In its 1995 General Competition, the Advanced Technology Program (ATP) funded a joint venture project, involving Air Products and Chemicals, Inc., and Toromont Process Systems, Inc., to develop closed-cycle air refrigeration (CCAR) technology, using dry air as the working fluid. The project was successfully completed in 1999. Coupled with subsequent corporate product development, it resulted in a cost-effective system for delivering ultra-cold refrigeration in the –70°F to –150°F temperature range to food processing, volatile organic compound, and liquid natural gas applications.

This Executive Summary describes the results of a case study of the CCAR project that includes the history of the ATP-funded CCAR technology development project, a market assessment, and analyses of economic impact. Case study research, analysis and conclusions were completed during 2000 and early 2001.

Development of CCAR Technology

Concern over the environmental consequences of the widespread use of ozone-depleting chlorofluorocarbons and hydro-chlorofluorocarbons sparked efforts to develop environmentally benign refrigerants. Alternative refrigerants include ammonia, propane, and mixtures of inert gases (argon, krypton, and xenon). However, ammonia is toxic, propane is explosive, and inert gases are unstable mixtures that are substantially more expensive than chlorofluorocarbons and hydro-chlorofluorocarbons.

Refrigeration systems can also use air as a working fluid. Air is environmentally benign, safe to use, and has an unlimited source. Refrigeration with air as the working fluid is based on the reverse Brayton Cycle. This thermodynamic cycle was discovered in the nineteenth century and has been utilized for air-based refrigeration units in commercial aircraft.

Prior to the ATP-funded CCAR project, air-based systems were configured in an open cycle, where compressed cold air was blown into a cooling chamber and lost for further use. Makeup air had to be continuously dehumidified and compressed to compensate for the loss of cold air, leading to low efficiencies.

To reach improved system efficiencies, Air Products and Chemicals, a major U.S. company active in the refrigeration industry, undertook the technical development of an improved open-cycle air system (ColdBlast™) using complex multi-stage compressors. While this project did not fully meet technical, commercial, and revenue expectations, Air Products engineers concluded that an air-based system, if operated at higher pressure and in closed cycle, could reach improved efficiency levels. They proposed this new approach to management.

No closed cycle system existed before and trying to reach the targeted high efficiency levels would require radical improvements in expander, compressor and heat exchanger technologies. These high risk technology changes were deemed necessary to achieve overall performance levels to make closed cycle systems commercially competitive.

Owing to the less than satisfactory ColdBlast™ experience and the project’s high-risk profile, Air Products management decided to de-prioritize further R&D in this area. Encouraged by the ATP funding opportunity, Air Products reversed its decision and convened a multi-disciplinary team to co-develop and cost share this high-risk project with ATP.

In partnership with Toromont Process Systems, Inc., (formerly Lewis Energy Systems), Air Products submitted an ATP application, and ATP selected the joint venture project for an award in its 1995 General Competition. The ATP agreed to cost share $2.1 million of the $4.3 million project. Air Products and Toromont funded the balance.

The project was successfully completed in 1999, culminating in a nine-month pilot test at a Kodak facility. Coupled with subsequent corporate product development, the project resulted in a CCAR system that can cost effectively deliver ultra-cold refrigeration in the –70°F to –150°F temperature range for food processing, volatile organic compound recovery, and liquid natural gas applications.

Assessment of Market Opportunities

An analysis of CCAR market opportunities was completed to provide a basis for estimating the prospective economic impact of this ATP-funded technology development project. The analysis included extensive fact finding in the food processing, refrigeration, marine propulsion, petrochemical, and gas utility industries and a review of available market studies and secondary sources.

CCAR is a niche technology for providing –70°F to –150°F ultra-cold temperatures cost effectively and without harmful environmental emissions to the food processing, volatile organic compound recovery, and liquid natural gas industries.

Conventional mechanical refrigeration systems operate effectively down to –70°F but cannot reach ultra-cold temperatures below –70°F. Liquid nitrogen and carbon dioxide cryogenic refrigeration systems can provide ultra-cold temperatures, but at four times the cost of mechanical refrigeration. CCAR technology is a cost-effective alternative for the –70°F to –150°F niche market, where it is able to deliver ultra-cold refrigeration at half the cost of cryogens.

