Colorado Stamping Manufacturer’s Solar Array Sees 5-Year ROI

Energy-efficient furnace, wind, temper peak loads

Colorado stamping manufacturer Qualtek Manufacturing installed a solar array on its warehouse and office, purchased a wind power purchase agreement, and replaced inefficient heat treatment furnaces.

The solar array supplies nearly all of the warehouse’s and office building’s energy use, effectively making the building a non-issue in energy planning. One new energy-efficient Ipsen vacuum furnace quartered the energy that the company’s two inefficient heat-treating furnaces had been using. For two years, the company relied on a wind power purchase agreement (PPA) to very effectively shave peak demand and hedge against higher energy prices. A fire that erupted during that period at the utility building resulted in higher prices for everyone else, tipping the energy cost scale in the manufacturer’s favor.

Solar-lead
Colorado stamping manufacturer Qualtek Manufacturing’s 30kW solar PV array on its warehouse and office building provides almost all of its power demand. It operates on a net metering agreement with Colorado Springs Utilities.

Metrics

Wind Energy PPA: Offset 2,088 MWh fossil-fueled electricity, reduced emissions by 30%

Solar Power: Produces 90% of electricity to warehouse/office, produced 144 MWh of zero-emssions electricity

Energy-efficient Furnace: Cut energy by 45%; shaves peak demand

Water Reuse: Captured from heat-treat operations and reused in finishing saves 35,000 gals. per year.

Colorado stamping manufacturer Qualtek Manufacturing installed a solar array on its warehouse and office, purchased a wind power purchase agreement, and replaced inefficient heat treatment furnaces.

The solar array supplies nearly all of the warehouse’s and office building’s energy use, effectively making the building a nonissue in energy planning. One new energy-efficient Ipsen vacuum furnace quartered the energy that the company’s two inefficient heat-treating furnaces had been using.

For two years, the company relied on a wind power purchase agreement (PPA) to very effectively shave peak demand and hedge against higher energy prices. A fire that erupted during that period at the Drake Power Plant resulted in higher prices for everyone else, tipping the energy cost scale in the manufacturer’s favor.

Press operations
Figure 1: Qualtek’s energy load varies dramatically depending on which operations it is currently doing—stamping, metal finishing, or heat treatment. Its heat treatment furnaces can ramp up to temperatures of 2,400 degrees F.

Stoked Peak Demand

When your operations include heat treatment with temperatures up to 2,400 degrees F (1,316 degrees C), stamping in 250-ton presses, and energy-guzzling metal finishing lines, your energy peaks are as extreme as the Rockies’ and leveling your energy usage is a pipe dream (see Figure 1).

“We’re kind of a nightmare and a dream for our utility company because our usage varies a lot,” said Qualtek President Christopher Fagnant. “We have a unique energy load usage profile. Our average use is about 300 kW while our typical peak demand is around 652 kW. Our highest demand of the year was 730 kW. So you pay for that difference between your typical load and your peak load. It is referred to as load factor. Demand charges are based on your load factor.”

“So because of that, we’re always looking for ways to reduce peak demand however we can,” Fagnant said, adding that more of his energy bill stems from demand charges than for usage—about 60/40. Therefore, getting a handle on energy use, emissions, and costs is critical.

A mixed-energy strategy that includes renewables has been advantageous for Qualtek.

Solar Sourced for Storage

Fagnant and his staff first looked into installing on-site solar energy (see Lead image).

“In Colorado Springs, we get, on average, 300 days of sun a year,” Fagnant said. “As a result, the price of solar installed is pretty competitive and the utility companies here have been accepting of distributed generation within their rate structure.”

The municipally owned utility, Colorado Springs Utilities, offers rebates for solar generation but does not allow third-parties to own the systems through power purchase agreements. “As a result, we had to have the financing to fund the system lined up ourselves,” he said.

Fagnant decided to install a solar energy system on a secondary building—a 12,000-square-foot warehouse storage and office space—rather than the main manufacturing facility. The building’s roof already had a two-degree pitch to the south, eliminating the need to pay for racking costs. “So the total cost of installation went down, improving the return on investment [ROI]. Whereas on the manufacturing building, we would have had to pay for racking to tip the modules up 3 degrees and face them south.” The warehouse/office building was already well-situated for easy installation, he added.

