3B-i APPENDIX 3B. XENON AVAILABILITY AND PRICING

TABLE OF CONTENTS

3B.1 INTRODUCTION .........................................................................................................3B-1 3B.2 SUPPLY......................................................................................................................... 3B-1 3B.2.1 Production Process.............................................................................................3B-1 3B.2.2 Key Players ........................................................................................................3B-1 3B.2.2.1 Praxair................................................................................................ 3B-1 3B.2.2.2 Air Liquide......................................................................................... 3B-2 3B.2.2.3 Linde .................................................................................................. 3B-2 3B.2.2.4 Iceblick............................................................................................... 3B-2 3B.3 APPLICATIONS ...........................................................................................................3B-2 3B.3.1 Lighting Industry ...............................................................................................3B-2 3B.3.2 Medical Applications.........................................................................................3B-2 3B.3.3 Space Industry....................................................................................................3B-3 3B.3.4 Semiconductor Industry.....................................................................................3B-3 3B.4 PRICE .......................................................................................................................... ..3B-3 3B.4.5 LCC Analysis.....................................................................................................3B-4 3B.5 CONCLUSION..............................................................................................................3B-5 3B.5.6 Supply ................................................................................................................3B-5 3B.5.7 Demand..............................................................................................................3B-5 3B.5.8 Price ...................................................................................................................3B-5 REFERENCES ..................................................................................................................... .....3B-7

LIST OF FIGURES

Figure 3B.1 Xenon Supply and Demand ..................................................................................3B-43B-1 3B.1

3B.2 APPENDIX 3B. XENON AVAILABILITY AND PRICING

INTR ODUCTION

In the screening analysis (chapter 4 of technical support document (TSD)), the Departm ent 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 high-efficiency inert fill gas warrant ed 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 serv icing 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 duri ng manufacturer interviews, DOE conducted this additional analysis to explore th e xenon market and confirm the abil ity of higher-efficiency inert fill gas to meet this screening criterion. The sections be low evaluate how the supply, market, and price of xenon affect its ab ility to be used as a high-efficiency inert fill gas.

SUPP LY

3B.2.1 Production Process

Xenon is one of three rare ga ses (along with neon and kr ypton) produced by cryogenic air separation. Given the low con centration of the rare gases in the air (Neon 0.002 percent, Krypton 0.0001 percent, and Xenon 0.00001 percent), the only cost-effective recovery option is a large air separation unit. Most worldwide s upply is me t by the three largest indus trial gas companies (Air Liquide, Praxair, and Linde); an other 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 em ployees and operations in more than 30 countries, Praxair posted annual sales of $9.4 billion in 2007. It s primary products are atmospheri c gases (produced when air ispurified, 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 industrial gas companies a nd a significant supplier of xenon.3B-2 3B.3 3B.2.2.2 Air Liquide

With m ore than 40,000 employees in 72 countri es, Air Liquide states it is the world leader in industrial and medi cal gases and related services. 1 Founded in 1902, Air Liquide achieved sales of 11.8 billion euros in 2007. Besi des manufacturing industrial grade xenon, Air Liquide manufactures and markets LENOXe, the firs t xenon-based 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) h ad 2007 sales of 12.3 billion euros. With more than 50,000 employees after acquiring Th e 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 pe rcent 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 predomin antly industrial gas companies.

APPL ICATIONS

3B.3.1 Lighting Industry

The most common application fo r all rare gases is lighting. 2 Using xenon instead of argon as a fill gas in incandescent lamps increases the lif e 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 headlight s, IMAX theaters, photography, and other applications where brig ht light is desired.

3B.3.2 Medical Applications

Xenon’s anesthetic properties were f irst 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 la rge scale study that evaluated the use of xenon anesthesia in humans concluded that xenon is at least equivalent to nitrous oxide-isoflurane in efficacy and safety. 9 Compared to nitrous oxide, xenon’s othe r benefits include a faster recovery time and environmental friendliness. High cost is the only obstacle prohibiting xenon from widespread use as an anesthetic. Currently a recovery system must be used for xenon to remain cost-effective.3B-3 3B.4 Besides its use in anesthesia, Xenon is also used in the me dical industry to enhance imaging in X-rays, CAT scans, and MRIs. 2 Xenon makes it possible to obtain better x-rays with reduced amounts of radiation. Finally, when mixe d 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 engi nes and ion plasm a 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 redu cing launch costs due to a lighter spacecraft. 11 Newer satellites use xenon ion pr opulsion systems, which have about four ion engines, for repositioning.

3B.3.4 Semiconductor Industry

Plasma display panels (PDPs) are commonly us ed 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 gl ass which contain a mixture of xenon and neon gas. Passing a voltage across the cell ionizes the gases and fo rms 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 ma nufacturing. Companies utilize xenon plasma etching to manufacture micro-electro-mechanical 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, Ai r 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 ab sorption to extract xenon from process effluent streams. A mixture co ntaining high levels of xenon is recovered and sent offsite for distillation once storage vessels are full. Air Pr oducts estimates customer cost savings could reach up to 67 percent.

