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

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  • Thollander, Patrik
  • Mardan, Nawzad
  • Karlsson, Magnus

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.

Suggested Citation

  • Thollander, Patrik & Mardan, Nawzad & Karlsson, Magnus, 2009. "Optimization as investment decision support in a Swedish medium-sized iron foundry - A move beyond traditional energy auditing," Applied Energy, Elsevier, vol. 86(4), pages 433-440, April.
    • Handle: RePEc:eee:appene:v:86:y:2009:i:4:p:433-440
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    6. Giacone, E. & Mancò, S., 2012. "Energy efficiency measurement in industrial processes," Energy, Elsevier, vol. 38(1), pages 331-345.
    7. Streckiene, Giedre & Martinaitis, Vytautas & Andersen, Anders N. & Katz, Jonas, 2009. "Feasibility of CHP-plants with thermal stores in the German spot market," Applied Energy, Elsevier, vol. 86(11), pages 2308-2316, November.
    8. Svensson, Inger-Lise & Moshfegh, Bahram, 2011. "System analysis in a European perspective of new industrial cooling supply in a CHP system," Applied Energy, Elsevier, vol. 88(12), pages 5164-5172.
    9. Thollander, P. & Svensson, I.L. & Trygg, L., 2010. "Analyzing variables for district heating collaborations between energy utilities and industries," Energy, Elsevier, vol. 35(9), pages 3649-3656.
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    11. Elena Stefana & Paola Cocca & Filippo Marciano & Diana Rossi & Giuseppe Tomasoni, 2019. "A Review of Energy and Environmental Management Practices in Cast Iron Foundries to Increase Sustainability," Sustainability, MDPI, vol. 11(24), pages 1-18, December.
    12. Mardan, Nawzad & Klahr, Roger, 2012. "Combining optimisation and simulation in an energy systems analysis of a Swedish iron foundry," Energy, Elsevier, vol. 44(1), pages 410-419.
    13. Porzio, Giacomo Filippo & Fornai, Barbara & Amato, Alessandro & Matarese, Nicola & Vannucci, Marco & Chiappelli, Lisa & Colla, Valentina, 2013. "Reducing the energy consumption and CO2 emissions of energy intensive industries through decision support systems – An example of application to the steel industry," Applied Energy, Elsevier, vol. 112(C), pages 818-833.
    14. Renato M. Lazzarin & Marco Noro, 2017. "Energy efficiency opportunities in the service plants of cast iron foundries in Italy," International Journal of Low-Carbon Technologies, Oxford University Press, vol. 12(2), pages 96-109.
    15. Aida Sa & Patrik Thollander & Enrico Cagno & Majid Rafiee, 2018. "Assessing Swedish Foundries Energy Management Program," Energies, MDPI, vol. 11(10), pages 1-13, October.
    16. A. S. M. Monjurul Hasan & Rakib Hossain & Rashedul Amin Tuhin & Taiyeb Hasan Sakib & Patrik Thollander, 2019. "Empirical Investigation of Barriers and Driving Forces for Efficient Energy Management Practices in Non-Energy-Intensive Manufacturing Industries of Bangladesh," Sustainability, MDPI, vol. 11(9), pages 1-13, May.
    17. Alexander Melnik & Kirill Ermolaev, 2020. "Strategy Context of Decision Making for Improved Energy Efficiency in Industrial Energy Systems," Energies, MDPI, vol. 13(7), pages 1-28, March.
    18. Broberg Viklund, Sarah & Karlsson, Magnus, 2015. "Industrial excess heat use: Systems analysis and CO2 emissions reduction," Applied Energy, Elsevier, vol. 152(C), pages 189-197.
    19. Teijo Palander & Jari Takkinen, 2021. "The Optimum Wood Procurement Scenario and Its Dynamic Management for Integrated Energy and Material Production in Carbon-Neutral Forest Industry," Energies, MDPI, vol. 14(15), pages 1-19, July.
    20. Karlsson, Magnus, 2011. "The MIND method: A decision support for optimization of industrial energy systems - Principles and case studies," Applied Energy, Elsevier, vol. 88(3), pages 577-589, March.
    21. Li, Yingjian & Li, Jiezhi & Qiu, Qi & Xu, Yafei, 2010. "Energy auditing and energy conservation potential for glass works," Applied Energy, Elsevier, vol. 87(8), pages 2438-2446, August.
    22. Atabay, Dennis, 2017. "An open-source model for optimal design and operation of industrial energy systems," Energy, Elsevier, vol. 121(C), pages 803-821.
    23. Tolis, Athanasios & Doukelis, Aggelos & Tatsiopoulos, Ilias, 2010. "Stochastic interest rates in the analysis of energy investments: Implications on economic performance and sustainability," Applied Energy, Elsevier, vol. 87(8), pages 2479-2490, August.

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