APPENDIX 3B. XENON AVAILABILITY AND PRICING

TABLE OF CONTENTS

3B.1 INTRODUCTION .........................................................................................................3B­1

3B.2 SUPPLY.........................................................................................................................3B­1

3B.2.1 Production Process.............................................................................................3B­1

3B.2.2 Key Players........................................................................................................3B­1

3B.2.2.1 Praxair................................................................................................ 3B­1

3B.2.2.2 Air Liquide......................................................................................... 3B­2

3B.2.2.3 Linde .................................................................................................. 3B­2

3B.2.2.4 Iceblick............................................................................................... 3B­2

3B.3 APPLICATIONS ...........................................................................................................3B­2

3B.3.1 Lighting Industry ...............................................................................................3B­2

3B.3.2 Medical Applications.........................................................................................3B­2

3B.3.3 Space Industry....................................................................................................3B­3

3B.3.4 Semiconductor Industry.....................................................................................3B­3

3B.4 PRICE ............................................................................................................................3B­3

3B.4.5 LCC Analysis.....................................................................................................3B­4

3B.5 CONCLUSION..............................................................................................................3B­5

3B.5.6 Supply ................................................................................................................3B­5

3B.5.7 Demand..............................................................................................................3B­5

3B.5.8 Price ...................................................................................................................3B­5

REFERENCES ..........................................................................................................................3B­7

LIST OF FIGURES

Figure 3B.1 Xenon Supply and Demand ..................................................................................3B­4

3B­i

EE-2006-STD-0131 COMMENT 37.2
APPENDIX 3B. XENON AVAILABILITY AND PRICING

3B.1 INTRODUCTION

In the screening analysis (chapter 4 of technical support document (TSD)), the

Department of Energy (DOE) identified a number of technology options that could be used to

increase the efficacy of incandescent reflector lamps (IRL). Using the screening criteria, DOE

determined higher­efficiency inert fill gas warranted further consideration as a design option for

IRL.

One of the screening criteria is the practicability to manufacture, install, and service. If

mass production and reliable installation and servicing of a technology in commercial products

can be achieved on the scale necessary to serve the relevant market at the time the standard

comes into effect, then DOE will consider that technology practicable to manufacture, install,

and service. Due to concerns voiced during manufacturer interviews, DOE conducted this

additional analysis to explore the xenon market and confirm the ability of higher­efficiency inert

fill gas to meet this screening criterion. The sections below evaluate how the supply, market,

and price of xenon affect its ability to be used as a higher­efficiency inert fill gas.

3B.2 SUPPLY

3B.2.1 Production Process

Xenon is one of three rare gases (along with neon and krypton) produced by cryogenic air

separation. Given the low concentration of the rare gases in the air (Neon 0.002 percent,

Krypton 0.0001 percent, and Xenon 0.00001 percent), the only cost­effective recovery option is

a large air separation unit. Most worldwide supply is met by the three largest industrial gas

companies (Air Liquide, Praxair, and Linde); another major supplier, Iceblick, a former Statecontrolled enterprise of the Soviet Union.1

,

2 Together these four companies control more than 80

percent of the global supply of rare gases.2

3B.2.2 Key Players

3B.2.2.1 Praxair

With 28,000 employees and operations in more than 30 countries, Praxair posted annual

sales of $9.4 billion in 2007. Its primary products are atmospheric gases (produced when air is

purified, compressed, cooled, distilled and condensed) and specialty gases (produced as byproducts of chemical production or recovered from natural gas).3 Praxair also is one of the four

major worldwide gas companies and a significant supplier of xenon.

