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This work is copyright. In addition to any use permitted under the Copyright Act 1968, this document may be copied in whole or in part for personal and organisational use or published for educational purposes, provided that any extracts or copies are fully acknowledged. Copies or substantial extracts of this work may not be reproduced for profit without the permission of the Commonwealth of Australia, as represented by the Department of Resources, Energy and Tourism. Requests and inquiries concerning reproduction and rights should be addressed to the Commonwealth Copyright Administration, Attorney-Generals Department, 3 5 National Circuit, Barton ACT 2600, or posted at www.ag.gov.au/cca. This Energy Savings Measurement Guide is published by the Department of Resources, Energy and Tourism and was prepared by the Energy Efficiency Opportunities Section, Clean Energy & Energy Efficiency Division. The guide may be downloaded from www.energyefficiencyopportunities.gov.au. For printed copies, phone 1300 799 186 or email energyefficiencyopportunities@ret.gov.au.
Acknowledgements
This guide was produced for the Department of Resources, Energy and Tourism by WorleyParsons Ltd and Demand Response Limited (NZ), based on an earlier guide and input from the Energy Efficiency Opportunities program and other consultants, including (in alphabetical order): Geoff Andrews of Genesis Now Rob Fowler of Booz & Company Paul Goerick of Rawetech Dr Chris Lund of GHD Alan Pears of Sustainable Solutions Some additional material and revisions were implemented by the Department.
Important notice
This guide does not replace or modify any of the requirements in the Energy Efficiency Opportunities Act 2006 or the Energy Efficiency Opportunities Regulations and Energy Efficiency Opportunities Industry Guidelines. The Department of Resources, Energy and Tourism has published this guide purely for the assistance of the reader. The information in this guide is considered to be true and as accurate and complete as possible at the time of publication. The Department gives no warranty, however, for any changes in circumstances after publication that may impact on the accuracy and completeness of the information. Accordingly, readers should independently verify the guides accuracy, currency, completeness and relevance for their own individual purposes, and should obtain appropriate professional advice before making any business decision based on the guide. To the full extent permitted by law, the Commonwealth of Australia will not be liable in any way whatsoever for any damage, loss or expense arising from the use of or reliance on this guide. Hypothetical companies and activities are used as examples. They are for illustrative purposes only, and are entirely fictitious. Any resemblance to past or present organisations or individuals is coincidental and unintended. 2
Contents
Figures & tables Glossary & shortened terms Units of measurement Key Elements of the Assessment Framework Introduction to the guide 5 7 9 10 14 18 19 20 20 21 23 27 29 31 35 36 37 37 39 43 50 51 52 53 54 54 60 71 72 73 74 74 75 81 83 84 85 86 89 97 3
Part 1Building a platform to estimate, evaluate, measure and track energy savings
1.0 Establishing and using an energy baseline 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 Overview Defining an energy baseline Establishing an energy baseline Methods for establishing an energy baseline Forecasting future energy baselines Using an energy baseline Establishing an energy baseline at the Fair Dinkum Milk Company Section summary
2.0 Measuring, metering and capturing energy data 2.1 2.2 2.3 2.4 2.5 2.6 Overview of measuring, metering and capturing energy data Measuring, metering and capturing energy data How to develop an energy measurement system Energy metering and data capture systems Investing in energy measurement systems Section summary
3.0 Determining and improving accuracy 3.1 3.2 3.3 3.4 3.5 Overview of accuracy in opportunity evaluation Integrating accuracy into evaluations Statistical overview Determining accuracy Section summary
5.0 Evaluating an opportunity 5.1 5.2 5.3 5.4 Overview of evaluating an energy efficiency opportunity Financial analysis Valuing the whole-of-business costs and benefits Prioritising the implementation of opportunities
Developing business cases for decision makers Allocation of resources to evaluate energy efficiency opportunities Evaluating an opportunity for the Fair Dinkum Milk Company Section summary
101 105 105 106 107 108 109 109 112 114 115 116 116 119 120 123 123 124 125 126 126 127 133 133 134 135 136 139 143 148
