A Profitable Arrangement

A performance contract, combined with a retrofit of existing RTO equipment, can save millions in operating expenditures

• By Steve Blocki
• Oct 01, 2005

Attention is typically given to regenerative thermal oxidizer (RTO) performance only when a specific problem or fault shuts the system down or when the system is out of compliance. Opportunities to reduce the operating cost of an RTO by improving the energy efficiency are often ignored. Because of the rapidly increasing cost of natural gas, the incentive to evaluate and improve RTO efficiency before any maintenance problems occur has never been greater. If the temperature rise across an RTO is 140 degrees Fahrenheit or greater, energy recovery projects can usually be justified based on the utility savings alone. (Whether an energy efficiency project can pay for itself is a function of temperature rise and pressure drop across an RTO, the air volume being treated, and the annual hours of RTO operation. Other factors may also have an impact.)

One major concern with any energy-saving project is one of predicted savings vs. actual results. How can a plant be sure that the savings estimated during the project approval stage are actually realized after the project is completed? Are the predicted savings based on realistic assumptions? And more importantly, will the system continue to be operated at startup and into the foreseeable future in such a way that the savings are truly maximized?

Let's Make a Deal
A performance contract is a tool that can be used to resolve these concerns and guarantee a reduction in RTO operating costs, with no capital investment required.

Natural gas and electricity meters are installed to measure actual utility consumption in an RTO (the "baseline" consumption). During plant downtime, some type of energy efficiency improvement is made to the RTO. Possible improvements may be the addition of catalyst, installation of natural gas injection, or a more efficient ceramic packing. Because of the savings associated with these kinds of improvements, the plant pays nothing for them. After the unit is restarted, the utility meters continue to measure the utility consumption. Once a month, the meter readings are used to determine the actual realized savings: the baseline consumption (i.e., what would have been consumed if no improvements had been made) less the actual consumption.

Under some contracts, the plant keeps the first portion of the savings, up to a "guaranteed savings" value. Savings above the guaranteed amount are paid to the contractor who installed the project, up to a predetermined "savings target." Additional savings beyond the target are split between the plant and the contractor, often 50/50. When the contract expires, typically after four to eight years, the plant keeps all the improvements, as well as all the savings.

Performance contracts feature strong advantages over simply purchasing and installing energy-efficient projects. Most importantly, performance contracts make the contractor -- not the plant -- responsible for making the predicted savings a reality. Any shortfall in savings impacts the contractor only. The plant no longer has to evaluate how reasonable the assumptions or calculations are. That task is left to the contractor, who is likely to know more about RTOs.

The shared savings feature means it is in the contractor's best interest to periodically fine-tune the system to minimize operating costs. The plant is assured an efficient unit throughout the life of the contract. In most cases, the actual savings exceed the predetermined target savings, which generally means that the plant realizes savings greater than the guaranteed minimum, which lowers its costs even further.

Because the contractor is optimizing the system both at startup and throughout the life of the contract, the contractor is not simply taking a portion of the savings, he is actually increasing the amount of the savings.

An additional benefit of performance contracting is the "side repairs." When the system modifications are being installed, it is relatively inexpensive to make other necessary repairs on items such as insulation and burners. System improvements, such as value or control upgrades, can also be funded by the savings guaranteed to the plant.

The most beneficial performance contracts are structured so it is in the best interest of both the plant and the contractor to do everything possible to maintain system performance at maximum efficiency. A well-structured performance contract places the plant and the contractor on the same side of the business equation.

Case Study
One company's gamble on a performance contract

After having installed three regenerative oxidation systems (RTOs), a painting cabinetry company learned that a "tuneup" and ceramic media retrofit of the equipment could save them substantial energy costs. To do this they contracted with Dürr Environmental and Energy Systems who ended up supplying a fourth unit as well.

The company, which is based in Ohio, operates several RTO abatement systems. The three that had previously been installed were all burning too much natural gas and using a substantial amount of electricity. While the equipment was meeting government standards, as the years went by they just weren't performing as efficiently as they once had.

The RTOs were connected to several pieces of equipment, including spray booths and coating ovens, along with a variety of smaller pollution sources. Over time, overspray from the paint booths started clogging the RTOs. The result was a significant reduction in fuel efficiency. This is normal and occurs during the lifecycle of this type of equipment.

The company determined that cleaning and rebuilding the units with more efficient heat exchange ceramics would, in the end, not cost them any more money. As payment for the cleaning and retrofitting, the company entered into a contract in which Dürr took a portion of the company's savings as payment, and in return, the company received complete maintenance services for the life of the contract (in this case, five years). This equated to having an in-house expert available as often as necessary.

The total cost savings was in the $1 million range per year spread out over the four RTOs. Performance contracts like these feature strong advantages over simply purchasing and installing energy efficiency projects. Most importantly, performance contracts make the contractor -- not the plant -- responsible for making the predicted savings a reality. Any shortfall in savings impacts the contractor only. The plant no longer has to evaluate how reasonable the assumptions or calculations are.

This article originally appeared in the 10/01/2005 issue of Environmental Protection.