
                                                                        Solid Waste
                                                  Source: Draff 2002 NB
Figure 9 presents NEI data on the source categories for energy-related CAP emissions shown
in Figure 8, as well as emissions by fuel usage. According to DOE data, fuel inputs into fired
systems such as kilns, preheaters, and precalciners comprise the majority of sector energy
consumption,76 and these systems are classified under the "industrial processes" category in
NEI. Given AEO 2006's projected increases in economic production and energy consumption
for the cement industry, increases in energy-related CAP emissions are expected, which will
primarily occur at the facility level from coal combustion.

As NEI data do not include carbon dioxide emissions, we  use carbon dioxide emissions
estimates from AEO 2006, which totaled 40.1  million metric tons in 2004. (Additional carbon
emissions arise from the calcination of limestone, but such emissions are not classified as
energy-related.) The projected increase in sector energy consumption is projected to increase
carbon emissions to 44 million metric tons by 2020, at a slightly slower rate than the projected
energy consumption increase due to expected energy efficiency improvements.
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                                     Sector Energy Scenarios: Cement
3.2.2  Best Case Scenario

Opportunities
Table 24 ranks the viability of five primary opportunities for improving environmental
performance with respect to energy use (Low, Medium, or High). A brief assessment of the
ranking is also provided, including potential barriers.

                       Table 24: Opportunity assessment for the cement industry
 Opportunity
Ranking
Assessment (including potential barriers)
 Cleaner fuels        Medium       | The majority of the industry's energy inputs are met with coal—a relatively inexpensive but
                                   emissions-intensive energy source. To the extent possible, the cement industry uses
                                   inexpensive waste fuels in its kilns (tires, waste paints, oils, and carpet) to reduce energy
                                   costs. The primary environmental benefits of waste fuel use is avoided landfilling and more
                                   complete combustion than would be offered by most commercial incinerators due to higher
                                   temperatures and longer residence time in kilns.77

                                   Some waste fuels may be subject to either federal or state RCRA hazardous waste
                                   regulations or state solid waste regulations. For example, paint wastes and used oil may
                                   be categorized as hazardous waste and, thus, could require plants to obtain hazardous
                                   waste permits to burn these materials as fuels. The cement sector also faces technical
                                   barriers to greater waste fuel use (e.g., kilns can generally not use more than 25 percent
                                   tires, because the zinc slows down setting time) and supply constraints in terms of the
                                   long-term stability of sufficient quantities of alternate fuels to meet demand.
 Increased CHP
                    Low
 Equipment retrofit/
 replacement
High
                                   There may be opportunities for increased cogeneration of electricity in the cement industry,
                                   particularly if such applications are part of the design for new plants.78 Such opportunities
                                   would primarily involve systems to recover heat from exhaust systems and generate
                                   electricity onsite. There are also opportunities for increased waste heat recovery,
                                   particularly through waste heat utilization in preheater heat exchange systems.  However,
                                   the CEF report notes that there may be little incentive to devote capital to waste heat
                                   recovery systems as long as the industry is able to obtain low-cost energy (coal, waste
                                   fuels, etc.).
Given the magnitude of kiln-related energy requirements, DOE references the following
equipment replacement and retrofit opportunities to improve the efficiency of both wet and
dry kilns: installation/upgrades of preheat systems, enhanced heat recovery in the clinker
cooler, and more efficient grate coolers.80 Grinding technology improvements such as
replacing ball mills with high pressure roller mills or horizontal roller mills is another
example of an energy efficiency improvement opportunity for the cement industry.81 At the
same time, ball mills generally provide better mixing than roller mills, so roller mills may not
meet production-related requirements.

The expected life of onsite limestone reserves may be a determinant in selecting a retrofit
or equipment replacement option. If reserves are limited, small retrofits are more likely to
be implemented than full-scale equipment replacement. If reserves are substantial, sites
are more likely to undertake larger capital investments, which might include energy
efficiency improvements.82
 Process
 improvement
High
A recent study notes that the greatest opportunities for reducing energy consumption and
lowering emissions lie with improvements in cement pyroprocessing, which currently
operates at 34 percent thermal efficiency.83 In an example of a full-scale process change,
the cement industry is transitioning from wet process kilns to dry process kilns, which leads
to substantial reductions in energy use per ton of production. The kiln replacement process
is slow not due to regulatory considerations but economic considerations—specifically,
capital constraints and the long operational lifetime for kilns (30-40 years),  which mean that
changes in the number and types of kilns occur slowly, and typically only when the kiln has
reached the end of its useful life, because operating  cost savings are insufficient to justify
early retirement of the expensive capital. (At the same time, PCA estimates that nearly 44
percent of U.S. clinker production capacity is older than 30 years.) Opening new dry kilns
would trigger NSR review and other requirements (e.g., Maximum Achievable Control
Technology (MACT) standards for cement kilns; new NESHAPs for portland cement once
finalized); however, the long-term and continuing conversion from wet to dry kilns indicates
that this is not an insurmountable barrier to adopting the more energy-efficient dry process.
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                               Sector Energy Scenarios: Cement
 Opportunity        Ranking        Assessment (including potential barriers)
                             CEF cites pollution prevention and waste recycling as having potential to achieve efficiency
                             improvements in the cement industry.84 Alternative raw materials for cement clinker
                             production and cement blending (e.g., foundry sand) may be used; these alternative raw
                             materials reduce energy consumption by reducing the amount of virgin raw materials that
                             need to be quarried for the cement kilns or reducing the amount of cement clinker that
                             needs to be blended into the cement product. Other process-related opportunities include
                             reducing pyroprocessing energy use through increasing blending and using alternative
                             clinker materials,85 combustion system optimization, and adaptation to semi-wet
                             conversion processes (wet kilns).86
 R&D            Medium       Fluidized-bed kilns are an emerging technology that shows capital and operational savings
                             over dry kilns and may be adopted when existing kilns are slated for replacement. R&D
                             efforts focusing on reducing energy requirements in pyroprocessing offer the greatest
                             opportunities for improved environmental performance. A recent study notes the following
                             areas of R&D opportunities: developing less energy-intensive cement manufacturing
                             processes; developing systems for biomass fuel usage in kilns; and developing systems
                             for increased waste fuel utilization.87


Optimal Future Trends
Given more recent AEO 2006 projections that indicate an increasing energy consumption trend
for the cement industry, CEF's reference case projections appear outdated, calling into question
the validity of its advanced case projections. However, AEO 2006 does not provide sector-
specific data for its advanced energy scenario, and we must use the CEF study to approximate
an environmentally preferable energy consumption trend for the cement industry.

Under its advanced case projections, CEF projects no major change to the cement industry's
dependence on coal but shows larger declines in coal inputs than in petroleum and electricity
input, and a slight increase in natural gas consumption.  Rather than a fuel-switching  trend that
replaces coal with other energy inputs, the declining  coal fraction is the result of reduced energy
use in kilns through more aggressive introduction of blended cements in the U.S. market, and
faster retirement of wet process clinkers with  replacement by modern preheater precalciner dry
process kilns. For dry process plants, energy efficiency  opportunities reflected in the CEF
projections include optimized heat recovery in the clinker grate cooler and conversion to  grate
clinker coolers. For wet process plants, conversion to semi-wet processes and kiln combustion
system improvements produce additional energy efficiency gains. Cross-cutting  energy
efficiency improvements are achieved through preventative maintenance best practices,
improved process control through control system installations, and  installation of energy
management systems.

As with CEF's projections for all sectors, economic assumptions are the same under the
advanced case scenario as the reference case (growth  in production of 1 percent per year and
growth in value of output at 1.1 percent per year). (See Appendix A-2 of the CEF report for more
detailed descriptions of CEF's modeling assumptions under the business-as-usual and
advanced energy scenarios.) Given current expectations of production growth for the industry
and AEO 2006 reference case projections, it is unlikely that an advanced energy scenario would
achieve such aggressive reductions in energy consumption.
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                                 Sector Energy Scenarios: Cement
CEF's advanced case projections are shown in Table 25.

                 Table 25: CEF advanced case projections for the cement industry

1997 Advanced Case
Consumption
(quadrillion Btu)
Percentage
2020 Advanced Case
Consumption
(quadrillion Btu)
Percentage
         Petroleum
                                     0.036
        9%
0.034
11%
Natural gas
Coal
Delivered electricity
Total
0.018
0.316
0.030
0.4
5%
79%
8%
100%
0.030
0.216
0.028
0.308
Annual % change in energy intensity (energy consumption per dollar value of output)
10%
70%
9%
100%
-1.1%
         Overall % change in energy use (1997-2020)
                                        -23%
Environmental Implications

Though an advanced energy scenario may be unlikely to achieve the energy consumption
reductions projected by CEF, such a scenario would produce lower CAP emissions at the facility
level than are expected under a business-as-usual scenario. Conversion to precalciner kilns
also contributes to NOx emissions reductions.

Under the advanced energy scenario,  CEF projects the cement industry to achieve a 16 percent
reduction in 1997 carbon dioxide emissions levels by 2020 (compared with an increase of 5.7
percent projected under the reference case).

3.2.3  Other Reference Materials Consulted

COWIconsult,  March Consulting Group and MAIN.  Energy Technology in the Cement Industrial Sector. Report prepared for CEC
-DG-XVII, Brussels. April 1992.

Cembureau. Best Available Techniques for the Cement Industry. Brussels. 1993.

Greer, W. L, Johnson, M. D., Morton, E.L., Raught, E.G., Steuch, H.E. and Trusty Jr., C.B. "Portland Cement," in Air Pollution
Engineering Manual, Anthony J. Buonicore and Waynte T. Davis (eds.). New York: Van Nostrand Reinhold. 1992.

H. Klee. "The Task at Hand" Cement Americas. November 1, 2005. Internet source. Available at
http://cementamericas.com/mag/cement_task_hand/.

Holderbank Consulting. Present and Future Energy Use of Energy in the Cement and Concrete Industries in Canada. CANMET,
Ottawa, Ontario, Canada. 1993.

Portland Cement Association. Overview of the Cement Industry. May 2003. Internet source. Available at
http://www.cement.org/basics/cementindustry.asp.

R. Grancher. "U.S. Cement: Development of an Integrated Business," Cement Americas. September 1, 2005. Internet source.
Available at http://cementamericas.com/mag/cement_us_cement_development/index.html.
mmm As is the case with several sectors addressed in the CEF analysis, there are slight differences between 1997 fuel
    consumption data in the reference and advanced cases. We could find no explanation for such differences in the CEF
    analysis, but it could be that CEF made modifications to the base year (1997) parameters under the advanced case as
    compared with the reference case.
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                                     Sector Energy Scenarios: Cement
S. Ellis. "Environmental Update for the Cement Industry," Cement Americas. May 1,2003. Internet source. Available at
http://cementamericas.com/mag/cement_environmental_update/index.html.
Somani, R.A., S.S. Kothari. Die Neue Zementlinie bei Rajashree Cement in Malkhed/lndien. ZKG International. 1997.
Steuch, H.E. and Riley, P. "Ash Grove's New 2200 tpd Seattle Plant Comes on Line," World Cement. April 1993.
U.S. Environmental Protection Agency. National Emissions Inventory. 2002.
U.S. Environmental Protection Agency. DRAFT REPORT: Beneficial Use of Industrial By-Products in Cement Kilns: Analysis of
Utilization Trends and Regulatory Requirements. April 21, 2005.
U.S. Environmental Protection Agency. "National Emission Standards for Hazardous Air Pollutants from the Portland Cement
Manufacturing Industry; Proposed Rule." Federal Register. December 2,2005. Available at
http://www.epa.gov/ttn/atw/pcem/fr02de05.pdf.
U.S. Environmental Protection Agency. Rule and Implementation Information for Portland Cement Manufacturing Industry. 2002.
U.S. Environmental Protection Agency. Cement Kiln Dust Waste. Internet source. Available at
http://www.epa.gov/epaoswer/other/ckd/index.htm.
U.S. Environmental Protection Agency. Alternative Control Techniques Document - NOx Emissions from Cement Manufacturing.
Internet source.  1994. Available at http://www.epa.gov/ttn/catc/dir1/cement.pdf.
U.S. Geological  Survey. Mineral Commodity Summaries: Cement. U.S. Geological Survey. U.S. Department of the Interior.
January 2006. Available at http://minerals.usgs.gov/minerals/pubs/commodity/cement/cemenmcs06.pdf.
U.S. Geological  Survey. Historical Statistics for Mineral Commodities in the United States: Cement. August 2002. Internet
source.
Vleuten, P.P. van der. Cement in Development: Energy and Environment. Netherlands Energy Research Foundation, Petten,
The Netherlands. 1994.
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                     Sector Energy Scenarios: Chemical Manufacturing
                                                   Recent Sector Trends Informing the Base Case

                                                  Number of facilities: -i-
                                                  Value of shipments: t
                                                  Energy intensity: -i-

                                                  Major fuel sources: Natural gas, LPG & NGL

                                                  Current economic and energy consumption data are
                                                  summarized in Table 26 on page 3-22.
3.3    Chemical Manufacturing

3.3.1  Base Case Scenario

Situation Assessment
Chemical manufacturing (NAICS 325) is based on
the transformation of organic and inorganic raw
materials through chemical processes to formulate
products. Chemicals generally are classified into
two groups—commodity chemicals and specialty
chemicals.

  •  Commodity chemical manufacturers produce large quantities of basic and relatively
     inexpensive compounds in large plants, often built specifically to make one chemical.
     Since they make essentially equivalent products for general use in everyday consumer
     goods, sales are typically driven by price. Controlling production costs is crucial, which
     provides an incentive for energy efficiency improvements. At the same time, commodity
     plants often run continuously, typically shutting down for only a few weeks a year for
     maintenance. Thus,  there is often a limited window of opportunity in which energy
     efficiency-related improvements can be made.

  •  Specialty-batch or performance chemical manufacturers produce smaller quantities of
     more expensive chemicals that are used less frequently. Often there is only one or a
     limited number of suppliers producing a given product. As sales are based on product
     performance, controlling production costs may be of less concern than it is for commodity
     chemical manufacturers.

Both paint and coatings (NAICS 325510) and specialty-batch chemicals (not defined by a
NAICS code) currently participate in EPA's Sector Strategies Program.

The chemical industry uses energy both to supply heat and power for plant operations and as a
raw material for the production of chemicals, plastics, and synthetic fibers. Many small to
medium-sized firms comprise the industry, and are concentrated in areas abundant with other
manufacturing businesses, such as the Great Lakes region near the automotive industry, or the
West Coast near the electronics industry. Chemical plants  are also located near the petroleum
and natural gas production centers along the Gulf Coast in Texas and Louisiana.  Because
chemical production processes often use water, and chemicals are exported all over the world,
major industrial ports are another common location of chemical plants. According to the U.S.
Department of Labor (DOL), in 2002 approximately half of the establishments  in the industry
were located in California, Illinois, New Jersey, New York, Ohio, Pennsylvania, South Carolina,
Tennessee, and Texas; about 78 percent of sector energy usage was concentrated
geographically in the South Census Region.88

From 1997 to 2004 the chemicals sector showed economic growth in terms of value added and
total value of shipments (see Table 26). However, the number of plants has declined, as has
employment. As reported  by Business Week on May 2, 2005,  and quoted by the American
Chemistry Council in testimony before the Energy and Mineral Resources  Subcommittee on
May  19, 2005, 70 plants closed in 2004 (and businesses had targeted 40 more for shutdown in
2005), and employment fell below 880,000, down from over 1  million as recently as 2002. High
energy prices, especially natural gas prices, have been a contributing factor to domestic
declines, with companies looking to shift production and investment to operations overseas,
particularly in the commodity chemicals segment of the industry. Approximately 50 percent of
U.S.  methanol production capacity and 40 percent of ammonia production capacity were idled in
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                      Sector Energy Scenarios: Chemical Manufacturing
                                                  89
response to increasing natural gas prices after 2000.  Niche segments of the industry have the
most favorable economic outlook. DOE notes that the fastest growth is expected for industry
subsegments like specialty-batch chemicals.90

Table 26 summarizes current economic trend and energy consumption data originally presented
in Chapter 2.

      Table 26: Current economic and energy data for the chemical manufacturing industry
Economic Production Trends


Annual Change in
Value Added
1997-2004
1.9%
Annual Change in
Value Added
2000-2004
3.7%
Annual Change in
Value of Shipments
1997-2004
1.5%
Annual Change in
Value of Shipments
2000-2004
1.8%
Energy Intensity in 2002


Energy
Consumption per
Dollar of Value
Added
(thousand Btu)
15.3
Energy
Consumption per
Dollar Value of
Shipments
(thousand Btu)
8.5
Energy Cost per
Dollar of Value
Added
(share)
5.4%
Energy Cost per
Dollar Value of
Shipments
(share)
3.0%
                      Primary Fuel Inputs as Fraction of Total Energy Supply in 2002 (fuel use only)
              Natural Gas
                             Other™
                                          Net Electricity
                                                          Coal
                                                                        Fuel Oil
45%
31%
14%
8%
1%
                          Fuel-Switching Potential in 2002: Natural Gas to Alternate Fuels
Switchable fraction of natural gas inputs

Fuel Oil
Fraction of natural gas inputs that could be 77%
met by alternate fuels
LPG
13%
10%
Electricity
9%
                             Fuel-Switching Potential in 2002: Coal to Alternate Fuels
                                               Switchable fraction of coal inputs
                                                                         36%


Natural Gas
Fraction of coal inputs that could be met by 82%
alternate fuels
Fuel Oil
25%
Electricity
1%
Chemical production is highly dependent on natural gas: the sector currently consumes 10
percent of the U.S. natural gas supply both as fuel and process feedstocks.91 In terms of natural
gas inputs for fuel use, 55 percent is consumed as boiler fuel (with just over half of that fraction
used in CHP/cogeneration boilers and the remaining portion used in conventional boilers) and
40 percent is used for direct process inputs (primarily process heating). The remaining fraction
is composed of non-process uses such as facility HVAC and conventional electricity production
(1 percent of natural gas end uses were unreported in MECS).92 Cogeneration and self-
generation of electricity are important in the chemical industry, with 31  percent of net electricity
consumption produced through cogeneration  processes in 2002.93
nnn  "Other" includes petroleum-derived byproduct gases and solids, hydrogen, and waste materials used as fuel.
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                      Sector Energy Scenarios: Chemical Manufacturing
The chemical industry's prime motivation for energy efficiency is controlling operating and
production costs (e.g., fuel and raw material costs) in a competitive, worldwide market.94
Facility-wide approaches to energy efficiency, such as integrated heat exchanged networks to
maximize the use  of waste heat,  are well established in the industry. While energy consumption
in the chemical industry has increased in recent years (increasing 13.2 percent from 1994 to
2008, and 1.75 percent from 1998  to 2002),95 the sector has reduced energy consumption for
heat and power per unit of output by at least 39 percent between 1974 and 1995. Energy
intensity (in terms  of fuel consumption per dollar value of shipments) decreased by
approximately 10.5 percent between 1998 and 2002.96

Expected Future Trends
Driven by worldwide growth in demand for
chemical products, AGF projects natural
gas consumption by the chemical
manufacturing sector to increase through
2020. Under AGF's business-as-usual
scenario for the chemical  manufacturing
industry, natural gas consumption for use
in boilers and process heating is  expected
to grow at the rate of 1 percent per year
from 2001  to 2020."
97
              Voluntary Commitments

Through the Climate VISION program, the American Chemistry
Council (ACC), representing 90 percent of the chemical industry
production in the United States, has agreed to an overall GHG
intensity reduction target of 18 percent from 1990 levels by
2012. ACC will measure progress based on data collected
directly from its members. ACC also pledges to support the
search for new products and pursue innovations that help other
industries and sectors achieve the President's goal. Activities
include increased production efficiencies, promoting coal
gasification technology, increasing bio-based processes, and
developing efficiency-enabling products for use in other sectors,
such as appliances, transportation, and construction. See
http://www.climatevision.gov/sectors/chemical/index.html.

The chemicals sector also participates in DOE's Industries of the
Future (IOF)/lndustrial Technologies Program (ITP) as an
"Energy Intensive Industry." ITP's goals for all energy intensive
sectors include the following:

•   Between 2002 and 2020, contribute to a 30 percent
    decrease in energy intensity.
•   Between 2002 and 2010, commercialize more than 10
    industrial energy efficiency technologies through research,
    development & demonstration (RD&D) partnerships.

See http://www.eere.energY.gov/industry/chemicals/.
Though this analysis does not consider
feedstock energy inputs in terms of
energy-related emissions, feedstock
energy use has important economic
implications for certain sectors. Increases
in the price of natural gas are detrimental
to the chemical manufacturing sector in
terms of both fuel and feedstock  energy
inputs. AGF notes that subsets of the
industry with substantial feedstock use of
natural gas will continue to be particularly
affected by high natural gas prices—for
instance, companies engaged in  the
commodity production of ammonia and
methanol. AGF projects gas consumption
for these industries to plummet by about
60 percent between 2000 and 2020 due to energy-related pricing pressures. Despite such
economic impacts in some subsectors of the industry, AGF projects that overall the chemicals
sector will continue to grow due to new product development and expansion into new markets.98
CEF's projections are for the bulk chemicals industry, which includes industrial inorganic
chemicals, plastics,  industrial organic chemicals, and agricultural chemicals, but does not
include Pharmaceuticals, soaps,  detergents, cleaning preparations, paints, varnishes, and
miscellaneous chemical products. Thus, CEF projections address the commodity chemicals
subset of the chemical manufacturing industry and do not include the two subsectors that
currently participate in the Sector Strategies Program: paint and coatings  (NAICS 325510) and
specialty-batch chemicals. It is also important to note that where MECS data identify almost a
third of the sector's energy needs as being met by "other" fuels—primarily petroleum-derived
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                     Sector Energy Scenarios: Chemical Manufacturing
byproduct gases and solids, hydrogen, and waste materials used as fuel—CEF allocates these
fuels to the original fuel type that produced such byproducts or waste.

CEF's  reference case projections are based on the economic assumption that the bulk chemical
sector's value of output will increase at 1.1 percent per year. Under the reference case scenario,
CEF projects that energy consumption for fuel use by the chemicals sector will increase by 13
percent from 1997 to 2020, primarily driven by continued economic growth. Consumption of all
fuel types is expected to increase, with the largest percentage increase for coal (30 percent,
though overall coal remains a small fraction of total energy use), followed by petroleum (20
percent), purchased electricity (16 percent), and natural gas (9 percent). Energy intensity will
decrease at a slower rate than the industrial average of 1.1 percent per year, indicating that
slow adoption of energy-efficient technologies is expected. This projection is unsurprising given
the thin margins found in the commodity chemicals industry and the fact that due to production
requirements, opportunities to implement large-scale energy efficiency projects are limited.

Despite projected consumption increases for other types of fuels, the sector is expected to
continue to remain dependent on natural gas. Though  CEF predicts the fuel mix will shift slightly
away from natural gas toward petroleum, purchased electricity, and coal,  these projections were
made before recent increases in the price  of petroleum and natural gas. Fuel price trends  may
indicate the potential  for larger increases in the coal fraction relative to less carbon-intensive
fuels, though such increases would  be constrained by  technical and permitting constraints as
well as fuel availability. According to MECS fuel use tables, chemical manufacturing showed a
15 percent decline in natural  gas consumption and an  11 percent increase in coal consumption
between 1998 and 2002." However, MECS data also  indicate that there is a relatively small
switchable fraction of natural gas inputs, and coal is not a viable substitute for these inputs.

Table 27 summarizes the CEF reference case projection for the bulk chemicals sector.
          Table 27: CEF reference case projections for the bulk chemicals industry000
                               1997 Reference Case
                                                            2020 Reference Case

Petroleum
Natural gas
Coal
Delivered electricity
Total
Consumption
(quadrillion Btu)
0.479
2.188
0.175
0.637
3.479
Percentage
14%
63%
5%
18%
100%
Consumption
(quadrillion Btu)
0.576
2.395
0.227
0.738
3.936
Annual % change in energy intensity (energy consumption per dollar value of output)
Percentage
15%
61%
6%
19%
100%
-0.5%
        Overall % change in energy use (1997-2020)
                                   13%
In an effort to assess the impact of recent trends that may have affected industry energy
consumption since the CEF report was produced, we also examined reference case energy
consumption projections for the bulk chemicals subsector produced in connection with ElA's
Annual Energy Outlook 2006 (AEO 2006), which also uses the NEMS model but incorporates
more recent energy and economic data. AEO 2006 projects that the subsector's value of
shipments will grow at the rate of 0.6 percent per year (slower than CEF's rate), energy
consumption will remain relatively static through 2020 (around 2.7 quadrillion Btu, compared
    Energy consumption data do not include fuels used as feedstock.
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                      Sector Energy Scenarios: Chemical Manufacturing
with 3.5 quadrillion Btu under CEF's base case), and energy intensity (energy consumption per
dollar value of shipments) will drop at the rate of 0.4 percent per year. Natural gas consumption
is expected to grow by 8 percent over the period, with consumption of all other fuel inputs
declining: petroleum by 13 percent, purchased electricity by 8 percent, and coal by 2 percent.

As mentioned previously, the CEF and AEO 2006 projections do not include the two subsectors
of the chemicals industry that currently participate in EPA's Sector Strategies Program—paint
and coatings, and specialty-batch chemicals. In general, we would anticipate that increasing
economic production trends in these subsectors will drive a greater energy consumption
increase than is expected for the bulk chemicals subsector. For example, AEO 2006 projects
that bulk chemicals' value of shipments will grow 9 percent from  2004 to 2020, where the value
of shipments for all other segments of the chemical manufacturing industry will grow by 45
percent.

Environmental Implications
                  Figure 10: Chemical sector: energy-related CAP emissions
                   Chemicals Sector:
                   NB CAP Emissions
                   (Total: 1.5 million tons)
       Source: Draff 2002 NB
       * Includes emissions from unspecified sources; may include
       additional energy-related emissions.
                                                            Chemicals Sector:
                                                     Energy-Related CAP Emissions by Pollutant
                                                            (Total: 739,000 tons)
                                               Source: Draff 2002 NB
                                                  Effects of Energy-Related CAP Emissions

                                              S02 and NOX emissions contribute to respiratory illness
                                              and may cause lung damage. Emissions also
                                              contribute to acid rain, ground-level ozone, and
                                              reduced visibility.
Figure 10 compares NEI data on energy-
related CAP emissions with non-energy-
related CAP emissions for the chemicals
sector. According to the figure, energy-
related CAP emissions comprise
approximately half of all CAP emissions.
Although NEI data attribute emissions from
electric power generation to the generating
source rather than the purchasing entity, purchased electricity comprises a relatively small
fraction of total energy use for the chemicals industry, so NEI data provide a relatively complete
picture of the sector's energy-related CAP emissions. Energy-related CAP emissions are split
fairly evenly between sulfur dioxide and nitrogen oxides. (As noted in Section 2.3.3, NEI data on
carbon monoxide emissions appear higher than would be expected for stationary sources, so
we do not address carbon monoxide data in our assessment of CAP emissions for each sector.)
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                      Sector Energy Scenarios: Chemical Manufacturing
         Figure 11: Chemical sector: CAP emissions by source category and fuel usage
                   Chemicals Sector:
            Energy-Related CAP Emissions by Source
                   (Total: 739,000 tons)
             External
            Combustion
              Boilers
              61%
       Source: Draft 2002 NB
                              Industrial
                             Processes
                               33%
 Internal
Combustion
 Engines
                           Other
                           Chemicals Sector:
                     Energy-Related CAP Emissions by Fuel
                           (Total: 739,000 tons)
                                              Source: Draft 2002 NB
Figure 11  presents NEI data on the sources of energy-related CAP emissions. According to
NEI, 37 percent of the energy-related emissions shown in Figure 11 are from coal consumption,
26 percent are from natural gas, and 22 percent are from unknown sources. Most of the sector's
sulfur dioxide emissions stem from coal combustion, while nitrogen oxide emissions result from
combustion of all fuel types. As coal comprises 37 percent of energy-related CAP emissions but
less than 10 percent total fuel inputs for the chemical industry (see Table 26), NEI data
demonstrate the emissions intensity of coal as an energy source.

Though the largest fraction of energy-related CAP emissions are classified as stemming from
external combustion boilers according to NEI, emissions that are classified as "process-related"
are also substantial. NEI data classifications are problematic due to reporting inconsistencies,
as discussed previously. According to DOE, process heating and cooling systems represent
over 75 percent of the chemical manufacturing sector's energy consumption, including fired
systems such as furnaces and reboilers, steam systems, and cryogenic or other cooling units.
                                                       100
Though AEO 2006 projects a decline in energy consumption for the bulk chemicals subsector
that would reduce energy-related CAP emissions at the facility and to a smaller extent at the
utility level (from reductions in purchased electric power), we have previously noted that such
projections are unlikely to be applicable to all subsectors of the chemical manufacturing
industry, particularly sectors with faster-growing production like specialty-batch chemicals. In
these subsectors, increasing production is expected to dominate the energy consumption trend,
leading to increasing energy-related CAP emissions, primarily at the facility level. However, as
no fuel mix changes are expected for the industry, less emissions-intensive fuels will continue to
dominate consumption.

As NEI data do not  include carbon dioxide emissions, we use carbon dioxide emissions
estimates from AEO 2006, which totaled 343 million metric tons in 2004. For the bulk chemicals
subsector, carbon dioxide emissions are projected to fall by 2 percent by 2020. As is the case
for energy-related CAP emissions, these projections may not correlate with trends in faster-
growing subsectors of the chemical manufacturing industry.
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                           Sector Energy Scenarios: Chemical Manufacturing
3.3.2  Best Case Scenario

Opportunities
Table 28 ranks the viability of five primary opportunities for improving environmental
performance with respect to energy use (Low, Medium, or High). A brief assessment of the
ranking is also provided,  including potential barriers.

             Table 28: Opportunity assessment for the chemical manufacturing industry
Opportunity
Ranking
Assessment (including potential barriers)
Cleaner fuels        Medium          Coal represents a relatively small fraction of the sector's energy consumption, but it is an
                                   emissions-intensive energy source (as seen in NEI data). Though MECS data indicate that
                                   natural gas is the most viable substitute for coal use, natural gas price trends are unlikely
                                   to make this an attractive opportunity for the industry.

                                   A substantial fraction of the sector's energy needs are currently met by waste and
                                   byproduct fuels, and there are likely opportunities to increase use of alternate and waste
                                   fuels without compromising environmental quality (for example, in cases where using
                                   waste fuels for energy content reduces total energy consumption by combining energy
                                   generation and waste disposal processes). However, hazardous waste permitting
                                   requirements (for example, under  RCRA Subtitle C) may inhibit energy recovery from
                                   waste fuels.
Increased CHP
                   High
                 The chemicals industry meets a substantial portion of its electricity demand through onsite
                 power generation, primarily via cogenerating units that also produce steam. DOE notes
                 that particularly for organic chemical manufacturing, waste heat reduction and increased
                 waste heat recovery (including the use of waste energy streams in cogeneration)
                 represents a major opportunity for reducing energy losses.101

                 New CHP installations also face barriers in terms of utility rates and  interconnection
                 requirements if electricity production is expected to exceed onsite demand, and also from
                 NSR/PSD permitting.102
Equipment retrofit/
replacement
Medium          DOE notes that due to the substantial energy requirements for process heating, major
                 energy efficiency gains are achievable through retrofitting or replacing steam system
                 equipment (i.e., boilers, pipes, valves, traps, heat exchangers, and preheaters).103 The
                 American Council for an Energy Efficient Economy (ACEEE) noted that opportunities exist
                 to reduce water usage and increase energy efficiency by installing more efficient water
                 treatment technologies.104

                 The primary barriers to equipment changes are capital constraints, particularly in
                 segments of the industry that are hardest-hit by rising energy costs.
Process            Medium          Process optimization (e.g., waste reduction and improving process yields) is already
improvement                        widely practiced in the industry and likely has additional potential. Process improvement
                                   (i.e., using an alternative process or path to produce the same product) may require
                                   technological advances or a breakthrough in a new production process, and some areas
                                   of R&D offer potential for process improvement, such as catalysis as discussed below. For
                                   example, it is estimated that membrane separation in place of separation by distillation
                                   may save up to 40 percent of current energy requirements for separation of olefin/paraffin
                                   mixtures by 2020.105

                                   There are likely differences in the viability of process-related opportunities between bulk
                                   and batch chemical manufacturing, as batch production processes are typically prescribed
                                   by customer requirements. It may also be more difficult to make improvements on
                                   continually changing  process lines.
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                      Sector Energy Scenarios: Chemical Manufacturing
Opportunity
Ranking
Assessment (including potential barriers)
R&D            Medium        The chemical sector has developed mission statements and roadmaps for crucial R&D
                             priority efforts as part of its efforts with DOE/IOF; see
                             http://www.eere.enerav.gov/industrv/chemicals/. Energy-savings opportunities that
                             continue to be areas for industry research include membrane separation technologies;
                             improved process control systems, including adjustments to control flooding in distillation
                             columns; and process improvement through catalysis, which lowers the heat input
                             necessary to convert reactant species into products.

                             The sector also promotes research and funding into coal gasification due to its interest in
                             developing less expensive feedstock and fuel alternatives to natural gas. Gasification is
                             the first step in some coal-to-liquids (CTL) processes used to produce synthetic fuels
                             (syngas) from coal. Some of this fuel can be used as feedstock for chemical products, and
                             some can be used to power gas turbines, generating electricity and thermal energy with
                             substantially lower SOx, NOx, and particulate emissions than coal.
Optimal Future Trends
CEF's advanced energy scenario projects a 3.5 percent decrease in sector energy consumption
by 2020, compared with the 13 percent increase projected under the business-as-usual
scenario. As CEF does not assume any difference in the economic growth rate between the
base case and advanced case scenarios, the projected decrease in overall energy consumption
under the advanced scenario is driven by substantial increases in energy efficiency. According
to CEF, cogeneration is expected to play an important role in increasing energy efficiency in the
chemicals  sector. Currently, 51 percent of natural gas inputs for boiler fuel are consumed in
CHP/cogeneration processes and 49 percent are consumed in conventional boilers.106 An
optimal energy scenario increases the magnitude of the CHP fraction at the expense of the
conventional boiler fraction, boosting energy efficiency. Increased CHP would also reduce
purchased electricity consumption, as is evident from  the decline in the purchased electricity
category projected under CEF's advanced energy scenario.

Other energy efficiency improvements affecting CEF's advanced case projections include the
following:  increased boiler efficiency; steam system retrofits such as steam trap monitoring and
maintenance, insulation and condensate recovery; reduced  electricity consumption through
installation of energy-efficient motors, drives, fans, and compressors; and increased commercial
building efficiency. (Appendix A-2 of the CEF report contains detailed descriptions of CEF's
adjustment to the NEMS model in terms of expected rates of efficiency improvement for existing
equipment and implementation of new energy-efficient technologies under the advanced
scenario.)

The CEF advanced scenario summarized  in Table 29 projects a cleaner fuel mix by 2020, with
natural gas meeting a greater share of the sector's energy demand, and petroleum, coal, and
purchased electricity meeting a relatively smaller share. Consumption of all fuel types except
natural gas is expected to decline; natural  gas usage is projected to increase by 18 percent from
1997 to 2020, compared with a 9 percent increase under the base case scenario. As discussed
previously, increases in natural gas prices that have occurred since the CEF projections were
made call into question whether such outcomes could  realistically be achieved.
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                       Sector Energy Scenarios: Chemical Manufacturing
               Table 29: CEF advanced case projections for the chemicals industry
                                  1997 Advanced Case
                                                                 2020 Advanced Case

Petroleum
Natural gas
Coal
Delivered electricity
Total
Consumption
(quadrillion Bui) PPP
0.479
2.204
0.176
0.639
3.498
Percentage
14%
63%
5%
18%
100%
Consumption
(quadrillion Btu)
0.206
2.611
0.080
0.478
3.375
Annual % change in energy intensity (energy consumption per dollar value of output)
Percentage
6%
77%
2%
14%
100%
-1.2%
         Overall % change in energy use (1997-2020)
                                     -3.5%
Environmental Implications
At the facility level, CEF's advanced case projections indicate a moderate improvement in
energy-related CAP emissions under the advanced scenario through reduction in coal use.
However, petroleum use remains relatively unchanged and natural gas use increases. The
reduction in  purchased electricity would affect energy-related emissions at the utility level.
Emissions reductions associated with electric power generation would vary according to the
energy inputs employed by local power producers.

Under the advanced energy scenario, environmental benefits come from reduced emissions
due to the overall reduction in sector energy usage from 1997 levels. Under the advanced
energy scenario, CEF projects the chemicals industry to achieve a 24 percent reduction in 1997
carbon emissions levels by 2020. As seen with other CEF projections, reductions in the carbon
intensity of energy use are achieved both at the sector level through energy efficiency
improvement—for the chemicals sector, CHP will be a key driver of this trend—reductions in
emissions-intensive energy sources such as coal, and also through a cleaner fuel mix in offsite
electric power generation.

3.3.3  Other Reference Materials Consulted
3M. 2006. Improving Energy Efficiency. Internet source. Accessed 1 March 2006. Available at
http://solutions.3m.com/wps/portal/!ut/p/kcxml/04_Sj9SPykssyOxPLMnMzOvMOQ9KzYsPDdaPOI8yizelNzRx1C_lcFQEAGb_BG4
!.

American Chemistry Council. Guide to the Business of Chemistry. 2002.

American Chemistry Council. Testimony before the Energy and Mineral Resources Subcommittee on the Impact of High Energy
Costs on Consumers and Public. May 19, 2005. Available at
http://www.americanchemistry.com/s_acc/bin.asp?SID=1&DID=807&CID=206&VID=109&DOC=File.PDF#search='American%20
Chemistry%20Council%20number%20of%20facilities%20over%20time.

American Council for an Energy-Efficient Economy. The Integrated Approach: Case Studies. Internet source. Accessed 1 March,
2006. Available at http://aceee.org/p2/p2cases.htmttsandia.
    As is the case with several sectors addressed in the CEF analysis, there are slight differences between 1997 fuel
    consumption data in the reference and advanced cases. We could find no explanation for such differences in the CEF
    analysis, but it could be that CEF made modifications to the base year (1997) parameters under the advanced case as
    compared with the reference case.
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                           Sector Energy Scenarios: Chemical Manufacturing
Dow Chemical Company. Energy Efficiency and Conservation Efforts. Internet source. Accessed 1 March, 2006.

Dow Chemical Company. 2006. Increase Resource Productivity. Internet source. Accessed 1 March, 2006.

Gerard, Jack., American Chemistry Council. Testimony Before the Subcommittee on Energy & Mineral Resources, United States
House of Representatives, Legislative Hearing on the "Outer Continental Shelf Natural Gas Relief Act" Available at
http://www.americanchemistry.com/s_acc/bin.asp?CID=311&DID=1773&DOC=FILE.PDF.

Kelly, C., Hulse, L, and Wolfe, J. American Chemistry Council.  Comments of the American Chemistry Council on the Revisions
to the Definition of Solid Waste: Proposed Rule 68 Fed. Reg. 61558. October 28,2003. Available at
http://www.americanchemistry.com/s_acc/bin.asp?CID=414&DID=1451&DOC=FILE.PDF.

Khrushch,  M., Worrel, E., Price, L., Martin, N., and  Einstein, D. Ernest Orlando Lawrence Berkeley National Laboratory. Carbon
Emissions Reduction Potential in the U.S. Chemicals and Pulp and Paper Industries by Applying CHP Technologies. LBNL-
43739. 1999.

U.S. Department of Energy. Chemicals Project Fact Sheet: Distillation Column Flooding Predictor. Available at
http://www.eere.energy.gov/industry/chemicals/pdfs/dzyacky.pdf.

U.S. Department of Energy. 2006.  Chemicals Project Fact  Sheet: Distillation Column Modeling Tools. Available at
http://www.eere.energy.gov/industry/chemicals/pdfs/distillation.pdf.

U.S. Department of Energy. Separation of Olefin/Paraffin Mixtures With Carrier-Facilitated Transport Membranes. Available at
http://www.eere.energy.gov/industry/chemicals/pdfs/olefin_mixtures.pdf.

U.S. Department of Energy. Energy and Environmental Profile of the  U.S. Chemical Industry. 2000. Available at
http://www.eere.energy.gov/industry/chemicals/pdfs/profile_chap1.pdf.

U.S. Department of Labor, Bureau of Labor Statistics. Bulletin 2541', Chemical Manufacturing, Except Pharmaceutical and
Medicine Manufacturing. Internet source. Available at
http://www.umsl.edu/services/govdocs/ooh20042005/www.bls.gov/OCO/cg/print/cgs008.htm.

