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How the Inflation Reduction Act affects the process control industry

Oct. 4, 2022
As industries seek to cut their greenhouse gas emissions, process control and automation are catalysts to help them get there

The political path to energy transition is a rough road. From the left to the right, and back again, the road is full of twists and turns, as well as obstacles and potholes, all mostly centered around partisan (and sometimes nasty) policy debate. So, it’s no wonder the passage H.R. 5376, also known as the Inflation Reduction Act of 2022, left everyone from pundits to industry executives to activists steering toward social media to lament or boast about how the legislation will impact energy costs, energy security, possibly the future of humanity and so on.

However, one fact on which all can agree is that, while the legislation addresses a lot of things, its central focus is the U.S. energy mix of the future. In short, it’s a step toward advancing energy toward the net zero and clean energy objectives of the Biden administration and the present majority in Congress. Whether it will ultimately prove successful in quelling inflation, especially when it comes to energy costs, or pushing the nation toward cleaner energy, is yet to be determined. That's a debate for another day. But one thing is certain, one of the catalysts for cutting carbon emissions in industry and making energy usage by consumers and businesses more efficient is automation and process control technology. To that end, the legislation opens plenty of opportunities for these technologies to be incentivized and implemented across several sectors.

“I think it’s going to have a huge impact across several industries,” says Dr. Paige Marie Morse, sustainability advisor at AspenTech, a global industrial software provider and frequent service partner to producers of energy. “This is a significant activity by the U.S. because we haven’t shown leadership in climate change-related activities. The level of investment that's expected to go with it will impact the process industries.”

Jose Rivera, CEO of the Control Systems Integrators Association (CSIA), agrees that the investment in new energy buckets will benefit systems integrators and process control technology providers, especially those working with energy producers. “There's a huge amount of money going into energy security and climate change,” he says of the potential impact from the legislation. “If systems integrators see an opportunity they'll invest.”

Meanwhile, Michael Martinez, EcoStruxure Foxboro DCS Global Leader for Schneider Electric, says the Inflation Reduction Act will drive the “next level of sustainability and efficiency that we’ve been looking for,” especially following the COVID-19 pandemic that already began driving investment in efficiency technology. The shutdown and subsequent work-from-home trend saw companies start to seriously invest in things such as secure remote access, virtualization, and audio and video workflows.

Martinez says the incentives in the new legislation will only further advance those investments and add to them a more earnest effort on energy efficiency. “I absolutely believe it will have a positive impact overall on the automation and control industry [as a result],” he adds.

With the overall opportunity now in place, the question becomes where might it truly present itself?

Cleaning up energy

Oil and gas producers have been facing changes when it comes to production. Those changes revolve around, not only the way they cut methane emissions, but also in how they invest in new technology and opportunities. Hydrogen energy (both blue and green) has captured the fancy of many investors. Meanwhile, carbon capture and storage (CCS) is an area of high-potential growth for oil and gas producers, particularly in and around the U.S. Gulf Coast, where the Texas terrain and Gulf of Mexico seabed offer ideal sequestration landscapes. Wind energy development, particularly in the Gulf of Mexico and offshore New England, has gained an uptick in investment interest via the new legislation.

These advances are among many that stand to benefit from the Inflation Reduction Act. “The fact that there’s longer-term money to support hydrogen projects or carbon capture projects is significant,” Morse said.

For anyone in the process industries, the nature of their business is to be huge energy users. Sometimes, they’re energy producers, like refiners. Either way, they’ll be central to the success or failure of the Inflation Reduction Act of 2022.

“Let’s look at the ones that are huge energy users. They have a concern about, ‘How do I reduce my emissions?' ” Morse said, adding that any businessperson looking into a long-term investment needs to think about the environment they’re operating in and the encouragement for investment.

“Now we have at least 10 years of support for hydrogen projects, for carbon capture, for wind,” she continued. “As companies look to reduce their emissions, they need to be thinking about what kind of renewables should I be doing? Should I be participating in a hydrogen hub? This is now an incentive to make that happen.”

Martinez agrees that energy is a big area of interest in the legislation. “There’s an aspect of this bill that specifically addresses the clean energy transition,” he says, but reiterates that there are many energy-intensive industries beyond energy producers that will need to clean up their act.

“I think as it relates to the rest of industry, specifically those energy intensive industries, it’s more around addressing greenhouse gas reductions,” he continues. “I think it’s really the pulp and paper, chemicals, and other energy-intensive industries that are going to benefit the most.”

