Gerhard Knittel is in charge of energy sourcing at WACKER’s Raw Materials Procurement department. The 49-year-old family man has been at WACKER since 1986 and is responsible for all eight of the Group’s German sites. The electrical engineer firmly believes that successful procurement is based on a purchasing strategy aligned with company needs and on knowing the energy market first hand.
From his office window facing east across the Burghausen site, Gerhard Knittel gazes at a pale-gray, fully clad building painted in vertical blue stripes. To a layman, it’s nothing special. But just one glance tells WACKER’s head of electricity procurement that all is well. “As long as vapor is coming out of its stacks, I know nothing is amiss,” he explains. The towering, windowless structure is a highly efficient combined heat and power plant (CHP). Operated by WACKER in partnership with a major utility since 2001, the CHP houses a gas turbine which produces all the steam Burghausen needs for its chemical processes. “At the same time, our CHP also generates around a billion kilowatt hours of electricity a year,” stresses Knittel, who oversees energy supplies to all eight WACKER sites in Germany. A further 250 million kWh of electricity is generated as the high-pressure steam relaxes in various downstream production processes.
Hydroelectric Power Was the Start
Compared to the CHP, the 250 million kWh generated by WACKER Burghausen’s own hydroelectric power station – the Alzwerke – seems rather paltry. WACKER began harnessing water from the Alz river in 1922 by diverting it along a canal into the site. The water then plunges 63 meters through five massive, gray steel tubes to a yellow-painted machine house. There it drives five Francis spiral turbines and five three-phase generators. It is then discharged into the Salzach river. “For Dr. Alexander Wacker, the company founder, permission to use the Alz to generate power was key to locating production at Burghausen,” says Gerhard Knittel. “The hydroelectric power enabled him to make acetic acid and acetone cheaply.”
Soaring Production Raises Power Consumption
Gone are the days when the two power plants were able to cover demand on their own. The company’s tremendous growth has been accompanied by a voracious appetite for energy explains the 49-year-old, pointing to a chart on his computer screen. “Since 2008, we have classified electricity and natural gas as two of our most vital raw materials.” Which would explain why Knittel’s office is equipped not only with site plans for WACKER plants in Germany, but also with maps of the natural gas networks in Germany and the rest of Europe.
Flexibility and Strict Rules
WACKER’s chief energy buyer sources the remaining electricity that the company needs on the open market – which isn’t as easy as it sounds. It means striking the right balance between the production facilities’ need for extreme flexibility and the strict rules regulating the electricity market. “We can’t stockpile electricity. So, risk management is very important,” he explains. “Some supplies are secured for up to three years in advance. But there are times when we urgently need large quantities of electricity for the next day. When that happens, we go to the spot market and order the precise quantity – down to the very last hour.”
Knittel’s job involves keeping track of various parameters at once. Forbidden to trade in electricity or engage in price speculation, he has to buy specified minimum quantities every quarter, without exceeding maximum limits. He does not see these rules as restrictive. “They make sense because WACKER’s overriding objective is to supply production plants with the right quantity at the right price.”
Limit Orders and Spot Orders
Knittel liaises closely with WACKER’s production managers, power-plant operators, lawyers, accountants and Finance and Controlling specialists. He sources the electricity in a number of ways. After consulting with production managers to establish their power needs, he concludes contracts by phone or fax, buys on the spot market or places limit orders. The latter are only filled if the price hits a predefined level. Naturally, there is an in-built safety mechanism: “Given the huge sums involved, we have an office that constantly reviews the contracts,” says Gerhard Knittel.
Gas Market Is Opening Up
Knittel’s other key responsibility is procuring natural gas, the cleanest type of thermal primary energy. WACKER mainly sources it through a pipeline from Siberia. The market is fairly straightforward, but only for the time being. Traditional long-term delivery contracts are on the wane, increasingly being replaced by fixed-price and spot products. This sits well with Knittel: “It means we can influence prices more.” He follows the latest gas trends and conditions via the internet, daily market reports and the EEX energy exchange. There could be changes on the way. “In Burghausen alone, we consume 450 million cubic meters of natural gas. Broadening our supplier base – just as we’ve done with electricity – would give us more purchasing flexibility.” The head of energy procurement is in no doubt about that: “Especially when energy prices start rising again in the years ahead.”
A diverse energy mix: WACKER’s electricity supply is based on a mixture of fossil and renewable energy sources, both captive and external.
Burghausen’s energy mix
The Route Traveled by Natural Gas
Natural gas is procured via a pipeline that extends from Burghausen as far as Siberia’s natural gas fields, taking in Austria, Slovakia and Ukraine along the way. In Burghausen alone, WACKER currently needs some 450 million cubic meters of natural gas a year.
A Tradition of Hydro-Power
WACKER has a long tradition of generating energy from renewable sources. Since as early as 1922, the Alzwerke GmbH hydroelectric power station (a Wacker Chemie AG subsidiary) has been supplying hydroelectricity to the Burghausen plant. In 2010, the power station’s five turbines generated about 250,000 megawatt hours of electricity. Enough to continuously operate 1,000 vacuum cleaners for 9.7 years.
Use of Natural Gas in Burghausen
To run the gas-and-steam turbine power plant
For chemical processes