Adapting to Change Transforming Gas Technology Mr Don Allen WEA Aug. 2012 NZ
Adapting to change Transforming gas technology
Don Allen Gas Applications Specialist: Wine
1 Don Allen; trading as “Gas with Panache”, 2012
Philosophy of change
• “ A corporation is a living organism; it has to continue to shed its skin. Methods have to change. Focus has to change. Values have to change. The sum total of those changes is transformation” Andy Grove, Intel
2 Don Allen; trading as “Gas with Panache”, 2012
20 years of advancement? •
Over the last 20 years science has advanced our understanding of wine. There are at least 2 areas that have contributed significantly to the improvement of quality:
– Post bottling wine chemistry & wine bottle closures. – Corks, screwcaps, closures etc
– Understanding the role of oxygen in wine. – Reductive winemaking, TPO, micro oxygenation etc The common denominator is OXYGEN. “Exposure of wines to excessive amounts of oxygen causes irreparable damage, leading to the production of off-flavours associated with aldehydes and bacterial spoilage” Tofalo et al,2012. “Wine specifications should be moving to detail TPO instead of the less relevant DO; and in regard to TPO, generally the lower the better” Roget, AWRI
Oxygen Management is why inert gas is used; has the technology advanced? Sources: Jamie Goode, “What have scientists done for us” & Internet Journal of Oenology & Viticulture,2102 N.7/1
3 Don Allen; trading as “Gas with Panache”, 2012
Transforming quality; Targeting TPO to add value Gather the facts; (assess & audit equipment & operations )
Define realistic objectives
Add in control & technology options (repeatability)
Examine opportunities with research & knowledge
Add in appropriate & on-going training
Identify & eliminate bad habits (inefficiency)
“Price is what you pay. Value is what you get” Warren Buffett, 1930 -
4 Don Allen; trading as “Gas with Panache”, 2012
Setting the scope (by the numbers) $10.00
$/Bottle
$0.33
$8.00
$2.35
$6.00
$1.25
$0.33
$4.00 $5.71
$2.00
$0.35 GM/B
$0.30
Gen&Admin
$0.25
Selling costs
$0.20
EBIT
Cost/B
$0.15
EBT
$0.10
$0.04
$0.05
$0.00 Cost $/B
$0.00
EBIT
Average cost $AUD/Bottle (Rev $9.64)
EBT
Produced Cost $/Bottle If the figures are accurate these probably represent ~$1.50/bottle but can be positively influenced by making changes relating to gas use.
$1.11, 19%
Grapes
$1.40, 25%
Bulk Wine
$0.57, 10%
The only gas related operations that can be influenced are winemaking (labour and goods) and a portion of total packaging costs.
$0.60, 10%
Barrels/Oak Packaging all
$0.81, 14%
W/M Labour
$0.96, 17%
W/M Goods Cost
$0.26, 5%
Overheads
Source: Deloitte Benchmarking Survey; Australia; Average of all winery sizes
5 Don Allen; trading as “Gas with Panache”, 2012
Focus on Winemaking Up to $1.50/bottle is winemaking & may be gas related
Typical gassing operations (gas + labour) account for up to 30% of this (~$0.50/bottle)
A 20% efficiency improvement in this area alone will increase the profit by ~$0.10/bottle
Attention to ullage management techniques can (a) improve the TPO (b) further reduce production costs by reducing top up operations (typically ~8/yr)
Two recent assessments have shown a 25% - 60% improvement (>$150,000 in one case)
6 Don Allen; trading as “Gas with Panache”, 2012
Attaining Goals; TPO
7
Don Allen; trading as “Gas with Panache”, 20127
Gaseous & Dissolved Oxygen 1.60
Effect of gaseous oxygen on DO Dissolved oxygen mg/l
1.40 1.20 1.00 0C
0.80
5C 10C
0.60
20C 0.40
0.20 0.00 0.125
0.25
0.5
1
2
Gaseous Oxygen %
To manage dissolved oxygen, gaseous oxygen levels (i.e.the tank ullage) need firstly to be managed (TPO). Example 1: DO level = 0.5mg/l, @ 10C, ullage O2 needs to be 3 times more expensive than CO2 Bulk & almost 6 times more expensive than a generator, but there are occasions when its use is justified.
