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Energy Savings, Energy Management, ROI, Optimization, Printing Papers, Converting
Materials, Wood Products
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A turbulent and uncertain global economy, especially volatile now after the recent hor-
rific events, is putting more pressure than ever on manufacturers to aggressively find
ways to lower all costs. Focusing on energy savings is key, as political uncertainty
makes all manufacturers around the world vulnerable to sharply
$ WXUEXOHQW DQG XQFHUWDLQ JOREDO increased energy prices and regional energy shortages. The
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world’s factory automation suppliers, whose livelihood is com-
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pletely affected by these manufacturers, must seize the
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opportunity to offer products and services that provide specific
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ZDV WR ORZHU DOO FRVWV metrics and measurable return on investments (ROI), which is the
only way that a manufacturer can justify spending any money.
This is especially critical now, since factory automation suppliers are facing a global eco-
nomic downturn in their traditional industrial markets based on political uncertainties.
Factory automation suppliers must aggressively seek new market and revenue opportu-
nities to ensure their own survival.
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ARC continuously searches for ROI success stories from manufacturers. This particular
case focuses on UPM-Kymmene, a major forest product company based in Finland.
UPM-Kymmene was established when Kymmene Corporation and Repola Ltd., along
with its subsidiary United Paper Mills Ltd., decided to merge. The new company started
its operations in May, 1996. The company's businesses focus is on printing papers, con-
verting materials, and wood products. UPM-Kymmene employs about 33,000 people,
has production in 14 countries and a global network comprising over 170 sales and dis-
tribution companies. Annual sales in 2000 were about 9.6 billion Euros and its stock is
listed on both the Helsinki and New York stock exchanges.
One of UPM-Kymmene’s continuing challenges, as it is for all major global manufactur-
ers, is overseeing and incorporating newly acquired production facilities that were
originally functioning as independent companies. In the case of UPM-Kymmene, the
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number of these production facilities is approximately 100 and includes Blandin Paper,
Repap, Kymi, United Paper Mills, Kaukas, Kajaani, Schauman, Rosenlew, Raf Haarla
and Rauma-Repola’s forest industry operations.
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UPM-Kymmene’s operations are divided into three business areas: Printing Papers (pub-
lication papers and fine papers), Converting Materials, and Wood Products. The
company also has its own Resources Unit, which consists of raw material and energy
procurement. UPM-Kymmene's Printing Paper range consists of both coated and un-
coated papers and newsprint as well as both coated and uncoated fine papers. UPM-
Kymmene Converting main products are label materials, packaging materials and enve-
lope papers. UPM-Kymmene Wood Products' division produces sawn timber, plywood,
planed timber and value-added derivatives.
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The deregulation of the electricity market in the Nordic Countries started in 1993, begin-
ning with Norway. Norway formed a common market area with Sweden in 1996 and
Finland in 1998. During the last few years, Denmark had also deregulated their electric-
ity market, and joint the common Nordic market place called Nord Pool. Starting in
1998, UPM-Kymmene Group became a participant in Nord Pool.
The merger of Kymmene Corporation and Repola Ltd, along with a changing market
environment, required UPM-Kymmene to look for an energy management system to
support their extensive energy operations. Last year, the total annual electricity con-
sumption of UPM-Kymmene Group in Finland, including the amounts sold to others,
was 15 Twh. This demand was supplied by a wide variety of resources: 2.5 TWh
through co-generation and condensing power at the mill sites, 1.0 TWh through UPM-
Kymmene’s own hydro power stations, and 8.0 TWh through ownership in power com-
panies including hydro, nuclear and condensing resources. An additional source of
electricity, 3.5 TWh of UPM-Kymmene's total electricity balance of 15 TWh, comes via
the spot market purchase and bi-lateral contracts. It is this wide variety of locations and
resources that presented such a great energy management system challenge.
The cost of the individual supply power generating resources available to UPM-
Kymmene varies heavily because of the existence of this wide range of power generating
facilities, from hydro and nuclear power to coal and oil condensing. The total annual
electricity cost of UPM-Kymmene in Finland alone is more than 300 Million Euros. In
addition, there are wide cost fluctuations which make it difficult for manufacturers such
as UPM-Kymmene to accurately choose the most cost effective resource of electricity.
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For example, in the first half of 2001 the electricity price in the spot market varied be-
tween 11.3 to 77.3 EUR/MWh, with the average being 24.3 EUR/MWh. It is this wide
variety of facilities and costs that presented another great energy management system
challenge, purchasing a system that can optimally maximize resource utilization while
directing electricity from the power source that may only be the most cost effective for a
brief instant.
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Subsequently, UPM-Kymmene selected ABB to deliver a comprehensive Energy Man-
agement and Optimization system. The system is used for planning, optimizing,
monitoring, controlling and reporting the energy operations of the entire UPM-
Kymmene Group in Finland, including nine mill sites and several smaller facilities.
Cost efficient utilization of all the available energy resources and proper operative plan-
ning could not be possible without a real-time energy management system. The annual
savings estimated by UPM-Kymmene is in the range of millions of Euros. The savings
are the combined effect of being able to accurately forecast the future energy demand in
real-time, optimizing how the demand is being met with the minimum cost, and being
able to quickly react on any events in UPM-Kymmene’s own facilities or in a continu-
ously changing marketplace.
UPM-Kymmene’s total annual savings can be roughly broken down in the following ar-
eas: 35 percent decreased electricity supply costs, 25 percent increased electricity sales
profit revenue, 20 percent better load planning (cost savings achieved by avoiding penal-
ties), and 20 percent decreased labor costs. The ROI for UPM-Kymmene was in the
range of a few months, with the comparison based on having an Energy Management
and Optimization system versus not having a system at all.
Energy Management and Optimization systems are a major focus for many of the
world’s major factory automation suppliers. Key functions supported by these systems
typically include load forecast, tie line monitoring, optimal load allocation, electricity
purchase, sales management, monitoring, and reporting. The paper industry has a
strong demand for these systems due to their relatively quick ROI. Energy Management
and Optimization systems are applicable to all the process industries, which include the
Chemical, Pharmaceutical, Petrochemical, and Metals and Minerals industries.
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• Factory automation suppliers must offer products and services that provide manu-
facturers with specific performance metrics and measurable return on investments
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(ROI), which is the only way that a manufacturer can justify spending any money
during this turbulent and uncertain global economic period.
• End users should look at their capital and expense budgets as potential investments,
rather than costs, and look to creatively apply energy-saving products and services
in all areas that can pay for themselves very quickly and provide many years of cost
savings and efficiency benefits afterward.
• Utilities can benefit from energy management and optimization systems, which
maximize resource utilization by directing electricity from the power source that is
most cost effective, thereby reducing the need for the utility to have to invest in addi-
tional power generating capacity, at least in the short-term.
For further information, contact your account manager or the author at cresnick@arcweb.com.
Recommended circulation: All MAS clients.
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