6.0 Measuring energy savings for an opportunity 6.1 6.2 6.3 6.4 6.5 Overview of measuring energy savings Measuring energy savings Methods for measuring energy savings Measuring energy savings for the Fair Dinkum Milk Company Section summary
7.0 Tracking energy savings for an opportunity 7.1 7.2 7.3 7.4 7.5 7.6 Overview of tracking energy efficiency opportunities Tracking the energy savings outcome Establishing an opportunity tracking register Managing energy performance Energy tracking for the Fair Dinkum Milk Company Section summary
9.0 Appendices 9.1 9.2 9.3 9.4 9.5 Useful benchmarking and calculation tools Citations Example of an opportunity tracking register Other financial analysis methods How the guide can be used in conjunction with the National Greenhouse and Energy Reporting Scheme (NGERS)
Figures
A 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 1.9 2.1 2.2 2.3 2.4 4.1 4.2 4.3 4.4 5.1 5.2 5.3 6.1 6.2 6.3 7.1 7.2 Energy Savings Measurement Guide overview Dividing your site into processes for analysis Sample output from Steam System modelling software Adjusting the current energy baseline Forecasting an energy baseline Estimating energy savings Measuring energy savings Fair Dinkum Milk Company baseline boundary Fair DInkum Milk Company Plant 1 drier gas consumed versus milk powder produced Comparison of estimated and actual gas consumption in season one Consumption rates, before and after Layout of an existing metering system How to create a virtual meter Data capture process The principle of estimating energy savings Current process for heating of Plant 1 air into the drier ( denotes efficiency) Proposed process for heating of Plant 1 air into the drier Drier 1 air pre-heater opportunity estimating energy savings Ease of implementation Opportunity supporting documentFair Dinkum Milk Company example Marginal cost of abatement curve for various energy efficiency opportunities The principle of measuring energy savings Comparison of the measured gas consumption and the revised energy baseline for the Fair Dinkum Milk Co. Drier 1 air pre-heater opportunity Close-out report Energy monitoring report for the Fair DInkum Milk Company 15 22 26 28 29 30 32 34 33 34 39 41 45 46 74 81 81 83 98 102 104 109 113 114 118 123
Tables
A B C D 1.1 1.2 1.3 1.4 1.5 2.1 2.2 2.3 2.4 Key Element 3 of the EEO Programs Assessment Framework Key Element 4 of the EEO Programs Assessment Framework Key Element 5 of the EEO Programs Assessment Framework Key Element 6 of the EEO Programs Assessment Framework Opportunity baseline boundary examples Methods for establishing an energy baseline Adjusting for energy influencing factors Variables selected for regression analysis Fair Dinkum Milk Company regression results for Plant 1 drier gas consumption Metering system capability Features of standard metering hardware Solutions for common metering issues Solutions to common data collection issues 5 10 11 12 13 22 24 28 32 33 38 43 45 48
3.1 3.2 3.3 3.4 3.5 3.6 3.7 4.1 4.2 4.3 5.1 5.2 5.3 5.4 5.5 5.6 5.7 6.1 6.2 6.3 7.1 8.1 8.2 8.3 8.4 9.1 9.2
The t-distribution table t-distribution data analysis Common modelling errors Solutions for Issues when determining accuracy in sample sizes Common metering errors Capital cost analysed to assess relationship to project cost Recommended approaches to accuracy Common applications of estimation methods Gas consumption forecast Estimated gas saving* Non-energy benefits from energy efficiency improvements Strategic alignment test Economic viability test Difficulty of implementation test Magnitude of the savings Risk test Estimated payback for projected project Measuring energy savings methods and their applications Measured energy savings for the Fair Dinkum Milk Company Payback calculation for the Fair Dinkum Milk Company Common key performance indicators (KPIs) Typical data sets for participants in the manufacturing sector Typical data sets for participants in the mining and mineral processing sectors Typical data sets for participants in the transport sector Typical data sets for participants in the commercial buildings sector Indicative cash flows for Project A for MFC Inc. Indicative cash flows for Project B for MFC Inc.
56 59 60 63 64 65 66 80 82 82 90 99 99 99 100 100 106 111 112 113 121 129 130 131 131 143 143
Adjusted energy baseline Background paper Baseline energy Baseline period Benchmarking
Bench test
Confidence interval
Confidence level
heating, ventilating and air conditioning An idea for a potential change to a system, process, activity, technology or piece of equipment that: (a) is intended to improve energy performance; and (b) has not yet undergone technical or whole-of-business evaluation.