PRIC E

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 te levision industry (flat panel displays), the space industry (ion engines, satellite repositioning), the medical industry (i.e. imaging, anesthesia), and the semi conductor industry (electronic ch ip 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. 13Figure 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 y ear, 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 increase. Additionally, because significant tim e is required to increase production, xenon demand is forecasted to continue to exceed supply in the near future (as seen in Figure 3B.1 ). Wh ile there remain essentially inexhaustible supplies of xenon in the atmosphere, considerable investment would be required to ex pand 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 cylinders. These higher prices are expected to be sustained in the near-t erm until supply can meet the growing demand. 13

3B.4.5 LCC Analysis

3B-4 DOE perfor med an analysis to determine by how much the price of xenon could increase before it negatively impacted LCC savings. For th is analysis, DOE assumed that the cost of the lamp to the end-user would need to increase by at least the same amount as the LCC savings before the cost of xenon negatively impacted th e consumer savings. Because the LCC savings represent savings to the end-user, DOE divide d the LCC savings by the mark-up used in the manufacturer impact analysis to determine how much the xeno n manufacturing input cost would3B-5 3B.5 impact the end-user. DOE assumed that this cost incr ease would be completely attributable to an increase in the cost of xenon. Through manufactur er 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 cal culate how much the price of xenon could increase before it would negatively impact LCC savings.

CONC LUSION

3B.5.6 Supply

As shown in Figure 3B.1 , the supply of xenon has increased each year. H owever, the supply increases have be en modest and have not ke pt pace with the demand in recent years. This supply lag is likely due to the process by whic h 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 w ill become limited or significantly decrease from its current level over the analysis period. Theref ore, DOE believes the av ailability of xenon will not be impacted by this rulemaking. DOE concl udes that the supply of xenon will not affect the practicability to manufacture, in stall, and service IRL with higher-efficiency inert fill gas.

3B.5.7 Demand

DOE estima tes that the increased demand fo r xenon as a result of this rulemaking will range from 3.2 to 12.8 percent of current worldw ide 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 cas e. This increased demand is expected to have little long-term effect on the pr ice or availability of xenon, c onsidering the other contributing factors. Rapid growth or decline of existing ma rkets or the discovery of a new application could significantly impact the total demand for xenon, pe rhaps 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 mentione d above. DOE conclude s that the increased demand as a result of this rulemaking will not aff ect the practicability to manufacture, install, and service IRL with higher-efficiency inert fill gas.

3B.5.8 Price

Because both NEMA and ma jor lamp manuf acturers expressed concern specifically regarding the recent rise in the price of xenon, DO E analyzed the effect of price on LCC savings, as discussed in section 3B.4.5 . DOE concluded that the pri ce of xenon could increase to over $100 per liter before it started to negatively imp act LCC savings. As the average price of xenon3B-6 is currently $31.50 per liter, the pric e could more than triple before the cost of manufacturing a lamp with higher-efficiency inert fill gas outweig hed the efficacy benefits. Therefore, DOE does not believe that further price increases will aff ect product availability. Th us, DOE concludes that any increases in price as a result of this rulemaking will not affect the practicability to manufacture, install, and service IRL w ith higher-efficiency inert fill gas.3B-7 REFERENCES

1 Air Liquide. 2007 Annual report. (Last accessed July 9, 2009).

< http://www.airliquide.com/file/otherelem entcontent/pj/airliquide-radd2007-en5812 2.pdf >.

2 Betzendahl, Richard. “Rare Gases: A Fast Growing Gl obal Commodity.” CryoGas International , June 2007.

3 Praxair, Inc. “About Praxair. ” (Last accessed July 9, 2009). <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 accessed July 9, 2009). < http://www.airliquide.com/en/press/pressreleases/first-anest hesia-with-lenoxe-in-france-at- the-nimes-teaching-hospital.html >.

5 Linde AG. “General FAQ.” (Last accessed July 9, 2009).

< http://www.linde.com/international/web/linde/l ike35lindeco m.nsf/docbyalias/nav_generalfaq >.

6 Iceblick. “About Us.” (Last accessed July 9, 2009). < 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, Bene fit, and Future of Xenon Anesthesia.” Anesthesiology: Volume 98 (1), January 2003.

9 Rossaint, Rolf M.D. et. al “Multicenter Randomi zed Comparison of the Efficacy and Safety of Xenon and Isoflurane in Patients Undergoing Elec tive Surgery.” Anesthesiology: Volume 98 (1), January 2003.

10 Praxair, Inc. “Xenon Applications .” (Last accessed July 9, 2009).

< http://www.praxair.com/praxair.ns f/0/32F3A328E11BB600052565660052C139?OpenDocume
nt >.3B-8 11 Boeing Integrated Defense Systems. “NSTAR Ion Engine.” (Last accessed July 9, 2009).

< http://www.boeing.com/defense-space/space/b ss/factsheets/xips/n star/ionengine.html >.

12 Air Products Press Release. “Air Products Introduces XeCovery On-Site Xenon Recovery System. 2008. (Last accessed July 9, 2009).

< http://www.airproducts.com/PressRoom/Co mpanyNews/Archived/2008/15Jul200 8.htm >.

13 Betzendahl, Richard. “The Rare Gets More Rare: The Rare Gases Market Update.” CryoGas International , June 2008.