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Opinion: Problems with California’s new injection molding baseline

For the past 11 years I have filed for utility incentives for injection molders. These incentives urge molders to replace old inefficient machines on their floor with newer more efficient machines. The basis for the incentives has been measured energy savings for one year. Typically the incentive amounts to 10% of the cost of the new machine.

Bruce Blau

July 19, 2013

9 Min Read
Opinion: Problems with California’s new injection molding baseline

For the past 11 years I have filed for utility incentives for injection molders. These incentives urge molders to replace old inefficient machines on their floor with newer more efficient machines. The basis for the incentives has been measured energy savings for one year. Typically the incentive amounts to 10% of the cost of the new machine. 

Recently, the California Public Utilities Commission (CPUC), relying on an outside report which states that the transformation to new efficient injection molding machines has been completed in California, has decided to virtually eliminate incentives for machines. The effect will be significant, both to manufacturers and to molders who produce in California.

Below is my response to the CPUC on this arbitrary, unfair ruling. There is no question that the injection molding industry is being  unfairly treated. 

The 2013-14 Statewide Customized Offering Procedures Manual for Business begins by stating:

The 2013-14 Statewide Customized Offering provides financial incentives for the installation of high-efficiency equipment or systems.

The new baselines for injection molding machines eliminate virtually all incentives for California molders to upgrade their large inventory of inefficient old molding machines.

The proposed changes to the baseline standards for purchase of new injection molding machines (IMM) in California is based on an incorrect conclusion that the "market transformation (to energy efficient IMM) is largely complete." Inefficient hydraulic machines dominate the California IMM market. The incentives offered to encourage businesses to replace these machines with efficient new models have been an integral part in management's decision to make significant capital investments in new machinery.  The proposed new baseline IMM standards virtually eliminate incentives to upgrade old IMM units and will have a negative effect on the conversion of this industry to emerging new technology.

By applying an arbitrary baseline standard, the proposed change unfairly treats this large, important California industry.  This new contrived IMM baseline standard is inconsistent with existing "industry practice" baseline standards, which are based on measured energy consumption.

New injection molding baseline violates incentive baseline policy
Except for statewide guidelines, such as Title 24, the baseline for motors has been measured consumption of the old unit. Prior to the new IMM baseline standards, this has been true for the injection molding industry. Measured energy consumption, as the baseline, remains in effect for air compressors, chiller compressors, blowmolding machines, vfd's and virtually any other piece of electrical equipment.

The proposed new baseline standards for IMM applies a baseline not related to the energy consumption of the machine to be replaced. Instead, the new baseline standard adopts an arbitrary energy consumption level. This type of arbitrary baseline is not found in any other industry.

Currently, if a molder replaces a fixed volume hydraulic machine with a variable volume hydraulic machine, he will reduce his energy consumption by 50% and be paid an incentive based on energy savings. The proposed new baseline standard denies an incentive on this equipment upgrade, a violation of the above stated goal of the 2013-2014 Statewide Customized Offering Program.

The proposed new IMM baseline standards for injection molding is not consistent with other baselines used for similar equipment on the production floor or similar equipment in other industries. Because of the industry they are in, injection molders will be denied incentives on upgrades to energy efficient injection molding equipment.

Hybrid baseline is not the industry standard
There are few hybrid injection molding machines that achieve the .164 kWh/lb that the new guidelines stipulate.  The proposed new standard of .164 kWh/lb hybrid standard pertains to the new servo hybrid, which is just emerging onto the market.

The proposed hybrid servo baseline has just been introduced into the IMM market and is by no means an industry standard. The proposed new IMM baseline standard unfairly treats IMM differently from other machinery, which use measured energy usage as the industry baseline standard.

A majority of California molding machines are hydraulic
In California there are over 1500 injection molding manufacturers, and fully 70-75% of these have old hydraulic machines on the floor. Estimates of hydraulic machines still in operation in California range from 5000 to more than 10,000. These machines waste from 1.1 to 1.8 million MWH of energy each year.

The ERS Report incorrectly concludes that the "transformation " to efficient IMM has been completed. Nothing could be further from the truth. A personal visit to a dozen or more molders in California would clearly show that the preponderance of IMMs on the floor are inefficient hydraulic IMM.

The proposed new IMM baseline standards eliminate the opportunity to significantly reduce excessive energy usage by denying incentives to replace old inefficient hydraulic IMM that dominate the injection molding industry in California. 

Medical baseline discriminates
Clearly this baseline discriminates against any company that is dedicated to the manufacture of medical injected products.  Under the new guidelines, medical companies purchasing new injection molding equipment are denied any incentives.  Non-medical companies, purchasing new equipment over 200 tons, are allow incentives under the proposed new baseline guidelines. Medical and non-medical companies purchasing the same injection molding machine over 200 tons, are treated differently under the proposed new injection molding baseline standards.

