Energy consumption by Ukraine’s industrial output exceeds the indicator at Western countries some two- to threefold. Every advance on energy rises prices for all goods and worsens competitiveness of Ukrainian exports. The problem hits the highlight, as ev

ENERGY SAVING – THE METER IS ON

ENERGY SAVING – THE METER IS ON

Energy consumption by Ukraine’s industrial output
exceeds the indicator at Western countries some two- to threefold. Every advance on energy
rises prices for all goods and worsens competitiveness of Ukrainian exports. The problem
hits the highlight, as evidenced by adoption of the Laws of Ukraine “On energy
saving”, “On electric power”, as well as numerous special regulations by the Cabinet
of Ministers of Ukraine. Major assumptions of the state strategy for energy saving embrace
principles of scientific explanation and standardization in energy saving area, as well as
rationing of use of fuel and energy resources (FER).

Today is the time, when issues of efficient use of
electrical energy, development and implementation of long-term multipart programs, as well
as fulfillment of the policy on energy saving, creation and introduction of competitive
and renewable power sources (RPS) have firm grounds.

The problem hits the highlight, as evidenced by adoption of
the Laws of Ukraine “On energy saving”, “On electric power”, as well as numerous
special regulations by the Cabinet of Ministers of Ukraine. Major assumptions of the state
strategy for energy saving embrace principles of scientific explanation and
standardization in energy saving area, as well as rationing of use of fuel and energy
resources (FER).

The costs of energy carriers, such as oil and gas
concentrate, directly affect each and all prices. Growing prices for energy carriers
turned into one of the key economic problems for enterprises. Thus, in the 9 months of
2000, price index in Ukraine’s fuel sector made 127% to achieve some 131% by the end of
the year, and it still keeps on growing. Statistics over the 10 months reveals that
increase in costs within fuel industry fostered advance of wholesale prices in many other
sectors. The figure made 110.2% in ferrous metallurgy and 113.3% in machine building and
metalworking. Meanwhile, effected by wholesale prices tariff regulation in electrical
energy sector, the indicator was at 102%, which led to reasonable increase of losses in
the industry from UAH 439 mln. in the 8 months of 1999 to as much as UAH 1,149 mln. in the
respective period of 2000. As a result, the sector’s balance sheet profit in the first
half-year dropped from positive indicator to negative UAH 790 mln.

According to forecasts by the Institute of Economic
Forecast under the National Scientific Academy of Ukraine, considering the expected
advance on energy resources in 2001, growth rate of wholesale prices in Ukraine’s fuel
sector will add at least 20%. Thus, price index of producers makes 114.5%, whereas
consumer prices index goes up to 116.6%. Should wholesale energy and fuel prices increase
further on (for instance, by 30%), wholesale and consumer price indexes would equal 129.3%
and 128.4% respectively against December 2000. Specialists from the Institute believe that
not only administrative containment of price and tariff growth did not solve the problems,
but it also harmed producers, making the sectors unprofitable. Thus, minimization of
losses from energy carriers’ appreciation depends on the balance in state price policy.

In case wholesale prices report considerable growth, the
risk of not selling the output heads upward as well.

High energy consumption is the attribute of Ukraine’s
industry. Hence, production of USD 1 in GDP consumes 3.25 kg of fuel, while the figure in
Western Europe is impressively low at 0.6 kg.

Some 30% of total energy consumption in Ukraine fall for
industrial enterprises, that is, within machine building sector, ferrous and non-ferrous
metallurgy, mining field of metallurgical sector, chemical production, as well as light
and woodworking industries.

At present, the state control over energy efficiency
processes is primarily run as rationing of specific consumption of fuel and energy
resources (FER) per unit of output, as defined by the Law of Ukraine “On energy
saving” and the regulation of the Cabinet of Ministers of Ukraine No.93 of July 15,
1997.

The State Committee for Industrial Policy performs
systematic analysis of dynamics and structure of FER consumption, providing data on actual
requirements of energy consumption in production and making forecasts on energy dynamics,
consumption, and prospected saving.

Standards for specific energy consumption in production of
main types of energy-consuming output have been elaborated starting from 1996, but can not
be used to estimate the product’s energy consumption. Therefore, the State Committee for
Energy Saving and former Ministry of Industrial Policy developed the technique for
calculating of specific norms of plant’s through energy consumption for enterprises’
output and the implementation mechanism.

