ArcelorMittal Dofasco Case Study

Industrial Accelerator program helps minimize
capital investment in energy efficiency projects
while saving millions of dollars on electricity costs
at ArcelorMittal Dofasco
CASE STUDY
ArcelorMittal Dofasco
PROJECT STATS
Five energy-efficiency projects underway including:
•
Installation of a turbo generator that converts existing by
product fuels into electricity (estimated savings: 34,400
MWh annually)
•
A compressed air system upgrade (estimated savings:
2,434 MWh annually)
•
Installation of high efficiency belt presses (estimated savings:
2,895 MWh annually)
•
Installation of variable speed drives on a series of large
pumps and fans (estimated savings: 4,865 MWh annually)
•
And the installation of new efficient compressors (estimated
savings: 2,753 MWh annually)
•
Estimated electricity cost savings: $6.8 million annually
•
Estimated total project costs: $14.5 million
•
Estimated incentive: $7.4 million
At Hamilton’s ArcelorMittal Dofasco steel plant, one of the pillars of
its business is controlling energy costs.
Energy accounts for 20 to 25 per cent of the cost of a finished
steel coil and is the second-largest input cost after raw materials,
says Mike Cortese, senior energy specialist utilities for ArcelorMittal
Dofasco. “Raw material costs can’t be compressed. Energy has
a degree of efficiency and flexibility that you’re always working on.
You can control energy costs.”
“While non-capital energy efficiency initiatives, including training
and education and efficient operating procedures, are important
in controlling costs it is multi-million-dollar capital investments that
produce the greatest cost reductions, particularly when replacing
older inefficient equipment,” Cortese says.
ArcelorMittal is the world’s leading steel and mining company with
operations in more than 60 countries. In 2011 its revenues were
more than $94 billion US and its crude steel production was more
than 91.9 million tonnes.
ArcelorMittal Dofasco, with 10,000 employees in Canada, is one of
North America’s leading steel producers and supplier of high quality
flat-rolled steels. Steel has been produced at the Hamilton site since
1912 and annual steel shipments range between 3.5 million and 5
million tonnes.
“We need minimum capital investment
because we are funding the projects from
a combination of incentives and the energy
savings from the projects themselves.”
Keith Smith, manager Capital Planning, ArcelorMittal Dofasco
As part of the ArcelorMittal Group, the
challenge for the Hamilton plant is to make
its energy efficiency projects environmentally
and financially sound, says Keith Smith,
manager Capital Planning. “We’re
competing with other ArcelorMittal plants
around the world for a limited number of
investment dollars.”
To meet the financial challenge ArcelorMittal
Dofasco has utilized the Ontario Power
Authority’s (OPA) Industrial Accelerator
program. The program is a “key enabler” in
advancing energy objectives, Smith says.
“Through the Industrial Accelerator program
we can demonstrate that our portfolio of
energy projects is “cash neutral” to Arcelor
Mittal because project spending is offset by
Industrial Accelerator incentives plus project
savings,” he says.
The Industrial Accelerator is an incentive
program designed by the OPA to support
energy-efficiency investments within
transmission-connected facilities in Ontario.
Financial incentives of up to $10 million
are available for each capital project. This
is based on $230 per MWh for annualized
electricity saving or 70 per cent of the
eligible project costs or achieving a one-year
simple payback.
There are currently five energy-efficiency
projects underway at the Hamilton steel
plant, with a total cost of $14.5 million,
that may be receiving approximately $7.4
million in incentives. When fully operational,
the projects could reduce electricity
demand by 8.4 megawatts, a $6.8 million
annual cost saving.
The projects include a turbo generator
that converts existing by-product fuels into
electricity (estimated savings: 34,400 MWh
annually), a compressed air system upgrade
that optimizes the plant compressed air
grid infrastructure and controls the system
to improve the overall electrical efficiency
(estimated savings: 2,434 MWh annually),
installation of high efficiency belt presses to
remove excess moisture from by-product
solids handling systems (estimated savings:
2,895 MWh annually), installation of variable
speed drives on a series of large pumps and
fans within the Coke and Iron departments
(estimated savings: 4,865 MWh annually) and
the installation of new efficient compressors
to supply compressed air to the steelmaking
slab casters(estimated savings: 2,753 MWh
annually). Incentive payments are distributed
as each project is being built (with 25 per
cent on signing) instead of the traditional
incentive-payment process where incentives
are paid on completion.
“When capital investment is needed for a
new project, we now have two additional
income streams: the Industrial Accelerator
incentive and the actual energy savings
from existing and functioning projects.
The staggered incentive funding makes
it much easier for a large corporation like
ArcelorMittal to support and fund these
energy projects,” he says.
“We need minimum capital investment
because we are funding the projects from
a combination of incentives and the energy
savings from the projects themselves. So
instead of requesting $10 million from the
corporation, with the promise to return $20
million in three to four years, we may need
$100,000 each year by managing our
budget appropriately,” Smith says.
“ArcelorMittal Dofasco is looking to the
Industrial Accelerator program as the
“key enabler” in getting more projects
underway to cut its energy use and reduce
waste,” he says.
“The advantage of the Industrial Accelerator
program is that the company can run
a portfolio of energy efficiency projects
simultaneously. By the time the final project
in the energy portfolio needs cash, the first
project is generating electricity savings that
can be used for financing,” Smith says.
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“By managing project schedules and the
staggered incentive payments from the OPA
the Industrial Accelerator program allows to
have cash neutral energy spending even in
difficult economic times,” Smith says.
The company already has more than 100
additional energy projects underway and
under consideration, Smith says. “We use
a lot of energy and we also create a lot of
energy as byproduct gas and heat. This
means there are opportunities to capture
this energy waste and utilize it within our
operations in the future.”
Contact your Ontario Power Authority
Key Account Manager:
Call 1-877-504-3401
or email [email protected]
Visit our website at: industrialaccelerator.ca

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