THE DASH FOR GAS WHY UK BUSINESS CONSUMERS OF HEAVY FUEL OIL NEED TO CONSIDER CONVERTING TO NATURAL GAS

Transcription

1 THE DASH FOR GAS WHY UK BUSINESS CONSUMERS OF HEAVY FUEL OIL NEED TO CONSIDER CONVERTING TO NATURAL GAS

2 CONTENTS 3 Executive summary 4 Introduction 5 Key points to consider when converting from heavy fuel oil to gas 6 Why switch to gas? 7 Typical savings 8 Summary 9 Want to know more? 2

3 EXECUTIVE SUMMARY This paper will demonstrate the key benefits of switching from heavy fuel oil to networked natural gas for large business and industrial users. 3

4 INTRODUCTION Source: Department of Energy and Climate Change Quarterly Industrial Price Review June 2012 For businesses, manufacturers and other organisations operating in locations without access to mains gas pipelines, heavy fuel oil (often referred to as HFO, bunker oil or simply fuel oil) has often been an alternative energy choice driven by necessity rather than choice. This was due in part to the difficulty connecting remote areas of Great Britain to the gas network both in terms of geography and the high costs of installing miles of pipe across sometimes inhospitable terrain. But with heavy fuel oil costs continuing to increase at a faster rate than gas, spiralling up by 254% in real terms since 2001 compared to a 94% rise for gas during the same period, the cost benefit of investing in a new gas pipeline linked to mains gas has never had greater potential to flow into improved bottom line business performance. Environmental issues are increasing in profile. Using heavy fuel oil as an energy source emits around 25% more CO 2 than burning natural gas and significantly more sulphur dioxide. 4

5 KEY POINTS TO CONSIDER WHEN CONVERTING FROM HEAVY FUEL OIL TO GAS Heavy fuel oil costs continue to rise more quickly than natural gas Heavy fuel oil cost has increased in real terms by 254% since 2001 compared to 94% for gas Tanker deliveries of heavy fuel oil can be dependent on weather conditions; gas is a secure energy supply Gas is cleaner and better for the environment. Natural gas typically emits around 25% less CO 2 than heavy fuel oil and virtually no sulphur dioxide Gas is more efficient. There is no need for heavy fuel oil storage tank heating and gas has better combustion efficiency Natural gas has lower health and safety risks. Buried polyethylene gas pipes with a lifespan of more than 50 years are better protected from corrosion and human error compared to large above ground heavy fuel oil tanks. 5

6 WHY SWITCH TO GAS? Quickly reduce costs Gas offers significant financial savings to businesses currently using heavy oil to feed boilers, furnaces, kilns and generators. With heavy fuel oil price trends as they are, it is possible for the cost of connecting to the gas network to be recouped in a matter of months even where a new pipeline of several miles is required. Gas also offers greater price stability. Gas prices have historically been less volatile than heavy fuel oil prices. Pay as you go Unlike heavy fuel oil, businesses do not pay for gas before they use it, providing them with greater flexibility in terms of cash flow. Storm-proof businesses With gas, energy is always on tap. Organisations will no longer be at the mercy of tanker deliveries during spells of bad weather and can avoid the kind of energy supply disruption that can so easily have a negative impact on the commercial performance of a business. Gain more efficiency Gas burns more efficiently than heavy fuel oil and has a greater calorific value (the quantity of heat produced by its combustion) offering options to improve the efficiency of manufacturing and heating processes. Protect the environment Natural gas is not only more efficient than heavy fuel oil but cleaner. Switching to natural gas fired boilers will typically reduce CO 2 emissions by 25%. Unlike gas, heavy fuel oil produces significant sulphur dioxide and other pollutants as by-products of the combustion process contributing to greenhouse gas emissions. Sulphur dioxide produced by heavy fuel oil combustion can escape into the atmosphere in the form of fine particulate matters. This poses a threat to human health because it can travel deep into the lung. This particulate matter can also be transported over long distances and can eventually be deposited into water systems, which causes their acidification. Lower maintenance time and costs Heavy fuel oil needs to be stored on site, unlike gas which can be transported safely and securely straight to the boiler or appliance. As well as tying up space and cost, heavy fuel oil storage tanks need to be correctly maintained as does all the extra plant and moving parts associated with the use of heavy fuel oil including pre-heaters, pumps, fans, scrubbers and blowers. With clean burning gas, businesses can simplify their maintenance regimes thanks to the elimination of soot deposits and the retirement of obsolete machinery. Suitability for conversion to gas If the organisation is located in or near to an urban area, connecting to mains gas is likely to be comparatively simple and pipeline investment costs low. It may be that heavy fuel oil usage is a legacy issue and switching to lower cost gas will provide an opportunity to potentially increase production through greater equipment efficiency as well as lowering energy costs for organisations. For those located in more remote areas, investment in a new gas pipeline may appear to be more significant. But even with a pipeline stretching several miles, the large price differential between gas and heavy fuel oil means payback periods for investment costs can be short sometimes as little as a few months. Once the initial investment is recouped, on-going savings on energy costs from lower priced natural gas will go straight to the business bottom line. 6

