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Evaluating energy supply chains

   Consulting firm Quetica’s Statewide Freight Transportation Network Optimization Strategy for Iowa has led to the development of a new line of business—helping the energy sector avoid shortages.
   That was the case during the extremely cold winter of 2013-2014 in the Midwest when Iowa experienced a crisis-level shortage of propane. In big agricultural states like Iowa, propane is not only used by farms and rural communities for household heating, it also plays a significant role in drying corn before it’s placed into the storage silos. 
   In addition to the winter weather, Iowa’s propane access was further constrained by the closing of the Cochin pipeline for maintenance during the peak 2013 demand for propane, as well as rail disruptions and limited truck capacity.
   Without sufficient propane, Iowa’s homeowners, businesses and schools risk freezing during cold days and farmers cannot properly store their corn in a dry, mold-free environment before the winter. 
   “Although these events seem like an anomaly, ongoing changes in the propane supply chain in Iowa and nationally present risks in 2015 and beyond,” Quetica warned in a recent report. “With changing infrastructure (e.g., reversal of Cochin pipeline, increases in export capacity), globalization of the market and increasing price competition, there is no guarantee that propane supply will be available to meet all domestic residential and agricultural demand in Iowa in the future.”
   At the direction of the Iowa Department of Transportation, Quetica set up a computer simulation model to represent current and forecasted propane demand, as well as transportation and inventory capacity for this commodity, explained Holly Zimmerman, Quetica’s chief operating officer, who led the analysis.
   Recommended actions based on the analysis, which was completed earlier this year, called for:
   • Monitoring market conditions and infrastructure changes.
   • Communicating and educating the propane industry and consumers about changes, risks and recommendations.
   • Making behavioral changes, such as encouraging multiple driver shifts during peaks and early fills of storage tanks.
   • Incentivizing infrastructure investments, such as improving farm and residential storage and developing a terminal load reservation/scheduling system.
   • Implementing a “data strategy” to monitor current and future market conditions for propane.
   Iowa DOT is now exploring ways to implement the recommendations by cooperatively working with the propane industry and its customers, Zimmerman said.
   Quetica’s work in this area has also perked the interest of other power generation and energy businesses. The company has recently been approached to conduct a supply chain optimization study in Iowa’s burgeoning bioenergy industry. Biomass is used as feedstocks for the production of a broad range of industrial bio-based products including fuels, chemicals, polymers and materials.

Chris Gillis

Located in the Washington, D.C. area, Chris Gillis primarily reports on regulatory and legislative topics that impact cross-border trade. He joined American Shipper in 1994, shortly after graduating from Mount St. Mary’s College in Emmitsburg, Md., with a degree in international business and economics.