Carbon pricing necessitates asset optimization – smart manufacturing gets smarter

With carbon trading, it is where your factories are located that matters, according to experts like Alexander Rau from Climate Wedge. Rapid globalization has resulted in many process manufacturers in the oil, gas and petrochemical verticals having multi-site operations. This includes companies owning plants outside their headquartered jurisdictions. Without the right strategy to mitigate changing market conditions, companies risk losing significant ground to the competition. Inefficient processes expose petrochemical plants and refineries to the double whammy of rising crude oil prices and the need to reduce emissions. Carbon trading is broadly recognized as an exchange of credits between nations to reduce carbon dioxide emissions. Companies can also trade polluting rights. Detractors of carbon trading advocate direct government regulation. Either way, companies need to address the downside with a systematic and sustainable approach to achieve holistic efficiency. 

The world continues to change 
According to Alvin Toffler, the author of Future Shock, change is not merely necessary to life – it is life. As businesses and governments come to terms with what constitutes carbon pricing, China gears up for a national carbon trading schedule in the second half of 2017. Both industry players and observers have commented that the upcoming carbon trading initiative will have a greater impact on less efficient plants. This is a strong moot point for companies to adopt innovation to mitigate its impact while reaping benefits, such as increased profitability. Singapore, a city state in Southeast Asia, has also hopped onto the carbon pricing bandwagon by announcing plans to impose a carbon tax from 2019 to reduce greenhouse gas emissions. The targeted gases include carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons and sulphur hexafluoride. 

In this furious race to tag a price on carbon emissions, companies are also taking initiative to preempt profitability and reduce pollution. ABC News has reported that oil major BP Australia is factoring a global carbon price in its future planning. According to Claire Fitzpatrick, the Australian-based managing director of exploration and production, BP actively prepares for a future with a potentially higher carbon price by using an internal carbon price for industrialized countries when it evaluates large, new projects. In India, Mahindra & Mahindra is the first Indian company to announce an internal carbon price in October 2016. The company is committed to reduce its greenhouse gas emissions by 25% before the end of 2019. Earlier this year, Indian multinational company Infosys has also announced its internal carbon price at an event organized by the Carbon Pricing Leadership Coalition (CPLC) in Zurich. 

Asset optimization as the game plan
As less efficient plants bear the brunt from any carbon pricing policies, there is still time for better prepared process manufacturers to accelerate their adoption of asset optimization. Better defined as a comprehensive, holistic philosophy that drives the highest possible financial return from an asset base over its long life, asset optimization is applied across the entire asset lifecycle. As assets tend to be in service longer than the people working on them, it is a perpetual process. To unlock its full value, companies need to deploy five optimization initiatives – namely, capital expenditure (CapEx) excellence, operational excellence, supply chain excellence, organizational excellence, as well as the ability to sustain competitive leadership. 

In subscribing to CapEx excellence, global refineries have reduced energy costs by millions of dollars per year using integrated design to achieve best-in-class energy intensity index (EII) ratings. Second, to achieve operational excellence, refineries and chemical companies have saved time and money by choosing innovative software, such as advanced process control (APC). During APC controller revamps, industry averages for major units range from $2.5M to $6M savings per year. Third, in pursuit of supply chain excellence, chemical companies have achieved a 35% reduction in production workload. Increased efficiency helps companies better mitigate the impact of any carbon pricing initiative. Fourth, with organizational excellence, companies need to partner established technology partners and develop a center of excellence in process system engineering. Finally, to sustain competitive leadership, companies need to adopt a dynamic approach and address any operational challenges. They also need to make a concerted and continuous effort to adopt innovation. 

Asset optimization benefits decision makers, who are empowered to make better and more informed decisions. It is also made more powerful with the latest technology, as the Industrial Internet of Things (IIoT) accelerates the optimization of business assets. Supported by the capabilities of cloud computing, visualization and mobility, key stakeholders gain better insights into the use of data to address real-time operational needs. This propels process manufacturers into an era of unprecedented efficiency. 

Smart manufacturing gets smarter
As an added element of horsepower to the overarching concept of asset optimization, asset performance management (APM) 2.0 has incorporated advanced analytics to predict issues and prescribe operator actions. With advanced analytics, operators derive a holistic view of both the process and asset. Aspen APM software combines asset analytics, reliability modeling and machine learning to analyze, understand and guide. However, disruption seldom happens in isolation. This drives the need for dynamic assessment and a system of success to address problems, according to the level of risk they represent. With Aspen APM, each new alarm triggers a recalculation of risk profiles to guarantee that the most current financial and risk probability assessment is used. 

One of the world’s largest plastics, chemical and refining companies, LyondellBasell, agrees that APM can unlock significant value, in saying, “AspenTech’s new Asset Analytics contains a unique set of modeling and data science-based technologies. Utilizing the additional process insight available from this promising new software solution brings with it the potential to operate closer to the true flooding limit on this tower. For a world scale olefins unit, this would be worth millions of dollars per year.”

More specifically, the proliferation of carbon pricing initiatives changes the way we view emissions as a company. For instance, we now include managing emissions, as part of our planning, scheduling, control, asset and financial solutions for customers. Thus, the best time to prepare for any carbon pricing legislation is now. Today, process manufacturers have access to an unprecedented wealth of innovation as part of asset optimization. In choosing to deploy the best innovation, smart manufacturers will achieve maximum efficiency and accelerate ahead of the competition during stringent times.