U.S. Environmental Protection Agency. New Source Review: Report to the President. 2002.

U.S. Environmental Protection Agency. National Emissions Inventory. 2002.
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                       Sector Energy Scenarios: Food Manufacturing
3.4   Food Manufacturing
3.4.1  Base Case Scenario
Situation Assessment
Food manufacturing (NAICS 311) is a multi-
.....    . ..   .  .  .   ..  . .     ,      ..    .  .        Current economic and energy consumption data are
billion dollar industry that transforms livestock       summgrized jn Tgb|e 3Q Qn9y   3.32P
and agricultural products into a diverse set of
  Recent Sector Trends Informing the Base Case

Value of shipments: t

Major fuel sources: Natural gas, electricity, coal
products for intermediate or final consumption
by humans (or by animals as animal feed). Within the NAICS, industry subsectors are
distinguished by the raw materials (generally of animal or vegetable origin) they process into
food products. The industry is highly diversified and dominated by large-scale, capital-intensive
firms, with more than 26,000 facilities across the United States.107 Agribusiness participates in
EPA's Sector Strategies Program.

From 1997 to 2004 the food manufacturing sector showed economic growth in terms of value
added and total value of shipments (see Table 30). Much of the industry's energy consumption
takes place in the East North Central and West North Central regions.108

While the food-processing sector is typically amongst the largest manufacturing energy
consumers in states where the industry is  located, and has the fifth-highest energy consumption
of the sectors considered in this analysis, its energy intensity is relatively low (see Table 16).
Still, energy is an  important input cost for the industry, typically ranking third along with capital in
terms of business costs; raw materials and labor are the dominant cost factors.

For food manufacturing, the most important fuels are  natural gas, purchased electricity, and
coal.109 According to DOE, approximately 9 percent of the industry's electricity demand  is met
with onsite power systems, with the majority of that electricity (95 percent) produced in
cogenerating units that also produce steam.110

The following eight subsectors consume approximately half of the total energy used by the food
manufacturing industry: wet corn  milling; beet sugar; soybean oil mills; malt beverages; meat
packing; canned fruits and vegetables; frozen fruits and vegetables; and bread, cake, and
related goods. It is estimated that 40 percent of the value of processed food is added through
energy-intensive manufacturing. Process heating and cooling systems (steam systems, ovens,
furnaces, and refrigeration units) have the greatest energy requirements in food manufacturing
(over 75 percent of the sector's energy use)  and are necessary to maintain food safety. Motor-
driven systems (pumps, fans, conveyors, mixers, grinders, and other process equipment)
represent 12 percent of the sector's energy use, and facility functions (heat,  ventilation, lighting,
etc.) comprise approximately 8 percent.111 The sector also has the largest transportation
demand of the sectors considered in this analysis, comprising more than 20 percent of the
manufactured commodity shipping ton-miles recorded by DOT in  2002 (see Table 11).112

Recent fuel consumption trends (1998 to 2002) show increased coal usage, which  may indicate
that some companies are increasing coal consumption in response to increases in  the price of
natural gas.113 (For a detailed discussion of fuel-switching and the limitations thereof, please see
Section  2.2.3.) Rising energy costs are a motivator for increased energy efficiency  in the food
manufacturing industry. Energy ranks third among input costs, behind raw materials and labor,
but is often viewed as a fixed cost. The industry may have substantial potential for energy
efficiency improvement, as historically it has not taken a strategic approach to energy
management, and firms often lack awareness of energy efficiency opportunities. Moreover, the
margins in the food manufacturing industry are relatively thin compared  to other manufacturing
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                         Sector Energy Scenarios: Food Manufacturing
and processing industries; thus, the sector may be typically slower to adopt technologies and
processes that require significant capital outlays.

To  provide more information to the sector, a Food Industry Resource Efficiency team (FIRE)
developed an energy portal for food processors through the State Technologies Advancement
Collaborative (STAC) program, administered by the National Association of State Energy
Officials for DOE. Other organizations, such as Efficiency Vermont and the Northwest Alliance,
work toward assisting specific commodity processors in their regions with improving energy
efficiency. This regional approach recognizes that food production and processing tends to be
geographically distinctive: wine processing in northern California,  dairy in Wisconsin, and so
forth.

Table 30 summarizes current economic trend and energy consumption data originally presented
in Chapter 2.

        Table 30: Current economic and energy data for the food manufacturing industry
Economic Production Trends

Annual Change in
Value Added
1997-2004
2.5%
Annual Change in
Value Added
2000-2004
2.5%
Annual Change in
Value of Shipments
1997-2004
0.8%
Annual Change in
Value of Shipments
2000-2004
1.8%
Energy Intensity in 2002


Energy
Consumption per
Dollar of Value
Added
(thousand Btu)
6.0
Energy
Consumption per
Dollar Value of
Shipments
(thousand Btu)
2.6
Energy Cost per
Dollar of Value
Added
(share)
3.3%
Energy Cost per
Dollar Value of
Shipments
(share)
1.5%
                      Primary Fuel Inputs as Fraction of Total Energy Supply in 2002 (fuel use only)
Natural Gas
52%
Net Electricity
21%
Coal
17%
Other™
8%
Fuel Oil
3%
                           Fuel-Switching Potential in 2002: Natural Gas to Alternate Fuels
                                            Switchable fraction of natural gas inputs
                                                                          28%


Fraction of natural gas inputs that could be
met by alternate fuels
Fuel Oil
71%
LPG
41%
Electricity
13%
                             Fuel-Switching Potential in 2002: Coal to Alternate Fuels
                                                Switchable fraction of coal inputs
                                                                          20%


Fraction of coal inputs that could be met by
alternate fuels
Natural Gas
83%
LPG
19%
Fuel Oil
13%
    "Other" fuels include waste materials used as fuel.
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                       Sector Energy Scenarios: Food Manufacturing
Expected Future Trends
In the United States, increasing demand for fresh processed foods by individual consumers and
by HRI (hotel, restaurant, institutional) customers has increased energy consumption by the
food manufacturing industry. Demographically, the increase in two-earner couples, increased
disposable income, and an aging population are all pushing the system to deliver more ready-
to-eat or fast-prepared foods. Additionally, if the next wave of food consumption entails more
fresh foods, particularly more fruits and vegetables, energy utilization may increase, since
reducing spoilage will require even more sophisticated and possible lengthy supply chains, cold-
chain accuracy, hot house expansions, etc. AGF projects continued  economic growth for the
food manufacturing industry through 2020 due to increases in population and disposable
income, and the fact that foreign competition is less of a limiting factor than it is for other
industries.114

Under its reference scenario, CEF projects that energy consumption by the food manufacturing
sector will increase by 19 percent from 1997 to 2020,  primarily driven by continued economic
growth in the sector (the value of industry output is assumed to increase at the rate of 1.2
percent per year). Energy intensity (energy consumption per dollar value of output) is expected
to decrease at the slow rate of 0.5 percent per year. Consumption of all fuel types is projected to
increase. No large-scale changes in the sector's fuel mix are projected, though the projected
minor shift from natural gas to petroleum may be unlikely given the increases in the price of oil
that have occurred since the CEF study was published. The sector will continue to remain
dependent on natural gas. Supporting CEF projections, AGF predicts that overall natural gas
consumption by the food manufacturing industry will increase at 0.4  percent annually through
2020.  "
115
Table 31 summarizes the CEF base case projection for the food manufacturing sector. The
small renewables fraction is primarily attributable to the use of bio-waste as fuel.

         Table 31: CEF reference case projections for the food manufacturing industry

Petroleum
Natural gas
Coal
Renewables
Delivered electricity
Total

Consumption
(quadrillion Btu)
0.209
0.625
0.183
0.014
0.208
1.239
Percentage
17%
50%
15%
1%
17%
100%

Consumption
(quadrillion Btu)
0.272
0.701
0.228
0.020
0.251
1.472
Annual % change in energy intensity (energy consumption per dollar value of output)
Percentage
18%
48%
15%
1%
17%
100%
-0.5%
        Overall % change in energy use (1997-2020)
                                                                       19%
In an effort to assess the impact of recent trends that may have affected industry energy
consumption since the CEF report was produced, we also examined reference case energy
consumption projections for the food manufacturing sector produced in connection with ElA's
Annual Energy Outlook 2006 (AEO 2006), which also uses the NEMS model but incorporates
more recent energy and economic data.
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                        Sector Energy Scenarios: Food Manufacturing
AEO 2006 projects faster growth in the industry's value of shipments than CEF (2 percent per
year) and a similar rate of decrease in energy intensity (0.6 percent per year). Overall, AEO
2006 projects that sector energy consumption will increase 24 percent from 2004 levels by
2020. The industry's energy needs will continue to be met by natural gas (54 percent of total
energy inputs in 2020), purchased electricity (22 percent), and coal (17 percent). Consumption
of all fuels is projected to increase, with the exception of petroleum, which is expected to decline
by 6 percent over the period. The largest percentage increases in fuel consumption are for
renewables (43 percent increase from 2004 to 2020), natural gas (30 percent increase), and
purchased electricity (24 percent increase).

Environmental Implications
              Figure 12: Food manufacturing sector: energy-related CAP emissions
                Food Processing Sector:
                  NEI CAP Emissions
                  (Total: 395,000 tons)
     Source: Draff 2002 NB
     * Includes emissions from unspecified sources; may include
     additional energy-related emissions.
                                                              Food Processing Sector:
                                                         Energy-Related CAP Emissions by Pollutant
                                                                (Total: 248,000 tons)

                                                                SO2
                                                                37%
                                                   Source: Draff 2002 NB
NOX
29%
                                                         Effects of Energy-Related CAP Emissions

                                                     S02 and NOX emissions contribute to respiratory illness
                                                     and may cause lung damage. Emissions also
                                                     contribute to acid rain, ground-level ozone, and
                                                     reduced visibility.
Figure 12 compares NEI data on energy-related
CAP emissions with non-energy-related CAP
emissions for the food manufacturing sector.
According to the figure, energy-related CAP
emissions comprise a relatively large fraction of
total CAP emissions, in part due to the sector's
substantial process heating and cooling
requirements. According to MECS data (see Table 30), purchased electricity (net) meets
roughly 20 percent of the sector's energy needs. As NEI data attribute emissions associated
with electric power generation to the generating source rather than the purchasing entity, there
are substantial energy-related CAP  emissions that are not represented in NEI data for this
sector.
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                       Sector Energy Scenarios: Food Manufacturing
    Figure 13: Food manufacturing sector: CAP emissions by source category and fuel usage
               Food Processing Sector:
          Energy-Related CAP Emissions by Source
                 (Total: 248,000 tons)
                              Industrial
                            r Processes
                            I   304   Internal
                                  Combustion
                                    [Engines
                                     3%
                               Stationary
                               Source Fuel
                               Combustion
                           Other   <1%
    Source: Draft 2002 NEI
                  Food Processing Sector:
             Energy-Related CAP Emissions by Fuel
                   (Total: 248,000 tons)
                                                                       Biomass
                                Residual Oil
                          / \  ~  5%

                       All Others \
                                                 Source: Draft 2002 NB
                                                                    3%
                               Distillate Oil
                                 2%
Figure 13 presents NEI data on the sources of energy-related CAP emissions shown in Figure
12. NEI data classify the majority of energy-related CAP emissions as produced by external
combustion boilers. As noted previously, NEI data classifications are problematic due to
reporting inconsistencies, but equipment classified under "external combustion boilers" likely
includes steam systems used for process heating. Segments of the food manufacturing industry
with high boiler usage include sugar, malt beverages, corn milling, and meat packing. As noted
previously,  more than 75 percent of the sector's energy requirements are for process heating
and cooling systems, which, according to DOE classifications include steam systems, fired
systems, and cooling units. Motor-driven systems are another substantial end use of energy'
but are primarily electric so associated emissions would not be captured in NEI.
                                          ,116
According to NEI data shown in Figure 14, 52 percent of the sector's energy-related CAP
emissions are from coal consumption, and 19 percent are from natural gas consumption. The
emissions intensity of coal is evident from this figure, as MECS data (see Table 30) report that
coal comprises approximately 16 percent of the sector's energy inputs compared with more than
50 percent for natural gas. Sulfur dioxide and nitrogen oxides (both linked to coal combustion),
are fairly equal  contributors to energy-related CAP emissions for the food manufacturing
industry. (As noted in Section 2.3.3, NEI data on carbon monoxide emissions appear higher
than would be expected for stationary sources, so we do not address carbon monoxide data in
our assessment of CAP emissions for each sector.) Given AEO 2006 and CEF reference case
projections of increasing energy consumption through 2020, energy-related CAP emissions are
expected to increase as well, with the majority of energy-related CAP emissions continuing to
occur at the facility level.

As NEI data do not include carbon dioxide emissions, we use carbon dioxide emissions
estimates from  AEO 2006, which totaled 92 million metric tons for the food manufacturing sector
in 2004. AEO 2006 projects that the industry's carbon dioxide emissions will increase 19
percent from 2004 to 2020—a somewhat smaller increase than the projected growth in energy
consumption (24 percent). Though we do not address transportation energy use in detail in this
analysis, the sector also has extensive freight shipping needs.
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                       Sector Energy Scenarios: Food Manufacturing
3.4.2  Best Case Scenario

Opportunities
Table 32 ranks the viability of five primary opportunities for improving environmental
performance with respect to energy use (Low, Medium, or High). A brief assessment of the
ranking is also provided, including potential barriers.

             Table 32: Opportunity assessment for the food manufacturing industry
Opportunity
Cleaner fuels
Increased CHP
Equipment retrofit/
replacement
Process
improvement
R&D
Ranking
Medium
High
Medium
High
Medium
Assessment (including potential barriers)
There is potential for increased switching to waste fuels (such as used vegetable oil
that can be reused as boiler fuel) and reduced use of coal as boiler fuel. Limitations on
this opportunity are imposed by technical constraints (type of boiler and burners in
place) and economic constraints (relative price of coal versus less emissions-intensive
fuels). Permitting considerations (NSR/PSD) may also affect fuel-switching.
CEF cites increased cogeneration as the greatest energy efficiency opportunity for the
sector. One area of opportunity is increased use of waste heat (e.g., using boiler flue
gases in CHP processes,117 or from refrigeration processes, where heat from engines
used to drive compressors can be used to preheat water or for space heating at the
plant).
New CHP installations also face barriers in terms of utility rates and interconnection
requirements if electricity production is expected to exceed onsite demand, and also
from NSR/PSD permitting.118
Energy efficiency gains are achievable through retrofits or replacement of existing
equipment with more efficient new models, particularly in steam systems since these
systems have the largest energy requirements and associated energy losses.
Equipment-related opportunities noted by DOE include replacing steam systems with
direct-fired drying equipment (impulse drying, infrared drying, and press drying).119
Other areas for steam system retrofits or equipment replacement include boilers,
pipes, valves, traps, heat exchangers, and preheaters.
Process improvement opportunities include changes in operating techniques to
implement best energy management practices, optimizing energy consumption in
scheduling processing activities, wastewater reuse, and conversion and/or sale of
byproducts. For example, while dehydration systems were originally designed for
maximum product throughput, newer systems include recirculating dampers.
ACEEE has made several recommendations for the food products industry including
industry practices such as pasteurization and sterilization by cold pasteurization and
electron beam sterilization; evaporation and concentration by supercritical extraction
and protein separation, drying by vapor recompression supercritical extraction; and
chilling, cooling, and refrigeration by controlled atmosphere packaging.
In some cases, process changes must be reviewed, certified, and approved by USDA,
Food and Drug Administration, or other regulatory agencies; the added cost of this
regulatory review may serve as a barrier to efficiency improvement.
A recent LBNL study notes that membrane technologies can reduce energy
requirements associated with traditional filtration, separation, and evaporation
processes, and also increase byproduct recovery.120 Advanced cooling and
refrigeration processes also offer potential energy savings, though it is important to
note that many larger plants already use ammonia refrigeration systems, which are
quite efficient and provide the multiple refrigeration temperatures often required in food
manufacturing plants. In addition to membrane technologies and refrigerants, there is
also continued research and progress on uses of byproducts, byproduct reduction,
analytical methods, sanitizing and cleaning agents and procedures, wastewater
treatment technologies, and packaging technologies.
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                        Sector Energy Scenarios: Food Manufacturing
Optimal Future Trends
CEF's advanced energy scenario projects a smaller increase in sector energy consumption (8
percent from 1997 to 2020) than under the business-as-usual scenario (19 percent increase).
According to CEF, cogeneration is expected to play an important role in increasing energy
efficiency in the food manufacturing sector, contributing to a faster decrease in energy intensity
(decline of 0.9 percent per year) than was projected in the reference case (decline of 0.5
percent per year). The effects of increased CHP may also be evident through a slight decline in
purchased electricity (1 percent) in the advanced case, despite the overall trend of increasing
energy consumption. Over the same period, consumption of natural gas and petroleum is
expected to increase by 14 percent and 15 percent, respectively, and coal use is expected to
decline by 16 percent. CEF's advanced case employs the AEO 1999 HiTech case assumptions
concerning rates of deployment of energy-efficient equipment, and also assumes increased
energy efficiency for boilers and commercial buildings.

CEF's advanced case projections are  summarized  in Table 33.

         Table 33: CEF advanced case projections  for the food manufacturing  industry
                                1997 Advanced Case
                                                             2020 Advanced Case

Petroleum
Natural gas
Coal
Renewables
Delivered electricity
Total
Consumption
(quadrillion Bui) ln
0.210
0.630
0.184
0.014
0.208
1.246
Percentage
17%
51%
15%
1%
17%
100%
Consumption
(quadrillion Btu)
0.242
0.718
0.155
0.022
0.206
1.343
Annual % change in energy intensity (energy consumption per dollar value of output)
Percentage
18%
53%
12%
2%
15%
100%
-0.9%
        Overall % change in energy use (1997-2020)
Environmental Implications
Under the advanced energy scenario, CEF projects a smaller increase in sector energy
consumption than under its reference case, which is a net gain in terms of energy-related CAP
emissions. The advanced case also predicts a shift from coal to natural gas that does not occur
under the reference case, which would lead to lower CAP emissions at the facility level than are
expected under the business-as-usual conditions—particularly sulfur dioxide and nitrogen
oxides.

Despite the overall increase in sector energy consumption, under the advanced energy
scenario, CEF projects the food manufacturing industry to achieve an 11 percent reduction in
carbon emissions levels by 2020.  Projected carbon emissions reductions are attributable to
efficiency gains from increased CHP and reductions in purchased electricity (which is
rrr  As is the case with several sectors addressed in the CEF analysis, there are slight differences between 1997 fuel
   consumption data in the reference and advanced cases. We could find no explanation for such differences in the CEF
   analysis, but it could be that CEF made modifications to the base year (1997) parameters under the advanced case as
   compared with the reference case.
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                          Sector Energy Scenarios: Food Manufacturing
associated with substantial energy losses, as discussed previously), and reductions in the use
of carbon-intensive energy sources such as coal. However, replacing purchased electricity with
petroleum and natural gas will also have the effect of shifting energy-related CAP and carbon
emissions from the utility level to the facility level. The location of carbon emissions is not
important from a climate perspective. However, energy trends that are environmentally
preferable from a climate perspective may also lead to less-than-optimal trends for facility
emissions of criteria air pollutants.

3.4.3  Other Reference Materials Consulted
American Council for an Energy-Efficient Economy. Energy Usage in the Food Industry. October 1998. Available at
http://www.aceee.org/pubs/ie981.htm.

Northwest Food Processors Association. Efficiency Practices Fact Sheets and Reports. Available at
http://www.nwfpa.org/eweb/DynamicPage.aspx?site=energy&webcode=lower&wps_key=dab74ed3-b4ba-4b51-96ff-
e39c311019e2.

Northwest Food Processors Association. Energy Portal for Food Processors. Available at
http://www.nwfpa.org/eweb/startpage.aspx?site=Energy&design=no.

U.S. Department of Energy. Technology Roadmap: Energy Loss Reduction and Recovery in Industrial Energy Systems.
November 2004. Available at http://www.eere.energy.gov/industry/energy_systems/pdfs/reduction_roadmap.pdf.

U.S. Environmental Protection Agency. National Emissions Inventory. 2002.
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                         Sector Energy Scenarios: Forest Products
3.5   Forest Products
                                                 Recent Sector Trends Informing the Base Case
3.5.1  Base Case Scenario
Situation Assessment
Forest products manufacturing (NAICS 321 and
322) includes companies that grow, harvest, or
process wood and wood fiber for use in
products such as paper, lumber, board
products, fuels, and many other specialty
materials. The forest products sector can be       Current economic and energy consumption data are
 ........       .     .    .    ,,x   .           summarized in Tab e 34 (pup & paper) and Tab e 35
divided into two major categories: (1) pup,         (wood products) beginning on page 3-41.
paper, and paperboard  products; and (2)
Number of facilities: -i-
Pulp and paper value of shipments: -i-
Wood products value of shipments: t
Energy intensity: -i-

Major fuel sources: Wood biomass, black liquor,
natural gas, & electricity
engineered and traditional wood products. As
reported by DOE's Industrial Technologies Program (ITP), there are more than 4,600 pulp and
paper facilities and 11,600 lumber and wood products facilities,121 typically located near wood
sources to minimize transportation costs. While the industry has operations in all 50 states,
Wisconsin, California, and Georgia are the nation's top three producers of forest products.122
The forest products industry participates in EPA's Sector Strategies Program.

From 1997 to 2004 the pulp and paper industry showed a decline in value added and value of
shipments, and the wood products industry showed slow growth in both metrics (see Table 34
and Table 35). The primary  economic pressure on the U.S. forest products industry is from
foreign competition, both from its historical competitors such as Canada, Scandinavia, and
Japan, and from countries with emerging industries such as Brazil, Chile, and Indonesia.123
Over the past 10 years, DOE/ITP reports that many forest product companies have been forced
to close or idle a large number of mills to reduce costs and  remain competitive.

The forest products sector has several unique energy consumption attributes that distinguish it
from other manufacturing sectors. More than half of the sector's energy needs are met with
renewable biomass fuels that are byproducts of the manufacturing process, and which facilities
burn in boilers to generate steam and electricity.124 Renewable byproduct fuels are primarily
spent pulping liquors (chemicals and other burnable substances dissolved from wood in the
pulping process) and "hogged fuel" (logging and wood processing waste such as bark and other
wood residuals).125 The forest products industry is the largest user of wood byproduct fuels,
representing 93 percent of total wood fuel usage  by U.S. manufacturing industries.126 According
to energy data reported by AF&PA in 2002, spent pulping liquors met more than 40 percent of
pulp and paper manufacturing energy requirements, and wood waste met around 15 percent.
For wood products manufacturers, wood waste met more than 65 percent of total energy
requirements.127 (These fractions are slightly higher than MEGS' estimates of "other" fuel use
fractions for the sectors in 2002, which may in part be attributable to differences in the data
collection methodologies employed by the two sources.) Trees remove carbon from the
atmosphere as they grow, and thus from a lifecycle perspective, consumption of wood
byproduct fuels represents an almost carbon neutral energy source. (There is some energy
consumption associated with harvesting and transporting biomass, and accounting for such
energy use means that  it is not entirely carbon neutral).  At the same time, the forest products
industry has the third-highest fossil fuel consumption among manufacturing industries,128 so
further reducing fossil fuel inputs represents both a cost savings and an environmental
improvement opportunity for the sector.

The other characteristic that distinguishes energy consumption by the forest products industry
from that of other manufacturing industries is the extent to which combined heat and power
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                         Sector Energy Scenarios: Forest Products
(CHP) applications are used to meet demand for electric and thermal energy. As discussed
previously, CHP (also referred to as cogeneration) is considered an environmentally preferable
generating technology because the simultaneous production of thermal and electric energy is
more efficient than electric-only generating processes, and onsite electricity production
eliminates the energy losses associated with long-distance transmission and distribution of
electric power over the grid. The forest products sector is the largest cogenerator among U.S.
manufacturing industries, with more than 65 of the industry's electricity needs are being met
through cogeneration processes.129 Thermal  energy (primarily steam) is used for process
heating, evaporation, and drying, as well as to power equipment such as saws and conveyors.
Electricity is primarily used to power process equipment.130

Energy use by the industry is dispersed geographically but is highest in the East North Central,
West North Central, and West South Central regions.131 Pulp and paper manufacturing
accounted for 86 percent of the energy used  in 2002, while wood products manufacturing
accounted for the remaining 14 percent.132 The majority (81 percent) of the sector's energy
requirements are for process heating and cooling systems, particularly those used for drying
and evaporation.133

Due to competitive pressures and the energy-intensive nature of its manufacturing  processes,
the forest products industry is highly motivated to control the costs of purchased energy.
According to DOE, long-term reductions in energy intensity have been achieved primarily
through process efficiency  improvements and addition of CHP capacity.134 To address the
impact of rising energy costs in the 1990s, the sector made comprehensive energy efficiency
investments, increased  burning of wood waste to produce energy, and reduced petroleum
inputs in  favor of natural gas. From 1998 to 2002, the energy intensity of the wood products
sector declined by 29 percent, and the energy intensity of the pulp and paper sector declined by
19 percent.135 Available energy consumption data precede energy price increases that have
occurred since 2002. AF&PA indicates that further energy intensity reductions have resulted
from recent energy price increases, primarily through the closure of inefficient mills. Since 2002,
the industry has sought to control energy costs through increased utilization of waste streams
for energy content (spent pulping liquors and wood residuals),136 and achieved energy
consumption reductions through installation of variable speed motors and more energy-efficient
lighting.137

Environmental compliance also represents a substantial cost for the  industry. DOE reports that
from 1997 to 2002, 14 percent of annual capital equipment expenditures were dedicated to
environmental protection measures, at an industry-wide cost of $800 million per year.138 The
intersection between environmental compliance  and energy consumption  may involve trade-
offs. For  instance, according to AF&PA, natural gas consumption by the wood products industry
has increased due to environmental regulations that require the installation of regenerative
thermal oxidizers (RTOs), and the new Plywood MACT is expected to require additional RTO
installations by 2008.139

Table 34 and Table 35 summarize current economic trend and energy consumption data
originally presented in Chapter 2.
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                                Sector Energy Scenarios: Forest Products
             Table 34: Current economic and energy data for the pulp and paper industry
                                              Economic Production Trends

Annual Change in
Value Added
1997-2004
-1 .2%
Annual Change in
Value Added
2000-2004
-3.6%
Annual Change in
Value of Shipments
1997-2004
-1 .6%
Annual Change in
Value of Shipments
2000-2004
-4.0%
                                                Energy Intensity in 2002



Energy Energy
Consumption per Consumption per Energy Cost per Energy Cost per
Dollar of Value Dollar Value of Dollar of Value Dollar Value of
Added
(thousand Btu)
31.1
Shipments
(thousand Btu)
15.2
Added
(share)
8.8%
Shipments
(share)
4.3%
                           Primary Fuel Inputs as Fraction of Total Energy Supply in 2002 (fuel use only)
                Other (Primarily
                 Biomass)
Natural Gas
                    Coal
                                  Net Electricity
                                                      Fuel Oil
54%
21%
10%
9%
5%
                                 Fuel-Switching Potential in 2002: Natural Gas to Alternate Fuels
Switchable fraction of natural gas inputs

Fuel Oil
Fraction of natural gas inputs that could be 80%
met by alternate fuels
Electricity
16%
32%
LPG
9%
                                   Fuel-Switching Potential in 2002: Coal to Alternate Fuels
                                                          Switchable fraction of coal inputs
                                                                                          23%


Fuel Oil
Fraction of coal inputs that could be met by 66%
alternate fuels
Natural Gas
57%
Electricity
10%
    For pulp and paper manufacturing, biomass fuels categorized as "other" fuels in MECS include spent pulping liquor
    (approximately 70% of the "other" category) and wood residues and byproducts (approximately 27% of the "other"
    category).
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                             Sector Energy Scenarios: Forest Products
            Table 35: Current economic and energy data for the wood products industry
                                         Economic Production Trends

Annual Change in
Value Added
1997-2004
1.8%
Annual Change in
Value Added
2000-2004
2.5%
Annual Change in
Value of Shipments
1997-2004
0.3%
Annual Change in
Value of Shipments
2000-2004
0.2%
                                           Energy Intensity in 2002


Energy
Consumption per
Dollar of Value
Added
(thousand Btu)
10.6
Energy
Consumption per Energy Cost per
Dollar Value of Dollar of Value
Shipments
(thousand Btu)
4.2
Added
(share)
4.7%
Energy Cost per
Dollar Value of
Shipments
(share)
1.9%
                         Primary Fuel Inputs as Fraction of Total Energy Supply in 2002 (fuel use only)
Other (Primarily
Biomass)1"
61%
Net Electricity
19%
Natural Gas
15%
Fuel Oil
3%
LPG&NGL
1%
                             Fuel-Switching Potential in 2002: Natural Gas to Alternate Fuels


Switchable fraction of natural gas inputs
Fuel Oil
Fraction of natural gas inputs that could be 36%
met by alternate fuels
LPG
36%
20%
Other
27%
Expected Future Trends
The forest products industry will continue
to seek to control energy costs in an
effort to maintain  its competitive position
in the global market, and the industry
views increased biomass utilization as a
key tool for  achieving that objective. At
the same time,  several factors have the
potential to  increase energy demand:

   •  Increased facility energy use
      resulting from stricter pollution
      control requirements and
      increased facility automation.

   •  Reductions in timber acreage lead
      to increased harvesting of sub-
      optimal timber that requires more
      energy-intensive processing.
CEF does not address the wood
products sector, but since the pulp and
paper industry has substantially greater
               Voluntary Commitments

Through Climate VISION, the American Forest & Paper
Association has committed to reducing the industry's GHG
intensity by 12 percent between 2000 and 2012. Specific
initiatives include improving carbon emissions inventories and
reporting, enhancing carbon sequestration in managed forests
and products, and increasing energy efficiency, cogeneration,
use of renewable energy, and recycling. See
http://www.climatevision.gov/sectors/forest/index.html.

The forest products sector also participates in DOE's Industries
of the Future (IOF)/lndustrial Technologies Program (ITP) as an
"Energy Intensive Industry." ITP's goals for all energy intensive
sectors include the following:

•   Between 2002 and 2020, contribute to a 30 percent
    decrease in energy intensity.
•   Between 2002 and 2010, commercialize more than 10
    industrial energy efficiency technologies through research,
    development & demonstration (RD&D) partnerships.

See http://www.eere.enerav.gov/industrv/forest/.
    For wood products manufacturing, biomass fuels categorized as "other" fuels in MECS are primarily wood waste.
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                         Sector Energy Scenarios: Forest Products
energy requirements, it is appropriate to focus our future scenario assessments on this subset
of the forest products industry. The pulp and paper industry is also one of the three sectors
(along with cement and steel) for which CEF made detailed parameter modifications to the
NEMS model used to produce AEO 1999. Modifications included adjustments to baseline
energy intensities and rates for annual improvements in energy intensity, which were adjusted
to reflect best-available sector-specific research. It is important to note that the CEF analysis
predates the energy price increases of 2004 and 2005 that have shifted the industry towards
even greater use of biomass as an energy source (spent pulping liquor and wood waste), and
toward lower energy intensity through the closure of older, less efficient manufacturing facilities.

Under the reference case scenario, CEF projects that the pulp and paper industry's energy
consumption will continue to be dominated by renewable fuels (primarily biomass) and natural
gas, though renewable energy sources will grow at the expense of natural gas, coal, and
petroleum as the industry continues to reduce its demand for purchased fuels. Economic energy
intensity (energy consumption per dollar value of output) is expected to  decrease at the rate of
0.9 percent per year, and physical energy intensity (energy consumption per ton of production)
is projected to decrease at  the annual rate of 0.5 percent per year. Economic production is
projected to grow at the rate of 1.2 percent per year.

CEF's assumptions about production growth in the pulp and paper sector drive the expected
increase in energy consumption despite the trend of decreasing energy intensity. CEF
projections are also based  on the assumption that Kraft/sulfite pulping will increase from an 83.7
percent market share in 1994 to an 88.7 percent market share by 2020, with mechanical pulping
dropping from 9.6 percent to 5.7 percent, and semi-chemical pulping dropping from 6.7 percent
to 5.6 percent. Energy efficiency improvements embedded in CEF's reference case projections
include an anticipated decline in energy consumption for raw materials preparation, an increase
in heat recovery from mechanical pulping processes, slow penetration of energy-efficient
grinding technologies, and  reduced heat requirements for the papermaking process due to full
commercialization of the CondeBelt process by 2020. (Appendix A-2 of  the CEF report contains
detailed descriptions of CEF's adjustment to the NEMS model in terms of expected rates of
efficiency improvement for  existing equipment and implementation of new energy-efficient
technologies under the business-as-usual scenario.)

CEF reference case projections are summarized in Table 36.

           Table 36: CEF reference case projections for the pulp and paper industry

Petroleum
Natural gas
Coal
Renewables
Delivered electricity
Total
1997 Reference Case
Consumption
(quadrillion Btu)
0.122
0.672
0.394
1.483
0.258
2.929
Percentage
4%
23%
13%
51%
9%
100%
2020 Reference Case
Consumption
(quadrillion Btu)
0.096
0.427
0.269
1.997
0.274
3.063
Annual % change in economic energy intensity (energy consumption per dollar value of output)
Percentage
3%
14%
9%
65%
9%
100%
-0.9%
        Overall % change in energy consumption (1997-2020)
                                   5%
U.S. Environmental Protection Agency
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                         Sector Energy Scenarios: Forest Products
CEF's assumption of increasing economic production may be inconsistent with current industry
realities given that key economic indicators for the industry—value added and value of
shipments—have declined since 1997 (-1.2 percent per year and -1.6 percent per year,
respectively). If economic production remains flat or declines further, sector energy consumption
would be expected to decrease given expected energy efficiency improvements.

In an effort to assess the impact of recent trends that may have affected industry energy
consumption  since the CEF report was produced, we also examined reference case energy
consumption  projections for the pulp and paper industry produced in connection with ElA's
Annual Energy Outlook 2006 (AEO 2006), which also uses the NEMS model  but incorporates
more recent energy and economic data. However, AEO 2006 also projects production to grow
(increasing at 1.1 percent per year), albeit at a slightly slower rate than projected by CEF, which
drives an expected increase in energy consumption of 12 percent over the  period. AEO 2006
projects a decrease in energy intensity of 0.5 percent per year. Consumption  of renewable fuels
is expected to grow by 20 percent over the period, meeting the majority of the sector's energy
consumption  increase. Petroleum consumption is projected to decline, and coal consumption is
projected to remain static. CEF and AEO projections of increased reliance on renewable
biomass fuels are in line with AF&PA expectations, though according to AF&PA data, the pulp
and paper industry already meets 60 percent of its energy needs with biomass.140

Continued energy pricing pressures are expected to drive increased utilization of biomass
resources as  an energy source. At the same time, increased yield and process efficiency
reduces the availability of biomass byproducts for energy consumption purposes.141 The
industry is also concerned about increasing demand for biomass that would drive up the cost of
the industry's raw material, in part due to government policies that broadly encourage the use of
biomass as fuel—for instance, by renewable power generators.142

Environmental Implications
               Figure 14: Forest products sector: energy-related CAP emissions
                  Pulp & Paper Sector:
                   NB CAP Emissions
                   (Total: 1.2 million tons)
      Source: Draff 2002 NB
      * Includes emissions from unspecified sources; may include
      additional energy-related emissions.
                Pulp & Paper Sector:
         Energy-Related CAP Emissions by Pollutant
                (Total: 721,000 tons)

                    VOC
                    3%
    Source: Draff 2002 NB
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                          Sector Energy Scenarios: Forest Products
                  Wood Products Sector:
                   NB CAP Emissions
                   (Total: 515,000 tons)
       Source: Draft 2002 NB
       * Includes emissions from unspecified sources; may include
       additional energy-related emissions.
                                                           Wood Products Sector:
                                                     Energy-Related CAP Emissions by Pollutant
                                                            (Total: 408,000 tons)
                                                              VOC
                                               Source: Draft 2002 NB
                                                      Effects of Energy-Related CAP Emissions

                                                   S02 and NOX emissions contribute to respiratory illness
                                                   and may cause lung damage. Emissions also
                                                   contribute to acid rain, ground-level ozone, and
                                                   reduced visibility.
Figure 14 compares NEI data on energy-related CAP emissions with non-energy-related CAP
emissions for the two subsectors of the forest products industry: pulp and paper, and wood
products. The forest products sector's fraction of
energy-related CAP emissions (as a percentage
of total CAP emissions) is higher than that of
many other sectors included  in this analysis. This
is in large part due to the extent to which the
sector meets its own electric  and thermal energy
requirements through onsite power generation,
with extensive use of relatively more energy-
efficient CHP applications. (As discussed previously, onsite power generation also reduces the
magnitude of energy losses that occur in power transmission and distribution.) Substantial
process heating requirements in both sectors also contribute to the magnitude of the energy-
related CAP fraction.

The substantial fraction of ammonia  (NH3) emissions shown for the wood products industry is
the result of an NEI data reporting error: 225,000 TPY of ammonia emissions reported in NEI
are from a single facility and are believed to be incorrectly reported or misclassified as energy
related. After correcting for this error by eliminating that data  point, total energy-related CAP
emissions for the wood products industry are approximately 180,000 TPY (as reported in Table
13, Section 2.3.3), and the largest fractions of energy-related CAP emissions are carbon
monoxide (55 percent), VOCs (19 percent), and nitrogen oxides (14 percent). (As noted in
Section 2.3.3, NEI data on carbon monoxide emissions appear higher than would be expected
for stationary sources.)

Though the fraction of energy-related CAP emissions for the wood products sector is larger than
the energy-related fraction for pulp and paper, due to the greater energy requirements of the
pulp and paper industry, on a ton-basis energy-related CAP emissions are much larger for the
pulp and paper sector than they are for wood products sector. According to MECS data (see
Table 35), in 2002 purchased electricity met nearly 20 percent of the wood products sector's
energy requirements, indicating  that a substantial fraction of the sector's energy-related
emissions are not captured by NEI data for the sector (as such emissions are attributed to the
generating source rather than the purchasing entity). For pulp and paper, net electricity met
approximately 9 percent of the sector's energy  demand in 2002.
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                          Sector Energy Scenarios: Forest Products
      Figure 15: Forest products sector: CAP emissions by source category and fuel usage
                  Pulp & Paper Sector:
            Energy-Related CAP Em issions by Source
                   (Total: 721,000 tons)
                                 Industrial
                               -Recesses
                                   Internal
                                  Combustion
                                   Engines
                              Other
       Source: Draft 2002 NEl
                  Wood Products Sector:
            Energy-Related CAP Em issions by Source
                   (Total: 408,000 tons)
       Source: Draft 2002 NB
                Pulp & Paper Sector:
          Energy-Related CAP Em issions by Fuel
                (Total: 721,000 tons)


                       Natural Gas
                         .14%
                            Residual Oil
                              11%
                                 Petroleum
                                  Coke
                                  1%
                            [A// Others
                              5%
                                               Source: Draft 2002 NB
               Wood Products Sector:
          Energy-Related CAP Emissions by Fuel   UNK
                (Total: 408,000 tons)        (Plywood
                                A Operations)
                                               Source: Draft 2002 NB
Figure 15 presents NEl data on the sources of energy-related CAP emissions shown in Figure
14. For both sectors, most energy-related emissions are classified as stemming from external
combustion boilers. NEl data classifications are problematic due to reporting inconsistencies, as
discussed previously. According to DOE data for the pulp and paper industry, process heating
and cooling systems represent 81 percent of the sector's energy use, with drying and
evaporation processes requiring substantial energy inputs. "External combustion boilers"
includes  steam systems reboilers. Direct-fired systems such as furnaces are likely included
under "industrial processes." Motor-driven systems comprise 13 percent of the sector's end use
of energy, which includes pumps, conveyors, compressors, fans, mixers,  grinders, and other
process equipment,143 but are primarily electric powered so would not be  represented in NEl
data.

Although MECS data report that coal supplied only 10 percent of the pulp and paper industry's
energy requirements in 2002,  NEl data show coal  as contributing to 43 percent of the sector's
energy-related CAP emissions. As MECS reports  more than 50 percent of the sector's energy
coming from "other" fuels (which includes biomass), NEl data  show that biomass (wood waste)
is a less emissions-intensive energy source than coal. For wood products, combustion of
wood/bark waste is the dominant energy-related source of CAP emissions.