3B­1

EE-2006-STD-0131 COMMENT 37.2
3B.2.2.2 Air Liquide

With more than 40,000 employees in 72 countries, Air Liquide states it is the world

leader in industrial and medical gases and related services.1 Founded in 1902, Air Liquide

achieved sales of 11.8 billion euros in 2007. Besides manufacturing industrial grade xenon, Air

Liquide manufactures and markets LENOXe, the first xenon­based anesthetic. It was used for the

first time in France on December 18, 2007. In conjunction with LENOXe, Air Liquide also

developed the anesthesia workstation FELIX DUAL.4

3B.2.2.3 Linde

Based in Germany, The Linde Group (Linde) had 2007 sales of 12.3 billion euros. With

more than 50,000 employees after acquiring The BOC Group, Linde has a large engineering

division to compliment its industrial gas operations.5 One of four major industrial gas companies

worldwide, Linde also is a major manufacturer of xenon.

3B.2.2.4 Iceblick

Iceblick, founded in 1992, produces about 60 percent of the world’s supply of neon and

more than 20 percent of the supply of krypton and xenon.6 It obtains its raw materials from

chemical companies based in Russia, Ukraine, Kazakhstan, and Romania. Iceblick then purifies

the gases and sells the products to consumers, which are predominantly industrial gas companies.

3B.3 APPLICATIONS

3B.3.1 Lighting Industry

The most common application for all rare gases is lighting.2 Using xenon instead of

argon as a fill gas in incandescent lamps increases the life of the filament because it allows the

lamp to produce the same amount of light output while using less energy. Xenon lighting is used

in stadiums, aviation, automotive headlights, IMAX theaters, photography, and other

applications where bright light is desired.

3B.3.2 Medical Applications

Xenon’s anesthetic properties were first discovered in 1939, though it was not used as a

medical anesthetic until 1951.7 Its use as an anesthetic had been largely forgotten until about

1990, mainly because of the high cost.8 Since that time, a large amount of research has analyzed

the pros and cons of using xenon. The first large scale study that evaluated the use of xenon

anesthesia in humans concluded that xenon is at least equivalent to nitrous oxide­isoflurane in

efficacy and safety.9 Compared to nitrous oxide, xenon’s other benefits include a faster recovery

time and environmental friendliness. High cost is the only thing prohibiting xenon from

widespread use as an anesthetic. Currently a recovery system must be used for xenon to remain

cost­effective.

3B­2

EE-2006-STD-0131 COMMENT 37.2
Besides its use in anesthesia, Xenon is also used in the medical industry to enhance

imaging in X­rays, CAT scans, and MRIs.2 Xenon makes it possible to obtain better x­rays with

reduced amounts of radiation. Finally, when mixed with oxygen, xenon enhances contrast in CT

imaging and can be used to determine blood flow.10

3B.3.3 Space Industry

Xenon is used in the space industry for ion engines and ion plasma thrusters for satellites.

Ion engines depend on electrically charged atoms to generate thrust. They are ten times more

efficient than the alternative chemical propulsion systems. Using xenon reduces the required

propellant mass by up to 90 percent, thereby reducing launch costs due to a lighter spacecraft.11

Newer satellites use xenon ion propulsion systems (XIPS), which have about four ion engines,

for repositioning.

3B.3.4 Semiconductor Industry

Plasma display panels (PDPs) are commonly used for large TV displays (typically larger

than 37 inches) and compete directly with liquid crystal displays (LCDs). PDPs have many tiny

cells between two plates of glass which contain a mixture of xenon and neon gas. Passing a

voltage across the cell ionizes the gases and forms a plasma. Photons emitted by the plasma

excite the phosphors coating the back of each cell, emitting colored light. Thus, the operation of

each cell is similar to that of a fluorescent lamp.

Xenon is also used in electronic chip manufacturing. Companies utilize xenon plasma

etching to manufacture micro­electro­mechanical systems (MEMS). Demand for this industry

alone increased from under one million liters of xenon per year to almost three million liters per

year in twelve months. In response to this rapid increase in demand, Air Products, an industrial

gas company, introduced a xenon recovery system for the semiconductor and MEMS industries

in July 2008.12 This technology uses vacuum swing absorption to extract xenon from process

effluent streams. A mixture containing high levels of xenon is recovered and sent offsite for

distillation once storage vessels are full. Air Products estimates customer cost savings could

reach up to 67 percent.