Independent variable
Independent variables (i.e. those variables that independently affect energy consumption) including production rate, product mix, raw material, occupancy, and ambient conditions. Energy consumption is the dependent variable. The capital investment that must be paid before or at the time of implementation. Integral balance is a balance taken at two specific instances in time. It describes what has happened over the time period between two points. An integral balance is generally applied to the beginning and the end of a batch process. The discount rate that will yield a net present value (NPV) for the project of zero, which is calculated iteratively. An appropriate measure of the energy efficiency or intensity for a site, fleet, process or company, such as gigajoule/tonne (GJ/t). The cost of an additional unit of a product or service. The arithmetic average. The net present value measures the increase in value of the investment based on the rate of return required by the company. Future net cash flows are discounted back to their present value to account for the effects of inflation and the interest available from alternative investments. The opportunity tracking register contains all the key information used to evaluate each opportunity and data resulting from the evaluation and prioritisation of each opportunity. An approach to energy-savings measurement that involves using existing measurements where available and estimating other variables based on engineering calculations and assumed parameter values. In a pilot study, an improvement is first applied to a single piece of equipment or process. Savings obtained in the pilot study can be used to estimate savings if the opportunity is implemented more widely. A method for minimising energy consumption of processes by calculating thermodynamically feasible energy targets (or minimum energy consumption) and achieving them by optimising heat recovery systems, energy supply methods and process operating conditions. The measure of the range in which the true value is expected to occur. This is stated in conjunction with a level of confidence, which is the probability that the quoted range, such as 5%, contains the true value. A statistical technique which examines the relation of a dependent variable (response variable) to specified independent variables (explanatory variables). Sensitivity analysis explores the possible effects of changes in parameter values from the original assumed values. Sensitivity analysis provides a deeper understanding of which parameters are of primary importance in an evaluation, and identifies break-even points and other milestones. This approach uses process data and engineering calculations to model a process and test parameter values. Simpler simulations may be run using spreadsheet software, while more complex simulations with more advanced models can use proprietary software or run as fully-developed applications. supervisory control and data acquisition The standard error is a measure of accuracy of the predictions produced by the model. This calculation is performed by common spreadsheets and statistical software tools. Equal to the square root of the variance, the standard deviation is the average difference between the measured values and the mean value. The t-statistic is a method of assessing whether the means of two groups are statistically different from each other. To calculate precision in the units of the data, a t-value is derived from a t-distribution table. A t-distribution table shows t-values for a given degree of freedom (dfnumber of measurements minus one) and probability (or p-value). 8
Internal rate of return (IRR) Key performance indicator (KPI) Marginal cost Mean Net present value (NPV)
Pilot study
Pinch analysis
Precision
Simulation model
The average of the squared deviations from the mean for a set of values. The standard deviation is the square root of the variance. Variable speed drive, also referred to as a variable frequency drive Means the financial evaluation of an energy efficiency opportunity to consider all relevant quantifiable business costs and benefits, including: (a) direct energy-related costs and savings; and (b) other quantifiable financial costs and benefits, for example: (i) capital costs or avoided capital investment; or (ii) reductions or increases in costs of maintenance, waste disposal, water usage or occupational health and safety; or (iii) changes in productivity, the quality of outputs or the quantity of outputs. Note: A whole-of-business evaluation is used to determine net costs and benefits in order to calculate payback periods for energy efficiency ideas and opportunities.
Units of measurement
Unit C CO2-e d GJ Definition degrees Celsius Universal unit of measurement to indicate the global warming potential (GWP) of greenhouse gases, expressed in terms of the GWP of one unit of carbon dioxide. day gigajoule, equal to 1x10 joules joules (J) are the standard unit of energy h km kW hour kilometre kilowatt, equal to 1,000 J/s watts are the standard unit for power kWh L m m
3 9
kilowatt-hour, equal to 3.6 megajoules (MJ); a unit of energy litre metre cubic metre milliamp megajoules, equal to 1x10 joules petajoules, equal to 1x10 joules second
15 6
mA MJ PJ s Sm t y
3
(b) (c)
(d) (e)
(f)
(g)
(h)
(i)
3.3
An energy analysis process to assist in the identification, quantification and evaluation of energy efficiency opportunities, using data from Requirement 3.2, is undertaken and documented, including: (a) energy use performance indicators, established at the appropriate level, with consideration of variations over time and major factors that affect energy performance application of a range of analysis methods to explore relationships between energy use and variables (e.g. output or climatic factors) that may influence energy use, using data collected at appropriate times (e.g. review of graphs and charts, regression analysis) a comparison of performance to actual and theoretical energy use benchmarks, at the relevant level (process, technology, activity or site) to identify and quantify opportunities (Note: Theoretical benchmarking may include engineering calculations or simulations based on thermodynamic and heat transfer analysis, fluid
(b)
(c)
(d)
10
mechanics or combustion analysis.) (e) if appropriate, other detailed analysis, comparative techniques or experimental approaches (e.g. engineering, vehicle trials, pilot studies, logistical approaches or thermographic imaging) are used to fully understand energy consumption analysis of the energy and material flows through the site or fleet, and the processes, systems and equipment at the site or of the fleet, to systematically quantify if energy is being used, wasted or lost, compared with the amount of energy required by the specific products and services that the energy use delivers (e.g. energy-mass balance or similar).