Market analyses showed that the U.S. food processing industry will be the most promising end market for the CCAR technology, where ultra-cold temperatures are particularly useful for the rapid chilling of precooked, further-processed food products. Through rapid chilling,

• Weight loss from evaporation is reduced. Food items are sold by weight, and avoided weight loss is a direct economic benefit of ultra-cold temperatures.
• Dehydration is reduced, leading to better tasting, higher quality products.
• Food safety is improved. Ultra-cold temperatures facilitate cooked food items cooling down more rapidly through the 141°F to 40°F “danger zone,” limiting opportunities for harmful bacteria formation.

Given the advantages of using environmentally benign air to replace harmful refrigerants, ATP-funded CCAR technology is also expected to become an attractive refrigeration alternative for applications beyond food processing, for example, for

• Condensing and capturing harmful volatile organic compound vapor emissions in the chemical, metals, and automotive industries
• Facilitating the replacement of highly polluting marine diesel fuels with clean burning natural gas in the form of liquid natural gas
• Low temperature reactions and storage applications in the petrochemical and pharmaceutical industries

The CCAR technology is currently being marketed and is generating considerable market interest. For example,

• Air Products recently signed a memorandum of understanding with a major food processor for the first commercial installation of a CCAR system.
• Negotiations are underway with other food processors, with a major energy company considering CCAR for hydrocarbon condensing, and with a petrochemical company considering CCAR for ethylene storage.

Economic Impact

The case study focused on identifying broad-based economic benefits to the U.S. economy from the ATP-funded CCAR technology. The study examined the effects of improved food safety, higher food processing yields and production rates, improved quality of processed foods, reduced harmful environmental emissions, additional U.S. exports, and cross-industry knowledge diffusion about ATP-funded innovations. Benefits were estimated for a conservative Base Case Scenario and alternative Optimal Scenario.

The case study also identified direct economic benefits to ATP’s corporate joint venture partners, including incremental revenues derived from commercializing the technology and enhanced organizational capabilities stemming from their ATP experience. ATP’s corporate partners control deployment of the CCAR technology through their intellectual property rights. Direct economic benefits to these companies will provide the motivation to sustain an effective marketing program which will be a prerequisite for diffusing the technology and turning the ATP’s investment into broad-based benefits for the U.S. economy.

To develop projections of CCAR’s broad-based economic impact, the case study estimated the number of units to be deployed over the 2002–2016 period. Under a conservative Base Case Scenario, the study posited that Air Products would deploy 17 CCAR units at U.S. food processing plants, including 10 units to replace cryogenic refrigeration and 7 units to boost or replace mechanical refrigeration. Under the Optimal Scenario, the study posited the deployment of approximately 20 percent higher number of units.

The case study estimated prospective cash flow benefits from CCAR installations, measured in 2001 dollars. The estimated cash flows were used to project several measures of the public return on ATP’s investment: net present value (NPV), internal rate of return (IRR), and benefit-to-cost ratio.

For the Base Case Scenario, the benefit-to-cost ratio was projected to be 220:1; that is, with all cash flows normalized to 2001 dollars, a public return of $220 was projected for every dollar of ATP investment. The Base Case IRR, another measure of public return from ATP’s investment, was 83 percent. The Base Case NPV from ATP’s investment was projected at $459 million. Of this amount, CCAR-induced food quality improvements represented 66 percent, yield improvements 25 percent, and faster production rates only 1 percent. CCAR-induced cost savings from replacing liquid nitrogen and carbon dioxide cryogens represented 7 percent of NPV.

The Optimal Scenario resulted in a benefit-to-cost ratio of 280:1, an IRR of 90 percent, and an NPV of $585 million.

An additional dimension of the public return from ATP’s investment is the potential for the CCAR technology to generate additional U.S. exports. For the Base Case Scenario, exports were estimated to increase by an average of $4.8 million each year over the period 2004–2016. For the Optimal Scenario, exports were estimated to increase an average of $6 million each year.