(dry Ice)
$/m3 (equiv.1,000 L)
Plus electricity cost; back up; maintenance (with generators)
$6.00
$5.15
$5.00
Average wine industry prices (AUD), small & medium winery. Generator is industry average
$4.00 $3.00
$1.55
$2.00 $1.00
$0.83 $0.90
$0.00 N2 Bulk
Gen. CO2 B N2 Cyl CO2 Ar Cyl Cyl
Dry Ice
12
Don Allen; trading as “Gas with Panache”, 2012
Nitrogen generation; options Rent or buy options
Rent only
PSA
Membrane
Fractional Distillation
• 6-8 bar • 99.5 – 99.9% • SE ~0.9kw/m3 • Smaller compressor, some pressure drop
• 10-12 bar • 99.5% • SE ~1.0kw/m3 • Higher pressure, lower pressure drop
• 6-8 bar • 99.9997% • SE 0.36kw/m3 • Very high purity = low DO. • Some LIN req’d
Comments: • PSA technology is older • Mtc issues with some PSA’s • Potential noise issue with PSA’s • Membranes performance degrades in the 1st year & need to be quoted accordingly. • Decision needs to be made early regarding a fully maintained unit (rent) or a “do it yourself” (buy). • Look to upgrade potential 13 Don Allen; trading as “Gas with Panache”, 2012
N2 generation; the full picture Purchased System Details Component m3/hr Generator MAXI 116 54 Compressor Kw 25 Kaeser 750 System Buffer L 5000 Storage Buffer L Activated carbon filter Drier & Oil detection Dewpoint dependant switching (option) Installation Total Capital Requirement
Consumption
Estimated annual gas req:
175,000
Peak hourly rate required
Minimum pressure required kPa Monthly gas req: Avg running hours/year: Avg running hours/month: Avg m3/hour (when running): Avg Weeks/Year: Avg Days/Week: Avg Hours/Day:
14,583 3,840 320 45.6 48 5 16
System comparison: Purchased
System capacity m3/hr Generator run hours Specific energy Total electricity kW Total electricity $/year Carbon emissions (tonnes)
Cost $102,000 $25,000 $2,800 $8,600 inc inc $3,000 $10,000 $151,400
Rental System Details Component m3/hr Generator M1004 57 Compressor kW 37 Buffer Telemetry Flowmeter Gas Mixer Installation Lease term (years) Annual Cost Input Cells
System capacity: Rented
54 3,241 1.00 175,000 $22,750 176
System capacity m3/hr Generator run hours Specific energy Total electricity kW Total electricity $/year Carbon emissions (tonnes)
$/month $5,372 $0 $0 $0 $0 $0 $0 5 $64,464
57 3,070 1.00 175,000 $22,750 176
CO2e Factors
Electricity $/kW Hr
SA VIC NSW WA SA VIC
1.005 1.35 0.98 0.93 $0.130
Annual Operating Costs Purchased System (1) Cost of capital (per year) $12,112 Depreciation $30,280 CAPEX Purchased System $42,392 Back up gas cost $30,625 Maintenance, system $8,000 Maintenance, compressor $5,000 Breakdown Mtc. Allowance $1,500 Registrations, inspections etc $1,000 Electricity cost purchased $22,750 Overheads 10% $4,239 Cost of CO2e $4,045 OPEX Purchased system $69,659 TOTAL ANNUAL REAL COST $112,051 Real cost per M3 $0.64 Cash Flow Analysis Period (years) 1 Cumulative difference; rental -$15,542 vs purchase Don Al l en, Apri l 2012 ©
Rented / Leased System (2) Rent / Lease cost $64,464
Back up gas cost Maintenance, system Maintenance, compressor Breakdown Mtc. Allowance Registrations, inspections etc Electricity, rented system
$5,250 $0 $0 $0 $0 $22,750
Cost of CO2e OPEX Rental system TOTAL ANNUAL REAL COST Real cost per M3
$4,045 $32,045 $96,509 $0.55
2
3
4
5
-$31,084
-$46,627
-$62,169
-$77,711
Other Operating Costs Back up; purchased 12,250 Back up; rented 5,250
Financial Assumptions Interest rate % 8.0% Depreciation Yrs 5 Overheads % 10% Maint cost %/capital 10% Back up; purch. % 7.0%
Back up; rented. % Back up; Purch $/m3 Back up; rent $/m3
Indicative; % based $15,140
3.0% $2.50 $1.00
$0.398 Direct Operating Cost only Comparison $0.183 (Maintenance + back up gas + electricity + overheads + CO2e) $0.640
TOTAL cost Comparison
$0.551
(ALL COMPONENTS)
14 Don Allen; trading as “Gas with Panache”, 2012
$0.85
$0.95
Assess “real” cost & audit performance (prior & regularly)
$50,000
Purity Required (DO @ 99.5% =
$45,000
$3,750 $5,000
Pressure; (PSA 6 bar, Mb 10 bar) Production capacity; (Needs to