The proposed new IMM baseline standards that denies incentives to rate payers, based on the industry that they are in, are discriminatory. The proposed new IMM baseline standards that treat companies in a different manner, who purchase like machinery to produce similar products, are discriminatory.

The ERS Report states that medical clean rooms use only all electric IMM. There is evidence that medical clean rooms still use hydraulic injection molding machines. The proposed new standards for medical molders assume that all IMMs purchased to produce medical products will be all electric. This is not true.

Hybrids not eligible
There are two types of hybrid injection molding machines on the market. A few hundred standard hybrid machines have been sold in the Southern California market. These machines still rely on a variable volume hydraulic pump and are only slightly more efficient than a variable volume hydraulic IMM.

A new generation of hybrid injection (Servo Hybrid) molding machine is being introduced into the marketplace. These utilize a servo drives to eliminate hydraulic pump operation during certain portions of the production cycle. This new technology is touting .14 kWh/lb. If these energy consumption numbers are verified, this is a clear breakthrough, reducing energy consumption over fixed volume hydraulic machines by 66%. The new proposed baseline standard reduces the current incentive for servo hybrids by 91.5%, thus eliminating any incentive to upgrade existing hydraulic IMM to this new technology. The proposed new IMM baseline standards eliminate virtually all incentives for this new servo hybrid breakthrough technology.

Limits of the all-electric market
All electric injection molding technology has been limited over the years to small tonnage machines. Although strides have been made to produce all-electric IMM in larger tonnage (over 1000) the use of these machines is limited. Manufacturers of large products such as plastic buckets, chairs and automobile parts, still rely heavily on hydraulic IMM, because of their ability to handle larger molds and shot sizes.

In addition, a number of molds require hydraulic assistance.  A molder recently purchased two all electric molding machines. Both of these all electric machines were modified by adding an independent hydraulic power unit to operate the molds.

The proposed new IMM baseline standards for IMM appears to be based on the incorrect assumption that all electric injection molding machines are the choice of molders, either under 200 tons or over 200 tons. This is not true.

The proposed new IMM baseline standards denied incentives to molders that have to use hydraulic machines in their operations and are willing to invest in energy saving hydraulic IMM.

New baselines are counterproductive
The cost of injection molding machines can range from around $60,000 for a small machine to over $1,000,000 for larger machines. Current injection molding incentives amount to between 7-11% of purchase price. Incentives have played a significant role in management's decision to invest in these more expensive machines. Elimination and/or reduction in the incentives will seriously impact management's willingness to replace functioning old machines with more efficient models.

A recent denial of an incentive to upgrade to 6 new servo hybrid IMM will cause the molder to cancel his order. This in turn will result in a loss of  2.8 million kWh in reduced energy usage a year.

The proposed new IMM baseline standards virtually eliminate incentives on new energy efficient purchases of IMM and unfairly place the injection molding industry among the lowest incentivized industries.

The proposed new IMM baseline standards negatively affect the payback of this capital-intensive purchase.

The proposed new IMM baseline standards will lead to the cancellation of orders and planned orders to upgrade to efficient new machinery, violating the express purpose of the 2013-2014 Statewide Customized Incentive Program

Options for molders with older presses
Molders have a number of options when considering replacement of old machines. Incentives are designed to lead the manufacturer to the most energy efficient option. These existing options for the molder are:

  1. Repair. New pumps, hoses and related equipment are relatively inexpensive

  2. Purchase used IMM machinery, many brought in from other states.

  3. Purchase of new variable volume hydraulic or hybrid hydraulic IMM

  4. Purchase of new servo hybrid hydraulic IMM

  5. Purchase of all electric IMM

The proposed new IMM baseline standards eliminates incentives on options # 3, #4, and severely cuts the incentive on #5.

Large machine inventory
As injection-molding businesses have continued to fail over the last 10 years, the inventory of used injection molding machines in inventory has increased. These older hydraulic units can be purchased for pennies on the dollar. Some are sold at removal cost.

The proposed new IMM baseline standards virtually eliminate incentives on new and efficient IMM and will direct many purchases to used IMM or overhaul of existing old IMM.

California injection molders use energy primarily to operate their IMM. These same molders pay significant amounts into the PPP without the ability to receive incentives on upgrades to efficient IMM.

The proposed new IMM baseline standards deny molder participation into the Public Purpose Program, into which they pay large sums each month.

The proposed changes have drawn immediate responses from major manufactures, molders and industry representatives. The initial sets of responses are attached in Exhibit H. These individuals express concerns that their industry has been targeted unfairly with arbitrary high baseline standards that are found nowhere else in manufacturing.

Editor's note: Bruce Blau, is the founder and owner of energy consulting firm Bruce R. Blau & Associates.

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