Climate change and urbanisation are two of the most important trends shaping the world, trends with profound implications for the cement industry. Cement is the key ingredient of concrete, the world’s most widely used building material, but it is also the product of an energy-intensive process that accounts for about 6% of global greenhouse gases. These emissions threaten to increase as developing countries urbanise and construct roads, buildings and other infrastructure in the decades ahead. To pursue a low carbon growth path, the industry needs to adopt the most efficient technologies, develop innovative products and explore promising technologies for alternative fuels, including wind and solar.
International Finance Corporation (IFC), the member of the World Bank Group dedicated to private sector development, invests in the cement industry because of its fundamental importance for economic development and poverty reduction in developing countries. Concrete is an essential building material for the construction sector, a major global employer that is vitally important to housing and basic infrastructure. The cement sector is capital intensive and subject to economic construction cycles. It requires a long-term perspective on financing and returns. Development institutions such as IFC often play a role in supporting cement projects in developing countries, where 90% of cement is consumed. IFC has an active cement portfolio of about 35 projects, representing over US$1.1 billion of IFC investment.
IFC’s strategy in the cement sector aims to encourage a shift to ‘greener’ cement. In addition to maximising the use of less carbon intensive cement and concrete, IFC works with companies who want to reduce energy consumption and reliance on fossil fuels. We believe there is incredible upside potential for reducing emissions and reducing energy costs in the cement industry, and these goals can be supported by employing the right financing structures and regulatory incentives for investment.
Cheaper, cleaner power
One of the strongest cases for investment in alternative technologies is for adopting waste heat recovery (WHR). This involves capturing the excess heat of an industrial process and using it to generate electric power. The financial payback can be rapid for a number of heavy industries, including steel and chemicals. Yet uptake in the cement industry has been limited except in Japan, Thailand, India and especially China, home to over 85% of the WHR installations in the world today.
A recent report by IFC and the Institute for Industrial Productivity estimated that WHR investments could reduce operating costs and improve EBITDA margins of cement plants by between 10 and 15%.
In developing these estimates, we considered country-specific business enabling environments to deploy the technology. We took into account the state of the cement industry, industrial electricity tariffs and concerns over reliability of grid-supplied electricity, regulatory and sustainability drivers, as well as political stability.
On average, electric power expenses account for up to 25% of total operating costs of a cement plant. Waste heat recovery technology utilises residual heat in the exhaust gases generated in the cement manufacturing process and can provide low-temperature heating or generate up to 30% of overall plant electricity needs. Other advantages include reductions in purchased power consumption, reductions in reliance on fossil fuel-based captive power plants and increased resilience to further fluctuations in electricity prices.
In other words, we can get more reliable and cheaper energy, while at the same time cutting greenhouse gas emissions.
This is part one of a two-part article written by Michel Folliet for World Cement’s March 2015 issue and abridged for the website. Subscribers can read the full issue by signing in, and can also catch up on-the-go via our new app for Apple and Android. Check back tomorrow for part two of the article on www.worldcement.com.
Read the article online at: https://www.worldcement.com/europe-cis/24122015/financing-a-greener-future-part-1-1/