The trend of increased renewable energy (biomass) consumption and decreased coal
consumption projected by CEF and AEO 2006 under a  business-as-usual scenario is likely to
improve the CAP emissions profile for the pulp and paper industry. The effect of increased fuel
usage of biomass on CAP emissions would also be likely to vary from site to site, depending on
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                         Sector Energy Scenarios: Forest Products
factors such as boiler characteristics and pollution controls, as well as the type of biomass that
is used for fuel (black liquor, waste paper products, wood chips, etc.)

As NEI data do not include carbon dioxide emissions, we use carbon dioxide emissions
estimates from AEO 2006, which totaled 113 million metric tons for the pulp and paper industry
in 2004. AEO 2006 projects that the industry's carbon dioxide emissions will remain relatively
static from 2004 to 2020, despite the expected increase in energy consumption. This projection
reflects the industry's utilization of less carbon-intensive biomass energy  resources to meet
increasing energy demand.

As noted previously, if CEF and AEO 2006 projections overstate future production growth for
the industry, energy-related CAP and carbon dioxide emissions could remain static or decrease
from current levels.

3.5.2  Best Case Scenario

Opportunities
Table 37 ranks the viability of five primary opportunities for improving environmental
performance with respect to energy use (Low, Medium, or High). A brief assessment of the
ranking is also provided, including potential barriers.

This opportunity assessment relies in large part upon a recent pulp and paper industry energy
bandwidth study conducted on behalf of DOE that was published in August 2006.144 From the
energy consumption baseline established by 2002 MECS data, the DOE  energy bandwidth
study estimates potential reductions in energy consumption that would be possible through
industry-wide implementation of best available technologies (technologies and processes in
place at the most modern mills) as well as energy-savings potential from  industry-wide
implementation of advanced technologies (practical minimums). DOE estimates that best
available technologies have the potential to reduce the pulp and paper sector's energy
consumption by 26 percent and could reduce purchased energy requirements by 46 percent,
with  a 38 percent reduction in purchased electricity, and a 48 percent reduction in purchased
fossil fuels. The largest  areas of potential energy savings are in paper manufacturing (32
percent reduction in energy consumption), pulping (28 percent reduction), and onsite energy
generating applications  (22 percent reduction in energy losses from cogenerating equipment
used to produce electricity and steam, referred to as "powerhouse losses.") Implementation  of
practical minimum technologies would further reduce sector energy consumption 17 below
levels achieved by best available technologies.

Though the energy bandwidth study does not address the wood products sector, given the
larger energy requirements of the pulp and paper sector it provides an appropriate indication of
the largest opportunities for reductions in sector energy consumption.

              Table 37: Opportunity assessment for the forest products industry
Opportunity
Cleaner fuels
Ranking
Medium
Assessment (including potential barriers)
As the industry meets a substantial fraction of its requirements for thermal energy and
electricity with biomass fuels, it uses emissions-intensive energy sources such as coal and
petroleum primarily as marginal fuels, except for the direct fossil fuel inputs required by lime
kilns in kraft mills. 45 Thus, transitioning to cleaner fuels is not considered to represent a
substantial opportunity for environmental improvement. Increased biomass utilization is
considered a key opportunity for the industry, but this opportunity is discussed in connection
with the Process Improvement and R&D categories below.
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                                  Sector Energy Scenarios: Forest Products
Opportunity
Ranking
Assessment (including potential barriers)
 Increased CHP
                    Low
                                   Though approximately 65 percent of the sector's electricity demand is met by CHP, the
                                   majority of the sector's demand for steam is met by CHP, limiting the opportunity for
                                   additional CHP capacity. There is opportunity to increase the electricity-to-steam ratio of
                                   CHP applications through gasification technologies,
                                   in connection with R&D efforts below.
                                                              ' and such opportunities are discussed
                                   Though the forest products sector is currently a net importer of electricity, industry
                                   representatives are concerned that recent changes in policy under the Public Utility
                                   Regulatory Policies Act (PURPA), Section 210(m), have created less favorable market
                                   conditions for onsite power generation. These changes eliminated requirements that
                                   electrical utilities purchase power from qualifying  facilities in certain markets.147 The forest
                                   products industry believes the new policy presents a barrier to increasing the use of CHP
                                   and other technologies that have the potential to  increase onsite power generation.148 New
                                   CHP installations may also face barriers in terms of utility rates and interconnection
                                   requirements if electricity production is expected  to exceed onsite demand, and also from
                                   NSR/PSD permitting.149
 Equipment retrofit/   Medium        Energy efficiency gains are achievable through retrofits and through replacement of old
 replacement                       equipment with more energy-efficient models. According to DOE, there are substantial
                                   energy-savings opportunities associated with implementation of equipment-related best
                                   practices, as well as with retrofit and replacement of process equipment—for example,
                                   installation of shoe presses to reduce drying energy requirements.150 There are also energy-
                                   savings opportunities associated with power generating equipment, as a majority of
                                   recovery furnaces and conventional power boilers in existing pulp and paper plants are 20 to
                                   30 years old; more than half of them will need to be replaced or upgraded in the near
                                   future.151

                                   Limiting the magnitude of equipment-related opportunities,  capital turnover in the sector is
                                   slow—equipment is capital intensive and has a long service life, and as industry is currently
                                   stagnant, there is little need for expanded production capacity that would drive new
                                   equipment purchases. Making a business case for equipment modifications can be difficult
                                   unless the  change is urgently needed to maintain production or environmental compliance.
                                   Anecdotal evidence suggests that this climate of scarce capital has discouraged operations
                                   managers from advocating even low-risk, cost-effective improvements in energy
                                   efficiency.152 Additionally, mills that want to expand or modify their operations may  be
                                   subject to PSD or NSR programs.
 Process
 improvement
High
Process optimization is expected to continue to be an important mechanism for achieving
energy efficiency gains for the forest products industry. AF&PA prioritizes further efforts to
increase energy recovery from biomass waste, both through implementation of existing best
practices and from new technology development.153

Due to the substantial energy requirements of the drying stage of the papermaking process,
DOE estimates that the largest potential energy savings are from implementation of best-
available technologies in the paper drying process, and substantial additional potential in
connection with liquor evaporation, and pulp digesting processes.154 (In the DOE bandwidth
study, potential energy savings from best-available technology implementation include
equipment retrofits and replacement as well as process improvement, and it is not possible
to disaggregate the relative potential savings from these opportunities.)

DOE notes that as much of the sector's boiler fuel comes from renewable biomass fuels that
are manufacturing process byproducts, there is a tradeoff between increased process
efficiency (which  reduces byproducts) and biomass fuel availability.155
 R&D               High           As the forest products industry has limited resources to devote to R&D efforts, the support of
                                   programs like DOE's Industrial Technologies Program is essential to achieving new
                                   technology development objectives. In partnership with DOE, the Forest Products Industry's
                                   Agenda 2020 has established a roadmap of R&D priorities, and there is a strong R&D
                                   pipeline for the  industry (see http://www.eere.enerav.aov/industrv/forest/).

                                   DOE prioritizes three areas as having the greatest opportunity for energy savings: (1) In
                                   paper drying, increasing the solids content of material exiting the press sections to reduce
                                   drying energy requirements; (2) reducing energy requirements for black liquor evaporation
                                   through nonevaporative concentration of weak black liquor, which can be accomplished
                                   through processes like ultrafiltration or multiple effect evaporation; and (3) increasing the
                                   energy efficiency of the lime kiln.156 AF&PA has a strong interest in the development of
                                   technologies to more fully exploit the industry's biomass resources for energy recovery.157
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                            Sector Energy Scenarios: Forest Products
Opportunity
Ranking
Assessment (including potential barriers)
                             Other developing technologies that DOE describes as having the potential to enable the
                             industry to achieve practical minimum energy consumption include: (1) CondeBelt drying
                             systems, which have higher drying rates by utilizing the temperature differential between
                             heated and cooled drying belts; (2) black liquor and biomass gasification, involving the
                             production of gas fuel from biomass process waste which, in combination with combined
                             cycle cogeneration turbines, would greatly increase the efficiency of onsite power
                             generation; and (3) forest biorefineries, which extract hydrogen and other chemical
                             feedstocks from wood chips prior to pulping, creating another value stream for the industry.
                             According to DOE, the net energy efficiency of the biorefinery model is still being
                             investigated,158 but biorefineries are closer to commercialization than gasification
                             technologies.159

                             General R&D barriers include the costs and risks associated with developing and
                             commercializing new technologies. As the industry develops improved technologies and
                             processes for utilizing biomass energy resources, one concern noted previously how
                             policies that promote biomass energy might increase demand  and bid up the cost of the
                             industry's raw material.
Optimal Future Trends
CEF's advanced energy scenario for the pulp and paper industry is similar to the base case
projection, with an even greater share of the sector's energy needs met by biomass fuels, and a
slight decrease in coal use as the industry makes even greater reductions in carbon-intensive
fuels. AF&PA notes that the industry's objective is to meet an even greater fraction of its energy
needs with renewable biomass fuels than the 73 percent share noted in CEF's advanced energy
scenario.160 The annual decrease in economic energy  intensity (energy consumption per dollar
value of output) is slightly larger than under the reference case scenario, and the projected
increase in overall energy use is smaller than under the reference case projection. Compared
with the reference scenario,  under the advanced scenario, the industry uses even more
biomass and relatively less purchased electricity, with  electricity inputs falling 22 percent from
1997 levels by 2020.
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                          Sector Energy Scenarios: Forest Products
CEF's advanced case projections are summarized in Table 38.

            Table 38: CEF advanced case projections for the pulp and paper industry
                                 1997 Advanced Case
                                                               2020 Advanced Case

Petroleum
Natural gas
Coal
Renewables
Delivered electricity
Total
Consumption
(quadrillion Btu)uuu
0.123
0.677
0.395
1.483
0.259
2.937
Percentage™"
4%
23%
13%
50%
9%
100%
Consumption
(quadrillion Btu)
0.068
0.429
0.107
2.186
0.201
2.991
Annual % change in economic energy intensity (energy consumption per dollar value of output)
Percentage
2%
14%
4%
73%
7%
100%
-1.0%
        Overall % change in energy consumption (1997-2020)
                                     2%
CEF's advanced case projections are based on the same economic growth assumption as the
reference case (1.2 percent per year). As previously noted, CEF's economic assumptions are
probably overly optimistic given recent industry trends, and if the trend of decreasing production
continues, sector energy consumption would be expected to continue to decline as well. In
comparison with the reference case, the faster decline in economic energy intensity is produced
by CEF's more aggressive assumptions about energy efficiency increases in new and existing
equipment including increased energy efficiency of boilers, steam systems, and motors, falling
film black liquor evaporation, increased  lime kiln efficiency, and black liquor gasification.™™"

Environmental Implications
Under the CEF advanced case, the decrease in purchased electricity means that energy-related
emissions will be concentrated somewhat more at the facility level, as opposed to the utility
level. However, due to the energy losses associated with electric generation (particularly from
fossil fuel-fired power plants), transmission, and distribution, energy production at the facility
level is generally more energy efficient,  and thus represents an environmentally preferable
energy scenario. Reductions in coal consumption under the advanced energy scenario are
expected to decrease CAP emissions, particularly sulfur dioxide and nitrogen oxides.

Under the advanced energy scenario CEF projects the pulp and paper industry to achieve a 52
percent reduction in 1997 carbon emissions levels by 2020, despite  the projected increase in
overall energy consumption.  This difference is attributable  to increased energy efficiency and
reductions in carbon-intensive energy inputs such as coal.  Increased use of carbon-neutral
biomass fuels will be a key component of achieving reductions in net carbon emissions.
   As is the case with several sectors addressed in the CEF analysis, there are slight differences between 1997 fuel
   consumption data in the reference and advanced cases. We could find no explanation for such differences in the CEF
   analysis, but it could be that CEF made modifications to the base year (1997) parameters under the advanced case as
   compared with the reference case.
   Percentages do not add to 100% due to independent rounding.
   We have noted just a few of the parameter modifications made by CEF under the advanced case NEMS modeling effort.
   Appendix A-2 of the CEF report contains more detailed descriptions of CEF's advanced case scenario parameters.
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                                Sector Energy Scenarios: Forest Products
3.5.3  Other Reference Materials Consulted

American Forest & Paper Association. Policy Issues: Access to the Electric Transmission Grid. Internet source. Available at
http://www.afandpa.org/Template.cfm?Section=Energy1&template=/TaggedPage/TaggedPageDisplay.cfm&TPLID=6&OriginallD
=286&lnterestCategorylD=289&ExpList=286.

American Forest & Paper Association. Policy Issues: Biomass. Internet source. Available at
http://www.afandpa.org/Template.cfm?Section=Energy1&template=/TaggedPage/TaggedPageDisplay.cfm&TPLID=6&OriginallD
=286&lnterestCategorylD=290&ExpList=286.

American Forest & Paper Association. Policy Issues: Industry Profile. Internet source. Available at
http://www.afandpa.org/Template.cfm?Section=Energy1&template=/TaggedPage/TaggedPageDisplay.cfm&TPLID=6&OriginallD
=286&lnterestCategorylD=287&ExpList=286.

American Forest & Paper Association. Policy Issues: Research & Development. Internet source. Available at
http://www.afandpa.org/Template.cfm?Section=Energy1&template=/TaggedPage/TaggedPageDisplay.cfm&TPLID=6&OriginallD
=286&lnterestCategorylD=291&ExpList=286.

American Forest & Paper Association. The Forest Products Industry and National Energy Security. Available at
http://www.afandpa.org/Template.cfm?Section=Energy1&template=/ContentManagement/ContentDisplay.cfm&ContentlD=7316.

Center for Technology Transfer, Inc.  Wisconsin's Wood Products Industry Business Climate Status Report. 2004.

Miner, R., Lucier, A. A Value Chain Assessment of Climate Change and Energy Issues Affecting the Global Forest-Based
Industry. Internet source. Accessed January 27, 2006.

PriceWaterhouseCoopers. Global Forest and Paper Industry Survey. 2005. Internet source. Available at
http://www.pwcglobal.com/extweb/pwcpublications.nsf/docid/e1f575ac5d728ff88525703c00287953.

The Policy Council. U.S. Wood products Industry: Competitive Challenges in a Global Marketplace. 2005. Internet source.
Available at http://policycouncil.nationaljournal.com/EN/Forums/American+Forest++Paper+Association/1f7d98e5-d352-45be-
8ec6-0d335ee9a4f7.htm.

Ruth, M., Davidsdottir, B., Amato, A. 2004. "Climate Change Policies and Capital Vintage Effects: The Cases of Pulp and Paper,
Iron and Steel, and Ethylene." Journal of Environmental Management, 70; 235-252.

Thomson Gale. SIC2611 Pulp Mills.  Internet source. Available at http://www.referenceforbusiness.com/industries/Paper-
Allied/Pulp-Mills.html.

U.S.  Department of Energy. Forest Products Project Fact Sheet: Combined Cycle Biomass Gasification. 1999. Available at
http://www.eere.energy.gov/industiyforest/pdfs/biomassj3asification.pdf.

U.S.  Department of Energy. Forest Products Project Fact Sheet: Development of Methane de NOx® Reburning Process for
Wood Waste, Sludge, and Biomass Fired Stoker Boilers. Available at
http://www.eere.energy.gov/industry/forest/pdfs/methane_denox.pdf.

U.S.  Department of Energy. Forest Products Project Fact Sheet: Microwave Pretreatment: In-Mill,  Kiln Schedule, and Process
Model.  2001. Available at http://www.eere.energy.gov/industry/forest/pdfs/microwave_pretreatment.pdf.

U.S.  Department of Energy. Forest Products Project Fact Sheet: The Lateral Corrugator. 2001. Available at
http://www.eere.energy.gov/industry/forest/pdfs/lateraLcorrugator.pdf.

U.S.  Department of Energy. Forest Products Project Fact Sheet: Decontamination of Process Streams Through Electrohydraulic
Discharge. 2002. Available at http://www.eere.energy.gov/industry/forest/pdfs/electrohydraulic_discharge.pdf.

U.S.  Department of Energy. Forest Products Project Fact Sheet: Lignin Separation and Epoxide-Lignin Manufacturing. 2002.
Available at http://www.eere.energy.gov/inventions/pdfs/lenox.pdf.

U.S.  Department of Energy. Forest Products Project Fact Sheet: ThermodyneTM Evaporator. 2002. Available at
http://www.eere.energy.gov/inventions/pdfs/merrillaireng.pdf.

U.S.  Department of Energy. Energy Implications of Environmental and Technological Transition. Available at
http://www.eia.doe.gov/cneaf/solar.renewables/aLa jjlance/wood/woodenfa-OS.htm.
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                                 Sector Energy Scenarios: Forest Products
U.S. Department of Energy. Forest Products Industry Analysis Briefs: Energy-Management Activities. 2004. Internet source.
Available at http://www.eia.doe.gov/emeu/mecs/iab98/forest/activities.html.
U.S. Department of Energy. ITP Wood products: Success Stories. Internet source. Accessed January 27, 2006.
U.S. Department of Energy. Energy and Environmental Profile of the U.S. Pulp and Paper Industry. 2005. Available at
http://www.eere.energy.gov/industry/forest/pdf s/pulppaper_profile.pdf.
U.S. Department of Energy. Wood Products Industry Profile. 2005. Available at
http://www.eere.energy.gov/industry/forest/pdfs/forest.pdf.
U.S. Department of Energy. Forest Products: Fiscal Year 2004 Annual Report. 2005. Available at
http://www.eere.energy.gov/industry/about/pdfs/foresLfy2004.pdf.
U.S. Environmental Protection Agency. National Emissions Inventory. 2002.
U.S. Environmental Protection Agency. New Source Review: Report to the President. 2002.
U.S. Environmental Protection Agency, Office of Enforcement and Compliance Assurance. Profile of the Pulp and Paper
Industry, 2nd Edition. 2002.
World Business Council for Sustainable Development.  The Sustainable Wood products Industry, Carbon, and Climate Change.
Available at http://www.wbcsd.org/web/publications/sfpi-cop11 .pdf.
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                          Sector Energy Scenarios: Iron and Steel
3.6    Iron  and Steel                          Recent Sector Trends Informing the Base Case
3.6.1  Base Case Scenario

Situation Assessment
The iron and steel industry participates in EPA's
Sector Strategies Program. To produce steel,        MaJ°rfuel sources: Coal'natural 9as'coke' electricity
                                                 Number of facilities: -i-
                                                 Value of shipments: Mixed (see text for explanation)
                                                 Energy consumption/ton of steel shipped: -i-
                                                 Current economic and energy consumption data are
                                                 summarized in Table 39 on page 3-55.
facilities in the iron and steel industry (NAICS
331111) employ one of two production
processes, which utilize a variety of raw
materials and technologies and have different
energy use profiles:

   •  Integrated steel mills use a blast furnace to produce molten iron from iron ore, coal, coke,
      and fluxing agents. A basic oxygen furnace (BOF) is then used to convert the molten iron,
      along with up to 30 percent steel scrap and alloys, into refined steel. Integrated
      steelmaking has declined from 52.6 percent of U.S. steelmaking production in 2001 to
      44.9 percent of production in 2005 (estimated value updated March 2006).161

   •  Electric arc furnace (EAF) steel mills utilize steel scrap and up to 30 percent of other  iron-
      bearing materials to produce steel. EAF steel plants primarily produce carbon steels as
      well as alloy and specialty steels. EAF steelmaking has grown from 47.4 percent of U.S.
      steelmaking production in 2001 to 55.1 percent of production in 2005 (estimated value
      updated March 2006).162

As certain steel qualities require the use of virgin materials, and as there are constraints on the
supply of economically available steel scrap, both integrated steelmaking and EAF steelmaking
are required and are not direct substitutes for one another. A recent study notes that some
integrated steel companies have adopted production technologies traditionally used in minimills
(such as advanced EAFs and thin slab casting), and distinctions between the integrated and
EAF segments of the industry may be blurring.163 Though the share of steel produced by the
EAF process has steadily increased (growing from 47 percent to 55 percent of total steel
production from 2001 to 2005164), expansion of EAF steelmaking capacity is predicated  on  the
availability of adequate and cost-effective supplies of scrap. According to AISI, the addition of
alternative ironmaking technologies will be essential to facilitating EAF capacity expansion.165

Though both processes are energy intensive, integrated steelmaking requires greater amounts
of energy per ton of shipped product. Different studies of energy use in the iron and steel
industry often employ somewhat different assumptions and boundary conditions which may lead
to slightly different energy intensity measurements (energy use per ton of production). Industry
data from 2004 establish an average energy intensity of 18.99 million Btu per ton (MBtu/ton) for
integrated steelmaking  and 5.01 MBtu/ton for EAF steelmaking, with an industry-wide intensity
of 11.8 MBtu/ton (based on EAF steelmaking at a 53 percent market share).166 A 2005 DOE
study estimates the average energy intensity of integrated steelmaking at 16.5 MBtu/ton, and
EAF steelmaking at 5.7 MBtu/ton.167

Iron and steel production is fairly concentrated geographically, with more than 85 percent of the
sector's energy use occurring in the Midwest (64 percent) and South (23 percent).168
Steelmaking in Indiana, Illinois, Ohio, Pennsylvania, Michigan, and New York accounts  for
approximately 80 percent of U.S. production.169

Beginning with employment contraction in the  1980s and accelerating through bankruptcies in
the 1990s and early 2000s, the U.S. steelmaking industry has recently undergone major
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                          Sector Energy Scenarios: Iron and Steel
restructuring.170 Despite the overall growth in value of shipments and value added from 1997 to
2004 (see Table 39), those metrics declined steadily from 1997 to 2003 and then jumped
precipitously in 2004 following increases in the price of steel.171 (The price increase was driven
by a surge in global demand for raw materials due to economic growth in China and other Asian
countries, as noted Section 2.4.1.) Restructuring strengthened the financial viability of domestic
steel production, and the industry's dramatic turnaround was supported by temporary tariffs on
imported steel enacted by the Bush Administration in 2002.172 As a result of the industry's
improved economic condition, an industry survey conducted in 2005 indicated that steel
producers anticipated increasing their capital spending by 30 percent over the next two years to
promote technological changes.173 The same study notes that for 2005-2006, companies were
expecting to increase investments in new equipment by 43 percent over 2003-2004 levels.
Despite the recent return to profitability, in the long term U.S. steelmakers remain vulnerable to
fluctuations in  global supply and demand. China recently became a net exporter of steel, and
the United States is joined by other steel-producing countries in its concerns about the potential
for Chinese production to contribute to a glut in global steel supply.174

Since 1990,  the widespread automation of steel production (facilitated by an industry R&D
partnership with  DOE) and the introduction of thin slab casting and ladle refining furnaces have
also decreased the energy intensity of steelmaking. Thin slab casting reduced reheating energy
requirements and increased the variety of products that EAF steelmakers were able to produce
(such as flat rolled steel).175 Economic trends and associated industry restructuring have also
contributed to  declining energy intensity. In the last fifteen years, there has been substantial
industry consolidation that involved the closure of older and  less efficient steelmaking facilities.
According to data compiled by AISI, the composite energy intensity of the U.S. steelmaking
industry (integrated and EAF production) has declined from  16.4 MBtu/ton in 1990 to 11.8
MBtu/ton in 2004, a decrease of 28 percent.176

Incremental  energy efficiency improvements at the plant level may not be able to produce
energy intensity  reductions of similar magnitude to those that the industry has historically
achieved through the transformational processes discussed  above. AISI has launched an R&D
initiative called "Saving One Barrel of Oil Per Ton (SOBOT)" that seeks to achieve the next
revolution in energy intensity reduction through the development of new transformational
technologies and processes that are less energy  intensive as well as R&D efforts aimed at
decreasing the energy intensity of existing processes.177 Using different boundary assumptions
than the AISI estimate, the 2005 Steel Industry Marginal Opportunity Study conducted by
Energetics on  behalf of DOE estimates that an energy intensity reduction of 5.1  MBtu/ton is
technically achievable for integrated steelmaking, with implementation of industry best practices
and commercially available technologies comprising slightly more than half of that potential, and
R&D opportunities comprising the remaining fraction. For EAF steelmaking, the analysis
estimates a technically achievable energy intensity reduction of 2.7 MBtu/ton,xxx with
implementation of industry best practices and commercially available technologies comprising
two thirds of that potential, and R&D contributing the remaining third.178 Discussion of specific
opportunities is included in Section 3.6.2.

Energy costs account for about 20 percent of the total cost of manufacturing steel.179 Coke and
coal meet a  combined 39 percent of the iron and steel industry's energy needs.  (Though not
    DOE produced this estimate of technically achievable potential by taking the difference between the current energy intensity
    of EAF steelmaking (5.7 MBtu/ton) and a practical minimum energy requirement that is estimated to be 3.0 MBtu/ton. AISI
    notes that energy-savings opportunities described by DOE as technically available may not be economically viable in all
    facilities.
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                           Sector Energy Scenarios: Iron and Steel
considered as part of this study, steelmaking also uses coal and coke as raw materials. They
are sources of carbon which, in combination with iron,  produces steel.) As natural gas meets 27
percent of the sector's energy requirements, increases in the price of natural gas are a
significant concern for the industry. Reducing natural gas requirements is one of the goals
motivating the industry's investment in SOBOT.180 Byproduct fuels produced onsite (listed as
"Other" in MECS, such fuels are primarily coal-based coke oven gas and blast furnace gas) and
purchased electricity are also important energy inputs. The mix between fuel-based and
electricity-based energy inputs differs between integrated and EAF steelmaking. Integrated
steelmaking accounts for roughly 75  percent of the industry's fuel consumption and 36 percent
of the industry's electricity consumption, while EAF steelmaking accounts for 25 percent of the
industry's fuel consumption and 64 percent of its electricity consumption (fractions based on
1998 MECS data).181

Table 39 summarizes current economic trend and energy consumption data originally presented
in Chapter 2.

           Table 39: Current economic and energy data for the iron and steel industry

                                     Economic Production Trends™


Annual Change in
Value Added
1997-2004
1.1%
Annual Change in
Value Added
2000-2004
8.3%
Annual Change in
Value of Shipments
1997-2004
1.7%
Annual Change in
Value of Shipments
2000-2004
6.1%
                                      Energy Intensity in 2002ZZZ

Energy
Consumption per
Dollar of Value
Added
(thousand Btu)
66.5
Energy
Consumption per
Dollar Value of
Shipments
(thousand Btu)
27.8
Energy Cost per
Dollar of Value
Added
(share)
20.4%
Energy Cost per
Dollar Value of
Shipments
(share)
8.0%
                      Primary Fuel Inputs as Fraction of Total Energy Supply in 2002 (fuel use only)
Coke & Breeze
36%
Natural Gas
27%
Otheraaaa
21%
Net Electricity
13%
Coal
3%
    Economic trend data are for the larger NAICS category, iron, steel, and ferroalloy manufacturing (NAICS 33111).
    Energy intensity data are for the larger NAICS category, iron, steel, and ferroalloy manufacturing (NAICS 33111).
    For iron and steel, the "other" category is largely composed of byproduct fuels such as coke oven gas and blast furnace gas
    (coal-based in origin).
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                            Fuel-Switching Potential in 2002: Natural Gas to Alternate Fuels
                                             Switchable fraction of natural gas inputs
                                                                            12%


Fraction of natural gas inputs that could be
met by alternate fuels
Fuel Oil
73%
Coal
13%
Other
9%
                              Fuel-Switching Potential in 2002: Coal to Alternate Fuels
Switchable fraction of coal inputs 3%

Other
Fraction of coal inputs that could be met by 60%
alternate fuels
Natural Gas
40%


Expected Future Trends
Controlling energy costs is critical to maintaining the competitive viability of the U.S. iron and
steel industry in the global marketplace. Recent restructuring has strengthened the industry's
position and is expected to spur investment in new technologies.182 In the long term, global
supply and demand fluctuations will         	
continue to play a role in the industry's
financial condition and capacity for
investment in energy efficiency
                             Voluntary Commitments
improvement.

The expansion of EAF steel production
and contraction of integrated steel
production has historically decreased the
overall energy intensity of the steelmaking
industry. According to 2005 data, more
than 75 percent of end-of-life steel
products in the United States are
recycled, including 100 percent of end-of-
life automobiles, 90 percent of end-of-life
appliances, and 63 percent of used
steel cans.183 Use of suboptimal scrap
produces more waste and requires more
energy to process. One industry
assessment states that some EAF mills
have sought to mitigate the risk of scrap
market volatility through investment in
onsite alternative ironmaking (Al)
production units to supplement scrap inputs. According to that analysis, due to the energy
intensity of Al production, increased domestic Al production could slow the rate of energy
intensity reduction at  EAF mills.
               The American Iron and Steel Institute (AISI) collects data for five
               indicators of sustainability: energy intensity, GHG emissions,
               material efficiency, steel recycling, and implementation of
               environmental management systems. AISI has also shown its
               commitment to improvements with regard to energy and the
               environment by joining Climate VISION. With its participation in
               this program, AISI has committed to improving member energy
               efficiency by 10 percent by 2012 (from 2002 levels). See
               http://www.climatevision.gov/sectors/steel/index.html.

               The steel sector also participates in DOE's Industrial
               Technologies Program (ITP) as an "Energy Intensive Industry."
               ITP's goals for all energy intensive sectors include the following:

               •   Between 2002 and 2020, contribute to a 30 percent
                  decrease in energy intensity.
               •   Between 2002 and 2010, commercialize more than 10
                  industrial energy efficiency technologies through research,
                  development & demonstration (RD&D) partnerships.
               See http://www.eere.energy.gov/industry/steel/.
184
As noted at the beginning of Chapter 3, the age of the CEF study (produced in 2000 and using
energy data from 1998) means that its projections are outdated in some cases, and particularly
for the iron and steel industry, which has undergone substantial restructuring since the CEF
report was produced. However, as the CEF report provides the best-available cross-sector
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assessment of business-as-usual and environmentally preferable energy trends, we include its
projections for the iron and steel sector as we do for other sectors addressed in this report.

The iron and steel industry is one of the three sectors (along with cement and paper)  for which
CEF made detailed parameter modifications to the NEMS model used to produce AEO 1999.
Modifications included adjustments to baseline energy intensities and rates of annual
improvement in energy intensity,  which were adjusted to reflect best-available sector-specific
research at the time (primarily a 1999 study by Worrell et. al. at Lawrence Berkeley National
Laboratory, Energy Efficiency and Carbon Dioxide Emissions Reduction Opportunities in the
U.S. Iron and Steel Sector).

Under the  reference case scenario, CEF projects that energy consumption by the iron and steel
industry will decrease 15 percent from the 1997 baseline by 2020 and that energy intensity will
decline at  1.4 percent per year over the period.

CEF projects no major fuel mix shifts for the iron and steel industry under the reference case.
Consumption of all fuels is expected to decline, with the exception of purchased electricity,
which CEF expects will increase slightly (2 percent). Natural gas use falls by the greatest
amount (28 percent), contributing to the increase in the relative importance of coal, despite the
fact that coal consumption is projected to fall by 10 percent.

CEF's projections are based on the economic assumptions that steel production will increase at
0.9 percent per year. The projected reduction in energy consumption for the industry  is in part
attributable to CEF's assumptions about structural changes within the sector: CEF uses the
AEO 1999 assumption that integrated steelmaking will drop from a 61 percent share of total
production in  1994 to 54 percent  in 2020, with an increase in EAF steelmaking from 39 percent
to 46 percent over the same period. (These assumptions are outdated now that EAF
steelmaking currently comprises more than 50 percent of steel production.) CEF's assumptions
about adoption of energy-efficient technologies also contribute to the projected decline in energy
consumption. For example, CEF  made adjustments to the AEO 1999 NEMS parameters for the
unit energy consumption values and retirement rates for existing equipment, as well as new
equipment expected to be installed over the period. At the same time, CEF's technology
assessments are based on a Lawrence Berkeley National Laboratory (LBNL) study that relied
on industry data from 1994. A more recent industry assessment by DOE assumes that 50
percent of the energy-savings opportunities estimated in that LBNL study have already been
achieved as of 2005.185 (More detailed information about the assumptions underlying CEF's
projections and how those assumptions were reflected in CEF-NEMS modeling can be found in
Appendix A2 of the CEF report. However, it is not possible to determine from report
documentation how much of the projected decline in energy consumption is attributable to
structural change within the sector, and  how much is attributable to energy efficiency
improvement.)
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                          Sector Energy Scenarios: Iron and Steel
CEF base case projections are summarized in Table 40.

            Table 40: CEF reference case projections for the iron and steel industry
                                1997 Reference Case
                                                             2020 Reference Case

Petroleum
Natural gas
Coal
Delivered electricity
Total
Consumption
(quadrillion Btu)
0.118
0.541
0.873
0.173
1.705
Percentage
7%
32%
51%
10%
100%
Consumption
(quadrillion Btu)
0.103
0.390
0.783
0.176
1.452
Annual % change in energy intensity (energy consumption per dollar value of output)
Percentage
7%
27%
54%
12%
100%
-1.4%
        Overall % change in energy use (1997-2020)
                                  -15.0%
As previously noted, EAF steelmaking has surpassed the market share that CEF projected
would be achieved by 2020. In an effort to assess the impact of recent trends that may have
affected industry energy consumption since the CEF report was produced, we also examined
reference case energy consumption projections for the iron and steel industry produced in
connection with ElA's  Annual Energy Outlook 2006 (AEO 2006), which also uses the NEMS
model but incorporates more recent energy and economic data. In line with CEF projections,
AEO 2006 projects annual growth in the industry's value of shipments to be 0.9 percent per
year, and industry-wide energy intensity to decline at 1.4 percent per year primarily due to the
assumption that most  new steelmaking capacity in the United States will be EAF production. (As
previously noted, constraints on viable scrap supply impose limits on EAF production capacity,
and the addition of alternative ironmaking technologies will  be essential to facilitating EAF
capacity expansion.) AEO 2006 projects that sector energy consumption will decline by 3.5
percent from 2004 to 2020 (substantially less than the 15 percent projected by CEF), with coal
consumption decreasing by 11 percent, and electricity consumption increasing by 14 percent.

Environmental Implications
                Figure 16: Iron and steel  sector: energy-related CAP emissions
                 Iron & Steel Sector:
                 NB CAP Em issions
                 (Total: 851,000 tons)
      Source: Draft 2002 NB
      * Includes emissions from unspecified sources; may include
      additional energy-related emissions.
                   Iron & Steel Sector:
             Energy-Related CAP Em issions by Pollutant
                   (Total: 228,000 tons)
                                                                 VOC
                                                             S02
                                                            ID
                                                            o% \{___^/
        Source: Draft 2002 NB
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                           Sector Energy Scenarios: Iron and Steel
                                                     Effects of Energy-Related CAP Emissions

                                                 S02 and NOX emissions contribute to respiratory illness
                                                 and may cause lung damage. Emissions also
                                                 contribute to acid rain, ground-level ozone, and
                                                 reduced visibility.
Figure 16 presents NEI data on energy-related
CAP emissions by pollutant type for the iron and
steel industry. Although NEI data attribute
emissions from electric power generation to the
generating source rather than the purchasing
entity, purchased electricity meets around ten
percent of the sector's energy needs, so the
above figure provides a fairly complete picture of
the sector's energy-related CAP emissions.  (Though EAF steelmaking is electricity intensive,
the magnitude of the fuel requirements for integrated steelmaking means that electricity remains
a fairly small fraction of total energy consumption.) Sulfur dioxide and nitrogen oxide emissions
are the largest fractions of energy-related CAP emissions. (As noted in Section 2.3.3, NEI data
on carbon monoxide emissions appear higher than would be expected for stationary sources, so
we do not address carbon monoxide data in our assessment of CAP emissions for each sector.)

       Figure 17: Iron and steel sector: CAP emissions by source category and fuel usage
                  Iron & Steel Sector:
           Biergy-Related CAP Em issions by Source
                  (Total: 228,000 tons)
            6v     \S     Internal
                     	\~~~-—^_ Combustion
                         nth=r     Engines
      Source: Draft 2002 NB
                                                               Iron & Steel Sector:
                                                         Energy-Related CAP Em issions by Fuel
                                                               (Total: 228,000 tons)
                                                   Source: Draft 2002 NB
Figure 17 presents NEI data on energy-related CAP emissions by source category and fuel
type. Though the largest fraction of energy-related CAP emissions is from external combustion
boilers, emissions that are classified as related to industrial processes are also substantial. NEI
data classifications are problematic due to reporting inconsistencies, as discussed previously,
but equipment classified under "external combustion boilers" includes cogenerating units used
to produce heat and electricity, and boilers used for process heating. Equipment classified
under "industrial processes" in NEI likely includes fired systems such as blast furnaces, metal
melters, and heaters.  Highlighting possible issues with NEI data classifications,  according to
DOE, more than 80 percent of the industry's energy requirements are for fired systems such as
furnaces, with boiler systems comprising approximately 7 percent of total energy use.186

In integrated steelmaking, the conversion of coal to coke is fueled by a  mixture of natural gas
and byproducts of the process such as coke oven gas. Energy-related emissions from this
process are likely classified as "byproduct of coke manufacturing" in NEI data. The industry also
uses other byproduct gases such as blast furnace gas, EOF gas, and EAF gas,187 which may be
classified in NEI as "process gas." Byproduct gases are also used as boiler fuel. As NEI data
are dependent on emissions reporting from a number of different sources, it is difficult to
precisely align reported energy-related emissions with sector energy consumption data from
sources such as MECS.

As previously noted, the CEF energy consumption projections are dated for a number of
reasons, and AEO 2006 projects that sector energy consumption will remain relatively static
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(decreasing at 0.2 percent per year). To the extent that declining coal consumption in the iron
and steel industry is attributable to energy efficiency improvement (AISI states that as an
industry-wide average, reasonable and obtainable energy efficiency improvements at the plant
level can be expected to reduce energy consumption per ton of production by around 0.7
percent per year), such trends would decrease energy-related CAP emissions at the facility
level.188 Reducing natural gas consumption in favor of cheaper coal-based byproduct gases
would reflect optimization of waste streams for their energy content. Increases in purchased
electricity would affect CAP emissions at the utility level, and emissions impacts would depend
upon local energy inputs for electric power generation. According to AISI, DOE's assumptions
about increasing EAF production may  not be accurate.

As NEI data do not include carbon dioxide emissions, we use carbon dioxide emissions
estimates from AEO 2006, which totaled 127 million metric tons for the iron and steel industry in
2004. AEO 2006 projects that the industry's carbon dioxide emissions will decline by 3 percent
from 2004 to 2020, in line with the expected decrease in sector energy consumption.

3.6.2  Best Case Scenario

Opportunities
Separate opportunity assessments have been conducted for integrated and EAF steelmaking
processes using the DOE and AISI analyses. For integrated steelmaking, Table 41 ranks the
viability of five primary opportunities for improving environmental performance with respect to
energy use (Low, Medium, or High). A brief assessment of the ranking is also provided,
including potential barriers. Table 42 provides a similar assessment for EAF steelmaking.