(f)
An evaluation of whole-of-business costs and benefits of opportunities is undertaken in order to calculate a payback period.
Evaluation should reach a level of detail and accuracy appropriate for the size of investment and consistent with core-business investment decision-making within the corporation. If an opportunity will require approval for significant 11
capital expenditure, the costs and benefits should be evaluated to within 10%, or to the level of accuracy required by the corporations existing capital expenditure process if this is established at a different level. 4.4 For all the opportunities with up to a four-year payback, recommendations are made to the appropriate decision-makers based on business criteria. Recommendations should include whether the opportunities should undergo further investigation, be implemented, or not be implemented. Reasons for not pursuing opportunities are documented.
Table C: Key Element 5 of the EEO Programs Assessment Framework
(b) (c)
Management responsible for investment/resource allocation determine the business response including which opportunities are to be implemented, which are to be further investigated (including improvements in data and evaluation accuracy) and which are not to be implemented. The appropriate decision-maker allocates timelines, resources and accountabilities for the business response to the assessment, including: all energy efficiency opportunities that a corporation decides to implement or investigate further (including improvements in data and evaluation accuracy) reviewing and monitoring to learn from experience and support public reporting.
5.3
12
13
All corporations must assess at least 80% of their corporate energy use and all sites that use more than 0.5 PJ of energy per year in their first five-year cycle. This increases to 90% of energy use for subsequent cycles.
14
15
Intended audience
While the ESMG is designed to be as clear and accessible as possible to a wide audience, it is primarily a technical guide, intended for company staff who will be involved in estimating, measuring and tracking energy efficiency opportunities. This includes engineers, managers and operational personnel.
16
Section 6Measuring energy savings for an opportunity. Once an energy efficiency opportunity has been implemented, the actual energy savings need to be measured to determine the financial success of the opportunity. Section 7Tracking energy savings for an opportunity. Describes how to monitor the success of implemented opportunities and improve energy performance.
17
PART 1BUILDING A PLATFORM TO ESTIMATE, EVALUATE, MEASURE AND TRACK ENERGY SAVINGS
18
SECTION 1.0
Establishing and using an energy baseline
1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 Overview Defining energy baseline Establishing an energy baseline Methods for establishing an energy baseline Forecasting future energy baselines Using an energy baseline Establishing an energy baseline at the Fair Dinkum Milk Company Section summary
19
1.1 Overview
Purpose of this section
This section explains: why it is necessary to establish the level of energy consumption before an energy efficiency opportunity is implemented at a site how to establish an energy baseline for an energy efficiency opportunity how to use an opportunity baseline to estimate and measure energy savings how to incorporate factors affecting current and future energy use into reliable baselines. Note that the energy use in the EEO baseline year is the absolute energy use over a specific period of time. Refer to section 4.3.2 of the EEO Industry Guidelines.
Section outcomes
At the end of this section, you will be able to: establish an energy baseline for an identified energy efficiency opportunity use the energy baseline to forecast energy use prior to implementing an opportunity.
20
Tip: It is useful to draw a schematic of the boundaries of the system. Note that the schematic may already be available as an energy-mass balance. Section 9 details how to develop an energy-mass balance.
21
Example
A company has identified six on-site energy consuming processes. An opportunity has been identified to reduce energy consumption in one of the processes (Process 5), but implementing the opportunity is expected to have a flow-on effect on the energy use in another process (Process 6). To determine the opportunity energy savings, both processes (Process 5 and Process 6) should be included in the opportunity baseline boundary. This diagram illustrates how the opportunity boundary could be established.