7 TYPICAL SAVINGS Fulcrum, a leading utility infrastructure business, has extensive experience of connecting organisations to the gas network and helping them realise the large cost savings available by switching from heavy fuel oil to gas. Organisations use differing amounts of heavy fuel oil dependent on their business activity and it is therefore difficult to give precise details of the cost savings an individual organisation can make. The table below provides guidance from two projects showing the energy cost savings achieved. Case study 1 A large food and drink organisation in a rural location used heavy fuel oil as the energy source to fire the boilers in their manufacturing plant. They had investigated switching to gas in the past but found the investment cost to be too high and the payback period to be too long. With the cost of heavy fuel oil increasing they reviewed the costs again and found they could save 2.4m per year and their investment costs would be repaid in just over one year. Savings made by switching from HFO to natural gas Case study 2 A university using heavy fuel oil as an energy source for five boiler plants converted to natural gas and saved around 45,000 per year in energy costs and paid back the investment in new pipelines and infrastructure in 2 years. The university also reduced its CO 2 emissions by 25%. Savings made by switching from HFO to natural gas 7

8 SUMMARY It is a fact. Heavy fuel oil costs have increased far more quickly than natural gas in recent years. Can organisations continue to use heavy fuel oil as their primary energy source when the benefits of converting to natural gas are so compelling? Switching to gas from heavy fuel oil can save more than 30% in annual energy costs Payback periods can be as little as a matter of months Heavy fuel oil price trends continue to rise faster than gas Gas is a secure, reliable energy source not reliant on tanker deliveries in foul weather Gas is cleaner and emits less CO 2 than heavy fuel oil Gas combusts more efficiently, potentially using less fuel energy Health and safety risks are lower using buried polyethylene pipes Less maintenance is required using gas fired equipment compared to heavy fuel oil pre-heaters, pumps, fans, scrubbers and blowers. 8

9 WANT TO KNOW MORE? Book your free assessment Here at Fulcrum, we believe that all organisations should have access to competitively priced, reliable and clean energy. Fulcrum offers all heavy fuel oil users a free assessment to determine how much organisations could save by connecting to the gas network. To see how much you can save, call Fulcrum on or visit to view a short film explaining the benefits of switching from heavy fuel oil to gas. Fulcrum's unique combination of expertise, accreditation, nationwide coverage and heritage as part of the Gas Board, Transco and National Grid, ensures a streamlined and compliant utilities infrastructure solution is delivered for its customers - on time, on budget and with minimum impact on the environment, whatever the nature of their business. Fulcrum 2 Europa View Sheffield Business Park Sheffield S9 1XH Tel: Fax: Minicom: enquiries@fulcrum.co.uk Web: You can also follow Fulcrum on Twitter and LinkedIn. 9