Capital allocation and opportunity

Morse is quick to point out that the Inflation Reduction Act is mainly about future projects, which can also be thought of as future capital allocation. “Where are [companies] headed with their next project?” she asks.

She reports there's encouragement to invest in more sustainable operations and different opportunities are popping up. Companies might not necessarily need to build out their new systems, but they could participate in less carbon-intensive projects like hydrogen hubs.

“There’s encouragement now to invest in the form of tax credits, but it can still help a lot of companies,” she says. “This will get them moving.”

Morse expects future capital investment to go into control technologies. “Definitely, initially, you have to plan the project. We’re very involved in some of the earlier stages, so you can assess the site,” she says. “Then you think, how can I best do carbon capture? As we progress, there becomes more logistics angles. How do you move the product around? How can you be sure that the CO2 remains contained?”

Morse points to technologies such as advanced process controls (APC) as a classic example of a technology that will be vital in executing such projects. “It will help stabilize operations and make sure you’re running as efficiently as possible,” Morse says, adding that there are other technologies of interest.

“A lot of what our customers are doing right now is looking at something called dynamic optimization where you think about the overall use across the site,” she continues. “First, that’s about operation, but it’s also about utilities management.”

Schneider’s Martinez sees a similar opportunity for control technology with the passage of the legislation, particularly with the help it offers.

“One of the things I found interesting in reading the bill itself is that it actually calls out that they could provide up to 50% of the cost of a project,” Martinez said. “It creates a significant incentive and opportunity to act on those sustainability and energy management initiatives that may have been sitting on the dock for a while.”

What does that mean for providers of control technology? For a company like Schneider Electric, Martinez explains, “This actually fits very well into our entire purpose,” referring to the company’s longstanding stated mission to “be the digital partner for sustainability and efficiency."

“I think we see opportunities everywhere, from upgrading the [power] grid to updating operating facilities to helping companies actually map out their energy and sustainability journey” he continues. “This is going to take both technology and expertise.”

That’s precisely the intent of the language within the legislation, according to Martinez. “If you look at some of the key drivers within the bill itself and some of the areas they actually allow for investment it really is in the area of doing the studies,” he says. “How can companies become more sustainable? How do they use energy?

“Then, there's that automation piece, in two aspects,” he continues. “One, how do they model their processes and are they operating efficiently, and two, how do they execute? So then there’s that automation technology that enables them to effectively process, and effectively manufacture the products and services they provide to their customers.”

CSIA's Rivera see a big role for system integrators in the execution of those plans. "The way the systems integration business works is that the benefit trickles down," he says.

"If a utility wants to integrate their grid, they have to do that at the control level," he continues. "I think the these investments [outlined in the Inflation Reduction Act] are designed to push early adopters to become users of technology. But, building all of that new energy infrastructure will require some level of integration."

Enhancing digitalization efforts

There’s nothing new about digitalization in industry. The digital transformation has been marching forward for quite some time. The Inflation Reduction Act, however, is poised to supercharge those efforts.

Schneider Electric recently released a study on the umbrella topic of digital transformation. According to Martinez, 94% of respondents said there would be a large impact over the next two to three years due to digital transformation. However, 55% of respondents said their DCS solution is only somewhat equipped to support such initiatives.

“I think the bill provides for funding to either invest in new systems that aren't only optimized around the energy consumption, but also for modernization and migration to the new types of these digital technologies,” adds Martinez. “Digital transformation goes hand-in-hand with sustainability, especially as it relates to the bill.”

AspenTech’s Morse agrees that making sense of these new opportunities for sustainability, companies must first know where they are starting and in what direction they need to proceed. Therein lies the added opportunity for process control technology and data analytics.

“The first thing these companies need to do is figure out where their emissions are, identify their biggest emitters, and then look for efficiency opportunities,” adds Morse. “Digitalization is critical for that. It gives you visibility on what’s happening at the unit itself and then also across the site."

Get ‘smart’

Building management is another area vital to the success of the Inflation Reduction Act. As part of the effort to transition energy, the legislation includes several paragraphs focused on smart building and facilities management.

“The bill drives in that direction. There are incentives for the manufacture of goods for the production of solar, wind, microturbines and other alternative energy sources,” says Martinez. “I think those types of investments are going to help drive that clean energy aspect. That, coupled with the capital expenditures for companies to reduce their emissions, gives operators and end-users the opportunity to reduce their overall manufacturing costs.” 

About the author: Len Vermillion

Len Vermillion is editor-in-chief of Control. He can be reached at [email protected].

About the Author

Len Vermillion | Editor in Chief

Len Vermillion is editor-in-chief of Control. 

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