Smelter technology, alloys with special properties and buildings that are energy-neutral during operation are among the areas we are developing.
Our research and development costs recognized as an expense amounted to NOK 508 million in 2011, compared to NOK 543 million in 2010.
The greater part of our R&D expenses goes to our in-house research organization, while the remainder supports work carried out at external institutions, see Note 14. Our main R&D centers are in Årdal (smelter technology) and Sunndal (alloys and casting) in Norway, Bonn in Germany (rolled products) and Toulouse in France (building systems).
We reviewed our R&D organization in 2011. Starting in 2012, all business areas will be responsible for their own technology development and execution of their respective technology strategies. As part of the new organizational model, a corporate technology office has been established to ensure a holistic and long-term approach to Hydro's technology strategy and agenda. The technology office will lead an internal R&D network with representatives from the business areas, and support the corporate management board in developing overall research and technology priorities and strategies.
Hydro Recognition Program
The objective of the Hydro Recognition Program is to energize all employees by recognizing excellent work and best-practice sharing. The winner is an organization or a team that has demonstrated outstanding effort within the areas of HSE, innovation or performance. Winners should clearly demonstrate the spirit of The Hydro Way, emphasizing the values of Hydro in the way they work. The first winners of the Hydro Recognition Program will be selected in 2012. The program replaces the President's HSE Award and Hydro Innovation Award.
Metal production moving forward
We intend to make production more efficient and to secure the necessary access to alumina and electrical power. Improvement efforts revolve around smelter technology and the positioning of new capacity in locations where there is a surplus of power.
Hydro's proprietary electrolytic process is one of the most efficient in the world. The primary aluminium plants in Sunndal, Norway and Qatalum, Qatar are using the newest technology. Our next-generation technology, HAL4e, is ready for use the next time we build an aluminium plant, having proven that it can produce primary aluminium with a specific energy consumption of 12.5 kWh/kg aluminium. We are now developing this technology further. HALsee - or HAL super energy efficient - is targeting a maximum of 12 kWh/kg aluminium. We are emphasizing cell productivity as well as reduced energy consumption and climate-gas emissions from the production process.
R&D in our Primary Metal business is important to strengthening competitiveness by improving the cost position at our metal plants. Prioritized tasks are operational support, implementation of new technology in existing activities and the development of next-generation electrolysis technology. Because energy constitutes from one-third to half of total production costs, energy efficiency is one of the most important ways to reduce costs, while at the same time reducing the climate footprint.
Our casthouses focus on process efficiency in terms of improved capacity utilization and process capability. The continuous improvement of product quality is an important part of our business concept, and is strongly linked to technical customer service. We develop our products together with customers, listening to their needs while improving our own casthouse processes.
In 2011, we established an electronic tool named Scrap Portal to raise competence and efficiency within the organization. Most remelters are using the portal for all scrap procurement. The portal is also used to coordinate scrap collection with customer deliveries. We have planned to finalize the development of generating management reports that look at various aspects of our scrap buying in March 2012.
In the area of recycling, we have lifted our budgets even further as a joint effort between our Metal Markets, Rolled Products and Extruded Products business areas. This includes funding for projects related to closed-loop recycling of downstream products, recycling-friendly alloys and products, upgraded scrap processing, and furnace technologies that help improve recycling rates and quality of scrap and metal produced. The scope of all our recycling-related projects also includes reduction of total waste and waste sent to landfill. Hydro participates in national and EU-funded projects to support our ambition as a company and industry.
Hydro has embarked on an extensive R&D program to develop post-consumer scrap-recycling technology following market demand for products with a low carbon footprint. The R&D program includes joint projects with external research institutes such as SINTEF and NTNU in Norway, and RWTH Aachen in Germany. In 2012, we expect to finalize some projects to prepare for investments in specific recycling plants.
We also engage in other joint projects. One project is funded by Norsk Forskningsråd: the AlEnergy project on Mass Flow Analysis (MFA), blending tools and melting/refining technology together with NTNU and SINTEF. There are four BMBF (German Federal Ministry of Research and Education) funded projects, one with CUTEC in Clausthal-Zellerfeld on SPL inertization for alternative fuel usage, and three with RWTH Aachen, covering bio-fuels, alloy recycling and aluminium recovery from incinerator ashes. Another project with RWTH Aachen on salt optimization recieves funds from the German Industrial Research Comittee AIF (Arbeitsgemeinschaft industrieller Forschung).
In Norway we receive support from several public institutions to further develop our smelter and casthouse technology as well as downstream activities. These include Enova, The Research Council of Norway and Innovation Norway. In 2011, we received in total NOK 42 million from these institutions, while we were granted NOK 190 million to be paid out in the years to come if certain projects are implemented. See also Energy and climate change.
Implementing and commercializing innovative product ideas and concepts are core activities. Innovation often takes place in joint projects with the customer once needs have been identified. Numerous new products are launched every year.
The carbon footprint of our solutions is gaining increasing attention and relevance, especially when looking at new applications of aluminium and when improving the ecological performance of existing ones. Our approach to involve customers and key stakeholders in developing better solutions helps us to differentiate and become the partner of choice. For example, our Rolled Products business area works with packaging manufacturers to improve certain packaging material, to provide high functionality while improving recycling rates.
