“Managing Energy Costs: The First Step”

Christopher Russell

November 1, 2005

Imagine a modern industrial facility being constructed—including all its mechanical systems—without a blueprint. Could it be done? Well, maybe, but the task would certainly take longer and the result would be a confusing maze of systems, some incomplete, and many counteracting the overall purpose. Once the building was finally completed, the operations staff would probably spend all their working hours simply untangling the mess made during construction.

This example introduces the theme of this month’s column: Energy assessments serve as the crucial blueprint to successfully manage industrial energy costs. Trying to manage energy costs without a blueprint—or in this case, a business plan—will yield results that, at best, fall short of expectations, and at worst, can interfere with the facility’s core mission.

An energy assessment is a summary of how much energy is brought into a facility and then distributed to various departments and systems. It summarizes the use of fuel, power and water as required by process activities within the facility, as well as the heating, ventilation, cooling, lighting and domestic water requirements of the physical buildings. The assessment summarizes energy inputs over a period of time—usually a year—and explains the relationship between consumption, production levels and weather conditions. A thorough assessment report will:

List the quantity of energy purchases.

Describe the energy consumption of major equipment, such as boilers, furnaces and air compressors.

Establish a normal energy requirement for each unit of production and each major piece of equipment or operating hour.

Analyze the prevailing gas and electric utility tariffs to document the cost impact as energy consumption varies with production volumes as well as hourly and seasonal operating patterns.

Identify and prioritize available opportunities for improving facility performance through energy improvements, which may include (1) changes in technology, (2) shifts in production activities across times of day, and (3) adjustments in the standard operating procedures to reflect energy-smart behavior. A proper energy assessment itemizes these improvements, showing the costs and benefits of each.

Facility managers and staff often resist receiving an energy assessment. Here are two common objections, with a rebuttal to each:

“We don’t have the money to pay for an assessment.”
A medium-sized manufacturing facility might spend $2 million on energy each year. Studies by the U.S. Department of Energy and others suggest that the average facility can cut 10 to 20 percent of its energy consumption, which is the same as saying that at least $200,000 is being wasted each year. A good energy assessment might take a few days and cost about $20,000. The plant has no money for an energy assessment because that money is needed to purchase energy, which ends up being wasted. Plus, energy prices are likely to rise faster than the price of an assessment.

“We are already as energy-efficient as we can be.”
This comment usually comes from a plant manager who has aggressively pursued equipment upgrades, or staff training, or procedural modifications or least-cost energy purchasing strategies. Rarely do facilities thoroughly pursue all of these dimensions in concert. Disappointing results may come, for example, when a new air compressor or boiler is installed, but nothing is done to address distribution leaks and poor staff performance in utilizing these systems. This is how capital investments fail to meet their payback criteria.

Energy assessments are often free through companies, state energy offices and university-based industrial assessment centers (www.oit.doe.gov/iac). The knowledge that comes from an energy assessment will return value in many ways:

The audit itself may reveal a number of low- or no-cost adjustments that pay for themselves immediately, such as shutting off steam mains that serve abandoned process lines.

Knowing their own energy consumption figures provides manufacturers with the leverage they need to negotiate better contracts with fuel commodity marketers. Marketers make money based on a percentage of the fuel they broker. Uninformed energy consumers give the marketer a blank check.

Knowing how much energy is being consumed is a good baseline for quantifying the impact of energy improvements. Managers can’t claim victory if they don’t know where they started.

When managers know how much fuel each piece of equipment uses, they know what that equipment costs to operate. This knowledge helps the manager fully understand the need for upgrades, replacements or fuel switching.

An energy audit also inventories and prioritizes the sources of emissions, providing an opportunity to reduce the risk of non-compliance with emissions regulations.

An energy assessment is the blueprint for improving business performance through smart energy choices. Outcomes are not accomplished all at once, but as a part of a measured process. A business plan will identify resources, milestones and planned outcomes. Perhaps most importantly, an energy assessment describes how a plant manager can make energy decisions that contribute directly to business success.