                Table 41: Opportunity assessment for integrated steelmaking
Opportunity
Cleaner fuels
Increased CHP
Equipment retrofit/
replacement
Ranking
Low
Medium
Low
Assessment (including potential barriers)
Though the industry is likely to remain heavily dependent on coal, DOE estimates that
there are opportunities for greater utilization of coke oven gas and other off-gas byproducts
for energy content.189 According to AISI, most coke oven gas produced by U.S. mills is
already used, and other technologies for capture and reuse of steelmaking off-gases have
not been adopted in the United States because they are not economically viable to deploy
here given current energy prices.190
Integrated steelmaking has less demand for electricity than EAF production, but the DOE
marginal opportunity study notes the opportunity for increased cogeneration, including
repowering current systems with off-gas turbine/steam turbine systems (0.48 MBtu/ton).
According to DOE, heat recovery opportunities lie with the sintering (0.09 MBtu/ton), BOF
(0.4 MBtu/ton), and annealing processes (0.29 MBtu/ton).191 AISI describes cogeneration
opportunities associated with non-recovery cokemaking, which combusts cokemaking off-
gases to produce steam to drive a steam turbine generator and produce electricity, either
for internal plant use or for sale to the grid. Currently, cokemaking off-gases are processed
into materials with economic value (coke oven gas, tar, ammonia, and other chemicals).192
Whether CHP is economically viable depends in large part upon the comparative value of
electricity production versus the capital costs of the CHP equipment. New CHP installations
also face barriers in terms of utility interconnection requirements if electricity production is
expected to exceed onsite demand, and also from NSR/PSD permitting.193
Equipment-related opportunities noted in the DOE marginal opportunity study include
variable speed drives for pumps and fans (0.03 MBtu/ton), which AISI notes are already in
wide use in the industry.1 4 Additional equipment-related opportunities are included under
"Process improvement."
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                                   Sector Energy Scenarios: Iron and Steel
 Opportunity
Ranking
Assessment (including potential barriers)
 Process
 improvement
                     Medium
               AISI notes that with existing technologies and best practices, improvements in blast
               furnace efficiency are possible through optimized injection technologies and better
               sensors/process control. Other near-term opportunities noted by AISI include blast furnace
               coal injection modeling (to reduce energy losses in the cokemaking process) and
               optimizing processes through minimizing the generation of scrap and oxides.195

               Though some of the process-related energy-savings opportunities noted in the DOE study
               require equipment installation or retrofits, for the purposes of this analysis they have been
               classified as process-related so that DOE's estimated potential energy intensity reductions
               can be included. Options that are noted by DOE that are technically available but that may
               not be economically viable  in all situations include the following: preventative maintenance
               (0.21  MBtu/ton); installation of energy monitoring and management systems for energy
               recovery and distribution between processes (0.06 MBtu/ton); coal moisture control and dry
               quenching in the cokemaking process (0.22 MBtu/ton); and in ironmaking  (the most
               energy-intensive process),  pulverized coal and natural gas injection, top pressure  recovery
               turbines, hot blast stove automation, and systems for improved blast furnace control
               (combined 1.34 MBtu/ton).  Casting/hot rolling energy efficiency opportunities include thin
               slab casting with tunnel furnace (0.93 MBtu/ton).196
 R&D                High           According to AISI, the greatest potential for reducing the energy intensity of steelmaking
                                    lies with development of new transformational technologies and processes. Examples of
                                    such transformational R&D efforts (applicable both to integrated and EAF steelmaking)
                                    include the following: (1) Molten oxide electrolysis (under development at MIT); (2)
                                    ironmaking by flash smelting using hydrogen (under development at the University of
                                    Utah); and (3) the paired straight hearth furnace (under development at McMaster
                                    University in Ontario, Canada).197 Other R&D opportunities for integrated steelmaking
                                    noted in the SOBOT analysis include reducing/optimizing energy usage  in  alternative
                                    ironmaking processes and increasing the scrap/hot metal ratio in the BOF  charge.198

                                    An example of an alternative ironmaking process, the most significant R&D opportunity
                                    noted in the DOE study is replacement of traditional coke-based iron ore reduction
                                    (involving the energy-intensive blast furnace) with direct iron ore reduction  using coal (2.58
                                    MBtu/ton).bbbb 1" The direct reduced  iron opportunity has a shorter timeline (2010) than the
                                    other R&D opportunities noted by DOE, which assume implementation occurs by 2020.
                                    Other R&D opportunities noted by DOE include increased direct carbon  injection  in the
                                    ironmaking process (0.7 MBtu/ton), blast furnace slag heat recovery (0.28  MBtu/ton), and
                                    increased scrap input into BOF (3.1  MBtu/ton).200

                                    Casting and rolling R&D opportunities (applicable  both to integrated and EAF steelmaking)
                                    include reduction of heat losses from cast products prior to rolling/reheating (0.75
                                    MBtu/ton) and near net shape casting.201 Near net shape casting is a general term that
                                    refers to processes that eliminate a reheating step by casting in the final shape.202 AISI
                                    also describes energy-savings opportunities potentially available from near net shape
                                    casting, with thin strip casting representing the largest opportunity in terms of tons of steel
                                    production. (DOE estimates potential energy intensity reductions from thin  strip casting at
                                    0.5-0.7 MBtu/ton.) Production of strip casting is presently limited to certain markets,  and
                                    further research is needed to expand the market for this technology. AISI also notes  beam
                                    blank casting as a growing opportunity for long products.203

                                    In general, major barriers to new technology and process development include not only the
                                    costs and risks associated with the research process itself, but also the implementation of
                                    new technology, once developed, is risky and in some cases may be considered  a "bet the
                                    company" investment.204 Federal funding (i.e., through DOE's Industrial Technologies
                                    Program) to mitigate the costs and risks associated with R&D efforts has also been
                                    reduced.
bbbb  The DOE report notes that if direct iron reduction potential was fully exploited, then some of the other R&D opportunities
     (such as those affecting blast furnace ironmaking) would not be applicable as they would represent double-counting.
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                        Table 42: Opportunity assessment for EAF steelmaking
 Opportunity
Ranking
Assessment (including potential barriers)
 Cleaner fuels
                   Low
                                  Due to the substantial electricity requirements for EAF steelmaking, there is little
                                  opportunity for cleaner fuels. However, onsite renewable energy generation could have
                                  substantial environmental benefits. Barriers to onsite renewables include cost, resource
                                  intermittency, and utility interconnection requirements.
 Increased CHP
                   Low
 Equipment retrofit/
 replacement
                   Low
                                  CHP does not represent a major energy efficiency opportunity for EAF steelmaking as the
                                  sector has relatively low demand for steam and waste heat is difficult to recover.
              Some equipment-related opportunities are included under "Process Improvement."
 Process            Medium        Process-related opportunities noted by AISI include improvements in process control (such
 improvement                     |  as increased electrical energy transfer efficiency, reduced tap-to-tap times, and increased
                                  percentage of power-on time), and improved scrap preheating/charging practices and post-
                                  combustion practices.205

                                  Though some of the process-related energy-savings opportunities noted in the DOE study
                                  require equipment installation or retrofits, for the purposes of this analysis they have been
                                  classified as process-related so that DOE's estimated potential energy intensity reductions
                                  can be included. DOE estimates that for EAF steelmaking, the energy-savings opportunity
                                  bandwidth from implementation of best practices and commercially available technology is
                                  as twice as large as the R&D opportunity bandwidth. Options that are noted by DOE that
                                  are technically available but that may not be economically viable in all situations include:
                                  installation of energy monitoring and management systems for energy recovery and
                                  distribution between processes; preventative maintenance; and improvements in the EAF
                                  process such as improved process control, oxy-fuel burners, DC-arc furnaces, scrap
                                  preheating, and post-combustion processes. The combined best practice/commercially
                                  available technology opportunity quantified by DOE is 1.8 MBtu/ton. Casting/hot rolling
                                  energy efficiency opportunities include thin slab casting with tunnel furnace (0.93
                                  MBtu/ton), which are applicable to both EAF and integrated steelmaking.206
 R&D               High           According to AISI, the greatest potential for reducing the energy intensity of steelmaking
                                  lies with development of new transformational technologies and processes. Examples of
                                  such transformational R&D efforts (applicable both to integrated and EAF steelmaking)
                                  include: (1) Molten oxide electrolysis (under development at MIT); (2) ironmaking by flash
                                  smelting using hydrogen (under development at the University of Utah); and (3) the paired
                                  straight hearth furnace (under development at McMaster University in Ontario, Canada).207
                                  AISI lists the following additional areas as important R&D opportunities for EAF
                                  steelmaking: improved processes for low-grade scrap recovery, as well  as sensible heat
                                  recovery from slags, fumes, and off-gases.208

                                  R&D opportunities noted in the DOE study include increasing the efficiency of melting
                                  processes (0.4 MBtu/ton), integration of refining functions/reductions of heat losses prior to
                                  casting (0.35 MBtu/ton), economical heat capture from EAF waste gas (0.26 MBtu/ton),
                                  purification/upgrading to scrap, and effective  utilization of slag and dust. Casting and rolling
                                  opportunities (applicable both to integrated and EAF steelmaking) include reduction of heat
                                  losses from cast products prior to rolling/reheating (0.75 MBtu/ton) and thin strip casting
                                  (0.5-0.7 MBtu/ton).

                                  R&D barriers (high costs and risks associated with new technology development,
                                  exacerbated by reduced availability of federal funds) are the same as those discussed in
                                  association with the integrated steelmaking R&D opportunity assessment.
Optimal Future Trends
The CEF advanced case projection shows a greater reduction in sector energy use and a larger
annual decrease in energy intensity than under the business-as-usual projection. The largest
fuel decrease is seen in the petroleum category, which falls by 83 percent from 1997 to 2020.
Natural gas consumption falls by 36 percent, and purchased electricity falls by 20 percent.
Though the coal fraction grows relative to  other fuel inputs, total coal consumption falls by 13
percent over the period. Table 43 summarizes the CEF advanced case projections for the iron
and steel industry.
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            Table 43: CEF advanced case projections for the iron and steel industry
                                1997 Advanced Case
                                                              2020 Advanced Case

Petroleum
Natural gas
Coal
Delivered electricity
Total
Consumption
(quadrillion Btu) cccc
0.118
0.529
0.873
0.173
1.693
Percentage
7%
31%
52%
10%
100%
Consumption
(quadrillion Btu)
0.020
0.336
0.758
0.140
1.254
Annual % change in energy intensity (energy consumption per dollar value of output)
Percentage
2%
27%
60%
11%
100%
-2.0%
        Overall % change in energy use (1997-2020)
                                                                           -26.0%
The economic assumptions underlying the CEF advanced case projections are unchanged from
the business-as-usual assumptions (annual  steel production increase of 0.9 percent per year
and growth in the economic value of the industry's output at 0.9 percent per year). Under its
advanced energy scenario, CEF projects that EAF steel production will increase to 55 percent of
the market by 2020, compared to 46 percent under the reference scenario. Retrofit measures
implemented under the advanced case  reduce  energy consumption in the following processes:
blast furnace (injection of pulverized coal and natural gas, blast furnace gas recovery, improved
control systems); EAF steelmaking (scrap preheating, improved process control with neural
networks, DC-Arc furnace); cold rolling (automated monitoring and targeting systems, heat
recovery on the annealing line); hot rolling (process controls, recuperative burners, energy-
efficient drives in the rolling mill);  casting (efficient ladle preheating); cokemaking (programmed
heating).dddd Energy savings are also produced by increased adoption of new process
technologies such as  alternative ironmaking and near net shape casting. Advanced case
assumptions common to all sectors include increased boiler efficiencies and commercial
building efficiency.

The CEF advanced case projections likely overstate potential energy savings available under an
optimal energy scenario, as EAF  steelmaking already comprises 55 percent of production.  In
addition, many of the  technologies noted above are already widely adopted in the industry, and
industry restructuring  since 2000  has resulted in further decreases in the energy intensity of
U.S. steelmaking. At the same time,  increased  adoption of energy-efficient technologies and
new technology development would  be  expected to accelerate  the industry's current trend of
decreased energy consumption.
dddd
As is the case with several sectors addressed in the CEF analysis, there are slight differences between 1997 fuel
consumption data in the reference and advanced cases. We could find no explanation for such differences in the CEF
analysis, but it could be that CEF made modifications to the base year (1997) parameters under the advanced case as
compared with the reference case.
Retrofit measures are a partial list of those contained in Appendix A-2, Industry: NEMS Input Data and Scenario Input, of
the Clean Energy Future report, pp. A-2.70-71.
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                               Sector Energy Scenarios: Iron and Steel
Environmental Implications

The reductions in fossil fuel consumption that are achieved under the advanced energy scenario
would lead to reductions in energy-related CAP emissions at the facility level,  particularly sulfur
dioxide and nitrogen oxides. CAP emissions reductions at the  electric power generation level
would also be expected from reductions in purchased electricity.

Under the advanced energy scenario, by 2020 CEF projects carbon emissions by the iron and
steel industry to fall 27 percent from 1997 levels, which is roughly equivalent to the projected
decline in sector energy usage.

3.6.3   Other Reference Materials Consulted

American Iron and Steel Institute. "Duty-Sharing Byrd Amendment Repealed," Steel Works, December 21, 2005. Internet source.
Available at:
http://www.steel.org/AMATemplate.cfm?Section=Public_Policy&TEMPLATE=/CM/ContentDisplay.cfm&CONTENTID=12412.

American Iron and Steel Institute. Letter to Members of the Senate staff assigned to environment issues. September 12, 2005.
Available at
http://www.steel.org/AMATemplate.cfm?Section=Public_Policy&TEMPLATE=/CM/ContentDisplay.cfm&CONTENTID=11860.

Considine, T., Jablonowski, T. and Considine, D.  The Environment and New Technology Adoption in the U.S. Steel Industry.
May 2001.

L. Price, E. Worrell, and M. Khrushch, Lawrence Berkeley National Laboratory. Sector Trends and Driving Forces of Global
Energy Use and Greenhouse Gas  Emissions: Focus in Industry and Bui/dings. [LBNL-43746]. September 1999. Analysis
conducted with support from EPA's Climate Protection Division, Office of Air and Radiation, and through the U.S. Department of
Energy.

U.S. Department of Energy. Energy and Environmental Profile of the U.S. Iron and Steel Industry.  August 2000.

U.S. Department of Energy. Steel Industry Technology Roadmap. Internet source. Available at
http://www.eere.energy.gov/industry/steel/roadmap.html.

U.S. Department of Energy. Dilute  Oxygen Combustion System. 1999. Available at
http://www.eere.energy.gov/industry/steel/pdfs/doc_system.pdf.

U.S. Environmental Protection Agency. National Emissions Inventory. 2002.

U.S. Environmental Protection Agency. New Source Review: Report to the President. June 2002.

U.S. Environmental Protection Agency. Fact Sheet: Proposed Amendments to Air Toxics Standards for Integrated Iron and Steel
Manufacturing. 2005. Available at http://www.epa.gov/ttn/oaipg/t3/facLsheets/29951factsheet.pdf.

U.S. Environmental Protection Agency. Economic Impact Analysis ofFinal Integrated Iron and Steel NESHAP: Final Report.
2002. Available at http://www.epa.gov/ttnecas1/regdata/EIAs/l&S_EIA_Final_1202.pdf.

U.S. Geological Survey. Iron and Steel Statistics and Information. Available at
http://minerals.usgs.gov/minerals/pubs/commodity/iron_&_steel/.

E. Worrell, N. Martin, and L. Price.  Energy Efficiency and Carbon Dioxide Emissions Reduction Opportunities in the U.S. Iron and
Steel Sector. July 1999.

Q. Zhang. "A Comparison of the United States and Chinese Steel Industries," Perspectives, Vol. 3, No. 6. 2001.
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                             Sector Energy Scenarios: Metal Casting
3.7    Metal Casting

3.7.1  Base Case Scenario

Situation Assessment
The metal casting industry (NAICS 3315) is a
diverse industry that plays a critical role in
U.S. manufacturing, as more than 90 percent
of all manufactured goods in the United States
contain cast metal components.209
There are approximately 2,300 metal
casting facilities in the United States,
including both ferrous and nonferrous
(primarily aluminum) foundries and die
casting facilities.210 Most metal casting
shops are small, independently owned
facilities that perform on a contract basis,
though some "captive" foundries are part of
larger manufacturing operations.eeee DOE
data indicate that approximately 70 percent
of sector energy use is by independent
metal casting facilities and 30 percent is by
captive foundries.211 The industry is
dominated by small "job-shop" businesses;
80 percent of metal casting facilities employ
100 people or less.212 The sector is also
varied due to differences in the metals
being melted,  alloying  requirements,
product specifications, casting processes
used, capacity of operations, etc. Though
metal casting facilities are found
nationwide, ten states  account for more
than 80 percent of the industry's shipments:
Ohio, Indiana, Wisconsin, Alabama,
Michigan,  Pennsylvania, Illinois,
Tennessee,  California,  and Texas.213
The metal casting sector currently
participates in EPA's Sector Strategies
Program.
       Recent Sector Trends Informing the Base Case

     Number of facilities: -i-
     Value added and value of shipments: -i-
     Energy intensity: -i-

     Major fuel sources: Natural gas, purchased electricity

     Current economic and energy consumption data are
     summarized in Table 44 on page 3-66.
                 Voluntary Commitments

  The metal casting sector participates in DOE's Industries of the
  Future (IOF)/lndustrial Technologies Program (ITP) as an
  "Energy Intensive Industry." ITP's goals for all energy intensive
  sectors include the following:

  •   Between 2002 and 2020, contribute to a 30 percent
      decrease in energy intensity.
  •   Between 2002 and 2010, commercialize more than 10
      industrial energy efficiency technologies through research,
      development & demonstration (RD&D) partnerships.

  The program has identified best practices for melting and other
  efficiency improvement opportunities in the sector that could
  result in energy savings and C02 emission reductions. Specific
  energy reduction techniques identified include the following:

  •   Replacing heel melting furnaces used for iron production
      with modern batch melters.
  •   Improving casting yield.
  •   Applying existing air/natural gas mixing methods to reduce
      ladle heating energy.

  Industry participation in the program is managed by the Cast
  Metals Coalition, which in 1998 set measurable goals for 2020,
  including using 20 percent less energy to produce castings,
  compared to the sector's 1998 energy requirements of 320
  trillion Btus. See
  http://www.eere.energY.gov/industry/metalcasting/and
  http://cmc.aticorp.org/.
In recent years, the metal casting sector has
experienced a downturn in part due to international competition and declines in the automobile
industry. Out of all sectors considered in this analysis, the metal casting industry had the largest
annual decrease in value added and  value of shipments from 1997 to 2004 (see Table 44). At the
same time, recent forecasts indicate  an improved economic outlook for the sector in the future. By
2008 metal castings sales are projected to increase 15 percent from 2005 levels, and metal
casting shipments are expected to  be 8 percent higher than 2004 levels.214 From 2003 to 2004,
    According to the DOE analysis, Theoretical/Best Practice Energy Use in Metalcasting Operations (2004), energy data that
    rely on NAICS classifications (as do the sources used in this report) fail to capture energy use by colocated facilities.
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                           Sector Energy Scenarios: Metal Casting
the industry's value of shipments grew by more than 7 percent.215 Growth in the production of light
metals is expected to continue, in part due to transportation industry trends.

Profit margins in the industry are generally small and combined with the small average business
size, suggest that companies have limited financial resources at their disposal, particularly for
R&D initiatives that involve high costs,  long investment horizons, and uncertain outcomes. At
the same time, R&D is essential to maintaining the industry's position in an increasingly
competitive global marketplace. DOE notes that casting processes must continually evolve to
meet increasing demand for lighter-weight, higher-strength castings.216 Thus, public/private R&D
partnerships are essential to ensuring the long-term health and productivity of the industry.
DOE's Industrial Technologies Program partners with the Cast Metals Coalition (representing 80
percent of the industry) and university researchers to develop transformational technologies that
seek to reduce metal casting energy intensity (energy consumption per ton of production) by 20
percent by 2020.217 Given the industry's limited financial resources, a recent DOE analysis
suggests that the most promising technology advancements offer less capital-intensive energy-
savings opportunities,  such as retrofits aimed at increasing the efficiency of existing furnaces.218

The metal casting industry is heavily dependent on natural gas and purchased electricity, and
growing interest in energy efficiency has been driven by the impacts of natural gas price
volatility.219 According to DOE, most of the sector's energy use (approximately 55 percent of
total energy costs) can be attributed to the melting of metals,  but moldmaking and coremaking
also utilize significant amounts of energy. Being one of the most energy-intensive industries in
the United States, reducing energy usage is a primary goal for the sector.220
The table below summarizes economic and energy consumption data presented in Chapter 2.
           Table 44: Current economic and energy data for the metal casting industry

                                    Economic Production Trends
                          Annual Change in    Annual Change in   Annual Change in    Annual Change in
                            Value Added      Value Added    Value of Shipments  Value of Shipments


1997-2004
-3.2%
2000-2004
-5.4%
1997-2004
-2.4%
2000-2004
-3.7%
                                      Energy Intensity in 2002






Energy Energy
Consumption per Consumption per Energy Cost per Energy Cost per
Dollar of Value Dollar Value of Dollar of Value Dollar Value of
Added Shipments Added Shipments
(thousand Btu)
10.3
(thousand Btu)
5.6
(share)
8.0%
(share)
4.6%
                      Primary Fuel Inputs as Fraction of Total Energy Supply in 2002 (fuel use only)




Natural Gas
49%
Net Electricity
34%
Coke & Breeze
15%
                          Fuel-Switching Potential in 2002: Natural Gas to Alternate Fuels
                                           Switchable fraction of natural gas inputs
                                                                        20%


Fraction of natural gas inputs that could be
met by alternate fuels
LPG
73%
Fuel Oil
13%
Electricity
13%
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                           Sector Energy Scenarios: Metal Casting
Expected Future Trends
As the CEF report does not address the metal casting sector, we are unable to present detailed
energy consumption projections for this industry. DOE analysis conducted in 2003 projected
that industry-wide energy consumption would increase through 2009 in response to increasing
production.221 Nonferrous casting shipments are growing due to increased demand for lighter
metals (for example, in the transportation industry and for the U.S. military). According to DOE,
aluminum casting production comprised 36 percent of sales and 34 percent of industry energy
consumption in 2003, and energy use in the typical aluminum casting facility is 381 percent
greater per ton  of metal produced than is typical for iron casting operations.222 DOE site visits
indicated that inefficient melting and holding operations were common in aluminum casting
facilities.

As with other energy-intensive industries (iron and steel, forest products), a gradual decrease in
energy consumption per ton of production is expected for the metal casting industry. Though
efforts to control energy costs are expected to drive incremental investment in energy efficiency,
capital constraints are likely to limit the rate of energy efficiency improvement.

Environmental Implications
                Figure 18: Metal casting sector: energy-related CAP emissions
               Metal Casting Sector:
                NB CAP Em issions
                 (Total: 73,000 tons)
    Source: Final v1 2002 NB
    * Includes emissions from unspecified sources; may include
    additional energy-related emissions.
                Metal Casting Sector:
          Energy-Related CAP Em issions by Pollutant
                  (Total: 5,200 tons)
                                                           SO2
                                                               VOC
                                                                       CO
                                                                       34%
                                                           v>
                                                            NC^	/  <•
     Source: Final v1 2002 NB
Figure 18 compares NEI data on energy-related
CAP with non-energy-related CAP emissions for
the metal casting industry. According to the
figure, energy-related CAP emissions comprise
a relatively small fraction of total CAP emissions.
However, purchased electricity meets more than
30 percent of the sector's energy demand. As
NEI data attribute emissions associated with electric power generation to the generating source
rather than the purchasing  entity, NEI data underestimate energy-related CAP emissions for this
sector.
          Effects of Energy-Related CAP Emissions

      S02 and NOX emissions contribute to respiratory illness
      and may cause lung damage. Emissions also
      contribute to acid rain, ground-level ozone, and
      reduced visibility.
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                            Sector Energy Scenarios: Metal Casting
        Figure 19: Metal casting sector: CAP emissions by source category and fuel usage
               Metal Casting Sector:
         Energy-Related CAP Em issions by Source
                 (Total: 5,200 tons)
 Petroleum
and Solvent
Evaporation
  1%

 Internal
Combustion
 Engines
  12%
   Source: Final v1 2002 NEl
  External
 Combustion
\ Boilers
                           Industrial
                         ^Processes
                            39%
                                                   Metal Casting Sector:
                                              Energy-Related CAP Em issions by Fuel
                                                     (Total: 5,200 tons)
                                                              Coal
                                                                       14%
                                                       Natural Gasl
                                                 Source: Final v1 2002 NFJ
                                                                           Gasoline
Figure 19 presents NEl data on energy-related CAP emissions by source category and fuel
type. Though the largest fraction of energy-related CAP emissions is from external combustion
boilers, process-related energy inputs are also substantial. As noted previously, NEl data
classifications are problematic due to reporting inconsistencies, but equipment classified under
"industrial processes" likely includes melting and holding furnaces that may be fired with coke,
natural gas, or electricity.223 (Cupola melting furnaces are used in ferrous metal casting and are
mostly fired with coke. Holding furnaces are used to maintain the temperature of molten metal
before input into pouring lines.) Other energy-using equipment that  is likely classified as
process-related includes equipment used in moldmaking, coremaking, and post-casting
activities.

Due to the energy-intensive nature of processes related to melting metals (which represent 55
percent of total energy consumption), DOE  notes that substantial energy-savings opportunities
lie with energy efficiency improvements in this area—not only to  the melting furnace itself,  but
also in terms of equipment used for metal preparation and pretreatment, refining and treatment
of molten metals, molten metal  holding, and molten metal tapping and transport.224 At the same
time, onsite emissions of energy-related CAPs are small compared  with other sectors
considered  in this analysis—approximately 5,000 tons per year compared with more than
700,000 tons per year for the chemical manufacturing industry.

3.7.2  Best Case Scenario

Opportunities
Table 45 ranks the viability of five primary opportunities for improving environmental
performance with respect to energy use (Low, Medium, or High). A  brief assessment of the
ranking is also provided, including potential  barriers.

                Table 45:  Opportunity assessment for the metal casting industry
Opportunity
       Ranking
  Assessment (including potential barriers)
 Cleaner fuels
                Low
                             The sector remains heavily dependent on natural gas and electricity, and shows little fuel-
                             switching potential. Natural gas is likely to remain important in part due to the growth of the
                             nonferrous casting segment of the sector (particularly aluminum casting), which prefers
                             natural gas-driven melting technologies.
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                                 Sector Energy Scenarios: Metal Casting
Opportunity
Increased CHP
Ranking
Low
Assessment (including potential barriers)
An extensive analysis of CHP opportunities conducted on behalf of DOE indicated little
potential for CHP in the metal casting industry, primarily on the basis of cost
effectiveness.226 However, there is potential for increased utilization of waste heat energy
through technologies such as heat recuperators, which use heat from exhaust gases to
 Equipment retrofit/
 replacement
                   Medium
                                  heat incoming combustion air.'
The financial barriers in this industry indicate that retrofitting existing technology may be a
more viable opportunity for the industry than equipment replacement. In iron metal casting,
cupola melting efficiency can be improved with retrofits such as replacing gas-fired hot
blasts with recuperative hot blasts, or installing variable speed/frequency drives on large
motors.228 Installation of automated temperature and power controls is another energy-
savings opportunity available in multiple melting-related applications.

As with retrofits, the greatest energy-savings opportunities from equipment replacement lie
with equipment used in melting processes. For iron metal casting, replacing heel melting
furnaces with modern batch melters is one such opportunity. A DOE analysis estimates
that heel melters account for 60 percent of ductile iron and gray iron induction furnaces
used by industry in 2003.229 For aluminum metal casting, there are substantial energy-
savings opportunities from replacing inefficient reverberatory furnaces with best practice
stack melters.230
 Process            Medium        There are also energy-savings opportunities through process improvement in ferrous and
 improvement                      | nonferrous metal casting operations, e.g., implementation of energy management best
                                  practices, optimizing scheduling (continuous melting), scrap cleaning, and improving
                                  casting yield.231
 R&D               Medium        DOE notes that given the energy requirements of melting processes, development of
                                  advanced melting technologies is an area of substantial energy-savings potential for the
                                  metal casting industry. Developing technologies that involve retrofits to existing furnaces
                                  rather than furnace replacement are most likely to be adopted, in part because retrofits
                                  may avoid permitting requirements, and also because they are typically less capital
                                  intensive. Developing retrofit technologies with  substantial energy-savings potential noted
                                  by DOE include the following: oxygen-enriched fuel combustion, charge preheating,
                                  molten metal delivery, and heat recovery from flue gases. Other promising R&D
                                  opportunities noted by DOE include the following: (1) new furnace designs that allow
                                  greater scheduling flexibility and reduced energy losses in batch melting processes; (2)
                                  technologies for increased waste heat recovery; (3) technologies to promote wider
                                  applicability of induction furnaces; (4) continued development of experimental melting
                                  furnace technologies, including Isothermal Melting Technologies; and (5) technologies that
                                  translate ladle  metallurgy furnaces used in wrought steel and aluminum ingot industries to
                                  the smaller capacities used in metal casting.232

                                  DOE notes that the greatest barriers to implementation of advanced melting technologies
                                  include the following: (1) composition of the industry (primarily small businesses) increases
                                  reluctance to take on the risks and costs associated with developing and implementing
                                  new technologies, and also means that smaller facilities may not be able to take
                                  advantage of energy-savings opportunities that are cost effective for larger-scale
                                  operations; (2) declining profit margins reduce investment capacity; (3) the diversity of the
                                  industry limits the applicability of cross-cutting technologies, meaning there is no "one-
                                  size-fits-all" approach to promoting energy efficiency improvement; and (4) new furnace
                                  technologies that require new/expanded exhaust systems may be subject to state and
                                  local permitting requirements.233
Optimal Future Trends
As no energy use projections are available for the metal casting industry, it is not possible to
compare a business-as-usual  energy scenario with an optimal energy scenario. Through
research and development on technologies that will transform  metal  casting energy use, DOE's
goal is to achieve a 20 percent reduction in the  energy required to produce a ton of product by
2020.234 An environmentally preferable energy scenario for the industry would primarily  involve
faster energy efficiency retrofit and replacement rates for existing equipment used  in melting
processes, increased adoption of best energy management practices, and increased investment
in R&D.
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                            Sector Energy Scenarios: Metal Casting
Environmental Implications
Improvements in melting furnace efficiency would reduce onsite emissions (both GHG and
CAP) stemming from fuel inputs of natural gas and coke.  Energy efficiency improvement in
cupola melting furnaces—which utilize coke as the primary fuel—would reduce a particularly
emissions-intensive (both in terms of GHG and CAP emissions) energy consumption process.

Reductions in electricity consumption  (which currently meets over a third of the sector's energy
needs) through increased energy efficiency would have a magnified impact on energy-related
CAP and GHG emissions at the utility level due to the magnitude of energy losses during
electric generation and transmission. As noted previously, CAP emissions reductions would
affect regional air quality, while GHG emissions reductions would have a global impact.

3.7.3  Other Reference Materials Consulted
American Foundry Society. Metal Casting Forecast & Trends; Stratecasts, Inc., Demands Supply Forecast. 2002.
American Foundry Society. Facts & Figures about the U.S. Foundry Industry. Available at http://www.afsinc.org/Trends.htm.
Cast Metals Coalition. Metalcastlng Industry Technology Roadmap: Pathway for 2002 and Beyond. 2003.
U.S. Department of Energy. Energy and Environmental Profile of the U.S. Metalcastlng Industry. Analysis prepared by
Energetics  Incorporated. 1999.
U.S. Environmental Protection Agency. National Emissions Inventory. 2002.
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                          Sector Energy Scenarios: Metal Finishing
                                                   Recent Sector Trends Informing the Base Case

                                                 Number of facilities: -i-
                                                 Value of shipments: -i-
                                                 Electricity energy intensity: t

                                                 Major fuel sources: Electricity, natural gas, petroleum

                                                 Current economic and energy consumption data are
                                                 summarized in Table 46 on page 3-72.
3.8   Metal Finishing

3.8.1  Base Case Scenario

Situation Assessment
A subset of the fabricated metal products
industry, metal finishing (NAICS 332813)
encompasses a variety of surface finishing and
electroplating operations that coat an object with
one or more layers of metal to improve
resistance to wear and corrosion, alter the
appearance,  control friction, or impart new physical properties or dimensions. This diverse
sector is composed of approximately 2,900 facilities, most of which are small, independently
owned facilities that employ 50 or fewer people.235 The industry is geographically concentrated
in highly industrialized areas of California, Texas, and the Great Lakes states.236

The metal finishing industry participates in EPA's Sector Strategies Program.

The sector faces economic pressures from foreign competition and declines in the U.S.
automobile industry, experiencing an 11 percent decline in the number of facilities since 2000,
and a 21 percent reduction in the number of employees.237 Profit margins in the industry are
generally small, which, combined with the small average business size, means that metal
finishing companies have limited financial resources at their disposal. From 1997 to 2004 the
sector experienced no growth in value added and a small annual decline in value of shipments
(see Table 46).ffff 238 According to the organization Energy  Industries of Ohio, electroplating
operations have been particularly hard hit by rising production costs and the pressures of
foreign competition that keep product prices down. In response, the electroplating industry
shows a general trend of moving overseas.239

Between 2002 and 2004, electricity represented  approximately half of the industry's energy
costs, with purchased fuels (a large percentage of which was natural  gas) comprising the
remaining portion.240 Different types of metal finishing operations have different energy
requirements; though some operations use relatively more direct fossil fuel inputs, electroplating
operations are electricity intensive. Since Census Bureau data from the Annual Survey of
Manufacturers (ASM) do not provide the annual amount of energy produced from purchased
fuels, it is not possible to calculate the total energy intensity of the metal finishing industry,
though it is possible to calculate electric intensity (kWh/dollar value of shipments). Industry-wide
electric intensity increased by approximately 3 percent from 1998 to 2004.241

The National Metal Finishing  Strategic Goals Program (SGP), a voluntary environmental
partnership between EPA and several metal finishing trade associations that focuses on
electroplating operations, collected energy intensity data (thousand Btu/dollar of sales) from
program participants.  According to these data, energy intensity remained relatively steady from
1998 to 2003, increasing by just 0.07 percent over the period, with year-to-year fluctuations that
may be attributable to economic production trends and variations in the number of companies
reporting data. Additionally, an independent third-party, the National Center for Manufacturing
Sciences, tracked the progress of 150 participating metal finishers that consistently reported
ffff   U.S. Census Bureau data on the industry's value added and value of shipments from the Annual Survey of Manufacturers
    covers a broader NAICS category (NAICS 3328: coating, engraving, heat treating, & allied activities) than the metal finishing
    industry.
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                           Sector Energy Scenarios: Metal Finishing
their environmental progress. Through 2001, cumulative improvements for these facilities
included a 7 percent reduction in energy use, normalized by dollar value of sales.242 The
differences in electricity intensity (ASM data) and energy intensity (SGP data) are in part
attributable to the fact that the SGP energy intensity metric includes both electric and fuel
energy inputs. Also, ASM data represent a larger cross-section of the metal finishing industry,
as SGP data are primarily from electroplaters.243

In general, most current efforts at improved energy efficiency and technology adoption in the
metal finishing sector are being driven by customer demand. These may take the form of
improved environmental performance (such as ISO 14001 certification), which requires
modification to existing processes, or lower-cost products, which requires efficiency of
operations and inputs, including energy. Many of the emerging technologies that offer energy
efficiency improvement opportunities for the metal finishing sector focus on waste reduction in
existing processes and substitutes to current electrochemical processes. At the same time,
metal finishing companies have little in-house technical expertise and tend to rely heavily on
their equipment suppliers for information.244 There are clear energy efficiency opportunities
available to the metal finishing industry, but given the economic pressures on the industry, it
seems most likely that improvement may come from retrofitting existing technologies with more
efficient equipment, as opposed to wholesale process changes.245

Table 46 summarizes current economic trend and energy consumption data originally presented
in Chapter 2.
         Table 46: Current economic and energy data for the metal finishing industry

                                    Economic Production Trends**
                                                                                gggg
                          Annual Change in    Annual Change in   Annual Change in   Annual Change in
                            Value Added      Value Added    Value of Shipments   Value of Shipments





IMM/-ZUU4
0.1%
E
Energy
Consumption per
Dollar of Value
Added
(thousand Btu)
NA
ZUUU-ZUU4
-1.2%
nergy Intensity in 2002
Energy
Consumption per
Dollar Value of
Shipments
(thousand Btu)
NA
IMM/-ZUU4
-0.3%
Hi
Energy Cost per
Dollar of Value
Added
(share)
6.7%
ZUUU-ZUU4
-2.0%

Energy Cost per
Dollar Value of
Shipments
(share)
4.0%
                      Primary Fuel Inputs as Fraction of Total Energy Supply in 2002 (fuel use only)i




Natural Gas
54%
Net Electricity
42%
Fuel Oil
2%
gggg  No fuel-switching data are available for this sector.
hhhh  Economic data are for the larger NAICS category of coating, engraving, heat treating, & allied activities (NAICS 33281).
""   Energy intensity data are for the larger NAICS category of coating, engraving, heat treating, & allied activities (NAICS
    33281).
i   Fuel use data are for the larger NAICS category of fabricated metal products (NAICS 332).
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                          Sector Energy Scenarios: Metal Finishing
Expected Future Trends
No energy projections are available for the metal finishing industry. The "metals-based
durables" sector is one of the industrial sectors modeled in the CEF report and by AEO 2006,
and includes the following industries: fabricated metal products,  machinery,  electric and
electronic equipment, transportation equipment, and instruments and related products. Though
we do not present a full analysis of CEF and AEO 2006 projections as we do for other sectors, it
is helpful to consider the metals-based durables projections in terms of extrapolating what future
energy trends are likely to be for the metal finishing industry. Further complicating efforts to
predict future energy consumption trends for the metal finishing  industry is the heterogeneous
nature of the sector itself. For instance, trends for electricity-intensive segments of the industry
(like electroplating)  may differ from trends in segments that rely  more heavily on natural gas.

Under the reference scenario for the metals-based durables industry, CEF and AEO 2006
project no major fuel mix changes through 2020, as the industry remains dependent on natural
gas and purchased electricity. In general, there is little opportunity for the metal finishing
industry to replace electricity and natural gas inputs with less expensive fuels, and we do not
anticipate any future fuel-switching trends for the metal finishing industry.

As is the case with  CEF projections, AEO 2006 projects substantial growth in economic
production for the metals-based durables industry through  2020, with the value of shipments
increasing 60 percent from 2004 levels. Energy consumption grows by 30 percent over the
same period, and energy intensity (energy consumption per dollar value of shipments) declines
by 1.2 percent per year. Though subsets of the industry like metal  finishing may be unlikely to
experience the same degree of growth (particularly given recent shifts towards overseas
production), some increase in energy consumption may result from increasing production.

Environmental Implications
                Figure 20: Metal finishing sector: energy-related CAP emissions
                  Metal Finishing Sector:
                   NB CAP Emissions
                     (Total: 400 tons)
                               Energy-
                               related
                                29%
       Source: Draft 2002 NB
       * Includes emissions from unspecified sources; may include
       additional energy-related emissions.
               Metal Finishing Sector:
         Energy-Related CAP Emissions by Pollutant
                  (Total: 100 tons)
    Source: Draft 2002 NB
Figure 20 compares NEI data on energy-
related CAP emissions with non-energy-
related CAP emissions for the metal
finishing sector. According to the figure,
energy-related CAP emissions are a
relatively moderate fraction of all CAP
emissions; however, NEI data attribute
emissions from electric power generation to the generating source rather than the purchasing
      Effects of Energy-Related CAP Emissions

  S02 and NOX emissions contribute to respiratory illness
  and may cause lung damage. Emissions also
  contribute to acid rain, ground-level ozone, and
  reduced visibility.
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                          Sector Energy Scenarios: Metal Finishing
entity. Given that purchased electricity supplies approximately half of the sector's energy needs,
NEI data underestimate energy-related CAP emissions for this sector. At the facility level,
almost 90 percent of energy-related emissions are sulfur dioxide and nitrogen oxides. On a ton
basis, the metal finishing sector's energy-related CAP emissions at the facility level are
relatively small compared with energy-related CAP emissions by other sectors (see Table 13).
       Figure 21: Metal finishing sector: CAP emissions by source category and fuel usage
                  Metal Finishing Sector:
            Energy-Related CAP Emissions by Source
                    (Total: 100 tons)
       Source: Draft 2002 NB
               Metal Finishing Sector:
           Energy-Related CAP Emissions by Fuel
                  (Total: 100 tons)
                                               Source: Draft 2002 NB
Figure 21 presents NEI data on the sources of energy-related CAP emissions shown in Figure
20. The metal finishing industry is a relatively minor source of onsite energy-related CAP
emissions compared with other sectors considered in this analysis—only 100 tons per year
compared with more than 700,000 tons per year for the chemical manufacturing industry.

Ninety percent of energy-related emissions are associated with external combustion boilers,
with distillate oil contributing to roughly two-thirds of energy-related emissions, and natural gas
contributing the remaining third. Given that fuel oil supplies around 2 percent of the sector's
energy requirements, the large fraction of energy-related emissions arising from fuel oil use is
most likely attributable to NEI data reporting errors.

Increases in sector energy consumption would affect energy-related CAP emissions at the
electric power generation level,  as well as  at the facility level through increased consumption  of
natural gas and petroleum-based fuels. The geographic dispersion of the metal finishing
industry and the relatively small volume of energy-related CAP emissions compared with other
sectors included in this analysis indicate that energy trends are unlikely to have a substantial
impact on regional air quality.

As NEI data do not include carbon dioxide emissions, we use carbon dioxide emissions
estimates from AEO 2006, which totaled 157 million metric tons for the metals-based durables
industry in 2004. (Carbon dioxide emissions from the metal finishing sector represent a fraction
of these emissions.) AEO 2006  projects that by 2020 the metals-based durables industry's
carbon dioxide emissions will increase by 25 percent. As discussed previously, a smaller rate of
increase in carbon dioxide emissions would be expected for the metal finishing industry, given
that energy consumption will likely increase at a slower rate than in the larger metals-based
durables sector.
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                          Sector Energy Scenarios: Metal Finishing
3.8.2  Best Case Scenario

Opportunities
Table 47 ranks the viability of five primary opportunities for improving environmental
performance with respect to energy use (Low, Medium, or High). A brief assessment of the
ranking is also provided, including potential barriers.