In 1999, the technique was applied at Alchevsk Iron and
Steel Works (ISW), as well as at Krivorozhstal ISW, Azovstal ISW, Donetsk Metallurgical
Plant, and DneproSpetsStal Works.

Heavy lever for energy saving in industrial sectors is
production restructuring, which was initiated by the very enterprises and has been carried
out since 1996. In 2000, there was drafted the “Schedule of measures for reduction of
energy consumption in manufacturing of energy-consuming and noncompetitive products…”

Major grounds for shutdown of certain enterprises and
decommissioning of manufacturing and assembling lines are as follows: output of
energy-consuming products with specific energy consumption standards, which substantially
exceed average indicators in the sector, as well as production of commodities incapable to
compete with similar domestic and foreign samples. Other reasons include production losses
at enterprises; poor demand for products; lack of prospects for core output in the future;
and necessity of production re-orientation and upgrade.

Fulfillment of the Schedule of measures should result in
annual additional economy of the following amount of energy:

In machine building sector:

electrical energy – 18.1 mln. kWh, natural gas – 26.5
mln. cu m, heat energy – 450 Gcal;

in metallurgical sector:

electrical energy – 412.5 mln. kWh, natural gas – 19.3
mln. cu m, fuel – 3,929.84 ths.arbitrary tons;

in chemical production:

electrical energy – 84 mln. kWh, natural gas – 18 mln.
cu m.

In the first half of 2000, economy of energy resources made
37.23 mln. kWh of electrical energy, 11.8 mln. cu m of natural gas, and 62.4 ths. arb.
tons of fuel.

Today energy saving activities are carried out under
conditions of industrial decline and insufficient current assets. Most enterprises develop
annual multipart plans of energy saving measures; yet, these are fulfilled only in parts,
as much as present assets allow. Hence, the most popular measures now are organizational
and technical activities, which require no or the smallest possible expenses and are
oriented at energy consumption saving.

Scientific research institutes and enterprises under the
State Committee for Industrial Policy suggested several projects important for sectors and
industries, implementation of which calls for investment.

Hence, the list of preferential investment projects on
energy saving, which are proposed for large-scale implementation, comprises projects
“Production of luminescent lamps”, “Introduction of new type of gas torches”, and
“Production and implementation of turbodetander systems (TDS) on the basis of jet
reaction turbines (JRT)”. Ukrainian enterprises are to become main developers and
executors of the projects.

Ferrous metallurgy is the most energy-intensive industrial
sector consuming 17% of fuel and 16.7% of electrical energy from total consumption.

By and large, primary energy accounts for more than 75% in
fuel and energy balance of the sector. Fuel efficiency in power engineering is no more
than 32-34% (40% in the industry). This suggests sizable reserves for growing efficiency
of fuel use. Notable advance on energy carriers and production decline, having caused
unprofitable use of FER, turned energy saving in metallurgy into one of the ways to raise
competitiveness of not only metal products, but also of allied industries, which concern
metal application.

Besides, urgent necessity to solve energy saving matters
arose due to lack of fuel base in Ukraine, which would be capable to satisfy demand for
energy resources.

When analyzing dynamics of changes in specific fuel
consumption, articles like iron and manganese ore, pellets, sinter, cast iron, open-hearth
and oxygen steel, rolled steel, as well as coke and aluminum cut specific consumption from
year to year, whereas electric furnace steel, steel and cast-iron tubes, and metal works
reveal the increasing trend.

As regards steel and cast-iron tubes, as well as metal
works, growing consumption is fostered by falling output, while the trend for electric
furnace steel is triggered by commissioning of additional systems and devices for quality
improvement. Consumption of electrical energy is equal to fuel consumption.

Some 220-215 standards for FER consumption are annually
approved for mining and metallurgical sector.

Analysis of fulfillment of scheduled standards unveils that
actual specific standards of FER go beyond the defined figures, when real output falls
short of the plan.

Thus, 165 standards were approved for the first half of
2000. Out of these, 105 were not outran, while 24 were overtaken because of poor
fulfillment of production plan.

Poor fulfillment of the standards for production plan in
2000 was caused by the following aspects of metallurgical activities: systematic
restrictions of enterprises in energy supplies, as well as on-and-off reduction in natural
gas pressure, which increased idle time of devices and lowered natural gas efficiency.
Other factors included advancing requirements for metal product quality and adhering to
environment and labor protection standards, which call for implementation of additional
devices and systems.

