The patterns of energy use in the chemical industry

This paper was sculpted from a report commissioned by the Department of Energy to assess the impact of proposed energy taxes on energy use by the US chemical industry. The discussion of energy taxes is eliminated here, however the broader discussion of the impact of energy prices on energy use is retained. The US chemical industry is currently the world leader by many important measures, such as technology contributions and employment. This leadership traces to a slate of advantages: science base, low cost energy, large market and economic/political stability. The focus of this paper is on the patterns of energy use: (1) There is an optimum economic trade of capital against energy. Industry optimizes this trade to lower its costs. For the large volume chemicals which dominate energy use, this tradable capital cost exceeds energy cost by a factor of 1.5. (2) The capital/energy trade follows clearly defined rules. The basic rules are rooted in thermodynamics. (3) An increase in energy prices would result in a drop in process energy use: a doubling of process energy prices would cut process energy use by approximately 1/3 but the capital cost would be in excess of $100 billion if driven into a short time span, such as 5 years. This is because of the long useful lifetime of capital facilities. (4) Process energy is about half the total energy use, with feedstock being the balance. Feedstock use is much less sensitive to price. Restated, the doubling of energy price will result in roughly a 1/6 reduction in total energy use. (5) Technology progress will also reduce energy use. This reduction is distinct from the impact of energy price. Technological progress will be at least as important in reducing energy use as will energy pricing, for the foreseeable future. (6) Technology progress can be sorted into two themes: (a) Learning curve improvements, which are almost inherent in the production process and the nature of competition; and (b) Breakthroughs that happen in a less predictable way. The speculated causes of breakthroughs are: a widely held perception of a major barrier and need for a breakthrough; and progress in underlying science