3B.4 PRICE

The price of xenon is highly dependent on the demand for the applications in which it is

used. Major applications for xenon include the lighting industry, the television industry (flat

panel displays), the space industry (ion engines, satellite repositioning), the medical industry (i.e.

imaging, anesthesia), and the semiconductor industry (electronic chip manufacturing). All of the

applications are growing rapidly. The demand from the semiconductor industry alone increased

from under one million liters per year to almost three million liters per year between June 2007

and June 2008.13

3B­3

EE-2006-STD-0131 COMMENT 37.2
Figure 3B.1 Xenon Supply and Demand

Figure 3B.1 above tracks and forecasts xenon supply and demand (as of June 2007).2

Total production of xenon was just over nine million liters in 2007. Responding to increasing

demand, production increased in the last year, reaching 12 million liters in June 2008.13 With the

development of new applications and growth of existing ones, demand for xenon is predicted to

grow. Additionally, because significant time is required to increase production, xenon demand is

forecasted to continue to exceed supply in the near future (as seen in Figure 3B.1). While there

remain essentially inexhaustible supplies of xenon in the atmosphere, considerable investment

would be required to expand global production substantially.

Since it is impossible to immediately ramp up supply, spot prices have increased from

$3.00­$4.00 per liter to $28.00­$35.00 per liter for large cylinders14. These higher prices are

expected to be sustained in the near­term until supply can meet the growing demand.13

3B.4.5 LCC Analysis

DOE performed an analysis to determine by how much the price of xenon could increase

before it negatively impacted LCC savings. For this analysis, DOE assumed that the cost of the

lamp to the end­user would need to increase by at least the same amount as the LCC savings

before the cost of xenon negatively impacted the consumer savings. Because the LCC savings

represent savings to the end­user, DOE divided the LCC savings by the mark­up used in the

manufacturer impact analysis to determine how much the xenon manufacturing input cost would

3B­4

EE-2006-STD-0131 COMMENT 37.2
impact the end­user. DOE assumed that this cost increase would be completely attributable to an

increase in the cost of xenon. Through manufacturer interviews, DOE estimated the quantity of

xenon that would be required to achieve the desired efficacy in an individual lamp. DOE used

this average volume per lamp and the cost to the manufacture to calculate a cost per volume of

xenon. Using this method, DOE was able to calculate how much the price of xenon could

increase before it would negatively impact LCC savings.

3B.5 CONCLUSION

3B.5.6 Supply

As shown in Figure 3B.1, the supply of xenon has increased each year. However, the

supply increases have been modest and have not kept pace with the demand in recent years. This

supply lag is likely due to the process by which xenon is separated, which requires significant

time to design and construct additional capacity. Due to the increased demand in the past few

years and the corresponding price increase, supply will likely continue to increase as it becomes

more cost effective to build air separation units with additional capacity. Based on historical

trends, it is unlikely that the supply of xenon will become limited or significantly decrease from

its current level over the analysis period. Therefore, DOE believes the availability of xenon will

not be impacted by this rulemaking. DOE concludes that the supply of xenon will not affect the

practicability to manufacture, install, and service IRL with higher­efficiency inert fill gas.

3B.5.7 Demand

DOE estimates that the increased demand for xenon as a result of this rulemaking will

range from 3.2 to 12.8 percent of current worldwide production in the year the IRL rulemaking

takes effect. Over the thirty year analysis period, the increased demand for xenon could range

from 0.5 percent to 18 percent of current worldwide production, depending on the shipment

scenario selected for the base and standards case. This increased demand is expected to have

little long­term effect on the price or availability of xenon, considering the other contributing

factors. Rapid growth or decline of existing markets or the discovery of a new application could

significantly impact the total demand for xenon, perhaps even more so than this rulemaking.

Furthermore, the above numbers are based on the current worldwide production (12 million

liters) and assume no increase in production over the analysis period. This is highly unlikely,

given that current demand substantially exceeds supply. Any future increase in xenon

production would decrease the percentages mentioned above. DOE concludes that the increased

demand as a result of this rulemaking will not affect the practicability to manufacture, install,

and service IRL with higher­efficiency inert fill gas.