Figure 1.1 Dividing your site into processes for analysis
Process 4
Process 5
Process 6
Process 5
Process 6 boundary
The following table offers examples of how to draw appropriate baseline boundaries for identified opportunities, and illustrates how establishing the individual baseline provides measurement of the energy savings from the opportunity.
Table 1.1: Opportunity baseline boundary examples
Sector
Industrial site
Opportunity
Metering/monitoring requirements Meter electric power used by refrigeration units (kW) Meter electric power used by refrigeration units (kW)
Manufacturing
Brewery
Reduce compressor pressures Replace fixed speed pump with variable speed drive pump Replace all motors with new, energy
Minerals processing
Concrete production
Mining
Coal mine
22
efficient versions Commercial buildings Transport Hospital Freight company Fuel switching, from coal to gas Mandatory checking of tyre pressures Boiler unit Fleet of trucks Amount of fuel bought Fuel economy
data acquisition (SCADA) system Refer to utility bills (gigajoules (GJ)) Engine management system (L/km)
Tip: Best practice definitions of project boundaries can be seen in the Clean Development Mechanism publications in support of the Kyoto Protocol. The focus of the Clean Development Mechanism is to establish a baseline for 2 emissions released; however, the same approach can be used for energy consumed .
Tip: Plotting energy use against significant variables such as time (e.g. monthly to determine any seasonal effects) or production level will highlight if there are any significant effects which require further analysis. Multi-variable analysis will assist in determining which variables are significant.
Clean Development Mechanism (CDM) Approved Baseline and Monitoring Methodologies are available from: http://cdm.unfccc.int/methodologies/ TecMarket Works Framework Team (2004). The California Evaluation Framework, Prepared for the California Public Utilities Commission and the Project Advisory Group, available from: http://www.cee1.org/eval/CEF.pdf 4 This table has been developed with reference to an unpublished working draft ISO standard, ISO/CD 50006, Measuring Energy Performance using Energy Baselines and Energy Performance Indicators General Principles and Guidance, being developed under the ISO Energy Management technical committee.
3
23
Applicable For a constant process (such as lighting that is on 24/7 for safety reasons) or if required for regulatory purposes (as with the baseline year). Where output is the primary source of variation in performance, and a simple basis for comparison or identification of nonconformities is required.
Not applicable Processes that are subject to variation, such as most systems at generation sites.
Comment The baseline year, used for compliance purposes, is probably the only absolute energy baseline that would be applicable to an EEO assessment.
Uses a historical average energy intensity figure, such as MWhe/GJth to estimate future performance: Et = (I Qt), where: I is the historical average energy intensity Q is the quantity of output in time period t. Uses a ratio of energy use to two or more variables, e.g. MW/[(flow rate).(hydraulic head in metres)] for a water pumping system, or MJ/t.km in transport.
Where changes in variables other than output can make the past energy intensity a poor predictor of performance, or where the data is of insufficient quality or frequency to develop a meaningful intensity baseline.
Provides only a very basic normalisation for variation in output. Using a simple energy intensity ratio can be a poor indicator of performance where there is significant variability.
Where output and one or two other variables are the major sources of variation in performance, and a simple basis for comparison or identification of nonconformities is required.
Where changes in other variables can make the past energy intensity a poor predictor of performance, or where the data is of insufficient quality or frequency to develop a meaningful intensity baseline.
Even with multiple variables, ratios provide only a very basic normalisation for variation in output. Using simple energy intensity ratios can be a poor indicator of performance where there is significant variability. Requires data collection to cover a representative period of time and is dependent on accuracy of input data. Regression analysis provides a simple way to normalise for changes in relevant variables by placing new data into the established regression equation. Tests should be run to ensure that the results are statistically valid. Can require constant refinement to reflect actual operating conditions. Incorrect assumptions may lead to inaccurate results. Energy and material flow analysis (or an energy-mass balance) may assist in the
Regression analysis
Determination of energy use, using statistical methods applied to historical energy data, to identify how the independent variables affect energy consumption.
Variable energy use, No historical data. historical data available. Useful where limited energy metering is installed.
Modelling/ simulation
Determination of energy consumption pattern using known variables, manufacturers data and engineering calculations.
For novel applications, changing process conditions (e.g. product specifications), modelling is used to design systems and model future performance, but after implementation of changes, regression analyses can be more effective for verifying 24
Method
Description
Applicable
Short-term metering
Spot or short-term Constant energy use metering of process or simple pattern. and sub-processes to determine energy use patterns.