We also work closely with customers to develop products that save energy and reduce emissions. Aluminium façades can lower operating costs and help enable buildings to produce as much energy as they consume during operation. We have constructed three such buildings in Hydro, in Germany, France and India. Heat pumps, integrated photovoltaic systems and intelligent building design all contribute to energy neutrality.
By bringing our building systems operation's R&D team closer to product development, we plan to increase sharing and thereby strengthen the Domal, Wicona, Technal and Alumafel brand centers, and to increase the speed-to-market of new products. This includes utilizing competence from our India unit, where craftsmen come closer to our brands' range of specialty products and systems, working mode and overall product offer. In fact, the operation's six locations in Europe and one in India work as if they were in the same location. In addition to the technical specifications of the products, delivery time is an important competitive factor. A separate KPI has been introduced to reduce the elapsed time from project to product to customer delivery.
Through our Rolled Products business area, we have a strategic research partnership with the University of Aachen in Germany, aiming at modeling the entire rolling process chain. An example of Rolled Products' innovations in 2011 is the development of a high-strength alloy that can contain 80-90 percent of heat exchanger-clad production scrap. The new alloy has been cast and rolled for seam welding, and the first trial orders for the automotive industry have been produced. HyGROSAL is a special aluminium coating that makes rotary heat exchangers more efficient by allowing a combined transfer of heat and mass. As a result, less energy is required for e.g. air conditioning and cooling of industrial buildings and sports arenas.
The Powerhouse alliance was founded in 2011. The alliance is aiming to build the world's northernmost energy-positive building - a building that produces more energy than it consumes during operation - in Norway. In addition to Hydro, the alliance includes the real estate firm Entra Eiendom, the developer Skanska, the architecture firm Snøhetta and the environmental NGO Zero. The ambition is to demonstrate that it is possible to develop energy-positive buildings not only in warm climates, but in colder climates like Norway. Since the alliance was formed, Powerhouse has started working on two projects in Norway, one rehabilitation project and one new building. The rehabilitation project is located in the municipality of Bærum, just outside Oslo, while the new building is being developed further north, in Trondheim. Eventually, Powerhouse will build more energy-positive buildings in Norway and abroad. Powerhouse is therefore interested in establishing contact with anyone who owns projects or possesses the expertise needed to expand the development of energy-positive buildings.
Together with the Powerhouse alliance, Hydro is aiming at building the world's northernmost energy-positive building.
Complete makeover without moving out
When Hydro refurbished its 40-year-old Building Systems headquarters in Milan, Italy, none of the 50 employees had to move out of the building, and the company avoided the major costs of renting temporary premises during the renovation period. The refurbishment was a complete "makeover" where all windows were replaced and outside insulation and new cladding added, in addition to an interior upgrade and other modifications. The standard after refurbishment is almost equal to the level of a new building. Moreover, the restored building is designed to use at least 20 percent less energy than before. The most important reason for the savings is the new aluminium windows with external sun-shading devices, which together with the 14-cm thick extra layer of insulation in the walls, has resulted in about 60 percent reductions in both winter heat loss and summer solar gains. The refurbished building has become a showcase for our building customers.
Hydro research scientists were involved in the SuperLightCar Project, which won the InnoMateria Award for its pioneering use of innovative materials in lightweight vehicle construction. The project team consisted of 37 leading representatives from research as well as the automotive and components supply industries from nine European countries. The SuperLightCar Project investigated how to best improve the material mix, particularly in the car body. Through lightweight construction, aluminium offers clear advantages, not only for sustainable use in large-scale production but also for long-term environmental impact. In the end, the share of aluminium in the car body increased to 64 percent of volume, and the vehicle was 35 percent lighter: a weight saving of 100 kilograms. The weight saving is normally equivalent to a reduction of CO2 emissions of 10 grams per km.
Best practice sharing
We strive toward business excellence through continuous improvement, utilizing people, technology and systems to be able to generate maximum value for our customers. Through decentralized power and responsibility, decisions are made by those best able to take them. Our business systems define the underlying principles needed to create a performance culture in a unit. One example is our Aluminium Metal Production System (AMPS), which is our best practice system and standard for world-class production and improvement in our primary metal business. AMPS builds on the principle of empowerment of each employee.
The production system has been implemented at all our metal plants, including the joint-venture plants Qatalum and Slovalco. Our new joint venture, Albras in Brazil, has also started implementing AMPS as a part of its improvement program based on Hydro technology. Encouraging results have already been achieved.
All employees in the organization are included in the process, which involves e-learning, classroom training, on-the-job training and job observation. AMPS includes an ongoing training academy, which also includes a leadership development program for all employees in management or supervisory positions. So far, 750 managers and supervisors have taken part in the leadership program, while all employees in the relevant business areas have participated in different academy training sessions. See page xx. Implementation is an important part of our USD 300 per mt cost-reduction program for primary production.
Our metal markets, extrusion and rolling activities have similar systems adapted to their business needs.
The Co-creation Program
In 2011, we established the Co-creation Program, which aims at securing value creation and the voice of technology throughout Hydro's value chain. Eleven employees from different parts of Hydro are educated to contribute to innovation management competence. The program includes different tools, with participants trained to support colleagues working in functions such as technology development, product development and business development. The participants represent a diverse professional background and six nationalities. Two of the participants are female. The Co-creation Program aims to develop healthy and down-to-earth innovative work practices that can be utilized across Hydro.