               Table 47: Opportunity assessment for the metal finishing industry
Opportunity
Ranking
Assessment (including potential barriers)
 Cleaner fuels
                Low
                            The sector remains heavily dependent on electricity and natural gas and shows little fuel-
                            switching trend.
Increased CHP
Equipment retrofit/
replacement
Process
improvement
R&D
Medium
Medium
High
Medium
Given that many metal finishers use electric energy in the electroplating stage and
thermal energy in heating the plating solution baths, small onsite generators that run on
natural gas and have CHP capabilities may be cost effective for some businesses. Low
NOx, high-efficiency generators are offered by a number of manufacturers.
Local and state permitting requirements to install these devices may pose a potential
barrier to implementation.246 New CHP installations also face barriers in terms of utility
rates and interconnection requirements if electricity production is expected to exceed
onsite demand, and also from NSR/PSD permitting. 47
The financial barriers in this industry indicate that retrofitting (versus replacing) existing
technology with state-of-the-art equipment is likely to provide ongoing efficiency
improvement. Facilities may also improve their efficiency by upgrading existing lighting
and improving their HVAC systems.
Multiple process improvement opportunities exist in metal finishing, including using more
efficient rinsing techniques and optimizing plating bath temperatures through adding
insulation and using timers. Process optimization may have greater potential for adoption
due to relatively low associated costs.
Several technologies in development could improve the energy efficiency of metal
finishing processes, including metal powder coating, thermal spray, and sputtering
technologies. Advanced wastewater treatment processes involving ion exchange and
permeable membrane technologies may also produce future opportunities for energy
savings.
The industry is also looking at the substitution of non-cyanide-based plating solutions in
place of cyanide solutions, which create costly and energy-intensive waste treatment
issues.248
Optimal Future Trends
An optimal energy scenario for the metal finishing industry would involve increased energy
efficiency through increased penetration of CHP applications, energy-efficient equipment, and
process improvements, as well as increased investment in the development of new energy-
efficient technologies and processes.

Given that CEF's projections for the metal-based durables industry are not particularly
applicable to the metal finishing sector, we have not included a full summary of CEF's advanced
case projections in this analysis, but the projections show relatively little change in the sector's
fuel mix, a decrease in energy intensity of 2 percent per year (compared with the reference case
projection of an annual decline of 0.7 percent), and an increase in  energy consumption of 20
percent (compared with the reference case projection of a 60 percent increase).
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                            Sector Energy Scenarios: Metal Finishing
Environmental Implications
Energy efficiency increases in the metal finishing sector would affect energy-related CAP and
carbon emissions at both the electric power generation level and the facility level. Increased
CHP would shift energy-related emissions from the electric power generation level to the facility
level to some degree. In cases where electric power supply is produced by fossil fuel-fired
power plants (which have the highest power generation losses), such a shift would  produce the
greatest decrease in  total energy-related emissions,  recognizing that emissions may actually
increase at the facility level as power is produced onsite. However, such effects would vary
according to local energy inputs for electric power generation. Energy efficiency improvements
could also reduce natural gas and petroleum consumption, affecting energy-related CAP and
carbon emissions at the facility level. NEI  data indicate that sulfur dioxide and nitrogen oxide
emissions would be most impacted by such efficiency gains.

Achieving an optimal energy scenario may be relatively more difficult for the metal finishing
sector given current financial pressures and the number of small, geographically dispersed firms
that comprise the industry.

3.8.3  Other Reference Materials Consulted
Angstrom Sciences. Sputtering Technology- The Process. 2006. Internet source.

Hannapel, Jeff, The Policy Group. Personal communication with U.S. Environmental  Protection Agency point of contact for the
metal finishing industry. February 10,2006.

Karthikeyan, J. 2004. Cold Spray Technology:  International Status and US Efforts, ASB Industries. Available from
http://www.asbindustries.com/articles/lnt_Status_Report.pdf; Internet; Accessed Feb. 11, 2006.

"What is Powder Coating?" Finishing.com. Internet source. Available at http://www.finishing.com/Library/pennisi/powder.html.

Encyclopedia of American Industries: Fabricated Metal.  Internet source. Available at
http://www.referenceforbusiness.com/industries/Fabricated-Metal/index.html.

National Metal Finishing Resource Center. Internet source. Available at http://www.nmfrc.org/.

U.S. Census Bureau. County Business Patterns. Internet source. Available at
http://www.census.gov/epcd/cbp/view/cbpview.html.

U.S. Census Bureau. Manufacturing, Mining & Construction Statistics, Annual Survey of Manufacturers. 2002. Available at
http://www.census.gov/mcd/asmhome.html.

U.S. Environmental  Protection Agency. Profile of the Metal Finishing Industry.  2002.

U.S. Environmental  Protection Agency. National Emissions Inventory. 2002.
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                   Sector Energy Scenarios: Motor Vehicle Manufacturing
                                                  Recent Sector Trends Informing the Base Case

                                                 Number of facilities: -i-
                                                 Value of shipments: t
                                                 Electricity intensity: -i-

                                                 Major fuel sources: Electricity, natural gas

                                                 Current economic and energy consumption data are
                                                 summarized in Table 48 on page 3-78.
3.9    Motor Vehicle Manufacturing

3.9.1  Base Case Scenario

Situation Assessment
This report looks at motor vehicle manufacturing
operations—specifically facilities that assemble
finished automobiles and light duty vehicles from
premanufactured automotive parts including the
engine, chassis components, and wheels and
tires (NAICS 33611).249 The assembly process
generally includes stamping, body welding, general assembly, and painting.

According to data published by the Alliance of Automobile Manufacturers, in 2006 there were 61
assembly  plants for automobiles and light duty trucks operating in 21 states, with Michigan,
Ohio,  Indiana, Illinois, and Missouri among the states with the most manufacturing facilities.250
Over the last 20 years, production has gradually shifted south, with new plants opening in
central Tennessee in the 1980s, and in Alabama, Mississippi, and South Carolina in the
1990s.251

In terms of the dollar value of production, the automobile industry is the largest industry in the
United States.252 The industry's value added declined slightly from 1997 to 2004, but value of
shipments increased by a small annual amount  (see Table 48). However, the economic data
also show substantial interannual variation, and larger annual increases in value added from
2000 to 2004.253 U.S. automakers face pressure from foreign competitors, which have an
increasing manufacturing presence in this country. The Big Three North American Original
Equipment Manufacturers (OEMs)—General Motors, Ford, and DaimlerChrysler—are reacting
to declining sales figures and economic strain by closing certain plants and downsizing their
companies. Ford announced in January 2006 that it would be closing 14 North American
manufacturing plants and cutting 18 to 21 percent of employees. GM is following suit with 12
plant closings and a 30,000 job cut through 2008.

The majority of sector energy demand is met by electricity, with natural gas and  other
purchased fuels meeting the remainder. Energy expenditures comprise approximately 1 percent
of total vehicle production costs.254 Major end uses of electricity include painting systems (27-50
percent), facility lighting and HVAC (26-36 percent), compressed air (9-14 percent), and welding
(9-11  percent). Fuels generate hot water and steam used in paint booths and heat in the curing
ovens used to dry paint.255 The amount of energy used in painting systems is affected by VOC
control requirements. Low-VOC powder paints (including anti-chip primers, clear coats,  and
lacquers) have been developed that rely on the  electrostatic attraction between the powder and
the vehicle to deposit the coating onto the surface.256 Though powder paints may require more
heat in the curing process, by eliminating solvents, less energy is required for ventilation,
pollution control, paint application, and paint gun cleaning. In addition, manufacturing powder
paints is slightly less energy intensive than solvent paints, resulting in additional indirect energy
savings.257 At the same time, substituting powder-based coating for solvent-based coating
cannot be accomplished without major capital-intensive process and equipment changes to the
painting lines and operations.

From  1998 to 2004,  electricity purchases have ranged between 50 to 60 percent of total energy
costs  for the industry.258 Since Census Bureau data from the Annual Survey of Manufacturers
do not provide the annual amount of energy produced from purchased fuels, it is not possible to
calculate the total energy intensity of the motor vehicle manufacturing industry, though it is
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                     Sector Energy Scenarios: Motor Vehicle Manufacturing
possible to calculate electric intensity (kWh/dollar value of shipments), which fell by almost 9
percent from 1998 to 2004.

Table 48 summarizes current economic trend and energy consumption data originally presented
in Chapter 2.

    Table 48: Current economic and energy data for the motor vehicle manufacturing industry
Economic Production Trends

Annual Change in
Value Added
1997-2004
-2.2%
Annual Change in
Value Added
2000-2004
1 .9%
Annual Change in
Value of Shipments
1997-2004
0.3%
Annual Change in
Value of Shipments
2000-2004
0.1%
                                         Energy Intensity in 2002



Energy Energy
Consumption per Consumption per Energy Cost per
Dollar of Value Dollar Value of Dollar of Value
Added
(thousand Btu)
NA
Shipments
(thousand Btu)
NA
Added
(share)
1.1%
Energy Cost per
Dollar Value of
Shipments
(share)
0.3%
                       Primary Fuel Inputs as Fraction of Total Energy Supply in 2002 (fuel use only)kl




Natural Gas
48%
Net Electricity
41%
Other
7%
Fuel-Switching Potential in 2002: Natural Gas to Alternate Fuels
Switchable fraction of natural gas inputs


Fraction of natural gas inputs that could be
met by alternate fuels
Fuel Oil
50%
LPG
42%
18%
Coal
11%
                              Fuel-Switching Potential in 2002: Coal to Alternate Fuels
Switchable fraction of coal inputs


Fraction of coal inputs that could be met by
alternate fuels
Natural Gas
94%
Fuel Oil
14%
Withheld
Electricity
4%
kkkk  Fuel input and fuel-switching data are for the larger NAICS category, transportation equipment (NAICS 336).
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                    Sector Energy Scenarios: Motor Vehicle Manufacturing
                                                          Voluntary Commitments

                                            Through Climate VISION, member companies of the Alliance of
                                            Automobile Manufacturers have committed to achieve at least a
                                            10% reduction in GHG emissions from their U.S. automotive
                                            manufacturing facilities, based on U.S. vehicle production, by
                                            2012 from a base year of 2002.a
Expected Future Trends
Economic pressures on the motor vehicle
manufacturing industry are expected to be
the primary motivation for efficiency
improvement, as the U.S. auto industry
seeks to increase its competitive edge on
the global market. A recent study predicts
that the publicly traded companies that
comprise the automotive industry may
also be motivated to reduce the impacts
of energy cost volatility by investing in efficiency.^M According to research conducted by the
Lawrence Berkeley National Laboratory (LBNL), due to the complexity, process, and
technological variation in the automotive assembly industry a wide array of opportunities exist
for energy efficiency and pollution prevention for paint, welding, and cross-sector practices (e.g.,
utilities, lighting, stamping, etc.).  However, given the relatively small fraction of total production
costs that energy entails,  efficiency improvement is likely to be incremental. No major shifts in
fuel mix are anticipated.

Environmental  Implications
         Figure 22: Motor vehicle manufacturing sector: energy-related CAP emissions
                                               259
              Motor Vehicle Assembly Sector:
                  NB CAP Bn issions
                   (Total: 49,000 tons)
      Source: Draft 2002 NB
      * Includes emissions from unspecified sources; may include
      additional energy-related emissions.
                                                             Motor Vehicle Assem bly Sector:
                                                         Biergy-Related CAP Bti issions by Pollutant
                                                                 (Total: 9,000 tons)
                                                    Source: Draft 2002 NB
                                                       Effects of Energy-Related CAP Emissions

                                                   S02 and NOX emissions contribute to respiratory illness
                                                   and may cause lung damage. Emissions also
                                                   contribute to acid rain, ground-level ozone, and
                                                   reduced visibility.
Figure 22 compares NEI data on energy-related
CAP emissions by pollutant type with total CAP
emissions for the motor vehicle manufacturing
industry. The industry is a relatively minor source
of onsite energy-related CAP emissions
compared with other sectors considered in this
analysis—approximately 9,000 tons per year
compared with more than 700,000 tons per year for the chemical manufacturing industry.

As purchased electricity meets a substantial fraction of this sector's energy needs, it is important
to note that NEI data attribute emissions to the generating source rather than the purchasing
entity, and thus underestimate energy-related CAP emissions for this sector. In terms of onsite
energy generation, the largest emissions fractions are nitrogen oxides and sulfur dioxide. (As
noted in Section 2.3.3, NEI data on carbon monoxide emissions appear higher than would be
expected for stationary sources, so we do not address carbon monoxide data in our assessment
of CAP emissions for each sector.)
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                    Sector Energy Scenarios: Motor Vehicle Manufacturing
Figure 23: Motor vehicle manufacturing sector: CAP emissions by source category and fuel usage
              Motor Vehicle Assem bly Sector:
           Energy-Related CAP Em issions by Source
                   (Total: 9,000 tons)
                             Industrial
                            r Recesses
                               '0  Internal
                                 Combustion
                                  Engines
      Source: Draft 2002 NEl
                Motor Vehicle Assem bly Sector:
               Energy-Related CAP Emissions by Fuel
                     (Total: 9,000 tons)
                             Coal
                             41%
                                  Gasoline
                                                   Source: Draft 2002 NB
Figure 23 presents NEl data on the sources of energy-related CAP emissions shown in Figure
22, by source category and fuel usage. External combustion boilers contribute to almost two
thirds of energy-related emissions for this sector. According to NEl data, 47 percent of energy-
related CAP emissions are due to onsite  natural gas consumption and 41 percent of energy-
related emissions are due to onsite coal consumption. The sector does not use large amounts
of coal, but coal's emissions intensity contributes to the relatively high fraction of coal-related
CAP emissions (sulfur dioxide and nitrogen oxides are both linked to coal combustion).

NEl data from 2002 show that key opportunities for reducing the environmental impacts of
sector energy use lie with reducing coal consumption and  increased energy efficiency of
external combustion boilers. According to the Alliance of Automobile Manufacturers, the industry
has made substantial  progress since 2002 in replacing coal-fired equipment with natural gas-
fired equipment, including the elimination of coal use at five DaimlerChrysler assembly plants,
and similar fuel conversions at other facilities.
260
Given the motor vehicle manufacturing sector's dependence on purchased electricity, the
sector's energy-related environmental footprint in part depends on energy inputs for local
electric power generation. Energy efficiency improvements will primarily affect purchased
electricity requirements, with associated reductions in energy-related emissions occurring at the
utility level.

As there are no energy consumption projections for the motor vehicle manufacturing industry
contained in AEO 2006, we do not report carbon dioxide emissions projections for this sector.

3.9.2  Best Case Scenario

Opportunities
Table 49 ranks the viability of five primary opportunities for improving environmental
performance with respect to energy use (Low, Medium, or High). A brief assessment of the
ranking is also provided,  including potential barriers.
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                        Sector Energy Scenarios: Motor Vehicle Manufacturing
           Table 49: Opportunity assessment for the motor vehicle manufacturing industry
Opportunity Ranking Assessment (including potential barriers)
Cleaner fuels

Low

For plants located near landfills, landfill gas may provide an alternative boiler fuel to coal or
other fossil fuels. Plants owned by Ford, GM, BMW, and DaimlerChrysler are currently using
landfill gas,261 but the location-specific requirements of this opportunity limit its potential for
offering widespread energy savings.
.....
                                process load that is met by steam or hot water, but CHP may be cost effective for those
                                plants with electricity, process heat, and steam requirements. To increase cost effectiveness,
                                CHP may also be combined with absorption chillers for plants with cooling requirements.
                                Though the LBNL study provided no examples of plants in the United States that
                                implemented CHP, plants in Europe and Germany have successfully implemented CHP
                                projects.262 New CHP installations also face barriers in terms of utility interconnection
                                requirements if electricity production is expected to exceed onsite demand, and also from
                                NSR/PSD permitting.263
Equipment
retrofit/
replacement
                Medium
Process
improvement
High
                Replacing aging equipment with state-of-the-art equipment offers potential for efficiency
                improvement, within limitations imposed by capital constraints. Due to the high energy
                requirements of the painting process, painting equipment replacement has substantial
                energy-savings potential. Specific opportunities include ventilation system, oven, and control
                system replacement, as well as installation of high-efficiency motors.264 There are also
                opportunities for energy efficiency improvements for body welding technologies and process
                changes.
Some process improvements may offer less capital-intensive opportunities for energy
efficiency improvement, and also may improve product quality and reduce operating costs.
The LBNL study provides many examples of process improvement, including reductions in
ventilation energy use through reduced ventilation speed, and turning down air flow during
breaks in the production process.265

A motor vehicle manufacturing company seeking to reduce energy consumption through
eliminating a shift was deterred by a potential triggering of NSR permitting requirements.
NSR could have been triggered due to the need for additional process equipment during the
remaining shift.266
R&D             Medium          The LBNL study references multiple ongoing technological developments in the industry that
                                will improve sector energy efficiency. Examples include the development of microwave
                                heating for paint curing, and VOC removal systems that will cost-effectively treat smaller
                                amounts of pollutant than current scrubber systems. Additional R&D is also needed to
                                facilitate further development of low-VOC paints or wet-on-wet painting as viable and cost-
                                effective energy-savings opportunities.267
 Optimal Future Trends
 As no energy use projections are available for the motor vehicle manufacturing industry, it is not
 possible to compare a business-as-usual energy scenario with an optimal energy scenario.
 However, a preferred energy management strategy for the industry would primarily involve
 faster replacement rates of existing equipment with energy-efficient equipment, increased
 adoption of process improvements, and increased investment in R&D. Pilot applications of CHP
 in the U.S. automotive industry offer additional opportunities for energy efficiency improvement.

 Environmental Implications
 Given the automotive industry's dependence on purchased power, and due to the magnitude of
 energy losses during electric generation and transmission, efficiency gains at the facility level
 have a magnified impact on energy-related emissions at the utility level. With the automotive
 industry geographically concentrated in the Midwest,  emissions reductions would also be fairly
 concentrated geographically, with potentially greater effects on regional air quality. Reducing
 fossil fuel inputs for boiler fuel through  increased landfill gas applications offer opportunities  for
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                       Sector Energy Scenarios: Motor Vehicle Manufacturing
improving the sector's emissions profile at the facility level, particularly for nitrogen oxides,
carbon monoxide, and sulfur dioxide.

3.9.3  Other Reference Materials Consulted

Ford Motor Company. Ford Motor Company Pollution Prevention Case Study: Conversion of Regenerative Thermal Oxidizers to
Regenerative Catalytic Oxidizers at the Ford Wixom Assembly Plant. Internet source. Accessed February 7, 2006. Available at
http://www.p2pays.org/ref/13/12248.pdf.

Isidore, C. "Ford to cut up to 30,000 jobs: No. 2 automaker to close 14 North American manufacturing plants in effort to stem
losses," CNNMoney.com. January 23, 2006. Internet source. Available at
http://money.cnn.com/2006/01/23/news/companies/ford_closings/index.htm.
"Toyota: We don't want to be No. 1," CNNMoney.com. Internet source. Accessed January 25, 2006.

U.S. Environmental Protection Agency. National Emissions Inventory. 2002.
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                 Sector Energy Scenarios: Motor Vehicle Parts Manufacturing
                                                 Recent Sector Trends Informing the Base Case

                                               Number of facilities: -i-
                                               Value of shipments: -i-
                                               Electricity intensity: t

                                               Major fuel sources: Electricity, natural gas

                                               Current economic and energy consumption data are
                                               summarized in Table 50.
3.10  Motor Vehicle Parts
       Manufacturing

3.10.1 Base Case Scenario

Situation Assessment

The motor vehicle parts manufacturing sector
(NAICS 3363) encompasses a diverse set of
firms that manufacture finished parts used in
the assembly of automobiles, ranging from
firms that manufacture components such as
gasoline engines, transmissions, and steering and brake systems, to those that manufacture
electrical and electronic equipment, to those that produce interior seating and trimmings.268
Original equipment manufacturers (OEMs) produce the equipment parts used in the assembly
of new vehicles. The industry is  highly fragmented, consisting of thousands of independent
companies across the United States. According to the U.S. Census Bureau, there were more
than 5,700  establishments in this NAICS in 2002,  a decline from 5,800 in 1997. The industry
experienced no growth in value added and a small decline in value of shipments from 1997  to
2004 (see Table 50).

According to the Automotive Parts Manufacturers' Association (APMA) of Canada, natural gas
meets approximately half of sector energy demand, with electricity meeting approximately 20
percent and petroleum-based fuels meeting  approximately 10 percent of demand.269 For the
U.S. industry, the electricity fraction may be  higher based on energy cost data compiled by the
Census Bureau. From 1998 to 2004, electricity purchases ranged from 69 to 75 percent of total
energy costs for the industry, representing smaller fractions in 2003 and 2004 as petroleum  and
natural gas prices increased.270

Since Census Bureau data from the Annual  Survey of Manufacturers  do not provide the annual
amount of energy produced from purchased fuels, it is not possible to calculate the total energy
intensity of the motor vehicle parts manufacturing industry, though it is possible to calculate
electric intensity (kWh/dollar value of shipments).  Electric intensity increased by 3 percent from
1998 to 2004. Total electricity consumption increased 14 percent from 1998 to 2004.271

Due to the diversity of the automotive parts manufacturing industry, there are a wide array of
processes associated with sector energy use, including assembly (18 percent of total energy
usage), plastics molding (16 percent), and surface coating and painting (13 percent).272 _Energy
costs generally  represent less than 10 percent of total production costs for the industry.
                                                                               273
Table 50 summarizes current economic trend and energy consumption data originally presented
in Chapter 2.

 Table 50: Current economic and energy data for the motor vehicle parts manufacturing industry
                                   Economic Production Trends
                         Annual Change in   Annual Change in   Annual Change in   Annual Change in
                          Value Added      Value Added     Value of Shipments  Value of Shipments


199/-2UU4
0.0%
2UUU-2UU4
-2.2%
199/-2UU4
-0.1%
2UUU-2UU4
-2.3%
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                   Sector Energy Scenarios: Motor Vehicle Parts Manufacturing
                                         Energy Intensity in 2002



Energy
Consumption per
Dollar of Value
Added
(thousand Btu)
NA
Energy
Consumption per
Dollar Value of
Shipments
(thousand Btu)
NA
Energy Cost per
Dollar of Value
Added
(share)
2.1%
Energy Cost per
Dollar Value of
Shipments
(share)
0.9%
                       Primary Fuel Inputs as Fraction of Total Energy Supply in 2002 (fuel use only)111


Natural Gas
Net Electricity
Other1™1™
                                                               41%
                               7%
                            Fuel-Switching Potential in 2002: Natural Gas to Alternate Fuels
                                              Switchable fraction of natural gas inputs
                               Fuel-Switching Potential in 2002: Coal to Alternate Fuels
                                                                              18%


Fraction of natural gas inputs that could be
met by alternate fuels
Fuel Oil
50%
LPG
42%
Coal
11%
Switchable fraction of coal inputs


Fraction of coal inputs that could be met by
alternate fuels
Natural Gas
94%
Fuel Oil
14%
Withheld
Electricity
4%
Expected Future Trends
Though no energy projections are available for the motor vehicle parts manufacturing industry,
recent trends suggest that electricity consumption is growing relative to the value of economic
output. Increases in electricity intensity suggest that controlling energy costs in a volatile fuel
market has not motivated the industry toward increased energy efficiency investment to a
notable degree. The available data for this sector suggest a slow rate of energy efficiency
improvement in future, primarily through replacement of aging equipment with newer
technologies. No fuel-switching trend is expected.
    Fuel input and fuel-switching data are for the larger NAICS category, transportation equipment (NAICS 336).
    Within MECS, the largest fractions of the "other" category include still gas and waste gas, asphalt and road oil, petroleum
    coke, and purchased steam.
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                 Sector Energy Scenarios: Motor Vehicle Parts Manufacturing
Environmental Implications
       Figure 24: Motor vehicle parts manufacturing sector: energy-related CAP emissions
              Motor Vehicle Parts Mfg. Sector:
                  NB CAP Emissions
                   (Total: 10,000 tons)
      Source: Draft 2002 NB
      * Includes emissions from unspecified sources; may include
      additional energy-related emissions.
                                                            Motor Vehicle Parts Mfg. Sector:
                                                         Energy-Related CAP Em issions by Pollutant
                                                                 (Total: 3,000 tons)

                                                                           NH3
                                                    Source: Draft 2002 NB
                                                      Effects of Energy-Related CAP Emissions

                                                  NOX emissions contribute to respiratory illness and
                                                  may cause lung damage. NOX emissions also
                                                  contribute to acid rain, ground-level ozone, and
                                                  reduced visibility.
Figure 24 compares NEI data on energy-related
CAP emissions with total CAP emissions for the
motor vehicle parts manufacturing industry. As
purchased electricity meets a substantial
fraction of this sector's energy needs, it is
important to note that NEI data attribute
emissions to the generating source rather than
the purchasing entity. Thus, NEI data
underestimate energy-related emissions for this sector. However, the sector is a relatively minor
source of onsite energy-related CAP emissions compared with other sectors considered in this
analysis—approximately 3,000 tons per year compared with more than 700,000 tons per year
for the chemical manufacturing industry.

The large fraction of carbon monoxide (CO) emissions for this sector are believed to be an NEI
reporting error, as 92 percent of all carbon monoxide emissions listed in NEI are from a single
facility. This error also contributes to the magnitude of energy-related  CAP emissions resulting
from internal combustion engines and gasoline  consumption shown in Figure 25, as that same
facility accounts for 98 percent of all CAP emissions resulting from internal combustion engines.
After correcting for this error by eliminating  the data from that facility, total energy-related CAP
emissions for the motor vehicle parts manufacturing industry are approximately 867 TPY (as
reported in Table 13, Section 2.3.3), carbon monoxide emissions comprise around 23 percent of
energy-related CAP emissions, and nitrogen oxide emissions comprise around 57 percent.
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                  Sector Energy Scenarios: Motor Vehicle Parts Manufacturing
                      Figure 25: Motor vehicle parts manufacturing sector:
                       CAP emissions by source category and fuel usage
               Motor Vehicle Parts Mfg. Sector:
            Energy-Related CAP Em issions by Source
                    (Total: 3,000 tons)

              Industrial
              Recesses
         6
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                  Sector Energy Scenarios: Motor Vehicle Parts Manufacturing
Opportunity Ranking Assessment (including potential barriers)
Equipment retrofit/
replacement
Process
improvement
R&D
Medium
High
Low
As in other sectors, replacing aging equipment with state-of-the-art equipment offers
potential for efficiency improvement in the motor vehicle parts industry. One example cited
by APMA includes fuel-fired equipment controlled by oxygen trim controls to improve
combustion efficiency. Facility lighting and HVAC improvements offer additional
opportunities for energy savings.274
Process improvements offer less capital-intensive opportunities for energy efficiency
improvement and also may improve product quality and reduce operating costs. System
optimization for compressed air, exhaust, and make-up air systems was cited as a best
practice by APMA. In plastics molding, reducing the time involved in press changeovers
decreases idle running time and saves energy.276 Other process improvement opportunities
may be similar to those found in the metal casting industry, and painting process
improvements may be similar to those found in motor vehicle manufacturing.
Our research did not produce any information regarding an R&D pipeline of energy
efficiency technologies unique to this sector.
Optimal Future Trends
As no energy use projections are available for the motor vehicle parts manufacturing industry, it
is not possible to compare a business-as-usual energy scenario with an optimal energy
scenario. However, a preferred energy management strategy for the industry would primarily
involve faster replacement rates of existing equipment with energy-efficient equipment and
increased adoption of process improvements.

Environmental Implications
Given the motor vehicle parts manufacturing industry's dependence on purchased  power, and
due to the magnitude of energy losses during electric generation and transmission, efficiency
gains at the facility level have a magnified impact on energy-related emissions at the utility level.
Due to the magnitude of energy losses during electric generation and transmission (more than
twice the amount of delivered energy for fossil fuel-fired power plants), efficiency gains at the
site level  have a magnified impact on energy-related emissions at the utility level. At the facility
level, energy efficiency improvements will primarily affect nitrogen oxide emissions. However,
due to the geographic dispersion of the industry,  energy trends are  unlikely to have a noticeable
impact on regional air quality.

3.10.3 Other Reference Materials Consulted
NRCan. Buildings and Industry: Powder Metallurgy at Automotive Pans Plant, Natural Resources Canada. 2005. Available at
http://oee.nrcan.gc.ca/publications/infosource/pub/ici/caddet/english/r405.cfm?attr=20.

Standard & Poor's. Industry Surveys: Autos & Auto Parts. 2005.

U.S. Department of Energy. Plastics: Industrial Assessment. 2003. Available at http://www.nrel.gov/docs/fy05osti/38529.pdf.

U.S. Department of Labor, Bureau of Labor Statistics. Motor Vehicle and Pans Manufacturing. Internet source.  Available at
http://www.bls.gov/oco/cg/cgs012.htm.

U.S. Environmental Protection Agency. National Emissions Inventory. 2002.
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                        Sector Energy Scenarios: Petroleum Refining
                                                    Recent Sector Trends Informing the Base Case

                                                  Number of facilities: -i-
                                                  Value of shipments: t

                                                  Major fuel sources: Refinery gas (fuel gas), natural gas

                                                  Current economic and energy consumption data are
                                                  summarized in Table 52.
3.11  Petroleum Refining

3.11.1 Base Case Scenario

Situation Assessment
The petroleum refining industry (NAICS 32411,
324110) includes establishments engaged in
refining crude petroleum into refined petroleum
products through multiple distinct processes
including distillation, hydrotreating, alkylation,
and reforming. In addition to fuels,  the industry
produces raw materials for the petrochemical industry.
In the 1980s and 1990s, the petroleum refining industry underwent large-scale consolidation,
shutting down small, inefficient refineries and expanding refineries with larger capacities. The
number of operable refineries dropped from 194 in 1990 to147 in 2004. During the same period,
throughput increased from  15.6 to  16.9 million barrels per day, and refinery utilization increased
from 87.1 to 93 percent. The industry is now dominated by a relatively small number of large,
vertically integrated companies operating multiple facilities.277

Sector energy usage is concentrated primarily in the South Census Region (57 percent) and the
West Census Region.278 For petroleum refining, the most important fuels are refinery gas (also
referred to as "still" gas, this fuel represents a substantial portion of the "other" fuel category in
MECS) and natural gas. Though petroleum refining used to be an industry with slim margins,
industry consolidation has largely addressed this problem. Of the sectors included in this
analysis, petroleum refining experienced the strongest economic growth in terms of annual
increases in value added and value of shipments from 1997 to 2004 (see Table 52).

Table 52 summarizes current economic trend and energy consumption data originally presented
in Chapter 2.

         Table 52: Current economic and energy data for the petroleum refining industry

                                    Economic Production Trends
                          Annual Change in    Annual Change in  Annual Change in   Annual Change in
                           Value Added      Value Added    Value of Shipments  Value of Shipments
                            1997-2004        2000-2004        1997-2004        2000-2004

5.4%
6.3%
6.6%
5.0%
                                      Energy Intensity in 2002
Energy





Consumption per
Dollar of Value
Added
(thousand Btu)
116.3
Energy
Consumption per Energy Cost per
Dollar Value of Dollar of Value
Shipments
(thousand Btu)
16.1
Added
(share)
21.0%

Energy Cost per
Dollar Value of
Shipments
(share)
3.1%
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                           Sector Energy Scenarios: Petroleum Refining
                        Primary Fuel Inputs as Fraction of Total Energy Supply in 2002 (fuel use only)
                                              Other™™
                                                             Natural Gas
                                                                           Net Electricity




68%

27%

4%

                            Fuel-Switching Potential in 2002: Natural Gas to Alternate Fuels
Switchable fraction of natural gas inputs



LPG
£QO/
Other
O70/
18%
Fuel Oil
O/lo/
             met by alternate fuels
Expected Future Trends
Several trends are expected to impact
sector energy use in the future:

   •  Heavy and/or sour crudes—which
      require more energy-intensive
      processing than "premium"
      crudes—are expected to contribute
      a growing fraction of fuel oil
      production. As existing reserves of
      oil are depleted and there is greater
      worldwide competition for premium
      (e.g., light, sweet) crudes, refiners
      will increasingly utilize heavy and/or
      sour crudes to meet demand.

   •  There is expected to be increasing
      use of unconventional sources of oil
      like tar sands and shale oil. These
      materials also require more energy-
      intensive processing to separate oil
      from sand or rock strata. The
      disposal of the rock byproduct after
      processing is  of environmental
      concern and would lead to further
      energy consumption to make the processed oil fit for refining into fuel products.

  •   Production of synthetic fuels (primarily used as blending components for diesel fuel) using
      coal-to-liquids (CTL), gas-to-liquids (GTL), or other processes will increase, particularly in
      the face of high oil prices. Synthetic fuel production is generally a more energy-intensive
      form of fuel production than traditional petroleum  refining processes, and is also
      associated with higher carbon dioxide emissions.
               Voluntary Commitments

The American Petroleum Institute is a member of Climate
VISION, committing to a 10 percent energy efficiency
improvement by 2012. Specific areas of focus include expanding
CHP, reducing methane and carbon venting from production
operations, gasifying refinery residuals, and developing more
robust methods for tracking and reporting GHG emissions
industry-wide. See
http://www.climatevision.gov/sectors/oil gas/index.html.

The petroleum refining sector also participates in DOE's
Industries of the Future (IOF)/lndustrial Technologies Program
(ITP) as an "Energy Intensive Industry." ITP's goals for all
energy intensive sectors include the following:

•   Between 2002 and 2020, contribute to a 30 percent
    decrease in energy intensity.
•   Between 2002 and 2010, commercialize more than 10
    industrial energy efficiency technologies through research,
    development & demonstration (RD&D) partnerships.

See http://www.eere.energY.gov/industry/petroleum  refining/.
 nn  "other" fuels consist primarily of byproduct gas generated in the refining process, often referred to as "still" gas.
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                        Sector Energy Scenarios: Petroleum Refining
  •   Increasing demand for biofuels will impact transportation fuel supply. The Renewable
     Energy Standard requires that ethanol—currently at 3 percent of the nation's gasoline
     supply—grow to 5  percent by 2012, and ethanol is projected to continue growing beyond
     2012. This statute  will require petroleum refineries to manufacture more gasoline blending
     stock to support the increase in ethanol production. Ethanol production is also more
     energy intensive than petroleum refining.

  •   Lastly, EPA's low sulfur regulations for on-road and off-road diesel are expected to
     decrease  refinery efficiency because the hydrotreatment process of sulfur removal is
     highly energy intensive.

Under its reference case scenario, CEF projects that overall energy consumption  by the
petroleum refining sector will increase by 25 percent from 1997 to 2020, primarily  driven by
increasing production. Energy intensity is projected to increase by 0.2 percent per year
(compared with a 1.1 percent annual decrease for industrial manufacturing as a whole).  In
addition to the production-related factors that drive increased energy consumption described
above, according to AGF the industry has exploited many of the easiest opportunities for energy
efficiency gains, so the future pace of energy efficiency improvement is likely to be slow.279

The sector will continue  to depend on refinery gas and natural gas as primary energy sources.
Fuel-switching is a readily  available option for the petroleum refining industry, and petroleum
refineries will continue to switch fuels in response to relative prices.280

CEF projections are summarized in Table 53.

          Table 53: CEF reference case projections for the petroleum refining industry

Petroleum
Natural gas
Coal
Delivered electricity
Total
1997 Reference Case
Consumption
(quadrillion Btu)
2.126
0.800
0.003
0.110
3.039°°°°
Percentage
70%
26%
0%
4%
100%
2020 Reference Case
Consumption
(quadrillion Btu)
2.291
1.300
0
0.200
3.791
Annual % change in energy intensity (energy consumption per dollar value of output)
Percentage
60%
34%
0%
5%
100%
0.2%
        Overall % change in energy use (1997-2020)
                                    25%
In an effort to assess the impact of recent trends that may have affected energy consumption
since the CEF report was produced, we also examined reference case energy consumption
projections for the petroleum refining industry produced in connection with ElA's Annual Energy
Outlook 2006 (AEO 2006), which also uses the NEMS model but incorporates more recent
energy and economic data. From 2004 to 2020, AEO 2006 projects that the industry's value of
shipments will grow at the rate of 1 percent per year, and energy consumption will increase by
50 percent over the period—double the increase projected by CEF. AEO 2006 projects that
    According to 2002 MECS data, total energy consumption for the petroleum refining sector in 2002 was approximately twice
    the value CEF reports for 1997. We are unable to fully account for the magnitude of the difference between the two data
    sources.
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                        Sector Energy Scenarios: Petroleum Refining
energy intensity (energy consumption per dollar value of output) will grow by 1.5 percent per
year. Consumption of all fuel types is projected to increase, with the largest increases seen for
still gas (43 percent) and coal (500 percent).

The dramatic increase in coal consumption  projected by AEO 2006 is primarily driven by the
increasing production of synthetic fuels from coal. CTL is the production of coal-based synthetic
fuels using either a direct liquefaction process or the Fischer-Tropsch process (which involves a
gasification step). This process is fundamentally a feedstock use of coal, but a CHP unit may be
added to generate electricity. EIA assumes  that expansion of CTL production in the petroleum
refining industry will be associated with considerable CHP capacity additions. For the CTL
production process modeled by EIA, 49 percent of coal inputs are retained in the product, 20
percent are consumed in conversion processes, and 31 percent are used for electricity
generation. Given the minimal electricity requirements of the petroleum refining industry, the
majority of such power production would likely be sold to the grid.

Environmental Implications
              Figure 26: Petroleum refining sector: energy-related CAP emissions
                Petroleum Refining Sector:
                   NB CAP Emissions
                   (Total: 789,000 tons)
      Source: Draft 2002 NB
      * Includes emissions from unspecified sources; may include
      additional energy-related emissions.
                                                         Petroleum Refining Sector:
                                                    Energy-Related CAP Emissions by Pollutant
                                                            (Total: 299,000 tons)
                                               Source: Draft 2002 NB
                                                   Effects of Energy-Related CAP Emissions

                                               S02 and NOX emissions contribute to respiratory illness
                                               and may cause lung damage. Emissions also
                                               contribute to acid rain, ground-level ozone, and
                                               reduced visibility.
Figure 26 compares NEI data on energy-
related CAP emissions with non-energy-
related CAP emissions for the petroleum
refining sector. According to the figure,
energy-related CAP emissions are less than
half of all CAP emissions and are dominated
by nitrogen oxide and sulfur dioxide. (As
noted in Section 2.3.3, NEI data on carbon
monoxide emissions appear higher than would be expected for stationary sources, so we do not
address carbon monoxide data in our assessment of CAP emissions for each sector.) Energy
efficiency and clean energy improvements are expected to primarily affect emissions of these
pollutants. According to MECS data, in 2002 net electricity comprised less than 2 percent of the
petroleum refining industry's total energy demand, so NEI data provide a fairly complete picture
of the sector's energy-related CAP emissions.
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                         Sector Energy Scenarios: Petroleum Refining
     Figure 27: Petroleum refining sector: CAP emissions by source category and fuel usage
                 Petroleum Refining Sector:
            Biergy-Related CAP Emissions by Source
                    (Total: 299,000 tons)
                         Other
                Engines
                 10%
      Source: Draft 2002 NB
                                           Petroleum Refining Sector:
                                        Energy-Related CAP Emissions by Fuel
                                              (Total: 299,000 tons)
                                                                            Residual Oil
                                                                           ^  7%
                                                                                Oil
                                                                           -—(unspecified)
                                                                                3%


                                                                            All Others
                                                Source: Draft 2002 NB
Figure 27 presents NEI data on the sources of energy-related CAP emissions shown in Figure
26. According to MECS data (see Table 52), "other" fuels (primarily refinery gas and still gas)
met the majority of the sector's energy needs in 2002. In NEI, such fuels are likely classified
either as "gas (unspecified)" or "process gas." Though the largest fraction of energy-related CAP
emissions is from external combustion boilers, emissions that are classified as related to
industrial  processes in NEI are also substantial. As previously noted, NEI equipment
classifications are problematic due to reporting inconsistencies. DOE reports that the majority of
the sector's energy consumption is from direct fuel inputs into the following systems: boilers,
furnaces,  reboilers in distillation columns, thermal and catalytic crackers, and steam systems
used for steam stripping and other purposes.
                            281
CEF and AEO 2006 projections of increasing energy consumption for the petroleum refining
industry would primarily increase energy-related CAP emissions at the facility level.

As NEI data do not include carbon dioxide emissions, we use carbon dioxide emissions
estimates from AEO 2006, which totaled 207 million metric tons in 2004. For the petroleum
refining industry,  increasing energy consumption leads to a projected increase in carbon dioxide
emissions of 56 percent from 2004 to 2020, in line with the expected increase in total energy
consumption.

