(329d) Exploring New Business Opportunities through an Innovative Collaboration between Industry and Academia: Leveraging Advances in Optimization with a Market Model for Cap & Trade Emissions Compliance

Air Products is committed to continuously improve its overall return on assets. Our core strengths in industrial gases and chemicals production are capital-intense operations. To complement these activities, we began to develop value-added service offerings for our customers. The idea was to generate income that requires a low capital investment by leveraging the skills and creativity of our human assets.

New business models and innovative solutions are often found through a synergistic collaboration of different skills sets within the company. We further leverage this by including academic leaders from business and technology in these collaborative efforts.

Air Products' core expertise in not in the development of software applications and algorithms. It is in the proficient application of computational tools to address business and manufacturing problems. For this reason, one successful industrial-academic technology transfer mechanism has been the formation of venture companies spun-off of leading academic research. These companies provide us with access to the technologies that enable us to solve challenging problems, while alleviating us of the need to develop and, in particular, support and maintain a wide-variety of software solutions. In this paper we describe a specific collaboration between Air Products' Computational Modeling Center and Advanced Process Combinatorics (APC) Inc., located in the Purdue Technology Center.

Air Products had developed a unique business concept, whose value proposition to prospective clients was to minimize the cost to meet NOx emission-level reduction compliance in the Houston-Galveston Area over a seven-year compliance period. Cost savings could be quantified through a Mixed-Integer Programming (MILP) model. The model contains over 200 companies, almost 3000 emission point-sources, and a two-tiered selection of control technology alternatives. The size of the model was too large for conventional MILP solvers, but was solved using a variety of solution techniques developed in conjunction with APC, in particular their expertise in Algorithm Engineering. Air Products' developed a trading model, which is based on the results of the MILP. It is formulated as a Nonlinear Programming (NLP) problem and solved using commercial optimization software. The trading model determines the amount traded and price of trades between companies based on the marginal cost to sellers and the marginal savings to buyers.

This presentation will highlight these efforts and quantify the benefits that had been associated with this offering.