Cap and Trade: What is it and Why is it an Opportunity for R&M
The principle concept behind cap and trade is the setting of an environmental policy that sets a limit on emissions of some type (in this case we will reference CO2). Examples of existing cap and trade programs include the Acid Rain Program and regional NOx Budget Trading programs.
The present plan behind the GHG (Greenhouse Gas) cap and trade program is to set carbon emission limits on a variety of industries through credits. Companies that do not use all of their credits may either ‘retire’ them (not use) or trade them on the market. Companies with emissions above the set level can choose to purchase credits on the market from those that chose to trade their excessive credits. Because it is an open market, much like Wall Street, others, including environmental groups, will be able to buy up excessive credits and ‘retire’ them, as well, driving up the cost of purchasing credits.
Presently, it is expected that cap and trade for GHG emissions will happen, and is happening both regionally and within various countries with a high degree of political success. At this point, the global direction is to address industrialized countries and make third world countries exempt.
How does this affect the R&M community? As we have previously presented, the implementation of correct maintenance practices can have a profound impact on energy consumption. It is energy consumption that can be directly related to emissions. We do know that caps will be placed on energy producers, such as powerplants. The question is how these companies will pass through the added costs. If the cap and trade program is directly implemented on facilities, then additional opportunities arise.
You can think of this in terms of vehicle emission limits. If some item in your vehicle is not operating properly, your emissions increase. In the states that do mandatory testing, if you fall under some value you have to get the vehicle fixed and then retested, or lose the ability to drive that vehicle. In this case, if caps are placed directly on industry, then if you have your equipment operating optimally, then you are less likely to have a problem.
The opportunity for R&M in the instance where companies are directly affected by cap and trade involves the ability to monitor maintenance improvements and make decisions in such a way to reduce energy consumption in electricity, natural gas, and other areas that are determined to emit GHG. So, for instance, just the application of a steam trap program can reduce the losses associated with natural gas (for gas-fired boilers) while just performing proper alignment on belted applications or improving you r electric motor rewind program will have an impact on electrical consumption. In the case of electrical consumption, the national average CO2 per MWh is 0.606 Tons and 1.34 lbs per kWh.
If I then perform a maintenance task on an electric motor that reduces its consumption by 2kW and it operates 4,000 hours per year, then the consumption is 2kW * 4,000 hrs/yr * 1MWh/1000 kWh = 8MWh/year. This times 0.606 Tons CO2 would be a reduction of 4.8 Tons CO2. With expected costs to be about $100/Ton, then this would potentially be an income of $480 in real dollars. Proper maintenance of equipment has the ability to reduced energy consumption at most plants by an average of 14%.
What it comes down to is simple: cap and trade will represent an opportunity for the R&M community to land on the P side of the company P&L (Profit and Loss) spreadsheet.
Fox News Cap and Trade Video 1: http://tinyurl.com/captrade1
Fox News Cap and Trade Video 2: http://tinyurl.com/captrade2
The present plan behind the GHG (Greenhouse Gas) cap and trade program is to set carbon emission limits on a variety of industries through credits. Companies that do not use all of their credits may either ‘retire’ them (not use) or trade them on the market. Companies with emissions above the set level can choose to purchase credits on the market from those that chose to trade their excessive credits. Because it is an open market, much like Wall Street, others, including environmental groups, will be able to buy up excessive credits and ‘retire’ them, as well, driving up the cost of purchasing credits.
Presently, it is expected that cap and trade for GHG emissions will happen, and is happening both regionally and within various countries with a high degree of political success. At this point, the global direction is to address industrialized countries and make third world countries exempt.
How does this affect the R&M community? As we have previously presented, the implementation of correct maintenance practices can have a profound impact on energy consumption. It is energy consumption that can be directly related to emissions. We do know that caps will be placed on energy producers, such as powerplants. The question is how these companies will pass through the added costs. If the cap and trade program is directly implemented on facilities, then additional opportunities arise.
You can think of this in terms of vehicle emission limits. If some item in your vehicle is not operating properly, your emissions increase. In the states that do mandatory testing, if you fall under some value you have to get the vehicle fixed and then retested, or lose the ability to drive that vehicle. In this case, if caps are placed directly on industry, then if you have your equipment operating optimally, then you are less likely to have a problem.
The opportunity for R&M in the instance where companies are directly affected by cap and trade involves the ability to monitor maintenance improvements and make decisions in such a way to reduce energy consumption in electricity, natural gas, and other areas that are determined to emit GHG. So, for instance, just the application of a steam trap program can reduce the losses associated with natural gas (for gas-fired boilers) while just performing proper alignment on belted applications or improving you r electric motor rewind program will have an impact on electrical consumption. In the case of electrical consumption, the national average CO2 per MWh is 0.606 Tons and 1.34 lbs per kWh.
If I then perform a maintenance task on an electric motor that reduces its consumption by 2kW and it operates 4,000 hours per year, then the consumption is 2kW * 4,000 hrs/yr * 1MWh/1000 kWh = 8MWh/year. This times 0.606 Tons CO2 would be a reduction of 4.8 Tons CO2. With expected costs to be about $100/Ton, then this would potentially be an income of $480 in real dollars. Proper maintenance of equipment has the ability to reduced energy consumption at most plants by an average of 14%.
What it comes down to is simple: cap and trade will represent an opportunity for the R&M community to land on the P side of the company P&L (Profit and Loss) spreadsheet.
Fox News Cap and Trade Video 1: http://tinyurl.com/captrade1
Fox News Cap and Trade Video 2: http://tinyurl.com/captrade2
posted by MotorDoc at
8:13 AM
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