3.11.2 Best Case Scenario

Opportunities
Table 54 ranks the viability of five primary opportunities for improving environmental
performance with respect to  energy use (Low, Medium, or High). A brief assessment of the
ranking is also provided, including potential barriers.

              Table 54: Opportunity assessment for the petroleum refining industry
 Opportunity
Ranking
Assessment (including potential barriers)
 Cleaner fuels
               Low
                             As the sector's primary energy source is refinery gas—a byproduct of the production
                             process—there is minimal potential for a large-scale shift toward cleaner fuel inputs.
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                             Sector Energy Scenarios: Petroleum Refining
 Opportunity
Ranking
Assessment (including potential barriers)
Increased CHP
Equipment
retrofit/
replacement
Process
improvement
R&D

High
Medium
Medium
Medium

Though the petroleum refining industry has relatively low demand for electricity, it has
the third-largest cogeneration capacity among manufacturing industries. The industry
meets 30 percent of its electricity requirements with onsite power generation, most of
which is cogenerated.282 Due to the magnitude of the industry's steam requirements,
cogeneration is generally a cost-effective way of meeting this demand. According to
DOE analysis there is substantial potential to increase CHP capacity in the refining
industry, and also to increase waste heat reduction and recovery (particularly in lower-
quality steam and exit gases).283 As mentioned previously, DOE expects that in the
future, increased synthetic fuel production will be a driver of increased cogenerating
capacity to the degree that onsite demand for electricity could be exceeded.284
New CHP installations also face barriers in terms of utility rates and interconnection
requirements if electricity production is expected to exceed onsite demand, and also
from NSR/PSD permitting.285
For capital-intensive industries, CEF predicts that the largest energy efficiency gains will
come from replacement of old equipment with state-of-the-art equipment.286
Opportunities lie with furnaces, heat exchange equipment (replacement with helical,
vertical heat exchangers), sensors and controls, equipment used in separation
processes, and containment vessels.287 Continuous reforming technology improves the
efficiency of transportation fuel refining; Digital Equipment Condition Monitoring is a
process control technology that allows the system to operate closer to maximum
efficiency. Retrofits can also reduce energy losses from steam systems (pipes, traps,
and valves).
API cites cost and regulatory barriers to energy efficiency improvement, noting "energy
efficiency is not usually a business driver and is difficult to justify as an investment when
capital recovery is too long."288 To avoid NSR, refineries may find it easier to retrofit
existing equipment as opposed to installing the latest energy-efficient technologies.
The most energy-intensive processes in petroleum refining include distillation
(atmospheric and vacuum), hydrotreating, alkylation, and reforming.289 Energy losses
can be reduced through implementation of energy management best practices,
minimization of energy-intensive processes such as distillation, process optimization to
reduce downtime and maintenance requirements, and replacement of solid phase
catalysts with ionic liquids.290 API has the objective of increasing usage of less energy-
intensive biological processes, including bioprocessing of crude, biotreatment of
wastewater, and bioremediation of soil and groundwater contamination.
API cites uncertainties about future product requirements as inhibiting some process-
related changes. There is uncertainty about future performance-related requirements on
the part of consumers, as well as uncertainty about future regulatory requirements.291
API notes the following R&D focus areas: replacements for existing separation
processes, improved process yields through development of more selective catalysts,
development of better pathways for hydrocarbon conversion, and bioprocessing.292
Promising technologies are currently in development, such as membrane separation
technologies that increase the efficiency of distillation units by 20 percent.
Under Climate VISION, the R&D Challenge focuses on technologies that
reduce/sequester carbon emissions.293 The industry has developed mission statements
and roadmaps for crucial R&D priority efforts as part of its efforts with DOE/IOF; see
httDV/www.eere.enerav.aov/industrv/Detroleum refinina/. With the elimination of most of
the nation's small, inefficient refineries and expansion of remaining, larger, more efficient
refineries, refining margins have improved in 2004 and 2005. The industry's
strengthened financial position may help attract capital necessary for R&D and other
large-scale improvements.
API notes the following factors that inhibit the development of new energy-saving
technologies and processes in the petroleum refining industry: a number of technical
barriers (intrinsic process inefficiency, lack of understanding about mechanisms leading
to fouling, inadequate sensing and measuring techniques, inadequate process models),
regulatory requirements, costs and risks associated with developing new technology,
and a lack of long-term commitment to fundamental research.
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                         Sector Energy Scenarios: Petroleum Refining
Optimal Future Trends
Under its advanced energy scenario, CEF projects the petroleum refining sector's overall
energy use to decline slightly below current levels, and energy intensity to decrease by 0.9
percent annually. The decline in sector energy consumption is driven primarily by decreased
demand for petroleum-based fuels brought about by the greenhouse gas emissions regulations,
rather than from energy efficiency gains within the sector. As GHG regulations included under
the advanced scenario drive shifts to less carbon-intensive fuels, CEF projects that the total
amount of energy provided by petroleum-based fuels will decrease by 2020, while the amount of
energy provided by natural gas will increase over 1997 levels.

CEF's advanced case projections are summarized in Table 55.

           Table 55: CEF advanced case projections for the petroleum refining industry

Petroleum
Natural gas
Coal
Delivered electricity
Total
1997 Advanced Case
Consumption
(quadrillion Btu)
2.126
0.800
0.003
0.110
3.039
Percentage
70%
26%
0%
4%
100%
2020 Advanced Case
Consumption
(quadrillion Btu)
1.799
1.014
0
0.126
2.939
Annual % change in energy intensity (energy consumption per dollar value of output)
Overall % change in energy use (1997-2020)
Percentage
61%
35%
0%
4%
100%
-0.9%
-3.0%
Environmental Implications

Under the advanced energy scenario, CEF projects that the petroleum refining industry to
achieve a 15 percent reduction in 1997 carbon emissions levels by 2020, primarily due to the
lower carbon intensity of natural gas as compared with petroleum-based fuels. This shift is
expected to improve emissions of criteria pollutants as well, particularly nitrogen oxides and
sulfur dioxide.

3.11.3 Other Reference Materials Consulted

American Petroleum Institute. Basic Petroleum Data Book, Volume XXV - Number 1. February 2005.

Ernest Orlando Lawrence Berkeley National Laboratory and American Council for an Energy-Efficient Economy. Emerging
Energy Efficient Industrial Technologies. March 2001.

Ernest Orlando Lawrence Berkeley National Laboratory. Energy Efficiency Improvement and Cost Saving Opportunities for
Petroleum Refineries - An ENERGY STAR® Guide for Energy and Plant Managers.  February 2005.

Howard K. Gruenspecht and Robert N. Stavins, Resources for the Future. New Source Review Under the Clean Air Act: Ripe for
Reform. 2002.

Lori Ryerkerk, Exxon Mobil at Texas Industrial Energy Management Forum, Beaumont, Texas. Taking on the World's Toughest
Energy Challenges. April 2005.

U.S. Department of Energy. Gasoline Biodesulfurization, Petroleum Project Fact Sheet. May 2003.
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                             Sector Energy Scenarios: Petroleum Refining
U.S. Department of Energy. Energy-Saving Separation Technology for the Petroleum Industry, Petroleum Project Fact Sheet.
December 2000.
U.S. Department of Energy. Robotics Inspection System for Storage Tanks, Petroleum Project Fact Sheet. September 1999.
U.S. Department of Energy. Energy and Environmental Profile of the U.S. Petroleum Refining Industry. Analysis prepared by
Energetics Incorporated. December 1998.
U.S. Environmental Protection Agency. National Emissions Inventory. 2002.
U.S. Environmental Protection Agency. New Source Review: Report to the President. June 2002.
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                   Sector Energy Scenarios: Shipbuilding and Ship Repair
                                                  Recent Sector Trends Informing the Base Case

                                                 Number of facilities: -i-
                                                 Value of shipments: t
                                                 Electricity intensity: -i-

                                                 Major fuel sources: Electricity, petroleum, natural gas

                                                 Current economic and energy intensity data are
                                                 summarized in Table 56 on page 3-97.
3.12  Shipbuilding and Ship Repair

3.12.1 Base Case Scenario

Situation Assessment
The shipbuilding and ship repair industry (NAICS
336611) consists of 346 facilities that build and
repair ships, barges, and other large commercial
and military vessels, as well as facilities that
manufacture offshore oil and gas well drilling and
production platforms.295 Most shipyards were
built prior to World War II, with layout changes made piecemeal through the years. Facilities that
are common to most shipyards include drydocks, shipbuilding positions, piers and berthing
positions, workshops, work areas, and warehouses. The shipbuilding and ship repair industry
participates in  EPA's Sector Strategies Program.

Although recent economic indicators have been positive for the shipbuilding and ship repair
industry, the sector faces some considerable economic challenges. Value added and value of
shipments increased from 1997 to 2004 (see Table 56).296 However, the long-term economic
outlook for the industry may be less favorable. The sector is heavily dependent on military
contracts and fairly uncompetitive in the global market of commercial shipbuilding, representing
less than one percent of the global  new construction  market for commercial vessels.297

Electricity purchases represent 75 to 80 percent of the sector's energy costs, and purchased
fuels represent the sector's remaining energy budget, with no major switching trends (i.e., from
electricity toward fuels) evident from 1998 to 2004.298 As Census Bureau data from the Annual
Survey of Manufacturers do not provide the annual amount of energy produced from purchased
fuels, it is not possible to calculate the total energy intensity of the shipbuilding industry, though
it is possible to calculate electric intensity (kWh/dollar value of shipments), which fell by almost
10 percent from 1998 to 2004.2" There is substantial regional variation in the sector's energy
profile. For example, yards in the Northeast have higher fuel usage due to facility heating
requirements.  Regional differences in electricity and fuel costs may affect the cost-benefit
calculations for energy efficiency improvement projects.

Energy-intensive processes for shipbuilding and ship repair include welding (electric arc welding
is most common), forging, abrasive blasting, and application of marine coatings. The greatest
energy-related environmental improvement opportunities are related to equipment replacement
and/or retrofits to increase the energy efficiency of compressed air systems, HVAC systems,
lighting, and motors.300

Table 56 summarizes current economic trend and energy intensity data originally presented in
Chapter 2.
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                     Sector Energy Scenarios: Shipbuilding and Ship Repair
   Table 56: Current economic and energy data for the shipbuilding and ship repair industry
                                                                                         PPPP
                                      Economic Production Trends

Annual Change in
Value Added
1997-2004
2.7%
Annual Change in
Value Added
2000-2004
5.4%
Annual Change in
Value of Shipments
1997-2004
1.8%
Annual Change in
Value of Shipments
2000-2004
2.4%
                                        Energy Intensity in 2002



Energy Energy
Consumption per Consumption per Energy Cost per Energy Cost per
Dollar of Value Dollar Value of Dollar of Value Dollar Value of
Added
(thousand Btu)
NA
Shipments
(thousand Btu)
NA
Added
(share)
1.2%
Shipments
(share)
0.8%
Expected Future Trends
Economic pressures on the shipbuilding industry are expected to play a dominant role in sector
energy use. Energy expenses represent a substantial fraction of production costs and, though
the industry has not historically taken a strategic approach to energy management, increasing
costs for electricity and fuels has driven growing consideration of energy issues, particularly in
areas with high electric rates.301 Efforts to control energy costs are likely to drive incremental
efficiency improvement, but capital constraints are likely to limit the extent of major capital
improvements.  Purchased electricity will continue to meet the majority of the sector's energy
requirements.

Increased VOC regulation has the potential to increase energy requirements for pollution control
systems. In addition, increased regulation of stormwater discharges could increase energy
requirements for water treatment.

Environmental Implications
          Figure 28: Shipbuilding and ship repair sector: energy-related CAP emissions
              Shipbuilding & Ship Repair Sector:
                   NB CAP Em issions
                    (Total: 6,000 tons)
                                Allother*
      Source: Draft 2002 NB
      * Includes emissions from unspecified sources; may include
      additional energy-related emissions.
                Shipbuilding & Ship Repair Sector:
             Energy-Related CAP Em issions by Pollutant
                      (Total: 2,000 tons)
                                                                   VOC
        Source: Draft 2002 NB
    MECS does not provide energy consumption data for this sector.
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                    Sector Energy Scenarios: Shipbuilding and Ship Repair
                                                     Effects of Energy-Related CAP Emissions

                                                 S02 and NOX emissions contribute to respiratory illness
                                                 and may cause lung damage. Emissions also
                                                 contribute to acid rain, ground-level ozone, and
                                                 reduced visibility.
Figure 28 compares NEI data on energy-related
CAP emissions with total CAP emissions for the
shipbuilding and ship repair industry. Onsite
energy-related CAP emissions are small
compared with other sectors considered in this
analysis—approximately 2,000 tons per year
compared with more than 700,000 tons per year
for the chemical manufacturing industry.

It is important to note that NEI  data attribute emissions to the generating source rather than the
purchasing entity. Given the sector's reliance on purchased electricity, NEI data underestimate
the industry's energy-related CAP emissions. According to NEI data shown in Figure 29, 63
percent of energy-related emissions are from residual oil consumption and 25 percent are from
distillate oil consumption. Figure 28 shows that use of these fuels contributes to high fractions of
sulfur dioxide and nitrogen  oxide emissions, with those two pollutants comprising 83 percent of
total CAP emissions.

                Figure 29: Shipbuilding and ship repair sector: CAP emissions
                             by source category and fuel usage
             Shipbuilding & Ship Repair Sector:
           Energy-Related CAP Emissions by Source
                   (Total: 2,000 tons)
      Source: Draff 2002 NB
                                                          Shipbuilding &Ship Repair Sector:
                                                         Energy-Related CAP Emissions by Fuel
                                                               (Total: 2,000 tons)
                                                         Residual Oil
                                                   Source: Draff 2002 NB
Figure 29 presents NEI data on the sources of energy-related CAP emissions shown in Figure
28, by source category and fuel usage. According to NEI data, the primary opportunities for
reducing energy-related CAP emissions lie with reductions in petroleum-based fuel consumption
and increased efficiency for external combustion boilers and internal combustion engines.
Economic pressures on the industry could lead to reductions in petroleum consumption, which
would decrease energy-related CAP emissions at the facility level, particularly sulfur dioxide and
nitrogen oxides. Given the sector's dependence on purchased electricity, a portion of the
sector's energy-related environmental footprint is linked to trends in  electric generation, with
most  energy-related  emissions impacts occurring at the utility level.

As there are no energy consumption projections for the shipbuilding and ship repair industry in
AEO 2006, we  do not report carbon dioxide emissions  projections for this sector.

3.12.2 Best Case Scenario

Opportunities
Table 57 contains a brief assessment of five primary opportunities for improving environmental
performance with respect to sector energy consumption, including potential barriers to
implementing such opportunities.
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         Table 57: Opportunity assessment for the shipbuilding and ship repair industry
Opportunity
Cleaner fuels
Increased CHP
Equipment retrofit/
replacement
Process improvement
R&D
Ranking
Low
Low
High
High
Low
Assessment (including potential barriers)
Due to the sector's dependence on purchased electricity, the environmental impact of
energy inputs will follow national trends for electric generation. There may be some
opportunity for clean fuels improvement through increased use of renewable energy,
either at the facility level or in electric generation, but cost considerations limit the
magnitude of this opportunity.
The sector shows little opportunity for CHP.
Equipment replacement and retrofits offer opportunities for energy efficiency
improvement, particularly in the areas of compressed air systems, air handling
equipment, lighting, HVAC, and motors. In the forging process, gas-fired heating can be
replaced with induction heating (uses a high-frequency electric current), which has lower
operational costs and requires lower energy inputs.
The industry's limited capital and competing capital demands are the primary barriers to
equipment-related opportunities. Industry representatives note that less capital-intensive
opportunities such as facility lighting upgrades may be relatively easier to approve.302
Process improvements may offer opportunities for energy efficiency improvement and
also may improve product quality and reduce operating costs. For example, energy-
related environmental impacts from welding processes may be reduced through use of
alternative energy sources, automation/robotics, and reduced post-weld processing.303
In forging processes, improved efficiency of press changeovers to reduce idle running
time will also save energy.304
A technical barrier to increased welding automation/robotics is the highly customized
nature of most welding operations in U.S. shipyards, where there are relatively few
repetitive production processes.
Given the capital constraints and long-term economic forecast for the shipbuilding
industry, low levels of investment in R&D of new technologies are expected. The
Welding Industry Vision Workgroup did set forth R&D needs and challenges with
respect to welding processes.
Optimal Future Trends
As no energy use projections are available for the shipbuilding industry, it is not possible to
compare a business-as-usual energy scenario with an optimal energy scenario. However,  a
preferred energy management strategy for the shipbuilding industry would primarily involve
faster replacement rates of existing equipment with energy-efficient equipment and increased
adoption of process improvements.

Environmental Implications
Given the shipbuilding industry's dependence on purchased power, the majority of
environmental benefits (in terms of decreased CAP and carbon emissions) from increased
energy efficiency in the shipbuilding industry would occur outside the facility at the utility level
from reductions in purchased electricity. Due to the magnitude of energy losses from fossil fuel
fired electric power generation, efficiency gains at the site level could have a magnified impact
on energy-related emissions at the utility level, depending on the energy sources employed by
local electric power generators.

Replacing fossil fuel-fired equipment with electric-powered equipment (as in the case of
induction heating in forging operations) would shift energy-related emissions from the facility to
the utility level. Though electric-powered equipment may  be more efficient, fossil fuel-fired
electric power generation is associated with substantial energy losses that could offset
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efficiency gains in terms of energy-related emissions. Such outcomes would depend on local
variations in electric power supply.
3.12.3 Other Reference Materials Consulted
U.S. Department of Transportation, Maritime Administration. Report on Survey of U.S. Shipbuilding and Repair Facilities.
MetalPass.com. Welding Industry Vision Workshop Result. Internet source. Available at
http://www.metalpass.com/metaldoc/paper.aspx?doclD=122.
U.S. Environmental Protection Agency. National Emissions Inventory. 2002.
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4.     Barriers to Environmentally
       Preferable Energy Outcomes
                   Chapter 4. Barriers to Environmentally
                       Preferable Energy Outcomes
                 4.1 Overview of Barriers
                 4.2 Nonregulatory Barriers
                 4.3 Regulatory Barriers
                 4.4 Conclusion
                                          Insights

Based upon our research—including the data sources we reviewed and the perspectives and insights
provided to  us  during interviews with internal and external stakeholders—this analysis (1) identifies
general categories of barriers (financial,  technical, institutional, and  regulatory) to environmentally
preferable energy outcomes in industrial manufacturing sectors; (2) notes that regulations and their
underlying legislation do not necessarily take into consideration the potential for an adverse impact on
energy efficiency or clean energy improvement; (3) discusses ways in which  regulations—issued by
EPA or other agencies—may thus create barriers to energy efficiency and clean energy improvement;
and (4) identifies specific regulatory requirements that may impact opportunities around cleaner fuels,
increased Combined heat and power (CHP),  equipment retrofit/replacement,  process improvement,
and research and development (R&D).
4.1    Overview of Barriers

As discussed in Chapter 3 of this report, including each sector's table of Best Case Scenario
Opportunities, there are a number of key opportunities for promoting environmentally preferable
energy outcomes within each of the 12 sectors. These opportunities—reducing energy-related
emissions through use of cleaner fuels, or by increasing energy efficiency through combined
heat and power technologies, equipment retrofit or replacement, process improvement, or R&D
involving energy-efficient technologies and processes—can be inhibited by a number of
barriers. Thus, the next step is to examine what the barriers are to implementing these
opportunities.

Based upon our research—including the data sources we reviewed and the perspectives and
insights provided to us during interviews with internal and external stakeholders—we identified a
number of different types of barriers that can impact energy efficiency and clean energy
investments. These include, but are not limited  to, nonregulatory barriers (i.e., financial,
technical, and institutional constraints) as well as regulatory barriers. Section 4.2 briefly
discusses the nonregulatory barriers to provide context for the consideration of regulatory
barriers. Section 4.3 then provides a more detailed discussion of regulatory barriers, as the
purpose of this analysis is to facilitate the development of policy approaches that EPA can
employ to address regulatory barriers and promote energy efficiency and clean energy
improvement in select manufacturing industries.

4.2    Nonregulatory Barriers

4.2.1  Financial Barriers

Primary and secondary research identified a number of financial barriers to environmentally
preferable energy outcomes associated with financial and human capital investment, fuel cost
differentials, and the broader economic circumstances facing one or more sectors. Sector
representatives interviewed for this analysis indicated that such cost barriers are among the
most important factors constraining energy efficiency and clean energy investments.
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Competing Capital Needs
Given scarce capital resources, the greatest investment priorities are typically for equipment
that (1) maintains or increases production and product quality or (2) is necessary to meet
regulatory requirements (i.e., for equipment required to comply with environmental or worker
safety regulations). Discretionary investments for energy efficiency or clean energy projects
must often compete with these higher-priority investments.

Stringent Investment Hurdles
Energy efficiency and clean energy investments may also face more  stringent investment
hurdles than other types of capital investment (i.e., shorter payback periods; evaluating
alternatives on the basis of up-front costs rather than lifecycle costs). Companies evaluate
capital investments in terms of which ones offer the highest return on investment (ROI). Energy
efficiency investments may be viewed less favorably than other investments,  since energy is an
input that does not necessarily increase production capacity or productivity, improve product
quality, increase worker safety, etc. This is particularly true in the case of new technologies that
may entail greater risks in implementation. The American Forest & Paper Association (AF&PA)
indicated that managers typically want to see an ROI of 25 to 30 percent on an  energy efficiency
investment.305 According to a 2004 study by the National Commission on Energy Policy, "business
managers routinely forego efficiency opportunities with payback times as short as 6 months to three
years—effectively demanding annual rates of return on efficiency investments in excess of 40-100
percent."306

Slow Turnover of Capital

If firms have made a substantial  investment in equipment that has a long service life, they are
likely to continue using such equipment until the end of its useful life before replacing it with a
more energy-efficient technology. In industries like cement and forest products, existing energy-
intensive equipment such as kilns and boilers  have long lifetimes and require substantial
amounts of capital to replace, which slows the rate of investment in more energy-efficient
technologies. Such barriers are exacerbated when industry production is stagnant or declining
and there is no expansion of production capacity, or  when the industry is already at risk due to
global competition and other economic conditions. This is the case for many of  the industries
addressed in this report, including aluminum, forest products, and segments of  the chemical
industry.

Economic Circumstances of the Industry
Firms are unlikely to invest capital in new equipment unless their long-term economic outlook is
favorable. Many basic U.S. industries, such as aluminum, forest products, and segments of the
chemical industry are not growing due to foreign competition and higher U.S. costs for labor and
other variable costs. It may be difficult for these industries to justify large capital investments
under current economic circumstances. It may also be more difficult to raise funding in equity
markets if a sector is in decline or if investors do not  perceive it as capturing value. Capital
investment decisions regarding equipment replacement or retrofits may also be affected by
resource-related constraints such as the extent of raw material reserves (e.g., the level of
investment in equipment upgrades at cement plants  may be based on the magnitude of
remaining onsite limestone reserves).

Some sectors face increased energy consumption based on consumer demands. Food
manufacturers have seen increased demand for ready-to-eat and fast-prepared foods, which
consume more energy in processing. Customers of metal finishers and motor vehicle parts
manufacturers are also demanding improved environmental  performance through certifications
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such as ISO 14000. Such certification processes are often an important tool in identifying
energy-savings opportunities, but they are also typically capital-intensive initiatives that may
require expenditures on process modifications that take precedence over energy-related
investments.

Resource constraints may also serve as a general barrier to energy efficiency and clean  energy
investment in certain sectors. As raw material inputs become more constrained for certain
sectors (e.g., in petroleum refining, sources of light, sweet crudes, and in forest products,
available land for harvesting), they may be forced to process lower-quality materials that have
higher energy requirements.

Staff Resource Constraints
Firms may be unable or unwilling to incur the costs  (in terms of staff time and  effort) associated
with evaluating the feasibility of an energy efficiency or clean energy opportunity and making the
investment case to management decision-makers. AF&PA indicated that even for cost-effective
and low-risk energy-savings opportunities, facility managers must typically develop an internal
business assessment of the investment for approval by upper management decision-makers.
The staff time and resources required to conduct such assessment may be a barrier to
implementing the opportunity. Even greater internal resources  may be needed to make the case
for higher-risk investments in  new technologies.307

Fuel Cost Differentials
As it relates to cleaner fuel opportunities, the substantially lower cost of coal (an emissions-
intensive energy source) as compared with cleaner fuels such  as natural gas is the primary
constraint on environmentally preferable fuel-switching opportunities. In addition, the price of
natural gas has historically been far more volatile, further diminishing its viability as a clean fuel
opportunity. An expert who works with metal casting facilities noted that while oxygen injection
increases combustion efficiency, oxygen is typically as expensive or more expensive than
natural gas, diminishing the attractiveness of this opportunity.308

4.2.2  Technical Barriers

In many cases, a given energy efficiency or clean energy opportunity may not be viable to a
sector or specific manufacturing facility given process, resource, quality control, or other
constraints.

Some energy efficiency or clean energy opportunities are not well suited to a given industry's
manufacturing process (e.g., CHP is not an attractive energy efficiency opportunity for electric
arc furnace steelmaking, because the sector has relatively low demand for steam, and waste
heat is difficult to recover). Process-related technical constraints may also affect the extent to
which a given opportunity can be utilized (e.g., in cement manufacturing, use of waste fuels
such as tires in kilns is constrained because the zinc content in tires slows down setting time).
The manufacturing process diversity of other sectors (e.g., chemical manufacturing, metal
casting) means that processes and technologies that work for some manufacturing facilities may
not be applicable to other operations.

Other technical constraints relate to the ability of firms to implement an energy efficiency or
clean energy opportunity given equipment configurations (e.g., type of boiler or burner in place),
facility constraints (e.g., adequate space for new process equipment), supply constraints (e.g.,
price and availability of alternative fuels), and location-specific  limitations (e.g., proximity to
landfills  as a source of landfill gas). Industries also face quality-control constraints related to
manufactured product output. For example, an R&D opportunity for the metal finishing industry
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is the substitution of non-cyanide-based plating solutions for cyanide solutions. While some
substitute processes reduce energy consumption in the metal finishing process as well as in
waste treatment, viable alternatives remain impractical for a number of metals due to product
quality issues.

4.2.3  Institutional Barriers

In some cases, institutional barriers associated with incentives and information flow constrain
investment in energy efficiency and clean energy opportunities.

Incentive Constraints
Incentive constraints refer to industry characteristics that reduce incentives to invest in energy
efficiency or clean energy opportunities. Even for the energy-intensive industries addressed in
this report,  energy costs are less significant than costs for labor and raw materials. Thus, energy
efficiency opportunities may not be considered a fruitful area to pursue potential cost savings.

Historically, sectors such as food manufacturing have viewed energy as a fixed cost, which
means that there is little incentive to pursue energy-savings opportunities. In some cases,
energy costs may be paid by headquarters, while equipment purchasing decision-making
happens at the facility level. If energy costs are outside the plant manager's incentive structure,
he or she may have little reason to pursue investments in energy-efficient equipment.
Conversely, facility managers may be reluctant to invest the time and effort in making the case
for energy efficiency-related capital upgrades to corporate management, as such investments
may not be perceived as integral to the business's profitability.

Informational Constraints
In addition to lacking a systematic  approach to energy management, firms may also lack
leading-edge information on energy-efficient technologies, or have inadequate internal
resources to seek out and evaluate such information. An expert on the metal finishing industry
indicated that, within the industry, there is generally a low level of technical capability in this
area, with firms relying heavily on equipment suppliers for expertise.309 In other cases, energy
efficiency expertise may be compartmentalized among technical experts, without adequate
distribution at the  decision-making level of the firm. Sometimes decisions about equipment
replacement must be made quickly to limit production interruptions.  In such cases, if more
efficient technologies have not been identified, replacement decisions may be less than optimal.
This problem is compounded by the fact that much industrial capital stock is long lived.

In other cases, informational constraints may be related to an excess of information, especially
where there are insufficient staff resources to devote to sorting through a mass of technical
assessments to identify which technologies offer the best opportunities for a given
manufacturing operation. At least one sector (aluminum) indicated that while there is an
enormous amount of technical information available regarding R&D for energy-efficient
technologies, it does not seem that this information is optimally coordinated and disseminated
across government, the private sector, and academia. Such lack of coordination may limit
implementation of newly developed technologies and processes.

4.3   Regulatory Barriers

It is clear that for manufacturing industries, nonregulatory barriers are often the dominant factor
inhibiting investment in energy efficiency and clean energy opportunities. Though it is critical to
acknowledge the importance of such barriers, the purpose of this analysis is to facilitate the
development of policy approaches that EPA can employ to address regulatory barriers and
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promote energy efficiency and clean energy improvement in select manufacturing industries.
This emphasis is appropriate given the role of EPA's Office of Policy, Economics, and
Innovation in developing and coordinating cross-agency policy approaches to improving the
environmental performance of entire sectors. The focus on regulatory barriers is also
appropriate given the purview of other federal agencies working to promote energy efficiency
and clean energy opportunities—for instance, DOE's Industrial Technologies Program, which
establishes collaborative public-private partnerships to facilitate new technology R&D.

Our assessment of sector energy consumption and National Emissions Inventory data in
Chapter 3 indicated that across multiple sectors, major areas of opportunity for  improved
environmental performance with respect to energy use lie with increased efficiency in  electric
and thermal energy generating systems, particularly through increased CHP and increased
boiler efficiency. Alternatives to fossil  fuels also represent key opportunities for  some sectors,
such as biomass fuels in the forest products industry and waste fuels in cement manufacturing.
Thus, our discussion of regulatory barriers focuses on key ways in which regulations may
contribute to less environmentally preferable energy outcomes in these areas:

   •   Regulations may fail to fully reward the environmental benefits associated with an energy
      efficiency opportunity, allowing energy efficiency to be evaluated on an equivalent basis
      with other pollution control strategies such as add-on controls.

   •   Regulations may lack procedural flexibility that facilitates pursuit of energy efficiency or
      cleaner fuel opportunities, particularly in areas where permitting changes  are required to
      implement an opportunity.

   •   Notwithstanding their environmental, health, and safety benefits, regulations affecting
      industrial manufacturing sectors frequently have implications in terms of energy
      consumption.  The rulemaking process may not consider and address such implications  in
      a consistent way.

   •   Regulations or policies may contribute to unfavorable market conditions for energy
      efficiency or cleaner fuels opportunities.

As discussed in Chapter 1, this analysis relies primarily on readily available public information,
limited interviews with representatives from the regulated community, and inputs from various
stakeholders, including industry and regulators. The examples of regulatory barriers discussed
in the following sections are not intended to be a comprehensive list of all of the regulatory
barriers potentially affecting the sectors included in this analysis, but rather are  intended to
illustrate key regulatory barriers that affect the most promising  energy-related environmental
improvement opportunities discussed in this report. Also, it is important to note  that these
barriers are not new, and many entities at the federal, state, and local level currently have
initiatives underway to address them. Our discussion of Policy Options in Chapter 5 will provide
some examples of regulatory initiatives at the federal level aimed at addressing these issues.

Regulations May Not Account for Environmental Benefits of Energy Efficiency
Energy efficiency is a form of pollution prevention that leads to decreases in energy-related
criteria air pollutant and greenhouse gas emissions through reduced fuel usage. However, some
environmental regulations do not fully account for the environmental benefits of energy
efficiency and do not provide adequate mechanisms for recognizing  or rewarding the emissions
reductions that accrue from  more efficient fuel use. In particular, input-based standards that
establish emissions limits based on heat input (e.g., pounds of pollutant emitted per Btu of
delivered fuel) or pollutant concentrations  at the outflow (parts  per million (ppm)) do not
differentiate between more and less efficient fuel usage.310 Input-based standards—which may
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be used in permitting regimes as well as in establishing emissions allowances under cap-and-
trade systems—do not provide a true indication of environmental performance, as there is no
accounting for the amount of energy produced from fuel inputs. By failing to account for the
environmental benefits associated with increased energy efficiency, such standards fail to
create appropriate incentives for investment in energy-efficient technologies.

Most equipment used to generate thermal or electric energy (boilers, turbines, many industrial
process, and CHP applications) have historically been governed by input-based emissions
standards.311 An input-based standard does not differentiate between a more efficient boiler that
produces more thermal energy from the same amount of fuel as a less efficient boiler. Though
the more efficient boiler generates less pollution on an annual basis due to its  lower fuel usage,
input-based  emissions limits have no mechanism for accounting for the difference in fuel usage
between these two boilers, or rewarding more efficient fuel use.

In addition to contributing to general disincentives for energy efficiency investment, input-based
standards are particularly problematic for CHP applications because they provide no
mechanism for accounting for the two forms of energy output—electric and thermal—that are
produced from a single fuel source, and thus offer little incentive for investment in CHP as a
pollution control strategy.

As noted in the opportunity assessments in Chapter 3, industry representatives frequently cite
the costs imposed by environmental regulations and associated permitting  requirements as
barriers to investment in energy-efficient equipment, such as the increased capital and
operational costs associated with add-on pollution controls that do not increase productive
output, or the administrative costs associated with permitting processes. To a  large degree,
input-based  regulations penalize energy efficiency investments by failing to recognize and offer
credit for their environmental benefits and requiring additional  investments  (i.e., through
installation of pollution control technology) to create emissions reductions. Input-based
regulations reduce compliance flexibility by not providing adequate mechanisms for sources to
include energy efficiency as part of their pollution control strategy.

Regulations May Lack Procedural Flexibility
Many of the  industry representatives consulted in connection with this analysis cited permitting
barriers as inhibiting investments in energy efficiency or cleaner fuels opportunities.  A facility
may be reluctant to  make a change that would require modification or review of an existing
operational permit (for instance, under Title V of the Clean Air Act) or trigger a preconstruction
permitting requirement under New Source Review (NSR). When energy efficiency or clean
energy investments trigger the need for new permits or changes to existing permits, the result
may be increased time required to implement a project, increased administrative burdens, or
other adverse impacts on the project schedule. Particularly for facilities with limited staff
resources, the potential for encountering permitting requirements may discourage pursuit of the
opportunity.

Potential permit-related barriers include the following examples:

   • Installation of  new melting furnace technologies that entail new or expanded exhaust
     systems typically triggers state and local permitting requirements. Many  smaller metal
     casting facilities would prefer to retrofit existing equipment than to install new technologies
     due to constraints  on capital and personnel resources to address  permitting
                  0-1 o
     requirements.
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   •  Due to concerns about the time and expense associated with an NSR permitting process,
     a motor vehicle assembly plant was dissuaded from undertaking a project that would have
     reduced energy use by eliminating a shift, as this change would have required the
     installation of additional permitted equipment to increase production during the remaining
     shift.313

   •  Increased use of alternate or waste fuels (e.g., process byproducts or waste oils,  paints,
     or tires) may represent opportunities for sectors to reduce purchased fuel requirements. In
     addition, waste fuel use can potentially also represent opportunities for environmental
     improvement in cases where using waste fuels for energy content reduces total energy
     consumption by combining energy generation and waste disposal processes, or through
     more complete combustion than would be offered under alternate disposal mechanisms
     (for example, the higher combustion efficiency that is achieved in cement kilns as
     compared with most commercial incinerators314).

Permitting requirements are in place to ensure an appropriate level of environmental protection,
and an environmentally preferable energy scenario would certainly not dispense with these
protections. In the case of increased use of waste fuels, for example, such activity would have
to represent a net environmental improvement over alternate mechanisms of disposal.
However, there are opportunities for increased flexibility under existing regulations that  could be
enacted to promote the implementation of energy-related opportunities with demonstrable
environmental benefits. In addition, the NSR process could be revised to better recognize
energy efficiency and pollution both in the permitting process and structure and in the
expression of the results through output-based permit limits.

Regulatory Process May Not Consider Energy Implications
Regulations frequently have implications in terms of energy consumption and associated
emissions, notwithstanding their environmental, health, and safety benefits. Examples follow:

   •  Hydrotreatment used to desulfurize diesel to meet EPA mandates for lower sulfur limits for
     on-road and off-road diesel is an energy-intensive process that will increase energy
     consumption at petroleum refineries. Further regulations to lower sulfur limits on home
     heating oil and residual marine fuel oil may also have similar impacts.

   •  Regulations requiring the installation of regenerative thermal oxidizers (RTOs) in the wood
     products industry have increased non-process-related consumption of natural gas. The
     new Plywood Maximum Achievable Control Technology will require additional RTO
     installations by October 2008.315

   •  The Occupational Safety and Health Administration's hexavalent chromium permissible
     exposure limit may increase energy use in the metal finishing industry due to increased
     use of protective equipment, including greater air monitoring equipment and special
     sanitizing showers for workers.

   •  Under the National Pollutant Discharge Elimination System, increased regulation  of
     stormwater discharges could increase energy requirements for water treatment at
     shipbuilding and ship repair facilities, potentially increasing air emissions.

   •  Increased volatile organic compound regulations  under the National Ambient Air Quality
     Standards have the potential to increase energy requirements for pollution control
     systems in multiple sectors.

In some cases, EPA has conducted an effective assessment of the energy-related impacts of
proposed regulations as  part of the rulemaking process. For example, EPA is undertaking an
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"energy impact" analysis of the Spill Prevention Countermeasures and Control regulations to
determine their effect on energy use in various industries. This analysis is being done in
coordination with DOE, the Small Business Administration, the Department of Transportation,
and the Department of Commerce. This model might be used to inform other regulatory and
nonregulatory efforts. Overall, there may be opportunities for closer consideration of energy-
related impacts and a  more systematic approach for evaluating such impacts during the
rulemaking process.

Regulations May Contribute to Unfavorable Market Conditions
Regulations may also  create disincentives for investment in energy-efficient technologies by
failing to establish appropriate policy frameworks for promoting broader application of these
technologies—either through policy actions that create disincentives for such investments or by
failure to enact regulations that establish supportive conditions for investment.  Examples of
such barriers include the following:

   •  Recent changes made by the Federal Energy Regulatory Commission regarding
     implementation of Section 210(m) of the Public Utility Regulatory Policies Act eliminate
     the requirement  that utilities purchase power from qualifying facilities  in certain markets,
     potentially creating less favorable market conditions for onsite power  generation.316

   •  New Internal Revenue Service guidance on the biomass tax credit (Section 45) decreased
     the value of the credit, potentially affecting the financial viability of increased biomass fuel
     usage.317

   •  Representatives from the iron and steel industry cited the need for greater  mitigation of
     the economic, technical, and environmental risks associated with the  use of new
     technologies. Specifically pertaining to regulatory liability, use of unproven  technologies
     may entail risks associated with long-term liability under the Comprehensive
     Environmental Response, Compensation, and Liability Act.318
Other frequently cited  barriers that fall into this category pertain specifically  to the adoption of
CHP and other distributed generation  (DG) technologies.  Many utilities create impediments to
CHP through their rate structures and through time-consuming interconnection requirements.
Such barriers are  among the top concerns of organizations working to promote broader
adoption of CHP technology like the United States Combined Heat and Power Association.319

Common utility rate practices that reduce the financial viability of grid-connected  CHP
opportunities include excessive rates for backup power, high  standby connection charges, and
exit fees. In deregulated markets, sources must still pay demand charges to access
competitively supplied backup power,  and transmission and distribution tariffs governing such
charges may also set unfavorable rates.320  Inequitable rate structures also affect adoption of
other DG technologies such as fuel cells and renewable energy generation  with biomass fuels
or other renewable energy sources. The fact that regulatory agencies  have  in many cases not
prohibited such practices  represents an opportunity for policy change.

Interconnection requirements—the technical and procedural requirements associated with
connecting a distributed generation technology to the grid—may also inhibit investment in CHP
and other  DG opportunities. Interconnection requirements vary locally as  determined by the
utility or entity governing the regional transmission infrastructure, and they are often time and
labor intensive, particularly for smaller applications that may be required to  meet the same
standards as large generating units. To inhibit installation of CHP applications, some utilities
have established extensive interconnection requirements such as pre-certification, high safety
standards, and costly testing, making  the interconnection process time intensive  and costly for
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grid-connected CHP applications.321 As interconnection requirements vary between jurisdictions,
the lack of standardization also serves as a barrier to broader technology adoption (particularly
for small units), as it inhibits mass production of DG technologies.322 The lack of standardized
and streamlined interconnection requirements that establish appropriate protocols for smaller
versus larger DG applications also represents a regulatory barrier.