In addition, the building’s predictable demand was a better fit for the solar system’s fairly predictable output, he said. “The usage on the second building is flat. Electricity is for lighting and HVAC mostly. It’s a lot more predictable and evenly distributed through the year.” Fagnant said he and his team calculated the building’s total annual usage, then calculated how many solar modules they would need in a grid-tied system to meet that usage. “So it was easier for us to plan and manage that usage. Effectively, we just took the building out of our energy planning, because now it is powered almost entirely by the solar array.”

Shortened ROI. Originally the project was estimated to have a simple ROI of 7 to 8 years. “Because of continued increases in traditionally sourced energy—coal and natural gas–in the last three years, coupled with a fire at the city’s main generation site (Martin Drake Power Plant) that disrupted that power, the ROI dropped below five years,” Fagnant said. “If we were to do the same project today, with the continued drop in solar panel/inverter costs, the ROI would probably have been closer to 3.5 years.”

“For seven or eight months a year, we are paying only the connection fee to the grid—$20 to $30 a month for electricity.” In the winter, with less sunlight to generate power, the bill is a modest $100 to $200 bill per month on the 10,000-sq.-ft. building. The initial NPV analysis estimated a payoff period of 8.5 years on the investment. “With higher than expected utility costs, over-performing PV panels, and $0 on maintenance to the system over the first five years, we are expecting to be cash-flow positive in six years. If we were to do the same project today, with the continued drop in solar panel/inverter costs, the ROI would probably have been closer to 3.5 years,” he said.

90 Percent of Load. The company sized the system to account for 90 percent of the building’s anticipated load. “Rebates from the utilities do not cover anything over your typical, they don’t want to be funding excess energy generation in direct competition with their own product.”

Wind to the Rescue

Chris-Fagnant
Figure 2: Qualtek President Chris Fagnant continually explores ways to mitigate his company’s peak loads.

Fagnant (see Figure 2) and his staff continued to explore ways to mitigate their peak load.

For two years, from January 2013 to December 2014, Qualtek sourced 2,088 MWh of wind power through a power purchase agreement (PPA) with Colorado Springs Utilities, effectively offsetting conventionally produced electricity with 100 percent clean renewable wind power. “Colorado is fairly windy and where we’re at, we typically get strong wind streams.”

The offset affected an emissions reduction of nearly 30 percent for its entire manufacturing operation, Fagnant said.

“We purchased this energy specifically for our manufacturing facility. It ended up supplying 30 percent of our total kilowatt-hour [kWh] consumption,” he added.

Fagnant’s objectives were twofold: “We did this partially to hedge against expected cost increases and unexpected cost increases, which occurred because of a fire at the coal-fired power plant. We partially did it to support the utilities in their efforts to expand their renewables portfolio. It also allowed us to utilize renewables without interfering with our drastic operational energy swings.”

In the beginning of the second year of the two-year PPA, the utility had a major fire in its main coal-fired power plant in the middle of town. The utility shut down its main reactors for about a month. One was down indefinitely. During that time period, the utility had to go out and buy power from the grid. “So then, the folks on the wind PPA were now getting a better price for electricity than the average industrial customer,” he said.

“For the first year we paid a 2.5 percent premium on this electricity. However, during the 4-month period after the fire we saw a 75 percent savings because the cost of our traditional energy had gone up so drastically.

“Unfortunately, when the PPA expired, the utilities made sure to not incentivize anybody to contract for a power purchase agreement in the following term. Somehow the rates for wind power went up at the same time the cost of wind production went down. It was fairly obvious that it was a concerted effort to discourage people from entering into a PPA like that again,” Fagnant said.

So, when the momentum for the wind power PPA option died down, Qualtek management circled back to scrutinize its operations, equipment, and machinery for energy efficiency opportunities to reduce demand.

Reducing Loads with Energy Efficiency

Fagnant said his staff is constantly looking for ways to reduce demand usage. Much of the impact on energy consumption has been made through equipment upgrades and retrofits.

He assessed that the biggest opportunity for electricity demand reduction is in its heat treatment operation. The furnaces, which heat up to 2,400 degrees F (1,316 degrees C) are the largest energy load.

