Carolina Energy 2019: Behind the Scene Costs

From Scott Carlberg

A lot happens behind the scenes to get your electricity to you. All with costs. Here are some of those costs. This is part of our series …

What should Carolinians expect, ask for, or watch for in their energy world in 2019? Energy Consumers of the Carolinas asked a handful of energy professionals. This column is about something behind the scenes. Part of our energy education goal is to discuss issues that may not be evident to electric consumers. One of these is about technology to make electric generation cleaner.

In coal and natural gas generating plants, selective catalytic reduction (SCR) is a method sometimes used to convert nitrogen oxides, also referred to as NOx, into harmless nitrogen and water. Diesel engines have also used SCR technologies.

SCR materials are catalysts in the chemical process. A Carolina-based company named CORMETECH, Inc., produces and regenerates SCR DeNOx catalyst to reduce nitrogen oxide for power plants as one of its business lines. It has about 350 employees. CORMETECH is headquartered in Charlotte, and has operating facilities in Durham and  King’s Mountain, NC.

We asked Mike Mattes, President and CEO of CORMETECH, for his look at the energy industry in the year ahead. His comments provide several useful angles on energy for ECC readers: 1) The Carolinas energy industry is more than the electric providers themselves. The Carolinas have a lot of people who are employed in various manufacturing and service portions of the industry. 2) Environmental controls are complex and have varying cost components, as you’ll see below. If you are a science or chemistry enthusiast, you’ll particularly track right along.

Creating electricity (generation) accounts for the largest part of electric costs. Transmission lines are the large high voltage towers. Distribution lines are the final stage of delivering electricity. 

Mike discussed how raw materials affect energy environmental controls. “2019 may be the first year that raw material price increases will significantly change the operation of small and medium sized companies and end-consumer pricing. We have seen a sizeable increase of raw material anywhere from 25% (titanium dioxide), 30% (tungsten trioxide) to over 300% (vanadium pentoxide) over the last 18 months and expect this to be an issue well into 2020. These increases will cause everyday products to cost the consumer more money. All three chemical compounds that are used to make SCR DeNOx catalyst are also present in cosmetic and skin care (titanium dioxide), paints (tungsten trioxide) or steel industry products (vanadium pentoxide).”

Chemistry meets business issues head-on. Mike said, “Even with careful price hedging, manufacturing process improvements, and long-term purchase agreements the last changes in pricing are substantial. These pricing pressures are compounded by the uncertainty on whether and when additional import tariffs are imposed on materials from abroad. We are now talking even more frequently with our customers about the current pressures and how to best reach their environmental emissions reduction objectives together.”

A look across business headlines reveals that cost issues are ubiquitous. For instance, Federal Express announced an almost 5% increase in rates recently (source). Electrolux, which has an NC presence, has “headwinds from rising costs … tougher than expected,” said one analyst. The cost of tires is expected to go up because, in part, of rising raw materials (source).  And if that isn’t enough – “Hershey is one of many companies getting squeezed by rising commodity and shipping costs.” Kisses go up more than two percent.

Any electric provider is like other businesses, it has behind the scenes costs. Electric providers are unlike many other businesses because they also have state commissions responsible for regulating the prices to consumers. We all rely on power companies to provide electricity every time we flip the switch. Like any business, managing cost is part of the final equation for a final price. 2019 may shape up to be a tough year for behind the scenes costs.