Rather than modernize equipment, one mining company chose to find ways to squeeze more efficiency out of their existing operations.
ArcelorMittal found itself stuck between a rock and a financial hard place in early 2008.
The mining and metals conglomerate had launched an ambitious plan to upgrade a 1940s era iron ore complex in Quebec by boosting annual production to 26-30 million tons from 16 million tons. Soon after, iron prices swooned, putting pressure on budgets. To top it off, the company realized that the port couldn’t be easily retrofitted to fit newer, larger ships: it had been dug directly out of bedrock.
Undaunted, ArcelorMittal went forward with what you could call the “Extreme Makeover: The Industrial Edition.” Rather than concentrate on new capital investments or construction projects, the company decided to increase production by synchronizing mining, grinding and logistics activities to see if it could squeeze more production out of the existing facility.
By 2015, the Mines Canada facility was producing 10 million more tons a year, the equivalent of $120 million in annual revenue. In one year alone, production increased to 26 million tons from 23 million by fine-tuning process steps – accomplishing that same 13 percent increase through capital could have cost $75 million, according to Michel
It’s a story you’re seeing across the industrial world. Paper manufacturers like Verso and Fortress are retrofitting paper mills from the 1960s and turning them into facilities for specialized packaging and materials. Pasta makers, chemical reactors and other piece of equipment that are likely older than the median age of people reading this article are getting solid state drives and WiFi nodules grafted onto their side.
“We need to get user or existing grid more efficiently to expand capacity,” said Richard Glick, a commissioner for the Federal Energy Regulatory Commission at ACORE Renewable Energy Grid Forum. “There’s a lot of interest in Congress to include grid modernization in an infrastructure bill.”
Four key factors
The trend is largely driven by four factors:
First, Moore’s Law, and the economic impact of it, remains alive and well. Processors, sensors and other pieces of hardware continue to dramatically and steadily decline in price while increasing in performance. That has paved the way for better uptime and predictive maintenance.
The pitch bearing— a set of bearing that angle wind turbine blades to maximize output—are often the cause of turbine failures and shut downs. Waiting until a pitch bearing fails can mean repair costs of $150,000 or more and there are few visible cues to indicate a problem. By monitoring its ongoing performance and predicating failures, Sempra Energy estimates costs associated with downtime and repairs by 90%. Orsted is using similar techniques to halve the number of boat trips needed to service its offshore wind turbines and save 20 million Euros a year.
Second, and perhaps most importantly, this is a revenue driver. Manufacturers can use these new technologies to attach aftermarket value-added services to new or existing equipment. Flowserve monitors pumps remotely: in one early case, it was able to detect that a welder’s blanket got sucked into a pump. Undetected, it could have cost more than $600,000.
Caterpillar’s CAT Connect services is saving one shipping company $1.5 million per ship per year by sending data on fuel consumption and recommendations on how to improve. In this case, customers save money while Caterpillar and its dealers increase their revenue.
Third, the financial sector has even more power than it had years ago. No one wants to invest money in new capital unless they have to. Retrofitting old equipment with software typically delivers a far more rapid ROI than new equipment.
And fourth, old equipment still works really well. The average age of a transformer on the U.S. electrical grid is now over 40 years old. There are tens of thousands of them scattered across the U.S. and they range in price from $2 million to $7 million. You’d be hard pressed to find any piece of equipment inside a data center that is 40 years old, let alone a data center that’s that old.
Itaipu operates the world’s largest renewable power facility in the world. Its hydroelectric dam on the border of Brazil and Paraguay produced 103 terawatts in 2016 – and is also several decades old. To prolong its life, Itaipu has invested in sensor systems that can detect potential mechanical and structural issues early in their lifecycle as well as systems for improving output.
You’re seeing interesting results on smaller scales too. J.D. Irving didn’t want to replace a saw that cut 60 foot long spools of paper into six-inch rolls of toilet paper, but it also wanted to start to get data from the 1970’s era system. With a wireless gateway and other technology, it was able to develop a relatively quick and inexpensive bypass.
Turning old into new doesn’t solve every problem. A good percentage of the gains in energy efficiency in homes and buildings over the past decade have come because new equipment is substantially better. Still, it’s often the best place to start.
So I choose to live by this motto: when it doubt, don’t throw it out.