Optimization as investment decision support in a Swedish medium-sized iron foundry – A move beyond traditional energy auditing

Abstract

Due to increased globalisation, industries are facing greater competition that is pressing companies into decreasing their expenses in order to increase their profits. As regards Swedish industry, it has been faced with substantial increases in energy prices in recent years. Barriers to energy efficiency such as imperfect information inhibit investments in energy efficiency measures, energy audits being one means of reducing barriers and overcoming imperfect information. However, an evaluation of such energy audits in Sweden reveals that it is chiefly low-cost measures that are undertaken as a result of an audit. Moreover, these audits often tend to focus on support processes such as ventilation, lighting, air compressors etc., while measures impacting production processes are often not as extensively covered, which underlines the need for further support in addition to energy audits. Decision support is practised in a variety of different disciplines such as optimization and simulation and the aim of this paper is to explore whether investment decision support practices may be used successfully towards small and medium-sized manufacturers in Sweden when complex production-related investment decisions are taken. The optimization results from the different cases, involving a foundry's investment in a new melting unit, indicate that with no electricity price fluctuations over the day, the investment seems sound as it lowers the overall energy costs. However, with fluctuating electricity prices, there are no large differences in energy costs between the option of retaining the existing five melting furnaces at the foundry and investing in a twin furnace and removing the holding furnaces -which was the initial investment plan for the foundry in the study. It would not have been possible to achieve this outcome without the use of investment decision support such as MIND. One of the main conclusions in this paper is that investment decision support, when strategic investment decisions are to be taken, may be a means of emphasising energy efficiency for energy-intensive SMEs beyond the level of traditional energy auditing. Keywords

Local and regional energy companies offering energy services: Key activities and implications for the business model

“…Matos and Silvestre, 2013;Rauter et al, 2015). In such research, optimization as an investment decision support, such as the so-called 'MIND-method', can be used (Thollander et al, 2009). …”

Industrial excess heat use: Systems analysis and CO2 emissions reduction

“…pulp and paper, forest, automobile manufacturing and chemical) to study both economic and environmental aspects (e.g. CO2 emission impact) [25][26][27][28]. A more through description of the method can be found in [21].…”

Combining optimisation and simulation in an energy systems analysis of a Swedish iron foundry

“…Basically, the analysis in reMIND includes four steps [2,32,37]. In the first step, the real system has to be delimited.…”

“…However, it has been shown that many of these difficulties may be solved by DES and ESO tools [2][3][4][5][6][7][8][9][10][11][12][13][14][15]. The ESO tool has been used in several industries, such as the Swedish foundry industry [2], steel industry [3,4] and pulp and paper mills [5,6], as well as in district heating systems [7] and waste treatment [8].…”