Producers Are Converting to Electric Power In the Face of High Diesel Prices

On August 4 diesel fuel was $4.502 per gallon in the United States. In March 2001 it was $1.338 and a year ago it was $1.604. An aggregate operation whose profitability factors in diesel prices of less than $2 per gallon is hard hit by fuel prices that have nearly tripled in a year.

There has been a dramatic shift in response to the high diesel prices said Billy Wetta CEO of dredge builder Dredging Supply Company. Customers are either selling their diesel-driven equipment and buying new electric equipment or converting to electric he said.

Sonny Lightsey in charge of powered electric equipment at DSC has been constantly on the road recently performing conversions said Wetta as well as assigning some conversions to Mike Carlson’s automation department.

The savings from converting to electric are impressive: at the most expensive end electric power runs 12 cents per horsepower hour while diesel is 24 cents per horsepower hour. At the least expensive end – mostly in the Southern U.S. where power can be as low as five cents per kilowatt hour – electric power averages four cents per horsepower hour versus 24 cents for diesel a 600 percent savings.

“The cost of an electric conversion can be offset in one year based only on fuel savings” said Wetta.

He explained that DSC is doing mostly low voltage conversions – 600 horsepower and less. To accomplish this they bring in 4000-volt service to the dredge and transform it to 480 or 600 volts required by the equipment generating up to 1200 horsepower.

To generate medium voltage – 600 to 7500 volts – they will bring in medium to high voltage to the dredge and transform it down as needed by the equipment.

Running a diesel generator is less efficient than straight diesel because it loses about 20 percent of its efficiency in converting to electric. But in places where it is required to shut off power at peak times of the day some operators will run a diesel generator during that time which is more expensive but allows them to keep their operation running.

FROM BOB HAGLER

Bob Hagler is president of Hagler Systems which specializes in dredge pump systems especially long lines requiring booster pumps. For electrically-driven booster pumps his company provides the pump on a skid with the electric motor and a matching E-Skid (electrical skid) containing the transformer and either a variable frequency drive (VFD) or electronic soft starter.

To illustrate the ratio of investment to cost savings in fuel costs Hagler told IDR that they had recently bid on a conversion involving a medium-voltage (2300 to 4150 volts) electrical system costing about $350000 where the customer expected to save a million dollars in fuel costs alone.

There are primarily two options for electrical drives 1) Soft Starter 2) Variable Frequency Drive (VFD) Hagler explained.

A Soft Starter is a constant speed drive that reduces motor starting “in rush” by reducing starting amps that can result in very expensive “peak demand” charge from a power company. The price tag on a 2000 horsepower soft starter for constant speed operation can be as low as $40000. Most dredge pumps need variable speed to operate but boosters can be constant speed.

Variable speed electric motor control is available but has its price. A VFD (variable frequency drive) is required at a price tag of $200000. It is the most expensive item in the electrical system. A VFD also protects the power company from the power surge at startup. This surge can be up to six times the running amps if a VFD or soft start is not employed.

For a low voltage VFD- say 480 to 600V – the cost drops to approximately $60000 for a 600hp model.

When changing to electric power a contractor or producer must find out from the local utility if the necessary power level is available in that spot . Even if more power must be provided by the utility which the customer must pay for it can still figure in as more economical than continuing to run on diesel fuel.

Maximum “practical” horsepower for a low voltage VFD is about 700 to 800 horsepower though methods of increasing this are available. A medium voltage system is preferred for pumps operating at 1000 to 5000 horsepower.

Hagler described a rule of thumb for comparing the cost of electricity to the cost of diesel fuel:

A $1.00 per gallon fuel cost is equal to approximately seven cents per kilowatt electrical power cost. Electricity is cheaper than fuel since it is derived from a number of domestic fuels such as coal or hydroelectric and not gas.

This comparison assumes that the engine is a relatively modern fuel-efficient type with fuel consumption of .35 pounds of fuel per horsepower hour. Most old engines are as bad as .4 pounds of fuel per horsepower hour.

At this consumption rate (.35 pounds per horsepower hour) a pump will consume 25 gallons of fuel per 500 horsepower. Thus a “good” 2000 horsepower engine will consume 100 gallons per hour of fuel at a cost of $400 per hour.

This cost does not include the high maintenance cost of an engine fuel transportation costs and other factors.

While fuel prices fluctuate electricity prices remain fairly stable ranging from five cents to 12 cents per kilowatt hour depending on location. Producers need to get ready for it and plan the conversion of their systems to electric.

Operating a 900 horsepower engine-driven pump can cost more than $180 per hour at today’s fuel prices burning more than 45 gallons of fuel each hour.

At a cost of 12 cents per kilowatt hour (though in most places this can be as low as 7 cents per kilowatt hour) changing to electrical power can result in a savings of $100 per hour. A conversion to electric at this power price will bring a return on investment (ROI) in 18 months.

Transportation costs have long been a limiting factor in sales of aggregates defining the distance from any mining operation that the product can be sold profitably. Now that cost of operation has also been limited by fuel prices converting to electric has been added to this equation converting to electric power is a viable option that could possibly reduce operating costs to below the 2007 cost of diesel fuel.

INPUT FROM SCOTLAND

Ron Young a former member of the British Merchant Marine and decades-long employee of an electrical utility in Southern California moved back to his native Scotland in 2006. He provided this input on the fuel situation there:

“There have been numerous ‘Fuel Protests’ in the U.K. in recent months where lorry drivers (truckers) have formed convoys of around a hundred or so vehicles and driven them into various city centers to disrupt traffic and draw media attention to their plight.

“Right now diesel is at £1:31 per liter and unleaded gasoline is at £1:17 per liter. Although the imperial gallon consists of four liters and is a little larger than the U.S. gallon it still means that we are paying around $10.69 per gallon for diesel and $9.55 per gallon for gasoline.

“This is only the tip of the iceberg as our economies are largely based upon the price of oil. Therefore everything that is manufactured will incur additional costs and everything that has to be delivered including raw materials and finished products will cost more whether they are transported by road rail or air.”