Energy use in the shortRequires data collection term is variable and erratic. that captures the energy consumption level or pattern of the operation accurately.
The data is then analysed to develop an equation, often linear in the first instance, which describes the relationship (or regression line) between the dependent and independent variable. In some circumstances non-linear forms of regression, such as polynomials, may be required. Regression can be performed by either a manual scatter plot or other parameter-quantification process tools. These tools are included in programs such as Microsoft Excel, NLREG and MATLAB. Links to the homepages of these programs are in Section 12.1.4. The EEO Representative Assessment Guide, available from www.ret.gov.au/energy/Documents/energyefficiencyopps/PDF/newsletters%2010/EEORepAssessGuide-FINAL.pdf, also discusses regression analysis.
25
Further details of these regression steps are provided by the Canadian Industry Program for Energy Conservation 5 guide . The data gathered and the regression analysis results can both introduce errors. These errors can be estimated using the techniques described in Section 3 of this guide. Section 8.2 includes a worked example of how to complete a multi-variable regression analysis.
Results of any calculation will only be as accurate as the inputs to the calculation. To ensure accuracy, the model should be routinely updated to include process modifications or operational changes. Each major component in a system can be modelled and the resultant system energy use calculated to establish a baseline. Simple or well-known systems may be modelled using engineering calculations. More complex systems may require specific and expensive utility system analysis software, and it may be necessary to engage an energy analysis expert. An example of the output from a steam analysis software package is provided in the Figure 1.1.
Figure 1.2: Sample output from Steam System modelling software
Tip: Measurement via modelling is a technical and complex method for determining energy savings. It may prove cost effective to engage energy simulation experts for this type of simulation analysis.
5 Canada. Canadian Industry Program for Energy Conservation (CIPEC) (2000). Energy Management Information SystemsAchieving Improved Energy Efficiency. Ottawa: Office of Energy Efficiency of Natural Resources Canada. Available from: http://oee.nrcan.gc.ca/publications/industrial/EMIS/8569
26
Example
A water pumping station fills a reservoir at a fixed rate. The head and flow rate are constant, so when the pump is operating energy use will always be the same. Pumping conditions Head: Flow rate: Power requirement: 100 m 250 L /s 300 kW (measured)
The power requirement was temporarily metered to determine the energy required to pump water at the given rate. This energy requirement may be multiplied by the volume of water pumped to project the energy use for any period: Time required [s] = volume volumetric flow rate) Energy required [kW] = power [W] time taken [s] 3600 [s/h] Calculating the energy consumption to pump 13,500,000 L of water to the reservoir: (13.5 10 L (250 L/s) (300 kW 3600 s/h) = 4500 kWh Specific energy consumption: 300 kW (250 L/s 3600 s/h) = 0.33 10 kWh/L This is the energy requirement for the current combination of equipment and operational parameters. If significant changes are made, new readings will be necessary to establish a new baseline.
3 6
Tip: Identifying the factors that contribute to an energy baseline has practical benefits. By understanding which factors impact on energy consumption, and how they vary over time, a process can be better managed at an operational level. Improving understanding of a process can reveal additional energy savings or process improvements. 27
Figure 1.3: Adjusting the current energy baseline to account for factors which influence energy consumption.
Adjustment Adjusted energy Energy Energy baseline baseline without opportunity implementation
Examples of variables that affect energy performance and corresponding adjustments that can be made when forecasting a future energy baseline are listed in Table 1.3, below. Section 1.6 presents an example demonstrating the importance of adjusting the energy baseline for changes in external factors so as to identify the actual impact of the opportunity.
Table 1.3: Adjusting for energy influencing factors
Influence on energy consumption Some products are more energy intensive than others. Fixed energy overheads are spread over production, so energy intensity changes with production.
Adjustment required Set separate baselines for each product. Index energy baseline to production rate.
Tip Compare performance with appropriate baseline when evaluating opportunities and measuring savings. Optimisation of assets is a key method to improve energy efficiency while improving business outcomes. Compare performance with appropriate baseline when evaluating opportunities and measuring savings.