The heat treatment is performed on metal parts for annealing and stress relieving and also for hardening (see Figure 3). The manufacturer heat treats virtually all stainless and carbon steel in raw material, stamped, and machined forms to anneal and stress relieve it for gun components, blade housings for industrial lawn mowers, and medical devices, for example.

Stainless steel and aluminized steel parts
Figure 3: Stainless steel and aluminized steel parts are heat treated.

“We heat treat a lot of hand tools with fairly recognizable brand names, ratcheting wrenches, and box end wrenches. We’ll heat-treat everything from metal injection-molded parts to machined parts to raw bar stock. We’re part of the typical supply chain for most machine shops. In some cases we’re actually processing the same part twice,” Fagnant said.

One of the heat processes Qualtek uses is vacuum heat treating (see Figure 4). “Vacuum furnaces are electrically heated–that’s sort of the nature of vacuum processes. There’s no combustion involved. And so you’re electrically heating just like your oven in your kitchen.”

Ipsen-Titan-furnace
Figure 4: Qualtek realized substantial energy savings by replacing two inefficient heat treat furnaces with one energy-efficient Ipsen Titan vacuum furnace.

Fagnant said that the biggest dent in energy demand came from buying a new, energy-efficient furnace with better heating elements, an Ipsen Titan H2 vacuum furnace. “We had two furnaces that were reaching their end-of-life and replaced them both with one furnace. That one furnace literally uses half of the electricity of the two it replaced–so a quarter of those two combined. That has allowed us to reduce the peak load significantly,” he said.

Because a vacuum furnace is heating electrically, it is, by nature, somewhat inefficient, Fagnant said. “Plus, it takes a lot of power to ramp up the heating cycle on those furnaces. So we’ve invested in controls for the existing furnaces to control the ramp rate so it doesn’t cycle as hard to begin with. That slowed the process down without affecting the heat treating recipe, and helped taper off the peak load.”

Some of the load reduction has resulted from educating the staff on energy-conserving behaviors and being strategic about when to turn on the furnace. “Sometimes it’s just plain smart scheduling and making our staff aware that we want to avoid high usage during peak times, or that we don’t have two furnaces ramping at the same time. “We’ll say ‘Hey, you can’t just turn on this big furnace for a $400 load. You’ve got to prioritize because every time we fire this baby up it costs us $300.’ All of those sorts of things are just operational, but they’ve yielded a pretty big return with a fairly small investment.”

Future Strategies

Fagnant said he is always considering renewable energy as a supplement to reduce total energy use and has his sights on tapping advantageous financing options to install a large 100-kW solar array someday. “We are likely to continue looking for ways in which we can shift loads onto renewable generation for the sake of peak-shaving as well as energy storage.”

But for now, he wants to reduce the overall operational energy usage before offsetting it with renewable energies.

“Right now I think our money is better spent on updating and replacing inefficient equipment because that has a bigger impact long-term.

“Most of this equipment that we buy we expect to last 40 years. So replacing old equipment with new, more energy-efficient equipment in a strategic way allows us to reduce that energy load out into perpetuity, rather than, say, offsetting current energy use that is inefficient,” he added.

Fagnant emphasized that all of the efforts to reduce energy use are part of Qualtek’s overall sustainability plan, which includes water use reduction. “That’s really big here in Colorado. We capture water from the heat treat operations and reuse it in our finishing area. That alone saves 35,000 gallons of water per year.” Recently Qualtek was selected as a gold-level member of the Colorado Environmental Leadership program.

Community-Garden
Figure 5: Reducing Qualtek’s energy use is part of its sustainability plan. Being nestled in the Colorado mountains is a continual reminder that the manufacturer is part of a local and global community, Fagnant relayed. The company has a community garden, the fruits of which are free to the company’s employees.

“We, as a company, aim to be an example for how we expect our employees and our community to approach resource use. We sit below one of the most iconic mountains in the country, so the motivation for ‘why we conserve’ is quite literally right out our window,” Fagnant commented.

“Our employees take pride in the fact that we make things that keep airplanes flying, surgeons operating, and trucks driving down the road—and that we don’t do it at the expense of our environment.”

 

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