At the same time, such factors as complexity of
technological processes at metallurgical enterprises, large density of various energy
systems, necessity to displace large volumes of raw materials, high-temperature semis, and
wastes in technological processes, which is accompanied with movement of heavy energy
flows of different physical and chemical nature, still foresee extremely accurate
organization of continuity and line balance of metallurgical processes.

Even the minor failures and discontinuity, as well as
disconnection from energy- and gas supply networks cause notable production losses or
further unrecoverable damage.

Lack of secured orders for metal products, misbalance of
inner industrial supplies of raw materials and FER, as well as ill-timed and low-quality
repairs of technological and energy equipment call forth weighty reduction in energy
efficiency, even with modern technologies energy saving facilities present at enterprises.

Positive results achieved under severe economic crisis in
Ukraine are due to adherence of metallurgical enterprises to main energy saving
guidelines.

Inefficient high energy-intensive metallurgical systems
were decommissioned and idle operating was put to the lowest notch. Thus, out of 54 blast
furnaces operating in 1998 only 39 remained, 45 open-hearth furnaces were left out of 66,
and 19 out of 22 converters kept on operating.

Several rolling mills were stopped and heaters at operating
mills were laid up partially.

A number of oxygen blocks and compressors in oxygen
workshop were decommissioned, etc.

Similar activities were run in mining, sintering,
by-product coke, tube, hardware, and refractory sectors, where operating facilities of
sub-sectors, enterprises, and systems were adjusted to conjuncture on local and foreign
markets.

Modern technologies are introduced, such as, out-of-furnace
steel machining at Nizhnedneprovsk Tube Works, DneproSpetsStal Works, and Donetsk
Metallurgical Works. Electric furnace melting was advanced at DneproSpetsStal Works,
Donetsk Metallurgical Works, etc. Commissioned rolling mills were brought to design
output, which will raise the sector’s export potential (rolling mills 150-1 and 250-6 of
Krivorozhstal ISW, rolling mill 150 of Makeyevka ISW).

There was applied new technology of partial metal rolling
with the smallest temperature losses of hot ingots and hot semis, when removed from steel
melting workshop to blooming and cogging mills; the height of sintering layer was
increased and the amount of fine fraction in sinter was reduced; finally, technologies of
raising air-blast temperature in stoves were subject to improvement.

Besides, overhaul of technological and energy systems was
fulfilled; thermal insulation of heat pipelines was repaired; more rational use is made of
waste-heat utilization plants; and automated systems of commercial and technical FER
consumption recording were put on stream. Newly developed technologies aim at reduction of
costs of secondary energy sources, such as oxygen, compressed air, water, etc.

Most metallurgical enterprises have already created
departments on energy saving matters. Energy audits are practiced by either enterprises
themselves or with assistance of outside organizations. There were developed FER saving
measures, fulfillment of which is subject to systematic control by company management.
Plant commissions on FER saving examine workshops and bays concerning elimination of fuel
and energy losses.

Weighty losses of energy resources in metallurgical
industry today are fostered by absence of the system of exclusively monetary payments.
Commodity exchange has not fallen away yet, though it causes inefficiency of low-cost
energy saving technologies as well as inability to accumulate funds for implementation of
modern technologies and energy saving facilities. Ukraine still sees no saving measures,
which are stipulated by the State program for energy-saving and which would contribute to
material incentive of enterprises and individuals for FER saving.

Loss of control over complex metallurgical industry and
presence of different ownership patterns led to discontinuity of technological operations,
in particular, at integrated works and by-product coke plants.

So far, metallurgists have no secured portfolio of
short-term and prospective orders on both interior and foreign markets.

Enterprises are short of systems of automated commercial
and technological (in-plant) record and control over consumption of all energy sources,
which fails to provide timely diagnosis and elimination of causes of excessive expenses.

Successful solution of global problem of energy saving may
be encouraged by development of all-purpose address-operating coding of parameters, as
well as improvement of calculation system for technological energy consumption.

(Compiled using the materials from the State Committee for
Industrial Policy “Scientific, technical, and organizational guidelines and solutions to
the problem of energy saving in industrial sectors of Ukraine”).