3B.5.8 Price

Because both NEMA and major lamp manufacturers expressed concern specifically

regarding the recent rise in the price of xenon, DOE analyzed the effect of price on LCC savings,

as discussed in section 3B.4.5. DOE concluded that the price of xenon could increase to over

$100 per liter before it started to negatively impact LCC savings. As the average price of xenon

3B­5

EE-2006-STD-0131 COMMENT 37.2
is currently $31.50 per liter, the price could more than triple before the cost of manufacturing a

lamp with higher­efficiency inert fill gas outweighed the efficacy benefits. Therefore, DOE does

not believe that further price increases will affect product availability. Thus, DOE concludes that

any increases in price as a result of this rulemaking will not affect the practicability to

manufacture, install, and service IRL with higher­efficiency inert fill gas.

3B­6

EE-2006-STD-0131 COMMENT 37.2
REFERENCES

1 Air Liquide. 2007 Annual report. Last viewed on December 23, 2008. Available at

<http://www.airliquide.com/file/otherelementcontent/pj/airliquide­radd2007­en58122.pdf>.

2 Betzendahl, Richard. “Rare Gases: A Fast Growing Global Commodity.” CryoGas

International, June 2007.

3 Praxair, Inc. “About Praxair.” Last viewed on December 23, 2008. Available at

<http://www.praxair.com/praxair.nsf/AllContent/CD937FF096576A6585256A92006E6ED5?Op

enDocument&URLMenuBranch=2172D0A50585464685257035005ED87>.

4 Air Liquide. “First Anesthesia with LENOXe in France, at the Nimes Teaching Hospital.”

March 2008. Last viewed on December 23, 2008. Available at

<http://www.airliquide.com/en/press/press­releases/first­anesthesia­with­lenoxe­in­france­at­thenimes­teaching­hospital.html>.

5 Linde AG. “General FAQ.” Last viewed on December 23, 2008. Available at

<http://www.linde.com/international/web/linde/like35lindecom.nsf/docbyalias/nav_generalfaq>.

6 Iceblick. “About Us.” Last viewed on December 23, 2008. Available at

<http://iceblick.tenet.odessa.ua/eng/>.

7 Marx, Thomas M.D., M. Schmidt M.D., U. Schirmer M.D., and H. Reinelt M.D.. “Xenon

anesthesia.” Journal of the Royal Society of Medicine: Volume 93. October 2000.

8 Goto, Takahisa M.D.; Nakata, Yoshinori M.D., M.B.A.; Morita, Shigeho M.D. “Will Xenon

Be a Stranger or a Friend?: The Cost, Benefit, and Future of Xenon Anesthesia.”

Anesthesiology: Volume 98 (1), January 2003.

9 Rossaint, Rolf M.D. et. al “Multicenter Randomized Comparison of the Efficacy and Safety of

Xenon and Isoflurane in Patients Undergoing Elective Surgery.” Anesthesiology: Volume 98 (1),

January 2003.

3B­7

EE-2006-STD-0131 COMMENT 37.2
10 Praxair, Inc. “Xenon Applications.” Last viewed on December 23, 2008. Available at

<http://www.praxair.com/praxair.nsf/0/32F3A328E11BB600052565660052C139?OpenDocume

nt>.

11 Boeing Integrated Defense Systems. “NSTAR Ion Engine.” Last viewed on December 23,

2008. Available at <http://www.boeing.com/defensespace/space/bss/factsheets/xips/nstar/ionengine.html>.

12 Air Products Press Release. “Air Products Introduces XeCovery On­Site Xenon Recovery

System. Last viewed December 23, 2008. Available at

<http://www.airproducts.com/PressRoom/CompanyNews/Archived/2008/15Jul2008.htm>.

13 Betzendahl, Richard. “The Rare Gets More Rare: The Rare Gases Market Update.” CryoGas

International, June 2008.

3B­8

EE-2006-STD-0131 COMMENT 37.2