Networks and Demand. The Use of Electricity in an Industrial Process

Abstract: The formation of demand for an individual resource is examined in a network setting. Demand is seen as an interactive process, where several firms make use of a resource directly and indirectly and, in so doing, shape the primary demand for it. This thesis is also concerned with how an individual firm can influence its demand. The third issue deals with the use and development of knowledge about resources.The empirical investigation was designed as a case study and was based on interviews with about 100 people. The focal firm is Hallsta Paper Mill (one of three paper mills within Holmen Paper, a major player in the European newspaper market), one of Sweden's biggest users of electricity. In 2000 Hallsta used 1,7 TWh electricity. Hallsta is a producer of wood containing paper, including standard newsprint, improved newsprint (machine finished paper) and paper for magazines. These paper grades are based on the thermo mechanical pulp (TMP) process, where about 2600 kWh of electricity is needed to produce one ton of pulp. In the TMP process there is one single piece of equipment that uses the lion's share of all the electricity, the disc refiner. The empirical enquiry reveals why this process uses such large amounts of electricity. The demand for electricity is analysed by adopting an industrial network approach using a resource based network framework.The results of this study show that the use of the electricity is embedded in the interfaces to various products and production facilities controlled by different business units. The use of these products and production facilities requires a pulp with certain features. These features can only be produced using a large amount of electricity in the TMP process. Thus, the features of the pulp that are created when the primary demand takes place, are of benefit to a large number of business units as their production facilities and their products augment in value. The demand for electricity is seen to take place in five interrelated network orders. The picture of resource use and demand formation in networks has implications for the individual firm's strategy to economise on and/or develop resources and for the knowledge about resources needed to achieve this.Single handed, the individual firm has little leeway to influence its demand for electricity. Direct co-operation with parties that directly and indirectly influencing the demand for electricity were shown to be crucial to economise upon or to "develop" the use of electricity. Furthermore, the understanding of how demand is formed from an individual firm's perspective, must be seen in the light of the firm's overall strategy and of the value creation strategies of the other firms with which the focal firm interacts and forms relationships.Two different types of resource knowledge were identified from the empirical study: knowledge about outcomes from resource combinations and knowledge about functional relationships from resource interfaces. The use of an individual resource requires knowledge about several other resources. Still, these types of knowledge are developed in different contexts and must be combined to create a whole. From this, it follows that relationships are important mechanisms for the co-ordination of knowledge use and knowledge development.