In addition to the substantial public benefits to the U.S. economy, the case study estimated private benefits to Air Products and Toromont from commercializing CCAR technology. The present value of projected revenues from CCAR installations in the food service, volatile organic compound, and liquid natural gas industries was projected to be $65 million. Although available information was insufficient for estimating the resulting profit contribution, $65 million projected revenues appears adequate to support Air Products’ continued commitment to sell, support, and service the CCAR refrigeration technology.

In addition to the above quantifiable economic benefits, CCAR technology is associated with the following qualitative benefits:

1. Improved food safety in food processing industry: Even when fully cooked, food items can grow bacteria in the 40°F to 141°F temperature range, the so-called “danger zone.” CCAR is an innovative refrigeration technology that accelerates the rate of cooling for cooked and further-processed foods, facilitating quick passage through the “danger zone” and reducing public health risks from food borne bacteria.
   
2. Improved food safety and reduced operating costs in the food service (restaurant and fast food) industries: The food service industry is subject to Hazard Analysis and Critical Control Points (HACCP) safety regulations, requiring time-consuming monitoring of foods in the 40°F to 141°F temperature range. By using precooked, further-processed foods, food service establishments avoid bringing temperatures up to cooking levels. This has the effect of reducing operating costs by limiting time-consuming labor requirements mandated in HACCP regulations.
   
3. Reduced diesel emissions from hauling liquid nitrogen and carbon dioxide: CCAR is a distributed refrigeration technology, installed onsite, at the point of use. Use of CCAR instead of hauling cryogens from regional air separation and carbon dioxide plants will avoid diesel emissions from 12,000 to 14,000 roundtrips per year of truck shipments.
   
4. Reduced diesel emissions from ocean-going vessels: Air emissions from cargo ships and ocean-going ferries powered by diesel engines are among the most polluting combustion sources per ton of fuel consumed. Use of CCAR refrigeration for dockside liquid natural gas facilities and replacement of marine diesel fuel with liquid natural gas are expected to provide up to 98 percent reduction of carbon monoxide emissions, 55 percent reduction in nitrogen oxide emissions, and 95 percent reduction in particulates.
5. Cross-industry knowledge diffusion: CCAR technology was chosen as a finalist for the Kirkpatrick Award in the November 1999 issue of Chemical Engineering Magazine in recognition of its “step-out” performance levels. It is expected that cross-industry knowledge dissemination about the performance improvements associated with the design and fabrication of CCAR system components will lead to expanded utilization of low leakage seals, high pressure heat exchangers, and innovative investment casting technologies in other industries.
6. Enhanced organizational capacity: On the basis of the ATP-funded CCAR experience, both Air Products and Toromont reported enhanced organizational capabilities. Air Products Cryomachinery Laboratory adapted the use of advanced computational fluid dynamics methodologies for routine engineering design. Encouraged by its successful joint venture experience with Air Products, Toromont entered into a new strategic alliance with Allison Chalmers.

Conclusions

The case study concludes that the new CCAR technology has made significant progress toward meeting the necessary conditions for commercialization and market acceptance. These conditions are:

• Successful completion of technical development and demonstration phases
  
• Market studies indicating substantial demand in the food processing industry
  
• Informal market intelligence indicating good potential in the volatile organic compound recovery, liquid natural gas, pharmaceutical, and petrochemical industries
  
• Technological advantages that can be translated into business advantages
  
• Continued active marketing of CCAR systems by Air Products

Based on these elements of progress, it is anticipated that public returns from ATP’s CCAR investment, broad-based economic benefits to the food processing industry and consumers, and substantial environmental benefits from avoided refrigerant and transport emissions have a high probability of being realized.

Furthermore, it is unlikely that CCAR technology would have been developed without ATP funding. Following a less than fully satisfactory development experience with the ColdBlast™ open-cycle air refrigeration system, Air Products made the decision to de-prioritize the development of the high-risk closed-cycle CCAR technology. Hence, the above quantitative and qualitative benefits to the U.S. economy can be directly attributed to ATP’s CCAR investment. These benefits are summarized in Table 1.