$0
CO2e
$35,000 $30,000
B/Up Elect. Mtc
$25,000 $20,000
meet future peaks) $15,000
$37,200
membrane, fractional distillation)
$6,500
$9,000
Type of system (PSA,
$6,500
$40,000
$19,400
0.25mg/l, 99.9% = 0.05mg/l)
OH Deprec. Capital
Utilisation; SE (kW/m3) $5,000
CO2e
$7,920
$10,000
$0
Reliability; lifespan
Purchase
Rent
The recommendation is to have a full financial & operational assessment made of the N2 generator (options) project before proceeding; focussing on the impact over the anticipated lifespan. 15 Don Allen; trading as “Gas with Panache”, 2012
N2 Generation; Utilising the Asset 7 Year Dep. Buy Low range
7 Year Dep. Buy High range
Rented system Low range
Rented system High range
$1.80
Total N2 cost; Purchase vs Rent; various ranges $1.60 $1.40 $1.20 $1.00 $0.80
$1.57
$0.60 $1.00
$0.40
$0.78
$0.70
$0.70
$0.63
$0.20 $0.88
$0.67
$0.48
$0.46
$0.44
$0.41
$0.00 5m3/hr (15-30k)
14m3/hr (35-70k)
28m3/hr (60-140k)
43m3/hr (90-200k)
57m3/hr (110-300k)
86m3/hr (70-440k)
Includes: Capital (return on investment), depreciation, overheads, regular maintenance (system + compressor), breakdown maintenance (assume 2/year), calibration/certifications, registration/inspections (buffers etc), electricity, backup, CO2e.
16 Don Allen; trading as “Gas with Panache”, 2012
Total gas cost; assessing the facts
17 Don Allen; trading as “Gas with Panache”, 2012
Total gas cost; assessing the facts
2012 Preliminary Gas Assessment; SA winery
18 Don Allen; trading as “Gas with Panache”, 2012
Storage & Ageing Unit Operation Pumping Transport to broached tank Transfer off tanker Racking (bottom pump) Racking (top tank pumping)# Racking from barrel Uptake via topping (avg. 8/yr) Centrifugation Continuous tartaric stabilisation Membrane filtration
Min
Don Allen Gas Applications Specialist: Wine
1 Don Allen; trading as “Gas with Panache”, 2012
Philosophy of change
• “ A corporation is a living organism; it has to continue to shed its skin. Methods have to change. Focus has to change. Values have to change. The sum total of those changes is transformation” Andy Grove, Intel
2 Don Allen; trading as “Gas with Panache”, 2012
20 years of advancement? •
Over the last 20 years science has advanced our understanding of wine. There are at least 2 areas that have contributed significantly to the improvement of quality:
– Post bottling wine chemistry & wine bottle closures. – Corks, screwcaps, closures etc
– Understanding the role of oxygen in wine. – Reductive winemaking, TPO, micro oxygenation etc The common denominator is OXYGEN. “Exposure of wines to excessive amounts of oxygen causes irreparable damage, leading to the production of off-flavours associated with aldehydes and bacterial spoilage” Tofalo et al,2012. “Wine specifications should be moving to detail TPO instead of the less relevant DO; and in regard to TPO, generally the lower the better” Roget, AWRI
Oxygen Management is why inert gas is used; has the technology advanced? Sources: Jamie Goode, “What have scientists done for us” & Internet Journal of Oenology & Viticulture,2102 N.7/1
3 Don Allen; trading as “Gas with Panache”, 2012
Transforming quality; Targeting TPO to add value Gather the facts; (assess & audit equipment & operations )
Define realistic objectives
Add in control & technology options (repeatability)
Examine opportunities with research & knowledge
Add in appropriate & on-going training
Identify & eliminate bad habits (inefficiency)
“Price is what you pay. Value is what you get” Warren Buffett, 1930 -
4 Don Allen; trading as “Gas with Panache”, 2012
Setting the scope (by the numbers) $10.00
$/Bottle
$0.33
$8.00
$2.35
$6.00
$1.25
$0.33
$4.00 $5.71
$2.00
$0.35 GM/B
$0.30
Gen&Admin
$0.25
Selling costs
$0.20
EBIT
Cost/B
$0.15
EBT
$0.10
$0.04
$0.05
$0.00 Cost $/B
$0.00
EBIT
Average cost $AUD/Bottle (Rev $9.64)
EBT
Produced Cost $/Bottle If the figures are accurate these probably represent ~$1.50/bottle but can be positively influenced by making changes relating to gas use.