4.4   Conclusion

While barriers to broader investment in energy efficiency and clean energy opportunities often
stem primarily from nonregulatory factors such as financial, technical, and institutional
constraints, regulations can reinforce such barriers by not accounting for the environmental
benefits of energy efficiency, by not offering appropriate incentives for investment, by making
investment less feasible through a lack of procedural flexibility, and in general by contributing to
unfavorable market conditions or failing to create more favorable market conditions for energy
efficiency and clean energy technologies. Chapter 5 provides  suggested policy options EPA
could employ to remove or reduce the  regulatory component of impediments to energy
efficiency and clean energy investment.
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5.    Policy Options
                   Chapter 5. Policy Options
           5.1  Internal Actions and Coordination
           5.2  External Actions and Coordination
           5.3  Conclusion
                                        Insights
EPA program offices have already undertaken a number of steps to remove regulatory barriers at
the federal level.  The research  conducted for this  analysis—including the data sources we
reviewed and the perspectives and insights provided to us during  interviews with internal and
external stakeholders—has indicated  that environmentally  preferable  energy outcomes may
also be promoted through the following  policy options: (1) developing  and promoting broader
application of regulations  that recognize  the emissions reductions resulting  from increased
energy efficiency;  (2) increasing procedural flexibility to promote environmentally preferable
energy use; (3) promoting  broader consideration of the energy implications of rulemakings; (4)
promoting the development of more favorable market conditions for energy efficiency and clean
energy technologies; and (5)  providing additional incentives and assistance through a sector-
based approach.
The analysis of key opportunities for promoting environmentally preferable energy outcomes in
each of the 12 sectors discussed in Chapter 3, and the potential regulatory barriers to
implementing those opportunities discussed in Chapter 4, indicate that changes in policy may
help to promote the use of cleaner fuels as well as energy efficiency improvement through
combined heat and power (CHP), equipment retrofit or replacement, process improvement, and
research and development (R&D).  EPA could remove potential regulatory barriers through
changes in policy or reduce potential regulatory barriers through incentives that make the
barriers surmountable from an investment standpoint. Certain activities are within EPA's internal
jurisdiction and are discussed in Section 5.1; others extend into broader coordination with
external agencies and entities and  are discussed in Section 5.2.

As with the discussion of regulatory barriers in Chapter 4, the following policy options are not
intended to be comprehensive or definitive in terms of actions to be undertaken by EPA. They
are simply intended to illustrate possible approaches for removing and/or reducing potential
regulatory barriers identified through our research, which consisted of a review of relevant data
sources and interviews with internal and external stakeholders.

5.1    Internal Actions and Coordination

It is important to note that several EPA program offices are in the process of making significant
adjustments to existing regulations that would have a direct impact on promoting
environmentally preferable energy  use:

   •   EPA continues to reform  the New Source Review program. For example, based on final
      recommendations from EPA's 2002 New Source Review: Report to the President, in
      September 2006 EPA's Office of Air and Radiation proposed making three improvements
      to specific areas of the NSR program: (1) "debottlenecking," allowing exemptions for
      projects that increase the overall efficiency of an operation by modifications to one part of
      a facility that increase throughput in unmodified parts of the facility; (2) clarifying NSR
      requirements regarding aggregation, treating multiple related projects as a single project
      for NSR purposes;  and (3) "project netting," eliminating the need for complex source-wide
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                                      Policy Options
      emissions analysis if the net effect of a project does not result in a significant emissions
      increase.323

   •  The Office of Solid Waste (OSW) has proposed a revised definition of solid waste to
      promote greater recycling primarily through the reuse of hazardous secondary materials.

   •  The Office of Air Quality Planning and Standards (OAQPS) has a number of initiatives
      underway to promote energy efficiency, including recently released output-based  New
      Source Performance Standards (NSPS) governing several sizes of boilers and combustion
      turbines that promote more efficient fuel use and recognize the environmental benefits of
      CHP. OAQPS also has initiatives underway to assess the climate impacts of proposed
      rulemakings, as well as a rule that offers increased permitting flexibility for modified wood-
      fired boilers to encourage the use of non-fossil  fuels.

The following policy options suggest additional actions EPA could take to remove the regulatory
barriers discussed in Chapter 4 through changes in regulatory policy.

Develop Regulations That Account for Environmental Benefits of Energy Efficiency
EPA could continue to develop and promote broader application of regulations that recognize
the emission reductions that result from increased energy  efficiency. Output-based regulations
provide a mechanism for incorporating the benefits of increased energy efficiency and  produce
emissions reductions across multiple pollutants through reduced fuel use—achieving emissions
targets for regulated  pollutants as
well as producing incidental
reductions in unregulated emissions
such as greenhouse  qases (GHGs)
/~> +~  + i™^i *.„„ i,,4.-^.,o r>.^.v,~*~       recognize the emissions reductions resulting from increased energy
uuipui-Daseu regulations promoie
energy efficiency as a pollution
control strategy by allowing
equitable comparison between
energy-efficient generating
equipment and other emissions
reduction technologies such as add-
on controls.  Such regulations are
also applicable to market-based
approaches to environmental protection by providing sources with greater compliance  flexibility
and promoting technology innovation.
                                                        Policy Option:

                                     Develop and promote broader application of regulations that
                                         Output-based emissions standards that account for the thermal
                                         and electric energy output of CHP.
                                         Output-based emissions standards governing other combustion
                                         processes such as energy-generating and manufacturing
                                         process equipment.
Suggested areas where the use of input-based standards may indicate opportunities for
regulatory improvement include the following:

   •  Clean Air Act permitting of new CHP applications under NSR typically employs an input-
     based approach that establishes emissions limits based on fuel inputs. By failing to
     account for the technology's dual outputs of thermal and electric energy, the input-based
     approach does not recognize and reward the increased fuel use efficiency of CHP.

   •  Recent combustion-related rulemakings that also employed input-based standards
     (Ib/MBtu) include the National Emission  Standards for Hazardous Air Pollutants
     (NESHAP) for some sizes of industrial boilers and process heaters. NESHAPs for
     stationary combustion turbines employed a concentration-based (ppm) standard.
In other recent rulemakings, such as the stationary combustion turbine NSPS, EPA has used
output-based standards to promote greater fuel use efficiency. EPA could continue to pursue
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                                       Policy Options
additional opportunities for the use of output-based standards, particularly with respect to NSR
permitting processes and new rulemakings governing combustion equipment (e.g., CHP,
boilers, and process heaters).

Increase Procedural Flexibility to Promote Environmentally Preferable Energy Use
To address permit-related barriers to investment in energy efficiency or cleaner fuels
opportunities, EPA could  increase procedural flexibility in the areas of flexible permitting and
increased recycling for energy recovery. In some cases, these strategies will require examining
emissions tradeoffs at a broader level than the facility level and quantifying energy consumption
and emissions tradeoffs. Options for providing technical assistance to industry and permitting
authorities to quantify and evaluate such tradeoffs are also discussed below.
                                                           Policy Option:

                                       Increase procedural flexibility surrounding opportunities to reduce
                                       energy-related emissions on a system-wide level through:

                                       •   Expanding flexible permitting opportunities that promote
                                           reductions in energy-related emissions as part of a pollution
                                           prevention strategy, including developing a flexible permitting
                                           rule.
                                       •   Promoting broader recycling of wastes and process byproducts
                                           for energy recovery.
                                       •   Providing assistance to the regulated community as well as state
                                           and local permitting authorities in support of efforts to increase
                                           procedural flexibility in environmental regulations, including
                                           technical guidance on evaluating energy-related environmental
                                           tradeoffs at a system-wide level.
FLEXIBLE PERMITTING

Flexible permitting aims to promote
certain environmentally preferable
activities by providing exceptions to
permitting requirements for certain
types of changes (for example,
modifications to methods of
operation or equipment), provided
that plant-wide emissions remain
below enforceable caps. Flexible
permitting may also entail an
advance approval process for
specific changes. Like output-based
emissions standards, flexible
permitting can also be used to
support market-based approaches to
environmental protection to provide
sources with greater compliance flexibility and promote technology innovation.

This policy option might include adding flexibility to the permitting process whereby specific
changes to fuel inputs, processes, or equipment that are directly tied to improving environmental
performance through energy-related modifications would not automatically trigger the full blown
permit review. For example, many industry comments encountered in our research remark that
a more flexible definition of "routine maintenance" would help diminish NSR barriers to energy
efficiency improvement projects. EPA's September 2006 proposal is  a major step in this
direction.

EPA has historically offered flexible permitting on  a pilot basis for pollution prevention and is
considering developing  a formal flexible permitting rule. In connection with its existing efforts,
EPA could evaluate additional energy efficiency and clean energy opportunities that are good
candidates for flexible permitting incentives, either through existing pilot programs  such as those
offered by Performance Track or ideally through development of a flexible permitting rule.

Suggested areas where flexible permitting may offer opportunities for regulatory improvement
include the following examples:

   •  Replacement of inefficient boilers with high-efficiency boilers or CHP.

   •  Other changes to fuel inputs, processes, or  equipment that are directly tied to improving
      environmental performance through energy-related modifications.
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                                     Policy Options
   •  Streamlined permitting processes or permitting exemptions to promote adoption of new
     energy-efficient technologies, such as those developed through DOE's Industrial
     Technologies Program (e.g., advanced furnace and process heating technologies).

   •  Expansion of flexible permitting beyond major sources.

RECYCLING FOR ENERGY RECOVERY

EPA's focus on recycling has traditionally been on promoting recycling for materials recovery
with relatively less emphasis on promoting recycling for energy recovery. As such, opportunities
to encourage  increased energy efficiency or alternatives to fossil fuel consumption through
recycling for energy recovery may be overlooked. Beyond efforts currently underway at OSW,
EPA could work to (1) find additional areas to promote greater emphasis on recycling for energy
recovery under existing regulations and (2) ensure that the development of new regulations
does not exclude environmentally beneficial uses of waste or byproduct-derived fuels.

Suggested  areas where increased recycling for energy recovery may offer opportunities for
regulatory improvement include the following examples:

   •  Employing a sector-based approach to identify areas where increased use of waste fuels
     (i.e., solvents, waste oil, or paint) could produce environmentally preferable outcomes
     over alternate methods of disposal (i.e., through avoided landfilling or through recovery of
     useful energy from waste that would otherwise be incinerated).

   •  Evaluating environmental tradeoffs to facilitate the development of regulatory mechanisms
     that promote greater recycling for energy recovery by recognizing the environmental
     benefits of energy-related reuse and recycling in the permitting process.

   •  Assessing energy implications and possible environmental benefits of increased energy-
     related recycling in the development of new regulations, and developing appropriate
     mechanisms to incent such  activities, provided they ensure an appropriate level of
     environmental protection.

ASSISTANCE TO INDUSTRY AND PERMITTING AUTHORITIES

In cases were EPA has revised or is in the process of revising regulatory requirements,
perception barriers may persist that inhibit investment in energy efficiency or clean energy
opportunities. For example, despite recent NSR reforms, industry may still be reluctant to
undertake energy-related projects that might potentially trigger NSR due to lingering concerns
that NSR requirements will be burdensome. Regulations are technically complex, and while they
are established at the federal level by EPA, they are  implemented at the state level, which may
lead to variability and uncertainty on the part of industry regarding regulatory requirements. A
sector-based  communications and outreach strategy could be designed to identify key areas
where NSR reforms have made energy-related improvement opportunities less burdensome
than they would have been previously.

Technical assistance may also be needed to support flexible permitting and increased recycling
for energy recovery, particularly where there are environmental tradeoffs between facility-level
and system-wide emissions. Implementing such policy options would require EPA to recognize,
understand, and articulate energy and environmental tradeoffs—for example, an energy savings
of "x" Btus would be "worth" an increase in "y" air pollutant. Moving beyond the facility level to a
system-wide perspective will likely require complex analysis. For example, the assessment
might involve  weighing energy savings and increased pollution at a fuel-using facility versus
decreased energy use for waste treatment and handling at a different facility where the waste
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                                      Policy Options
originated. However, a better understanding of these implications and tradeoffs is critical,
because without this information permit writers at the state and local level may not welcome (or
implement) any increase in regulatory flexibility. Traditional approaches to environmental
protection have been based on pollution control technology rather than efficiency or pollution
prevention. Without clear guidelines and a consistent regulatory approach, industry may remain
uncertain about varying approaches and requirements across multiple facilities and states,
which could create further  disincentives for energy-related improvements.

The following examples are suggested areas where increased assistance may offer
opportunities for regulatory improvement:

   •   Developing an information clearinghouse for the regulated  community that provides  a
      single point of contact and up-to-date information on regulatory requirements that have
      been revised to promote greater investment in energy efficiency and clean energy
      improvement projects.

   •   Developing guidance for state and local regulators on the environmental benefits of
      energy efficiency and clean energy technology, and their appropriate treatment in the
      permitting and regulatory process.

Promote Broader Consideration of Energy Implications of Rulemakings
Environmental regulations can have significant energy impacts. To date, consideration of these
impacts has been unevenly incorporated in the regulatory process. Moving forward, EPA could
develop a systematic approach for incorporating an assessment  of energy impacts in all
regulatory venues.

The rulemaking process provides at least three opportunities to consider energy impacts:
                                                            Policy Option:

                                            Review methodologies currently used to assess energy
                                            impacts during the rulemaking process, assess how program
                                            offices are interpreting/implementing these provisions, and
                                            work across the Agency to develop a cohesive EPA position
                                            on how such impacts should be assessed and weighed
                                            against other Agency priorities.
   • Through Executive Order (EO) 13211,
     which requires agencies to prepare a
     Statement of Energy Effects on
     "significant" energy actions.

   • Through EO 12866, which requires
     agencies to prepare economic impact
     analyses on rulemakings that have
     $100 million annual impact, raise
     novel issues, and/or have "significant"
     impacts.

   • Through the Regulatory Flexibility Act, which requires a regulatory flexibility analysis if a
     proposed rule would have a "significant" economic impact on a "substantial" number of
     small entities.
EPA could explore opportunities under its own authority to require that energy impacts are
considered across all rulemaking and regulatory processes. EPA could review methodologies
currently used to assess energy impacts during the rulemaking process, assess how program
offices are interpreting/implementing these provisions, and work across the Agency to develop a
cohesive EPA position on how such impacts should be assessed and weighed against other
Agency priorities. Having a standardized policy would allow EPA to make more informed
decisions about energy resources and environmental benefits, including potential variations for
large versus small entities.
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                                      Policy Options
5.2   External Actions and Coordination
The following policy options suggest actions EPA could take to reduce regulatory barriers (as well
as certain nonregulatory barriers discussed in Chapter 4) through direct incentives or policy
support that make such barriers surmountable from an investment standpoint. Such policy support
would extend into broader jurisdictions beyond those that are in EPA's direct purview.

Promote Favorable Market Conditions
To promote the development of more favorable market conditions for energy efficiency or clean
energy opportunities, EPA could pursue additional avenues of cross-agency coordination,
grantmaking, and analysis.

CROSS-AGENCY COORDINATION
Across other federal agencies, EPA
could implement a consistent approach
to promoting policies that increase the
market viability of energy efficiency and
clean energy opportunities. As noted in
Chapter 4, research to date has
identified a number of existing or
potential environmental regulations and
policies that might impact one or more
sectors, including the following:

   •  Changes to the Public Utility
      Regulatory Policies Act that
      potentially affect the viability of
      onsite power generation.
                   Policy Option:

Promote more favorable market conditions for energy efficiency and
clean energy technologies through:

•   Coordinating across federal agencies to support policies that
    promote the market viability of energy efficiency and clean
    energy technologies.
•   Offering additional grants to support clean energy applications in
    manufacturing industries.
•   Analyzing the environmental impacts of utility demand response
    programs and working to promote clean energy technologies as
    an electricity demand reduction strategy.
   •  Changes to the Internal Revenue Service code that reduce incentives for biomass fuel
      use.
EPA could monitor proposed regulations and perform a cross-agency coordination function to
assess energy implications of proposed regulations or policy changes. A successful model EPA
already employs in this area is the Combined Heat and Power Partnership, which works to
promote more favorable market conditions for CHP and other distributed generation
technologies. EPA could explore additional opportunities for similar efforts, including
coordination with state regulators as well as with other federal agencies such as DOE and
FERC. Cross-agency coordination of these efforts could be designed to assure appropriate
coverage of relevant issues, facilitate communication, and avoid duplication of efforts.

GRANTMAKING
EPA could consider additional opportunities for offering direct grants to support clean energy
applications in industrial manufacturing sectors. Utilities and Clean Energy Program
Administrators, such as  The Renewable Trust Fund-Massachusetts Technology Collaborative,
have set up distributed energy resources in areas where the energy load is overwhelming. EPA
could identify and work with such entities in grantmaking to sectors. Such grants would allow
facilities to install solar or photovoltaic panels on their roofs—thereby integrating renewables
into how industrial load is met as a way to offset purchased energy requirements.
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                                      Policy Options
DEMAND RESPONSE ANALYSIS

Energy supply disruption and market volatility are concerns to all energy users but are of
particular concern to industrial customers for whom such disruption would negatively impact the
process line. In areas of the country such as the Northeast, there is strong interest in the ability
of demand response (DR) mechanisms to address system infrastructure constraints. For
example, some utilities and transmission system operators offer incentives for customers to
curtail their electricity usage at certain times to reduce peak demand. However, environmental
regulators are concerned with the potential environmental impacts of some DR technologies,
such as generators that produce an emissions-intensive form of backup power. EPA is currently
helping the Northeast states  assess the environmental impacts of different DR technologies.
This effort provides an example of another area where EPA could seek to promote better
convergence between energy and environmental goals. Expanding on its existing efforts, EPA
could analyze DR programs and work with utilities in particularly volatile or transmission-
constrained electricity markets to promote clean DR technologies across one or more sectors.

Provide Incentives and Assistance Through a Sector-Based Approach

EPA could explore additional sector-based approaches to promoting  environmentally preferable
energy outcomes in manufacturing industries, including the following:

   • Support and  promote energy efficiency and clean energy R&D activities that are underway
     across a variety of other voluntary programs.  Possible activities include the following:

        Providing sector-based
        information on  R&D
                          ,-,-> A ,., ,                         Policy Option:
        opportunities on an EPA Web
        page.

        Vetting and/or promoting
        various online emissions
        reduction/benefits
        calculators.

        Promoting energy-saving
        assessments and other
Employ a sector-based approach to promoting environmentally
referable energy outcomes through the following mechanisms:

•  Supporting energy efficiency and clean energy R&D
   opportunities.
•  Providing information regarding financial incentives that are
   available to support energy efficiency and clean energy
   opportunities, particularly for small businesses.
        initiatives launched by DOE
        under its Industrial Technologies Program.
        Showcasing sector-specific awardees under other programs (e.g., ENERGY STAR).

   •  Similar to its work on diesel retrofits for the construction and ports sectors, EPA could
     assess whether any federal, state, or local grant funding could be made available (or
     whether tax incentives exist) for plant upgrades—particularly for small businesses in high
     energy intensity markets. EPA could serve as an information clearinghouse regarding
     such opportunities that may be available to manufacturing sectors.

5.3    Conclusion

This analysis has suggested a number of potential strategies EPA could employ to remove or
reduce regulatory barriers to improved environmental performance with respect to energy use in
the 12 industrial manufacturing sectors. These policy options include actions the Agency could
take internally—such as developing regulations that account for the environmental benefits of
energy efficiency, increasing procedural  flexibility to promote environmentally preferable energy
use, and generally increasing consideration of energy impacts in rulemakings—as well as actions
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                                        Policy Options
involving increased coordination with other agencies and entities to promote favorable policy and
market conditions for energy efficiency and clean energy technologies.
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Appendix A:  Energy Projections

To develop the "base case" and "best case" future energy consumption scenarios for each
sector as described in Chapter 3, we relied primarily upon projections produced by three
analyses:

   •  Scenarios for a Clean Energy Future (CEF). Commissioned by the U.S. Department of
     Energy (DOE) in 2000, this report was produced by the Interlaboratory Working Group for
     Energy-Efficient and Clean Energy Technologies. For 8 of the 12 industrial manufacturing
     sectors considered in this analysis, the CEF  report projects future industrial energy
     consumption trends based on three alternative technology and policy-based scenarios.324
     In Chapter 3, the CEF analysis forms the basis for our "base case" and "best case" future
     energy scenarios for many of the sectors addressed in this report.325

   •  Annual Energy Outlook 2006 (AEO 2006). AEO 2006 is the most recent annual forecast
     of energy demand, supply, and prices for the United States produced by DOE's Energy
     Information Administration (EIA).  AEO 2006  includes energy consumption and carbon
     emissions projections for U.S. industrial manufacturing as well as for eight of the twelve
     sectors considered in this analysis.326 As the CEF report was produced in 2000, we used
     AEO 2006 to assess the impact of recent energy trends, and how those trends might be
     expected to produce different outcomes than projected by CEF in 2000. AEO 2006 also
     provided estimated annual carbon dioxide emissions for many of the sectors addressed  in
     this analysis.

   •  Natural Gas Outlook to 2020. This analysis was produced by the American Gas
     Foundation (AGF) and develops natural gas consumption projections under three
     alternative public policy  scenarios regarding  natural gas exploration and production.
     Projections include consumption trends for certain industrial  sectors that are heavily
     dependent on natural gas.327

In the following sections we provide a brief overview of the approaches taken by these studies,
and discuss how they were used in our analysis. For CEF and AEO 2006, we highlight key
similarities and differences between the projections and discuss general implications for future
industrial energy consumption trends.
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                             Appendix A: Energy Projections
A.1.  Clean Energy Future Scenarios

Overview
To develop CEF projections, the Interlaboratory Working Group used a modified version of the
National Energy Modeling System (NEMS) developed and maintained by EIA to produce its
Annual Energy Outlook projections. (The NEMS version used in connection with the CEF
analysis was the version used to produce the 1999 Annual Energy Outlook (AEO 1999)).

For the reference case scenario, modifications to the NEMS industrial demand module were
made in the following areas: (1) for all industrial sectors, equipment retirement rates were
changed to reflect actual lifetimes of installed equipment and (2) for the paper, cement, steel,
and aluminum industries, more detailed modifications were made to baseline energy intensities
and rates of energy intensity improvement to reflect best available research from those sectors.
As a result, the CEF reference scenario projects industrial energy consumption to be 3 percent
lower by 2020 than the projection made by AEO 1999.

CEF developed moderate and advanced energy scenarios that are primarily based on voluntary
commitments by industry to energy efficiency improvement.  Our analysis focused on the
advanced scenario, which promotes more aggressive energy efficiency improvement through a
combination of (1) expanded voluntary federal programs such as the Combined  Heat and Power
(CHP) Challenge and ENERGY STAR; (2) expanded federal informational programs such as
energy assessments and equipment labeling; (3) expanded  investment enabling programs such
as state grant programs, utility incentive programs, and tax rebates and credits; (4) mandatory
efficiency standards for motors; (5) expanded federal demonstration and research and
development (R&D) programs; and (6) a domestic carbon emissions trading program.

Table 58 compares the CEF reference case and advanced case projections for industrial energy
consumption.

     Table 58: Comparison of  CEF industrial energy consumption projections through 2020:
                            reference case and advanced case32
                                        Reference Case
                                                             Advanced Case

Base year energy consumption™11 (1997)
Energy consumption in 2020""
Annual energy consumption growth8888
Annual energy intensity growth

27.0 quadrillion Btu
32.7 quadrillion Btu
0.8% per year
-1.1% per year

27.0 quadrillion Btu
27.8 quadrillion Btu
0.1% per year
-1.9% per year
mi Given the age of the CEF study and that current industrial energy consumption as reported in AEO 2006 is lower than the
   CEF base year, we put relatively little emphasis on CEF consumption data and greater emphasis on projected rates of
   consumption growth/decline, as well as relative changes in the fraction of various fuel inputs.
rrrr  Energy consumption projections are in terms of site or delivered energy, though CEF also provides primary energy
   projections.
ssss All rate calculations are the calculated average growth rate.
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                              Appendix A: Energy Projections
                                         Reference Case
                                                              Advanced Case
        Annual fuel consumption growth

Petroleum
Natural gas
Coal
Purchased electricity
Renewable
Total value of shipments in 2020
(billion 2000 dollars)

0.9%
0.8%
0.0%
1.1%
1.4%
8,378

0.0%
0.3%
-1 .5%
0.0%
1.7%
8,378
A dvanced Energy Scenario

As discussed at the beginning of this section, the parameters that drive CEF's advanced energy
projections include a broad range of policy pathways for improving environmental outcomes with
respect to energy use,  including a cap-and-trade system for greenhouse gas (GHG) emissions.
Table 59 presents an abbreviated version of a table that appears in the CEF study showing how
various advanced energy policies affected different NEMS model parameters for the industrial
manufacturing sectors  included in the CEF analysis. The policies appear in the header rows,
and the affected parameters are listed by number, with a key below.
  Table 59: Qualitative representation of advanced energy policy impacts on CEF-NEMS model
                                                                                      329

Alumina and Aluminum
Cement
Chemical Manufacturing
Food Manufacturing
Iron and Steel
Metals-Based
Durables""
Petroleum Refining
Pulp and Paper
Technology
Demonstration
Programs
1,2,8
1,2,7,8
1,2,8
1,2,8
1,2,7,8
1,2,8
n/a
1,2,7,8
Energy
Assessment
Programs
1
1,7
1
1
1,7
1
n/a
1,7
Challenge
Programs -
Motor and
Air
1,2,8
1,2,7,8
1,2,8
1,2,8
1,2,7,8
1,2,8
n/a
1,2,7,8
Challenge
Programs -
Steam
3,6,9
3,6,9
3,6,9
3,6,9
3,6,9
3,6,9
n/a
3,6,9
Challenge
Programs
-CHP
6,9
6,9
6,9
6,9
6,9
6,9
n/a
6,9
ENERGY
STAR
Buildings and
Green Lights
5
5
5
5
5
5
n/a
5
Product
Labels
n/a
4
n/a
n/a
n/a
n/a
n/a
4
State
Programs
1,2,3,5
1,2,3,5
1,2,3,5
1,2,3,5
1,2,3,5
1,2,3,5
n/a
1,2,3,5
Clean Air
Act
Incentive
Programs
1,2,3,6,9
1,2,3,6,9
1,2,3,6,7,9
1,2,3,6,9
1,2,3,6,7,9
1,2,3,6,9
n/a
1,2,3,6,7,9
""   Section 3.8 includes a more detailed description of how CEF's definition of the "metals-based durables" sector matches with
    the metal finishing sector as defined in this analysis.
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                              Appendix A: Energy Projections
                                                             Tax   1  Tax Rebates   Investment I
                 R&D -               ESCO /    Climate            Incentives   for Specific   Tax Credit   Carbon
               Industries of             Utility      Wise     Pollution   for Energy    Industrial    forCHP    Trading
                the Future    Other R&D   Programs   Program   Prevention   Managers     Techs     Systems    System

Alumina and Aluminum
Cement
Chemical Manufacturing
Food Manufacturing
Iron and Steel
Metals-Based Durables
Petroleum Refining
Pulp and Paper


2
2
2
n/a
2
2
n/a
2

2,3,6
2,3,6
2,3,6
2,3,6
2,3,6
2,3,6
n/a
2,3,6


n/a
1,5,6,7,9
1,5,6,9
1,5,6,9
1,5,6,7,9
1,5,6,9
n/a
1,5,6,7,9

Modeled within NEMS
1: Increased annual rate of efficiency improvement in existing equipment

1,2,8
1,2,7,8
1,2,8
1,2,8
1,2,7,8
1,2,8
n/a
1,2,7,8

4
n/a
n/a
n/a
4
n/a
n/a
4

1,5
1,5,7
1,5
1,5
1,5,7
1,5
n/a
1,5,7

2
2
2
2
2
2
n/a
2

6,9
6,9
6,9
6,9
6,9
6,9
9
6,9

1-6,8,9
1-9
1-6,8,9
1-6,8,9
1-9
1-6,8,9
1-6,8,9
1-9

Modeled outside NEMS, then used to adjust NEMS parameters
7: Increased annual rate of efficiency improvement in existing equipment (iron & steel,
cement, and pulp & paper)
2: Increased annual rate of efficiency improvement in new equipment
                                          8: Increased annual rate of efficiency improvement in existing equipment (motor electricity
                                          use)
3: Increased boiler efficiency
4: Increased use of recycled materials (throughput changes)
5: Improved building energy efficiency
6: Increased use of cogeneration (within NEMS)
9: Increased use of cogeneration (DISPERSE modeling of CHP-policies)






Given that the CEF study (produced in 2000) predates recent price increases for natural gas,
we vetted CEF base case projections against projections developed by AGF in its report,
Natural Gas Outlook to 2020.330 This study develops natural gas consumption projections under
three alternative public policy scenarios regarding natural gas exploration and production,
including consumption projections for certain industrial sectors that are heavily dependent on
natural gas such as chemicals, petroleum refining, pulp and paper, and food manufacturing.
These projections were developed by Energy & Environmental Analytics using a proprietary gas
market data and forecasting model. We focused on the "expected" policy scenario for industrial
demand as the closest approximation of a business-as-usual scenario (the "existing" and
"expanded" scenarios, which respectively involve lesser and greater degrees of natural gas
exploration and infrastructure development than is currently planned, were less useful for our
analysis). Where appropriate, references to differences and similarities between the CEF and
AGF projections for natural gas consumption are made in the sector summaries contained in
Chapter 3.

A.2.  Annual Energy Outlook Scenarios

Overview

Each year EIA  uses NEMS to develop its long-term forecasts of energy supply, demand, and
prices called the Annual Energy Outlook. Energy consumption projections for specific industrial
manufacturing sectors are included as a supplement to the main report. The sector-specific
projections that are applicable to this analysis include the following: aluminum, bulk chemicals
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                              Appendix A: Energy Projections
(the commodity chemicals subset of chemical manufacturing), cement, fabricated metal
products (which includes metal finishing), food manufacturing, iron and steel, petroleum refining,
and pulp and paper (part of forest products). AEO 2006 also includes projected carbon dioxide
(CO2) emissions for these sectors, which EIA calculated based on fuel consumption projections
using CO2 coefficients from the EIA report, Emissions of Greenhouse Gases in the United
States 2004™

Our review of AEO 2006 began with comparing reference case projections for industrial
manufacturing as a whole with projections under the high industrial technology case, which
were examined as the ElA's closest approximation of a "best case" scenario for industrial
energy consumption.  Reference case projections are based on growth in gross domestic
product (GDP) of 3 percent per year (based on 2000 chain-weighted dollars), population growth
of about 0.8 percent per year, and oil prices of $55.93 in 2005 rising to $56.97/barrel by 2030
(all  oil  prices are in 2004 dollars). The industrial high technology case "assumes earlier
introduction, lower costs, and higher efficiencies for energy technologies."
                         332
Table 60 compares AEO 2006 reference case and high industrial technology case projections.
Though AEO 2006 projections are made through 2030, we only include projection data through
2020 to facilitate comparison with the CEF analysis.

   Table 60: Comparison of AEO 2006 industrial energy consumption projections through 2020:
                         reference case and high technology case3 3

Base year energy consumption (2004)
Energy consumption in 2020""""
Annual energy consumption growth™™
Annual energy intensity growth™™™
Annual CHP capacity growth™™
Annual fuel consumption growth
Petroleum
Natural gas
Coal
Purchased electricity
Renewable
Total value of shipments in 2020
(billion 2000 dollars)
Reference Case High Technology Case
25.68 quadrillion Btu
28.91 quadrillion Btu
0.7% per year
-1 .3%
2.6%

0.7%
0.7%
1.0%
0.7%
1.1%
7,778
25.68 quadrillion Btu
27.48 quadrillion Btu
0.4%
-1 .7%
3.0%

0.2%
0.4%
0.6%
0.2%
1.6%
7,778
    Energy consumption projections are site or delivered energy, though AEO 2006 also provides primary energy projections.
    All rate calculations are the calculated average growth rate.
    Energy intensity is measured as total energy consumption (TBtu) per dollar value of shipments (in 2000 dollars).
    Industrial CHP capacity is measured in gigawatts.
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                             Appendix A: Energy Projections
Compared with the reference case, the AEO 2006 high technology case projects that faster
adoption of new technologies will produce greater energy efficiency gains, particularly in
manufacturing industries. To some degree, the high technology case envisions expanded
energy production capacity through additional CHP and biomass recovery capacity, but overall
efficiency improvements in energy production  and process energy use means that the high
technology case projects lower energy consumption by 2020 compared with the reference case.

Under the reference case, EIA predicts that energy intensity will decrease at a higher rate in the
manufacturing sector (1.2 percent a year) than in the non-manufacturing sector (1.0 percent a
year). EIA attributes this difference to a continuing shift within U.S. manufacturing where the
value of shipments by non-energy-intensive sectors increases from 54 percent in 2004 to 61
percent in 2030, and the value of shipments by energy-intensive sectors declines from 21
percent in 2004 to 17 percent in 2030. The rate of energy intensity decrease is even greater
under the high technology case due to efficiency gains, but the high technology case does not
involve a faster macroeconomic shift from energy-intensive to non-energy-intensive
manufacturing.

Under the reference case, industrial fuel  consumption increases across all fuel types. The
relatively higher rate of increase in  coal consumption (compared with other fuels) is not strictly
driven by energy-related end uses, as industrial coal consumption for traditional energy-related
applications is fairly static. However, EIA assumes that expansion of coal-to-liquids (CTL)
production in the petroleum refining industry will be associated with considerable cogeneration
capacity additions through integrated gasification combined cycle (IGCC) technologies (see
Section 3.11). IGCC technologies combust gasified coal in a modified gas turbine and recover
exhaust heat to generate steam.

Aside from industrial energy consumption and intensity trends, another important factor affecting
future environmental impacts of industrial energy use is the trend in fuel inputs for electric power
generation. The AEO 2006 reference case projects that purchased electricity will meet 13.5
percent of industrial demand by 2020 (roughly the same fraction as in 2004). Through 2030,
AEO 2006 projects that the majority of new electric generation capacity will be supplied by coal-
fired plants, which are more expensive to build but much cheaper to operate than natural gas-
fired plants that tend to be used primarily to meet peak demand. The Southeast and  the West
are expected to see the greatest additions of coal-fired electric generating capacity. The
majority of power plants retired over the period are expected to be oil- and natural gas-fired
steam capacity. By 2030, AEO 2006 projects that coal-fired plants will meet 57 percent of the
nation's electricity demand, compared with 50 percent today. In part, increased coal
consumption in the electric power sector is driven by increases in electricity generation from
coal gasification in combination with IGCC technologies. Compared with traditional forms of
coal-powered generation,  IGCC technologies  have lower CAP emissions but equivalent carbon
dioxide emissions. Research is ongoing into carbon sequestration applications in combination
with IGCC to improve environmental performance.

Comparison of CEF and AEO 2006 Projections

In comparing the CEF and AEO 2006 projections, it is important to note that the CEF base year
(1997) value for industrial  delivered energy consumption is higher than the AEO 2006 base year
(2004) value. This difference is attributable to  the roughly 5 percent decrease in industrial
delivered energy consumption that occurred from 1997 to 2005.334 Since base year industrial
energy consumption in CEF is higher,  it is misleading to compare 2020 consumption projections
between the two studies. The calculated  annual growth rates are therefore a more appropriate
gauge for comparing the two analyses.
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                             Appendix A: Energy Projections
For the reference cases, CEF and AEO 2006 projections for annual increases in industrial
energy consumption are fairly close—0.8 percent and 0.7 percent per year, respectively. The
CEF reference case projects a slightly slower rate of energy intensity improvement than the
AEO 2006 reference case projection of 1.3 percent per year. CEF projects that industrial energy
intensity will decrease by 1.1 percent per year, with 75 percent of this improvement attributed to
inter-sector structural change (i.e., shifts towards less energy-intensive manufacturing
industries) and 25 percent to sector-specific efficiency improvement. Despite projections that
aggregated industrial energy intensity will continue to decrease, in this analysis we are primarily
interested in projected decreases or increases in energy intensity at the sector level,  as
discussed in Chapter 3.

In terms of projected annual changes in fuel consumption, the CEF reference case differs from
the AEO 2006 reference case, projecting faster increases in consumption of all energy inputs
(including renewables) except coal.  It is unsurprising that CEF envisions no coal increase under
the reference scenario, as the analysis was produced before recent price increases for natural
gas that may create incentives for switching to coal, and as the analysis does not consider the
energy-related impacts of CTL technology that are part of AEO 2006.

Where the CEF reference case projection is less optimistic than AEO 2006, the CEF advanced
case projection  is considerably more aggressive in terms of its energy consumption and
intensity reduction outcomes. This too is unsurprising, given that AEO projections are policy
neutral and limited to those policies  that have already been enacted and funded, with
implementation rules established.335 Thus, the  CEF reference case (which is based on AEO
1999) includes the effect of already  adopted policies and regulations in place as of 1999.

Where appropriate, references to differences and similarities between the CEF and AEO 2006
projections for specific industrial manufacturing sectors are made in the sector summaries
contained in Chapter 3.
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U.S. Environmental Protection Agency                                                                      March 2007

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U.S. Environmental Protection Agency                                                                      March 2007

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U.S. Environmental Protection Agency                                                                      March 2007

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U.S. Environmental Protection Agency                                                                     March 2007

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81 Holderbank Consulting. Present and Future Energy Use of Energy in the Cement and Concrete Industries in Canada. (1993).

82 Worrell, Ernst; Galitsky, Christina. Energy Efficiency Improvement Opportunities for Cement Making. (January 2004).

83 U.S. Department of Energy, Industrial Technologies Program.  Energy and Emission Reduction Opportunities for the Cement
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84 Intel-laboratory Working Group, Oak Ridge National Laboratory and  Lawrence Berkeley National Laboratory. Scenarios for a
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85 U.S. Environmental Protection Agency. Beneficial Use of Industrial By-Products in Cement Kilns: Analysis of Utilization Trends
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86 U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, Industrial Technologies Program. Energy
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87 U.S. Department of Energy, Industrial Technologies Program.  Energy and Emission Reduction Opportunities for the Cement
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88 U.S. Department of Energy, Energy Information Administration. Manufacturing Energy Consumption Survey, 2002 Data
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89 American Chemistry Council. Guide to the Business of Chemistry 2002. As originally referenced in U.S. Department of
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90 U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, Industrial Technologies Program. Chemicals
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91 Gerard, Jack.  Testimony Before the Subcommittee on Energy & Mineral Resources,  United States House of Representatives,
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92 U.S. Department of Energy, Energy Information Administration, Manufacturing Energy Consumption Survey, 2002,  Table 5.2,
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93 U.S. Department of Energy, Energy Information Administration, Manufacturing Energy Consumption Survey, 2002, Table 3.1,
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U.S. Environmental Protection Agency                                                                      March 2007

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101 U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, Industrial Technologies Program. Energy
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102 Elliott, Shipley, Brown. CHPFive Years Later: Federal and State Policies and Programs Update. [Report Number IE031]
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103 U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, Industrial Technologies Program. Chemicals
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105 U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy. Separation of Olefin/Paraffin Mixtures With
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106 U.S. Department of Energy, Energy Information Administration, Manufacturing Energy Consumption Survey, 2002, Table 5.2,
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107 U.S. Census Bureau. County Business Patterns, CenStats Databases. (Accessed September 13, 2006.) Available at
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108 American Gas Foundation.  Natural Gas Outlook to 2020. (February 2005). Available at
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109 U.S. Department of Energy, Energy Information Administration. Manufacturing Energy Consumption Survey, 2002 Data
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110 U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, Industrial Technologies Program. Energy
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U.S. Environmental Protection Agency                                                                      March 2007

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111 U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, Industrial Technologies Program. Energy
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112 U.S. Departments of Commerce and Transportation. 2002 Economic Census Commodity Flow Survey[EC02TCF:-US]
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115 American Gas Foundation. Natural Gas Outlook to 2020. (February 2005). Available at
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116 U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, Industrial Technologies Program. Energy
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117 U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, Industrial Technologies Program. Energy
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118 Elliott, Shipley,  Brown. CHPFive Years Later: Federal and State Policies and Programs Update. [Report Number IE031.]
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119 U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, Industrial Technologies Program. Energy
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120 E. Worrell, L. Price, C. Galitsky, Lawrence Berkeley National Laboratory. Emerging Energy-Efficient Technologies in Industry:
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121 U.S. Department of Energy. Forest Products Industry of the Future: Fiscal Year 2004 Annual Report. (February 2005).

