By Brian Gallagher
When the U.S. Department of Energy (DOE) released its “Industrial Decarbonization Roadmap” in September 2022, it acknowledged that the U.S. industrial sector is “particularly difficult to decarbonize.”
Industrial companies contribute one quarter of all domestic emissions, primarily due to fuel for heat and power as well as carbon-intensive feedstocks and processes. To help make greater strides in lowering greenhouse gas (GHG) emissions, the Biden-Harris administration announced in March its “Industrial Demonstrations Program” (IDP). According to the Department of Energy, the program will provide more than $12 billion, when combined with more than $6 billion in projected private cost share, in funding to accelerate decarbonization projects in energy-intensive industries. IDP is part of the President pledge to decarbonize the U.S. economy by 2050.
According to the DOE, it will seek projects incorporating technologies and processes that achieve emissions reductions in industrial materials processes and medium- and high-temperature heat generation; reduce emissions in chemical production processes; leverage smart manufacturing technologies and principles; use sustainable manufacturing; and increase the energy efficiency of industrial processes.
Through grants awarded to companies and researchers, the DOE will fund up to 50% of selected projects and is seeking “first-of-a-kind or early-stage commercial-scale projects” from industries that are known to emit the highest levels of GHGs, like iron and steel, aluminum, cement and concrete, chemicals, and pulp and paper. Priority will be given to projects that accelerate the industry toward deep decarbonization, spur follow-on investments, enable widespread adoption of the demonstrated technologies or create new markets for cleaner products, according to the DOE. Projects also should benefit local communities.
To fund the program, $430 million will come from the Bipartisan Infrastructure Law, $5.46 billion will come from the Inflation Reduction Act and more than $6 billion is projected to come from the private sector.
Win IDP Funding With Collaboration
With funding packages becoming available, industrial companies planning on applying for funding must create a high-quality construction plan with experienced team members. Owners must bring all team members, including technology, design, and construction partners, to the table well before construction begins. Early contractor input can bring greater accuracy and clarity to estimating and procurement, scope and scheduling, and risk identification. In today’s challenging construction market, improved accuracy and clarity in project planning can make the difference in successful project execution.
For example, early contractor involvement (ECI)—a project delivery method similar to design-build—brings all project stakeholders to the table at the planning and design phases. ECI adds value because it taps into the expertise of all involved parties, who often contribute unique perspectives, ideas, approaches, and solutions to constructability. This kind of team effort will be required to win and construct decarbonization projects.
Creating a formal pre-planning or preconstruction phase with input from the entire construction and design team is key. Though it takes approximately two months to perform, pre-project planning helps identify strategic information owners can use to address risks and determine where to commit resources to ensure a successful project outcome.
While there are costs associated with bringing contractors on as consultants early in project planning, 1-3% of the total project cost, they are mitigated by the fact that subcontractors don’t need to cushion their price like they would with traditional bid models. Getting involved early informs the contractor’s strategy, which results in more accurate pricing and more predictable industrial project outcomes. Projects also receive faster permitting, better regulatory compliance and fewer change orders—and are delivered on time and on budget more often. A history of projects completed with these efficiencies will help win IDP funding.
A strong preconstruction process helps to achieve industrial project success despite today’s uncertain construction supply chain. Acquisition of building materials remains a problem, with some material lead times being up to two years. By bringing contractors to the decision-making table during preconstruction, owners can achieve early commitment for procurement of critical materials, as well as work with designers to ensure what is ordered will match the requirements of the completed project design. A contractor that has existing relationships with vendors, subcontractors and suppliers may be able to secure holds based on a letter of intent—despite hold times for prices or shop availability being much shorter than they have been in the past.
Running scenarios and choosing supply alternatives may be required to keep a decarbonization project on track. While it would be impractical to select entirely different critical path materials for a given job, it is a good idea to compare materials costs to installation methods.
For example, it’s typical to place steel orders for the least amount of tonnage, which usually translates to more individual fabricated pieces. A shortage solution may be to order fewer pieces, allowing the shop to fit in the fabrication of the order sooner. However, this must be balanced against the cost of larger construction equipment to support heavier steel pieces, expected labor capabilities and transportation costs. Being flexible with delivery times and materials storage can also offset price and scheduling difficulties, although these must be balanced against insurance and other concerns.
New funding programs merely enhance the opportunities for the industrial sector to embark on projects that speed up decarbonization as well as grow competitiveness and expand manufacturing jobs. To succeed in winning IDP funding and project construction in today’s challenging market, owners should bring an experienced construction partner to the table well before breaking ground.
Gallagher is the Vice President, Corporate Development for Graycor. He has over 30 years of experience leading strategic planning, organizational development, marketing and sales efforts for design and construction firms. He is author of three books and was named a Top 20 Construction Influencer by Procore.