$1.11, 19%
Grapes
$1.40, 25%
Bulk Wine
$0.57, 10%
The only gas related operations that can be influenced are winemaking (labour and goods) and a portion of total packaging costs.
$0.60, 10%
Barrels/Oak Packaging all
$0.81, 14%
W/M Labour
$0.96, 17%
W/M Goods Cost
$0.26, 5%
Overheads
Source: Deloitte Benchmarking Survey; Australia; Average of all winery sizes
5 Don Allen; trading as “Gas with Panache”, 2012
Focus on Winemaking Up to $1.50/bottle is winemaking & may be gas related
Typical gassing operations (gas + labour) account for up to 30% of this (~$0.50/bottle)
A 20% efficiency improvement in this area alone will increase the profit by ~$0.10/bottle
Attention to ullage management techniques can (a) improve the TPO (b) further reduce production costs by reducing top up operations (typically ~8/yr)
Two recent assessments have shown a 25% - 60% improvement (>$150,000 in one case)
6 Don Allen; trading as “Gas with Panache”, 2012
Attaining Goals; TPO
7
Don Allen; trading as “Gas with Panache”, 20127
Gaseous & Dissolved Oxygen 1.60
Effect of gaseous oxygen on DO Dissolved oxygen mg/l
1.40 1.20 1.00 0C
0.80
5C 10C
0.60
20C 0.40
0.20 0.00 0.125
0.25
0.5
1
2
Gaseous Oxygen %
To manage dissolved oxygen, gaseous oxygen levels (i.e.the tank ullage) need firstly to be managed (TPO). Example 1: DO level = 0.5mg/l, @ 10C, ullage O2 needs to be 3 times more expensive than CO2 Bulk & almost 6 times more expensive than a generator, but there are occasions when its use is justified.
(dry Ice)
$/m3 (equiv.1,000 L)
Plus electricity cost; back up; maintenance (with generators)
$6.00
$5.15
$5.00
Average wine industry prices (AUD), small & medium winery. Generator is industry average
$4.00 $3.00
$1.55
$2.00 $1.00
$0.83 $0.90
$0.00 N2 Bulk
Gen. CO2 B N2 Cyl CO2 Ar Cyl Cyl
Dry Ice
12
Don Allen; trading as “Gas with Panache”, 2012
Nitrogen generation; options Rent or buy options
Rent only
PSA
Membrane
Fractional Distillation
• 6-8 bar • 99.5 – 99.9% • SE ~0.9kw/m3 • Smaller compressor, some pressure drop
• 10-12 bar • 99.5% • SE ~1.0kw/m3 • Higher pressure, lower pressure drop
• 6-8 bar • 99.9997% • SE 0.36kw/m3 • Very high purity = low DO. • Some LIN req’d
Comments: • PSA technology is older • Mtc issues with some PSA’s • Potential noise issue with PSA’s • Membranes performance degrades in the 1st year & need to be quoted accordingly. • Decision needs to be made early regarding a fully maintained unit (rent) or a “do it yourself” (buy). • Look to upgrade potential 13 Don Allen; trading as “Gas with Panache”, 2012
N2 generation; the full picture Purchased System Details Component m3/hr Generator MAXI 116 54 Compressor Kw 25 Kaeser 750 System Buffer L 5000 Storage Buffer L Activated carbon filter Drier & Oil detection Dewpoint dependant switching (option) Installation Total Capital Requirement
Consumption
Estimated annual gas req:
175,000
Peak hourly rate required
Minimum pressure required kPa Monthly gas req: Avg running hours/year: Avg running hours/month: Avg m3/hour (when running): Avg Weeks/Year: Avg Days/Week: Avg Hours/Day:
14,583 3,840 320 45.6 48 5 16
System comparison: Purchased
System capacity m3/hr Generator run hours Specific energy Total electricity kW Total electricity $/year Carbon emissions (tonnes)
Cost $102,000 $25,000 $2,800 $8,600 inc inc $3,000 $10,000 $151,400
Rental System Details Component m3/hr Generator M1004 57 Compressor kW 37 Buffer Telemetry Flowmeter Gas Mixer Installation Lease term (years) Annual Cost Input Cells
System capacity: Rented
54 3,241 1.00 175,000 $22,750 176
System capacity m3/hr Generator run hours Specific energy Total electricity kW Total electricity $/year Carbon emissions (tonnes)