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123 U.S. Department of Energy. Forest Products Industry of the Future: Fiscal Year 2004 Annual Report. (February 2005). As
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124 U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, Industrial Technologies Program. Energy
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125 American Forest & Paper Association. AF&PA Environmental, Health and Safety Verification Program: Year 2002 Report.
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U.S. Environmental Protection Agency                                                                     March 2007

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                                                  References
126 U.S. Department of Energy. Forest Products Industry of the Future: Fiscal Year 2004 Annual Report. (February 2005). As
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127 American Forest & Paper Association. AF&PA Environmental, Health and Safety Verification Program: Year 2002 Report.
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128 U.S. Department of Energy. Forest Products Industry of the Future: Fiscal Year 2004 Annual Report. (February 2005).

129 U.S. Department of Energy. Forest Products Industry of the Future: Fiscal Year 2004 Annual Report. (February 2005). As
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130 U.S. Department of Energy. Forest Products Industry of the Future: Fiscal Year 2004 Annual Report. (February 2005).

131 American Gas Foundation. Natural Gas Outlook to 2020. (February 2005). Available at
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132 U.S. Department of Energy, Energy Information Administration, Manufacturing Energy Consumption Survey, 2002, Table 3.2,
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133 U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, Industrial Technologies Program. Energy
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134 U.S. Department of Energy. Forest Products Industry of the Future: Fiscal Year 2004 Annual Report. (February 2005).

135 U.S. Department of Energy, Energy Information Administration. Manufacturing Energy Consumption Survey, 1998 and2002.

136 American Forest & Paper Association representatives who provided feedback on a previous draft of this report (dated
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137 U.S. Department of Energy, Energy Efficiency and Renewable Energy, Industrial Technologies Program. Pulp and Paper
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138 U.S. Department of Energy. Forest Products Industry of the Future: Fiscal Year 2004 Annual Report. (February 2005).

139 American Forest & Paper Association representatives who provided feedback on a previous draft of this report (dated
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140 American Forest & Paper Association representatives who provided feedback on a previous draft of this report (dated
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141 U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, Industrial Technologies Program. Energy
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142 American Forest & Paper Association representatives who provided feedback on a previous draft of this report (dated
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149 Elliott, Shipley, Brown. CHPFive Years Later: Federal and State Policies and Programs Update. [Report Number IE031]
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150 Drew Ronneberg, U.S.  Department of Energy, Energy Efficiency and Renewable Energy, Industrial Technologies Program.
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153 American Forest & Paper Association representatives who provided feedback on a previous draft of this report (dated
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155 U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, Industrial Technologies Program. Energy
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156 Drew Ronneberg, U.S.  Department of Energy, Energy Efficiency and Renewable Energy, Industrial Technologies Program.
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157 American Forest & Paper Association representatives who provided feedback on a previous draft of this report (dated
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U.S. Environmental Protection Agency                                                                     March 2007

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158 U.S. Department of Energy, Energy Efficiency and Renewable Energy, Industrial Technologies Program. Pulp and Paper
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165 Larry Kavanaugh, American Iron  & Steel Institute (AISI). Personal communication (January 29, 2007).

166 Larry Kavanaugh, American Iron  & Steel Institute (AISI). Personal communication (January 29, 2007).

167 U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, Industrial  Technologies Program. Steel
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173 Considine, T. Pennsylvania State University. The Transformation of North American Steel Industry: Drivers, Prospects, and
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175 Stubbles, J. Energy Use in the U.S. Steel Industry: An Historical Perspective and Future Opportunities. (September 2000).

176 American Iron & Steel Institute. Saving One Barrel of Oil per Ton (SOBOT):A New Roadmap for Transformation of
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177 American Iron & Steel Institute. Saving One Barrel of Oil per Ton (SOBOT):A New Roadmap for Transformation of
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U.S. Environmental Protection Agency                                                                     March 2007

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178 U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, Industrial Technologies Program. Steel
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179 American Iron & Steel Institute. Saving One Barrel of Oil per Ton (SOBOT): A New Roadmap for Transformation of
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180 American Iron & Steel Institute. Saving One Barrel of Oil per Ton (SOBOT): A New Roadmap for Transformation of
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181 U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, Industrial Technologies Program. Energy
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182 Timothy Considine, Pennsylvania State University. The Transformation of North American Steel Industry: Drivers, Prospects,
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183 Steel Recycling Institute. Steel Recycling Rates at a Glance: 2005 Steel Recycling Rates. Available at http://www.recycle-
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184 Stubbles, J. Energy Use in the U.S. Steel Industry: An Historical Perspective and Future Opportunities. (September 2000).

185 U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, Industrial Technologies Program. Steel
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186 U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, Industrial Technologies Program. Energy
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187 American Iron & Steel Institute. Saving One Barrel of Oil per Ton (SOBOT): A New Roadmap for Transformation of
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188 American Iron & Steel Institute. Saving One Barrel of Oil per Ton (SOBOT): A New Roadmap for Transformation of
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189 U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, Industrial Technologies Program. Steel
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190 Larry Kavanaugh, American Iron & Steel Institute (AISI). Personal communication. (January 29,  2007).

191 U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, Industrial Technologies Program. Steel
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192 American Iron & Steel Institute. Saving One Barrel of Oil per Ton (SOBOT): A New Roadmap for Transformation of
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193 Elliott, Shipley,  Brown. CHPFive  Years Later: Federal and State Policies and Programs Update. [Report Number IE031]
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194 Larry Kavanaugh, American Iron & Steel Institute (AISI). Personal communication. (January 29,  2007).

195 American Iron & Steel Institute. Saving One Barrel of Oil per Ton (SOBOT): A New Roadmap for Transformation of
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196 U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, Industrial Technologies Program. Steel
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197 Larry Kavanaugh, American Iron & Steel Institute (AISI). Personal communication. (January 29,  2007).

198 American Iron & Steel Institute. Saving One Barrel of Oil per Ton (SOBOT): A New Roadmap for Transformation of
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U.S. Environmental Protection Agency                                                                     March 2007

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199 U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, Industrial Technologies Program. Steel
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200 U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, Industrial Technologies Program. Steel
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201 U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, Industrial Technologies Program. Steel
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202 E. Worrell, L. Price, C. Galitsky, Lawrence Berkeley National Laboratory. Emerging Energy-Efficient Technologies in Industry:
  Case Studies of Selected Technologies. (May 2004).  [LBNL-54828]. Analysis prepared on behalf of the National Commission
  on Energy Policy, through the U.S. Department of Energy. Available at
  http://www.energycommission.Org/files/finalReport/lll.6.a%20-%20EE%20Technol%20in%20lndustry%20.pdf.

203 American Iron & Steel Institute. Saving One Barrel of Oil per Ton (SOBOT):A New Roadmap for Transformation of
  Stee/making Process (October 2005).

204 Larry Kavanaugh, American Iron & Steel Institute.  Personal communication, December 2006.

205 American Iron & Steel Institute. Saving One Barrel of Oil per Ton (SOBOT):A New Roadmap for Transformation of
  Stee/making Process (October 2005).

206 U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, Industrial Technologies Program. Steel
  Industry Marginal Opportunity Study. (September 2005). Analysis prepared by Energetics, Inc.

207 Larry Kavanaugh, American Iron & Steel Institute (AISI). Personal communication. (January 29, 2007).

208 American Iron & Steel Institute. Saving One Barrel of Oil per Ton (SOBOT):A New Roadmap for Transformation of
  Stee/making Process (October 2005).

209 U.S. Department of Energy, Energy Efficiency & Renewable Energy, Industrial Technologies Program. Metal Casting Industry
  of the Future: Fiscal Year 2004 Annual Report.

210 Personal correspondence, Jeffrey Kohn, U.S. EPA., with Alfred Spada, Editor-in-Chief of Modern Casting Magazine.
  (February 2006). As originally cited in U.S.  Environmental Protection Agency, Sector Strategies Program, Sector Strategies
  Performance Report (2006).

211 U.S. Department of Energy, Energy Efficiency & Renewable Energy, Industrial Technologies Program. Metal Casting Industry
  of the Future: Fiscal Year 2004 Annual Report.

212 U.S. Department of Energy, Energy Efficiency & Renewable Energy, Industrial Technologies Program. Metal Casting Industry
  of the Future: Fiscal Year 2004 Annual Report.

213 U.S. Department of Energy, Energy Efficiency and Renewable Energy, Industrial Technologies Program. Energy Use in
  Selected'Meta/casting Facilities. (May 2004). Analysis prepared by Eppich Technologies.

214 Kirgin, K., Stratecasts, Inc. Modern Casting Magazine, "Casting Sales Forecast to Grow 15% By '08." Vol. 96, No. 1 (January
  2006). Available at www.moderncasting.com. As originally cited in U.S. Environmental Protection Agency, Sector Strategies
  Program, Sector Strategies Performance Report. (2006).

215 U.S. Census Bureau.  Statistics for Industry Groups and Industries: 2004, Annual Survey of Manufacturers (December 2005),
  Available at http://www.census.gov/prod/2005pubs/am0431gs1.pdf.

216 U.S. Department of Energy, Energy Efficiency & Renewable Energy, Industrial Technologies Program. Metal Casting Industry
  of the Future: Fiscal Year 2004 Annual Report.

217 U.S. Department of Energy, Energy Efficiency & Renewable Energy, Industrial Technologies Program. Metal Casting Industry
  of the Future: Fiscal Year 2004 Annual Report.

218 U.S. Department of Energy, Industrial Technologies Program. Advanced Me/ting Technologies: Energy Saving Concepts and
  Opportunities for the Metal Casting Industry. (November 2005). Analysis prepared by BCS, Incorporated. Available at
  http://www.eere.energy.gov/industry/metalcasting/pdfs/advancedmeltingtechnologies.pdf.
U.S. Environmental Protection Agency                                                                     March 2007

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                                                   References
219 U.S. Department of Energy, Industrial Technologies Program. Advanced Melting Technologies: Energy Saving Concepts and
   Opportunities for the Metal Casting Industry. (November 2005). Analysis prepared by BCS, Incorporated. Available at
  http://www.eere.energy.gov/industry/metalcasting/pdfs/advancedmeltingtechnologies.pdf.

220 U.S. Department of Energy, Office of Industrial Technologies.  Energy and Environmental Profile of the U.S. Metal Casting
  Industry (September 1999). Analysis prepared by Energetics,  Inc. Available at
  http://www.eere.energy.gov/industry/metalcasting/pdfs/profile.pdf.

221 U.S. Department of Energy, Industrial Technologies Program. Theoretical/Best Practice Energy Use in Meta/casting
   Operations. Analysis prepared by KERAMIDA Environmental,  Inc.,  Schifo, J.F., and Radia, J.T. (May 2004). Available at
  http://www.eere.energy.gov/industry/metalcasting/pdfs/doebestpractice_052804.pdf.

222 U.S. Department of Energy, Industrial Technologies Program. Theoretical/Best Practice Energy Use in Meta/casting
   Operations. Analysis prepared by KERAMIDA Environmental,  Inc.,  Schifo, J.F., and Radia, J.T. (May 2004). Available at
  http://www.eere.energy.gov/industry/metalcasting/pdfs/doebestpractice_052804.pdf.

223 U.S. Department of Energy, Industrial Technologies Program. Advanced Me/ting Technologies: Energy Saving Concepts and
   Opportunities for the Metal Casting Industry (November 2005). Analysis prepared by BCS, Incorporated. Available at
  http://www.eere.energy.gov/industry/metalcasting/pdfs/advancedmeltingtechnologies.pdf.

224 U.S. Department of Energy, Industrial Technologies Program. Advanced Me/ting Technologies: Energy Saving Concepts and
   Opportunities for the Metal Casting Industry (November 2005). Analysis prepared by BCS, Incorporated. Available at
  http://www.eere.energy.gov/industry/metalcasting/pdfs/advancedmeltingtechnologies.pdf.

225 U.S. Department of Energy, Energy Efficiency and Renewable Energy, Industrial Technologies Program. Energy Use in
  Selected Meta/casting Facilities. (May 2004). Analysis prepared by Eppich Technologies.

226 U U.S. Department of Energy, Industrial Technologies Program. Theoretical/Best Practice Energy Use in Meta/casting
   Operations. Analysis prepared by KERAMIDA Environmental,  Inc.,  Schifo, J.F., and Radia, J.T. (May 2004). Available at
  http://www.eere.energy.gov/industry/metalcasting/pdfs/doebestpractice_052804.pdf.

227 U.S. Department of Energy, Industrial Technologies Program.  Advanced Me/ting  Technologies: Energy Saving Concepts and
   Opportunities for the Metal Casting Industry (November 2005). Analysis prepared by BCS, Incorporated. Available at
  http://www.eere.energy.gov/industry/metalcasting/pdfs/advancedmeltingtechnologies.pdf.

228 U.S. Department of Energy, Industrial Technologies Program. Theoretical/Best Practice Energy Use in Meta/casting
   Operations. Analysis prepared by KERAMIDA Environmental,  Inc.,  Schifo, J.F., and Radia, J.T. (May 2004). Available at
  http://www.eere.energy.gov/industry/metalcasting/pdfs/doebestpractice_052804.pdf.

229 U.S. Department of Energy, Industrial Technologies Program. Theoretical/Best Practice Energy Use in Meta/casting
   Operations. Analysis prepared by KERAMIDA Environmental,  Inc.,  Schifo, J.F., and Radia, J.T. (May 2004). Available at
  http://www.eere.energy.gov/industry/metalcasting/pdfs/doebestpractice_052804.pdf.

230 U.S. Department of Energy, Industrial Technologies Program. Theoretical/Best Practice Energy Use in Meta/casting
   Operations. Analysis prepared by KERAMIDA Environmental,  Inc.,  Schifo, J.F., and Radia, J.T. (May 2004). Available at
  http://www.eere.energy.gov/industry/metalcasting/pdfs/doebestpractice_052804.pdf.

231 U.S. Department of Energy, Industrial Technologies Program.  Theoretical/Best Practice Energy Use in Meta/casting
   Operations. Analysis prepared by KERAMIDA Environmental,  Inc.,  Schifo, J.F., and Radia, J.T. (May 2004). Available at
  http://www.eere.energy.gov/industry/metalcasting/pdfs/doebestpractice_052804.pdf. As originally cited in U.S.  Environmental
  Protection Agency, Sector Strategies  Program, Sector Strategies Performance Report. (2006).

232 U.S. Department of Energy, Industrial Technologies Program. Advanced Me/ting Technologies: Energy Saving Concepts and
   Opportunities for the Metal Casting Industry (November 2005). Analysis prepared by BCS, Incorporated. Available at
  http://www.eere.energy.gov/industry/metalcasting/pdfs/advancedmeltingtechnologies.pdf.

233 U.S. Department of Energy, Industrial Technologies Program. Advanced Me/ting Technologies: Energy Saving Concepts and
   Opportunities for the Metal Casting Industry (November 2005). Analysis prepared by BCS, Incorporated. Available at
  http://www.eere.energy.gov/industry/metalcasting/pdfs/advancedmeltingtechnologies.pdf.
U.S. Environmental Protection Agency                                                                       March 2007

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                                                   References
234 U.S. Department of Energy, Energy Efficiency & Renewable Energy, Industrial Technologies Program. Metal Casting Industry
  of the Future: Fiscal Year 2004 Annual Report.
235 U.S. Census Bureau. County Business Patterns, CenStats Databases. (Accessed September 1, 2006.) Available at
  http://censtats.census.gov/cbpnaic/cbpnaic.shtml.
236 U.S. Census Bureau. County Business Patterns, CenStats Databases. (Accessed September 1, 2006.) Available at
  http://censtats.census.gov/cbpnaic/cbpnaic.shtml.
237 U.S. Census Bureau. County Business Patterns, CenStats Databases. (Accessed September 1, 2006.) Available at
  http://censtats.census.gov/cbpnaic/cbpnaic.shtml.
238 U.S. Census Bureau. Statistics for Industry Groups and Industries: 2001, Annual Survey ofManufacturers. (January 2003),
  Available at http://www.census.gov/prod/2003pubs/m01as-1.pdf.
  U.S. Census Bureau. Statistics for Industry Groups and Industries: 2004, Annual Survey of Manufacturers. (December 2005),
  Available at http://www.census.gov/prod/2005pubs/am0431gs1.pdf.
239 Personal communication with Larry Boyd, Energy Industries of Ohio, (December 7,2006).
240 U.S. Census Bureau. Statistics for Industry Groups and Industries: 2004, Annual Survey of Manufacturers. [M04(AS)-1].
  (December 2005). Available at http://www.census.gov/prod/2005pubs/am0431gs1 .pdf.
  U.S. Census Bureau. Statistics for Industry Groups and Industries: 2001, Annual Survey of Manufacturers. [M01(AS)-1].
  (January 2003). Available at http://www.census.gov/prod/2003pubs/m01as-1 .pdf.
241 U.S. Census Bureau. Statistics for Industry Groups and Industries: 2004, Annual Survey of Manufacturers, [M04(AS)-1].
  (December 2005). Available at http://www.census.gov/prod/2005pubs/am0431gs1 .pdf.
  U.S. Census Bureau. Statistics for Industry Groups and Industries: 2001, Annual Survey of Manufacturers, [M01(AS)-1].
  (January 2003). Available at http://www.census.gov/prod/2003pubs/m01as-1 .pdf.
242 National Metal Finishing Strategic Goals Program. Internet source. (Accessed February 7, 2006). Available at
  http://www.strategicgoals.org/reports2/t7. cfm?state=all&requesttimeout=300.
243 Personal communication with Larry Boyd, Energy Industries of Ohio, (December 7,2006).
244 Personal communication with Larry Boyd, Energy Industries of Ohio, (December 7,2006).
245 Personal communication with Robin Kime, U.S.  Environmental Protection Agency, February 7, 2006.
246 Martin,  N., Worrell, E., Price, Ruth, et. al.  Ernest Orlando Lawrence Berkeley National Laboratory. Emerging Energy-Efficient
  Industrial Technologies.  [LBNL46990.] (October 2000). Available at http://ies.lbl.gov/iespubs/46990.pdf.
247 Elliott, Shipley, Brown. CHP Five Years Later: Federal and State Policies and Programs Update. [Report Number IE031]
  (January 2003).
248 National Metal Finishing Resource Center. Internet source. Available at http://www.nmfrc.org.
249 U.S. Census Bureau. 2002 NAICS Definitions. (2003).  Internet source. (Accessed  March 1, 2006.) Available at
  http://www.census.gov/epcd/naics02/def/ND336111 .HTM#N336111.
250 Alliance of Automobile Manufacturers. U.S. Production Facilities. (2006).
251 Klier, T. and Rubenstein, J. Chicago Fed Letter. "The U.S. Auto Supplier Industry in Transition." (May 2006). Available at
  http://findarticles.com/p/articles/mi_qa3631/is_200605/ai_n16139151.
252 Ernest Orlando Lawrence Berkeley National Laboratory (LBNL). Energy Efficiency Improvement and Cost Saving
  Opportunities for the  Vehicle Assembly Industry: An ENERGYSTAR Guide for Energy and Plant Managers. [LBNL-50939].
  (January 2003). Available at http://ies.lbl.gov/iespubs/50939.pdf.
253 U.S. Census Bureau. Statistics for Industry Groups and Industries: 2004, Annual Survey of Manufacturers, [M04(AS)-1]
  (December 2005). Available at http://www.census.gov/prod/2005pubs/am0431gs1 .pdf.
U.S. Environmental Protection Agency                                                                      March 2007

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                                                  References
   U.S. Census Bureau. Statistics for IndustryGroups and'Industries: 2001', Annual Survey of Manufacturers, [M01(AS)-1]
   (January 2003). Available at http://www.census.gov/prod/2003pubs/m01as-1 .pdf.

254 Ernest Orlando Lawrence Berkeley National  Laboratory (LBNL). Energy Efficiency Improvement and Cost Saving
   Opportunities for the Vehicle Assembly Industry: An ENERGY STAR Guide for Energy and Plant Managers. [LBNL-50939].
   (January 2003). Available at http://ies.lbl.gov/iespubs/50939.pdf.

255 Ernest Orlando Lawrence Berkeley National  Laboratory (LBNL). Energy Efficiency Improvement and Cost Saving
   Opportunities for the Vehicle Assembly Industry: An ENERGY STAR Guide for Energy and Plant Managers. [LBNL-50939].
   (January 2003). Available at http://ies.lbl.gov/iespubs/50939.pdf.

256 Ernest Orlando Lawrence Berkeley National  Laboratory (LBNL). Energy Efficiency Improvement and Cost Saving
   Opportunities for the Vehicle Assembly Industry: An ENERGYSTAR Guide for Energy and Plant Managers. [LBNL-50939].
   (January 2003). Available at http://ies.lbl.gov/iespubs/50939.pdf.

257 Ernest Orlando Lawrence Berkeley National  Laboratory (LBNL). Energy Efficiency Improvement and Cost Saving
   Opportunities for the Vehicle Assembly Industry: An ENERGYSTAR Guide for Energy and Plant Managers. [LBNL-50939].
   (January 2003). Available at http://ies.lbl.gov/iespubs/50939.pdf.

258 U.S. Census Bureau. Statistics for Industry Groups and Industries: 2001, Annual Survey of Manufacturers (January 2QQ3).
   Available at http://www.census.gov/prod/2003pubs/m01as-1.pdf.

   U.S. Census Bureau. Statistics for Industry Groups and Industries: 2004, Annual Survey of Manufacturers (December 2005).
   Available at http://www.census.gov/prod/2005pubs/am0431gs1.pdf.

259 Ernest Orlando Lawrence Berkeley National  Laboratory (LBNL). Energy Efficiency Improvement and Cost Saving
   Opportunities for the Vehicle Assembly Industry: An ENERGYSTAR Guide for Energy and Plant Managers. [LBNL-50939].
   (January 2003). Available at http://ies.lbl.gov/iespubs/50939.pdf.

260 Valerie Ughetta, Director, Stationary Sources, Alliance of Automobile Manufacturers. Personal communication with Alison
   Keane, U.S. Environmental Protection Agency (January 25, 2007).

261 Ernest Orlando Lawrence Berkeley National  Laboratory (LBNL). Energy Efficiency Improvement and Cost Saving
   Opportunities for the Vehicle Assembly Industry: An ENERGY STAR Guide for Energy and Plant Managers. [LBNL-50939].
   (January 2003). Available at http://ies.lbl.gov/iespubs/50939.pdf.

   Valerie Ughetta, Director, Stationary Sources, Alliance of Automobile Manufacturers. Personal communication with Alison
   Keane, U.S. Environmental Protection Agency (January 25, 2007).

262 Ernest Orlando Lawrence Berkeley National  Laboratory (LBNL). Energy Efficiency Improvement and Cost Saving
   Opportunities for the Vehicle Assembly Industry: An ENERGYSTAR Guide for Energy and Plant Managers. [LBNL-50939].
   (January 2003). Available at http://ies.lbl.gov/iespubs/50939.pdf.

263 Elliott, Shipley, Brown. CHPFive Years Later: Federal and State Policies and Programs Update. [Report Number IE031.]
   (January 2003).

264 Ernest Orlando Lawrence Berkeley National  Laboratory (LBNL). Energy Efficiency Improvement and Cost Saving
   Opportunities for the Vehicle Assembly Industry: An ENERGY STAR Guide for Energy and Plant Managers. [LBNL-50939].
   (January 2003) Available at http://ies.lbl.gov/iespubs/50939.pdf.

265 Ernest Orlando Lawrence Berkeley National  Laboratory (LBNL). Energy Efficiency Improvement and Cost Saving
   Opportunities for the Vehicle Assembly Industry: An ENERGY STAR Guide for Energy and Plant Managers. [LBNL-50939].
   (January 2003). Available at http://ies.lbl.gov/iespubs/50939.pdf.

266 U.S. Environmental Protection Agency. New Source Review: Report to the President. (June 2002).

267 Ernest Orlando Lawrence Berkeley National  Laboratory (LBNL). Energy Efficiency Improvement and Cost Saving
   Opportunities for the Vehicle Assembly Industry: An ENERGY STAR Guide for Energy and Plant Managers. [LBNL-50939].
   (January 2003). Available at http://ies.lbl.gov/iespubs/50939.pdf.

268 U.S. Census Bureau. Statistics for Industry Groups and Industries: 2004, Annual Survey of Manufacturers. (December 2005).
   Available at http://www.census.gov/prod/2005pubs/am0431gs1.pdf.
U.S. Environmental Protection Agency                                                                     March 2007

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                                                  References
269 Automotive Parts Manufacturers' Association (APMA). Energy Practice Benchmarking. Available at
   http://www.apma.ca/client/apma/apma.nsf/object/APMA+Benchmarking+Survey/$file/APMA+Benchmarking+Survey.pdf.

270 U.S. Census Bureau. Statistics for Industry Groups and Industries: 2001, Annual Survey ofManufacturers, (January 2003).
   Available at http://www.census.gov/prod/2003pubs/m01as-1.pdf.

   U.S. Census Bureau. Statistics for Industry Groups and Industries: 2004, Annual Survey of Manufacturers, (December 2005).
   Available at http://www.census.gov/prod/2005pubs/am0431gs1.pdf.

271 U.S. Census Bureau. Statistics for Industry Groups and Industries: 2001, Annual Survey ofManufacturers, (January 2003).
   Available at http://www.census.gov/prod/2003pubs/m01as-1.pdf.

   U.S. Census Bureau. Statistics for Industry Groups and Industries: 2004, Annual Survey of Manufacturers, (December 2005).
   Available at http://www.census.gov/prod/2005pubs/am0431gs1.pdf.

272 Automotive Parts Manufacturers' Association (APMA). Energy Practice Benchmarking. Available at
   http://www.apma.ca/client/apma/apma.nsf/object/APMA+Benchmarking+Survey/$file/APMA+Benchmarking+Survey.pdf.

273 Automotive Parts Manufacturers' Association (APMA). Energy Practice Benchmarking. Available at
   http://www.apma.ca/client/apma/apma.nsf/object/APMA+Benchmarking+Survey/$file/APMA+Benchmarking+Survey.pdf.

274 Automotive Parts Manufacturers' Association (APMA). Energy Practice Benchmarking. Available at
   http://www.apma.ca/client/apma/apma.nsf/object/APMA+Benchmarking+Survey/$file/APMA+Benchmarking+Survey.pdf.

275 Automotive Parts Manufacturers' Association (APMA). Energy Practice Benchmarking. Available at
   http://www.apma.ca/client/apma/apma.nsf/object/APMA+Benchmarking+Survey/$file/APMA+Benchmarking+Survey.pdf.

276 U.S. Department of Energy, Industrial Technologies Program. Plastics: Industrial Assessment. (July 2003). Available at
   http://www.nrel.gov/docs/fy05osti/38529.pdf.

277 U.S. Department of Energy, Office of Industrial Technologies. Energy and Environmental Profile of the U.S. Petroleum
   Refining Industry. (December 1998). Analysis prepared by Energetics, Inc. Available at
   http://www.eere.energy.gov/industry/petroleum_refining/pdfs/profile.pdf.

278 U.S. Department of Energy, Energy  Information Administration. Manufacturing Energy Consumption Survey, 2002 Data
   Tables, Table 1.2, Consumption of Energy for All Purposes (First Use). Available at
   http://www.eia.doe.gov/emeu/mecs/mecs2002/data02/shelltables.html.

279 American Gas Foundation. Natural  Gas Outlook to 2020. (February 2005). Available at
   http://www.gasfoundation.org/ResearchStudies/2020.htm.

280 American Gas Foundation. Natural  Gas Outlook to 2020. (February 2005). Available at
   http://www.gasfoundation.org/ResearchStudies/2020.htm.

281 U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, Industrial Technologies Program. Energy
   Use, Loss, and Opportunities Analysis: U.S. Manufacturing and Mining. (December 2004). Prepared by Energetics, Inc. and
   E3M, Incorporated. Available at
   http://www.eere.energy.gov/industry/energy_systems/pdfs/energy_use_loss_opportunities_analysis.pdf.

282 U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, Industrial Technologies Program. Energy
   Use, Loss, and Opportunities Analysis: U.S. Manufacturing and Mining. (December 2004). Prepared by Energetics, Inc. and
   E3M, Incorporated. Available at
   http://www.eere.energy.gov/industry/energy_systems/pdfs/energy_use_loss_opportunities_analysis.pdf.

283 U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, Industrial Technologies Program. Energy
   Use, Loss, and Opportunities Analysis: U.S. Manufacturing and Mining. (December 2004). Prepared by Energetics, Inc. and
   E3M, Incorporated. Available at
   http://www.eere.energy.gov/industry/energy_systems/pdfs/energy_use_loss_opportunities_analysis.pdf.

284 U.S. Department of Energy, Energy Information Administration. Annual Energy Outlook 2006 [DOE/R/\-Q
   (February 2006).
U.S. Environmental Protection Agency                                                                     March 2007

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                                                   References
285 Elliott, Shipley, Brown. CHPFive Years Later: Federal and State Policies and Programs Update. [Report Number IE031.]
   (January 2003).

2861 nterlaboratory Working Group, Oak Ridge National Laboratory and Lawrence Berkeley National Laboratory. Scenarios for a
   Clean Energy Future.  [ORNL/CON-476 and LBNL-44029]. (November 2000). Available at http://www.ornl.gov/sci/eere/cef/.

287 American Petroleum Institute. Technology Roadmap for the U.S. Petroleum Industry, Draft. (February 2000). Available at
   http://www.eere.energy.gov/industry/petroleum_refining/pdfs/petroleumroadmap.pdf.

288 American Petroleum Institute. Technology Roadmap for the U.S. Petroleum Industry, Draft. (February 2000). Available at
   http://www.eere.energy.gov/industry/petroleum_refining/pdfs/petroleumroadmap.pdf.

289 U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy, Industrial Technologies Program. Energy
   Use, Loss, and Opportunities Analysis: U.S. Manufacturing and Mining. (December 2004). Prepared by Energetics, Inc. and
   E3M, Incorporated. Available at
   http://www.eere.energy.gov/industry/energy_systems/pdfs/energy_use_loss_opportunities_analysis.pdf.

290 American Petroleum Institute. Technology Roadmap for the U.S. Petroleum Industry, Draft. (February 2000). Available at
   http://www.eere.energy.gov/industry/petroleum_refining/pdfs/petroleumroadmap.pdf.

291 American Petroleum Institute. Technology Roadmap for the U.S. Petroleum Industry, Draft. (February 2000). Available at
   http://www.eere.energy.gov/industry/petroleum_refining/pdfs/petroleumroadmap.pdf.

292 American Petroleum Institute. Technology Roadmap for the U.S. Petroleum Industry, Draft. (February 2000). Available at
   http://www.eere.energy.gov/industry/petroleum_refining/pdfs/petroleumroadmap.pdf.

293 Climate VISION. Private Sector Initiatives. Internet source. (Accessed September 13, 2006.) Available at
   http://www.climatevision.gov/initiatives.html.

294 American Petroleum Institute. Technology Roadmap for the U.S. Petroleum Industry, Draft. (February 2000). Available at
   http://www.eere.energy.gov/industry/petroleum_refining/pdfs/petroleumroadmap.pdf.

295 Personal correspondence, Shana Harbour (U.S. EPA) with Beth Gearhart (U.S. Maritime Administration). (December 2005).
   As originally cited in U.S. Environmental Protection Agency, Sector Strategies Program, Sector Strategies Performance
   Report. (2006).

296 U.S. Census Bureau.  Statistics for Industry Groups and Industries: 200'1, Annual Survey ofManufacturers (January 2003).
   Available at http://www.census.gov/prod/2003pubs/m01as-1.pdf.

   U.S. Census  Bureau. Statistics for Industry Groups and Industries: 2004, Annual Survey of Manufacturers (December 2005).
   Available at http://www.census.gov/prod/2005pubs/am0431gs1.pdf.

297 U.S. Department of Transportation, Maritime Administration. Outlook forthe Shipbuilding andRepair Industry'(June 1998).
   Available at http://www.marad.dot.gov/publications/outlook/outlook.htm. As originally cited in U.S. Environmental Protection
   Agency, Sector Strategies  Program, Sector Strategies Performance Report. (2006).

298 U.S. Census Bureau.  Statistics for Industry Groups and Industries: 2004, Annual Survey of Manufacturers (December 2005).
   Available at http://www.census.gov/prod/2005pubs/am0431gs1.pdf.

299 U.S. Census Bureau.  Statistics for Industry Groups and Industries: 2001, Annual Survey of Manufacturers (January 2003).
   Available at http://www.census.gov/prod/2003pubs/m01as-1.pdf.

   U.S. Census  Bureau. Statistics for Industry Groups and Industries: 2004, Annual Survey of Manufacturers (December 2005).
   Available at http://www.census.gov/prod/2005pubs/am0431gs1.pdf.

300 Industry representatives who provided feedback on a previous draft of this report (dated  September 21, 2006) included Daniel
   Youhas (Shipbuilding Council of America), Stacy Ballow (American Shipbuilding Association), Vincent Dickinson (Bath Iron
   Works). Personal communication (January 12, 2007).

301 Industry representatives who provided feedback on a previous draft of this report (dated September 21, 2006) included Daniel
   Youhas (Shipbuilding Council of America), Stacy Ballow (American Shipbuilding Association), Vincent Dickinson (Bath Iron
   Works). Personal communication (January 12, 2007).
U.S. Environmental Protection Agency                                                                      March 2007

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                                                  References
302 Industry representatives who provided feedback on a previous draft of this report (dated September 21, 2006) included Daniel
  Youhas (Shipbuilding Council of America), Stacy Ballow (American Shipbuilding Association), Vincent Dickinson (Bath Iron
  Works). Personal communication (January 12, 2007).

303 Metalpass.com. Introduction to Welding Industry Roadmap. Internet source.  (2002). Available at
  http://www.metalpass.com/metaldoc/paper.aspx?doclD=122.

304 U.S. Department of Energy, Industrial Technologies Program. Cost-Saving Strategies at a Metal Forging Plant. (2005).
  Internet source. Available at http://www.eere.energy.gov/industry/bestpractices/energymatters/articles.cfm/article_id=5.

305 American Forest & Paper Association representatives who provided feedback on a previous draft of this report (dated
  September 21, 2006) included Jerry Schwartz, Stan Lancey, Sundar Mahadevan, Tim Hunt, and Laurie Holmes. Personal
  communication (December 8, 2006).

306 National Commission on Energy Policy. Ending the Energy Stalemate: A Bipartisan Strategy to Meet America's Energy
  Challenges, (December 2004).

307 American Forest & Paper Association representatives who provided feedback on a previous draft of this report (dated
  September 21, 2006) included Jerry Schwartz, Stan Lancey, Sundar Mahadevan, Tim Hunt, and Laurie Holmes. Personal
  communication (December 8, 2006).

308 Personal communication with Arvind Atreya, Professor and Director of the Industrial Assessment  Center, University of
  Michigan, Department of Mechanical Engineering (December/, 2006).

309 Personal communication with Larry Boyd, Energy Industries of Ohio, (December 7,2006).

310 U.S. Environmental Protection Agency. Output-Based Regulations: A Handbook for Air Regulators. (August 2004). Prepared
  by Energy and Environmental Analysis.

311 U.S. Environmental Protection Agency. Output-Based Regulations: A Handbook for Air Regulators. (August 2004). Prepared
  by Energy and Environmental Analysis.

312 U.S. Department of Energy, Industrial Technologies Program. Advanced Melting Technologies: Energy Saving Concepts and
  Opportunities for the Metal Casting Industry. (November 2005). Analysis prepared by  BCS, Incorporated. Available at
  http://www.eere.energy.gov/industry/metalcasting/pdfs/advancedmeltingtechnologies.pdf.

313 U.S. Environmental Protection Agency.  New Source Review: Report to the President. (June 2002).

314 Choate, W., BCS Incorporated. Energy and Emission Reduction Opportunities for the Cement Industry. (December 2003).
  Prepared under contract for U.S. Department of Energy, Industrial Technologies  Program. Available at
  http://www.eere.energy.gOV/industry/i mf/pdfs/eeroci_dec03a.pdf.

315 American Forest & Paper Association representatives who provided feedback on a previous draft of this report (dated
  September 21, 2006) included Jerry Schwartz, Stan Lancey, Sundar Mahadevan, Tim Hunt, and Laurie Holmes. Personal
  communication (December 8, 2006).

316 Kelliher, J. T., Federal Energy Regulatory Commission (FERC). Chairman Joseph T. Kelliher's statement on new PURPA
  section 2W(m) regulations applicable to small power production and cogeneration facilities. Internet source.  (October 19,
  2006).  Available at http://www.ferc.gov/press-room/statements-speeches/kelliher/2006/10-19-06-kelliher-E-2.asp.

317 American Forest & Paper Association representatives who provided feedback on a previous draft of this report (dated
  September 21, 2006) included Jerry Schwartz, Stan Lancey, Sundar Mahadevan, Tim Hunt, and Laurie Holmes. Personal
  communication (December 8, 2006).

318 American Iron & Steel Institute (AISI) representatives who provided feedback on a previous draft of this report (dated
  September 21, 2006) included Jim Schultz, Larry Kavanaugh, and Bill Obenchain. Personal communication (December 6,
  2006).

319 United States Combined Heat and Power Association. Key Barriers and Issues for CHP. Internet source. Available at
  http://uschpa.admgt.com/CHPissues.htm.

320 National Renewable Energy Laboratory. Making Connections: Case Studies of Interconnection Barriers and their Impact on
  Distributed Power Projects. [NREL/SR-200-28053.] (July 2000). Available at http://www.nrel.gov/docs/fyOOosti/28053.pdf.
U.S. Environmental Protection Agency                                                                     March 2007

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                                                  References
321 Elliott, Shipley, Brown. CHP Five Years Later: Federal and State Policies and Programs Update, [Report Number IE031.]
   (January 2003).

322 United States Combined Heat and Power Association. Key Barriers and Issues for CHP. Internet source. Available at
   http://uschpa.admgt.com/CHPissues.htm.

323 U.S. Environmental Protection Agency. ProposedRule for Improvements to EPA's New Source Review Program:
   Aggregation, Debottlenecking, and Project Netting. Fact Sheet. (September 2006). Available at
   http://www.epa.gov/nsr/documents/dapn_frn_fs_9-8-06.pdf.

3241 nterlaboratory Working Group, Oak Ridge National Laboratory and Lawrence Berkeley National Laboratory. Scenarios for a
   Clean Energy Future. [ORNL/CON-476 and LBNL-44029]. (November 2000). Available at http://www.ornl.gov/sci/eere/cef/.

3251 nterlaboratory Working Group, Oak Ridge National Laboratory and Lawrence Berkeley National Laboratory. Scenarios for a
   Clean Energy Future. [ORNL/CON-476 and LBNL-44029]. (November 2000). Available at http://www.ornl.gov/sci/eere/cef/.

326 U.S. Department of Energy, Energy Information Administration. Annual Energy Outlook 2006[DOE/EIA-0383(2006)]
   (February 2006).

327 American Gas Foundation. Natural Gas Outlook to 2020. (February 2005). Available at
   http://www.gasfoundation.org/ResearchStudies/2020.htm.

3281 nterlaboratory Working Group, Oak Ridge National Laboratory and Lawrence Berkeley National Laboratory. Scenarios for a
   Clean Energy Future. [ORNL/CON-476 and LBNL-44029]. (November 2000). Available at http://www.ornl.gov/sci/eere/cef/.

3291 nterlaboratory Working Group, Oak Ridge National Laboratory and Lawrence Berkeley National Laboratory. Scenarios for a
   Clean Energy Future. [ORNL/CON-476 and LBNL-44029]. (November 2000). Available at http://www.ornl.gov/sci/eere/cef/.

330 American Gas Foundation. Natural Gas Outlook to 2020. (February 2005). Available at
   http://www.gasfoundation.org/ResearchStudies/2020.htm.

331 U.S. Department of Energy, Energy Information Administration. Emissions of Greenhouse Gases in the United States 2004.
   Available at http://www.eia.doe.gov/oiaf/1605/gg05rpt/index.html.

332 U.S. Department of Energy, Energy Information Administration. Annual Energy Outlook 2006 [DOE/R/\-Q383(2QQ6)]
   (February 2006).

333 U.S. Department of Energy, Energy Information Administration. Annual Energy Outlook 2006 [DOE/R/\-0383(200Q)],
   Appendix D.Table D.2, (February 2006).

334 U.S. Department of Energy, Energy Information Administration. Annual Energy Review 2005, Table 2.1d [DOE/EIA-
   0384(2005)] (July 2006). Available at http://www.eia.doe.gov/emeu/aer/consump.html.

335 Darmstadter, J. EM Magazine, "Coal Within a Revised Energy Perspective." Air & Waste Management Association. (July
   2006). Available at http://www.rff.org/rff/Publications/Coal-Revised-Energy-Perspective.cfm.
U.S. Environmental Protection Agency                                                                     March 2007

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