$/month $5,372 $0 $0 $0 $0 $0 $0 5 $64,464
57 3,070 1.00 175,000 $22,750 176
CO2e Factors
Electricity $/kW Hr
SA VIC NSW WA SA VIC
1.005 1.35 0.98 0.93 $0.130
Annual Operating Costs Purchased System (1) Cost of capital (per year) $12,112 Depreciation $30,280 CAPEX Purchased System $42,392 Back up gas cost $30,625 Maintenance, system $8,000 Maintenance, compressor $5,000 Breakdown Mtc. Allowance $1,500 Registrations, inspections etc $1,000 Electricity cost purchased $22,750 Overheads 10% $4,239 Cost of CO2e $4,045 OPEX Purchased system $69,659 TOTAL ANNUAL REAL COST $112,051 Real cost per M3 $0.64 Cash Flow Analysis Period (years) 1 Cumulative difference; rental -$15,542 vs purchase Don Al l en, Apri l 2012 ©
Rented / Leased System (2) Rent / Lease cost $64,464
Back up gas cost Maintenance, system Maintenance, compressor Breakdown Mtc. Allowance Registrations, inspections etc Electricity, rented system
$5,250 $0 $0 $0 $0 $22,750
Cost of CO2e OPEX Rental system TOTAL ANNUAL REAL COST Real cost per M3
$4,045 $32,045 $96,509 $0.55
2
3
4
5
-$31,084
-$46,627
-$62,169
-$77,711
Other Operating Costs Back up; purchased 12,250 Back up; rented 5,250
Financial Assumptions Interest rate % 8.0% Depreciation Yrs 5 Overheads % 10% Maint cost %/capital 10% Back up; purch. % 7.0%
Back up; rented. % Back up; Purch $/m3 Back up; rent $/m3
Indicative; % based $15,140
3.0% $2.50 $1.00
$0.398 Direct Operating Cost only Comparison $0.183 (Maintenance + back up gas + electricity + overheads + CO2e) $0.640
TOTAL cost Comparison
$0.551
(ALL COMPONENTS)
14 Don Allen; trading as “Gas with Panache”, 2012
$0.85
$0.95
Assess “real” cost & audit performance (prior & regularly)
$50,000
Purity Required (DO @ 99.5% =
$45,000
$3,750 $5,000
Pressure; (PSA 6 bar, Mb 10 bar) Production capacity; (Needs to
$0
CO2e
$35,000 $30,000
B/Up Elect. Mtc
$25,000 $20,000
meet future peaks) $15,000
$37,200
membrane, fractional distillation)
$6,500
$9,000
Type of system (PSA,
$6,500
$40,000
$19,400
0.25mg/l, 99.9% = 0.05mg/l)
OH Deprec. Capital
Utilisation; SE (kW/m3) $5,000
CO2e
$7,920
$10,000
$0
Reliability; lifespan
Purchase
Rent
The recommendation is to have a full financial & operational assessment made of the N2 generator (options) project before proceeding; focussing on the impact over the anticipated lifespan. 15 Don Allen; trading as “Gas with Panache”, 2012
N2 Generation; Utilising the Asset 7 Year Dep. Buy Low range
7 Year Dep. Buy High range
Rented system Low range
Rented system High range
$1.80
Total N2 cost; Purchase vs Rent; various ranges $1.60 $1.40 $1.20 $1.00 $0.80
$1.57
$0.60 $1.00
$0.40
$0.78
$0.70
$0.70
$0.63
$0.20 $0.88
$0.67
$0.48
$0.46
$0.44
$0.41
$0.00 5m3/hr (15-30k)
14m3/hr (35-70k)
28m3/hr (60-140k)
43m3/hr (90-200k)
57m3/hr (110-300k)
86m3/hr (70-440k)
Includes: Capital (return on investment), depreciation, overheads, regular maintenance (system + compressor), breakdown maintenance (assume 2/year), calibration/certifications, registration/inspections (buffers etc), electricity, backup, CO2e.
16 Don Allen; trading as “Gas with Panache”, 2012
Total gas cost; assessing the facts
17 Don Allen; trading as “Gas with Panache”, 2012
Total gas cost; assessing the facts
2012 Preliminary Gas Assessment; SA winery
18 Don Allen; trading as “Gas with Panache”, 2012
Storage & Ageing Unit Operation Pumping Transport to broached tank Transfer off tanker Racking (bottom pump) Racking (top tank pumping)# Racking from barrel Uptake via topping (avg. 8/yr) Centrifugation Continuous tartaric stabilisation Membrane filtration
Min