Raw materials
Changes to raw material can increase Set separate or decrease energy consumption baselines for each (e.g. a mineral processing plant using raw material. more energy when processing gold due to hardness). Temperature Relative humidity (RH)affects performance of wet cooling towers and gas turbines Degree days % RH
Ambient conditions
Degree day data is available for each geographical region (refer to the Bureau of Meteorology website for more information: <www.bom.gov.au>). Find appropriate measure (e. g. number of people, floor area or number of rooms). Optimisation of services according to occupancy rates can deliver significant savings. Compare performance with appropriate baseline when evaluating opportunities and measuring savings.
Occupancy
Increasing number of Index to occupancy guests/patients/employees increases levels or rooms in energy consumption. use.
28
Example
A manufacturing company plans to increase production. To forecast the energy baseline, the current energy baseline was adjusted for the production increase. The dashed line shows the forecast energy baseline, had the production level not been adjusted for an increase (source: IPMVP 6).
Figure 1.4: Forecasting the energy baseline
Energy use
Adjustment
Opportunity implementation
Baseline period
Reporting period
Time
6 USA. Department of Energy, Efficiency Valuation Organization (EVO) (2007). International Performance Measurement and Verification Protocol (IPMVP) Springfield: US Department of Commerce, Volume 1, Section 1.4.
29
Estimated Adjusted energy baseline Energy without opportunity implementation Forecast energy consumption with opportunity implementation energy savings
Measured Revised energy baseline Energy without opportunity implementation Measured energy consumption after opportunity implementation energy savings
30
Example
A minerals processing site has identified an energy efficiency opportunity. Implementing the opportunity will influence energy use across the site, so the baseline boundary has been set around the mineral processing site. Baseline: On average, each year the mineral site processes 180,000 tonnes of mineral, consumes 30.06 GWh of electricity and operates for 8,000 hours. From this, the baseline energy intensity was calculated: Site baseline energy intensity = 30.06 GWh 180,000 t = 167 kWh/t The production forecast from the companys business plan indicates production levels will alter significantly over that period. Production has a large impact on the sites energy use, so the baseline energy use needs to be adjusted to take into account production changes. The current energy consumption of 30.06 GWh can be adjusted to take into account the forecast changes in production by multiplying the current energy intensity (167 kWh/t) by the production forecast. This adjustment creates the forecast energy baseline which will later be used by the company to estimate energy savings.
Table 1.7: Annual production forecast
Units
Current
There is a 5% difference between the current energy baseline and the forecast energy baseline due to the forecast production change. There would have been a 5% inaccuracy in the baseline if the company had used the unadjusted energy baseline.
1.7.1 Background
The Fair Dinkum Milk Company converts standardised liquid milk to a powdered form. This involves using thermal energy to remove moisture from the raw milk. The milk enters the process with a moisture (water) content of 86%. During evaporation, steam is used to reduce the moisture to 50%. A gas-fired drier further dehydrates the finished product, to a 3% moisture content. The companys operation consists of two milk powdering plants, each with evaporators and a drier. A large amount of energy in the form of natural gas is required to heat the air entering the driers. Other energy required for the drying process is in the form of steam (raised in a natural gas-fired boiler) and electricity. The operating season for milk processing is from the beginning of July to the end of March. The plant, therefore, has a planned shutdown from April to the end of June. An energy savings opportunity has been identified at the Fair Dinkum Milk Company: heat can be recovered from the hot condensate in the Plant 1 evaporators to preheat the air feeding into the drier.
31
Steam
Exhaust
Milk
Plant 1 evaporators
Plant 1 drier
Condensate
Air
Energy baseline
The current energy baseline of 280 GJ per operating day was determined based on historic data from gas flow measurements. The gas flow meters have an accuracy of 0.5%, so the current gas consumption is an average of 280 GJ per operating day 0.5%.
The regression analysis was performed in Microsoft Excel using line of fit modelling. Figure 1.6 and Table 1.5 display the regression analysis results.
32
Figure 1.8: Fair Dinkum Milk Company Plant 1 drier gas consumed versus milk powder produced
Y X
Gradient = Y/X
120 Product produced (t) Table 1.5: Fair Dinkum Milk Company regression results for Plant 1 drier gas consumption
140
Coefficient Interceptplant not operating (GJ) Interceptplant operating (GJ) Gradientpowder mass flow (t/day) 0
th
th
90.0064
1.7628
51.0592
1.340 x 10
86.5398
93.4729
1.8198
0.0221
82.2362
6.549 x 10
-40
1.7763
1.8633
For definitions of standard error, t-statistic and p-value, refer to Section 3.3. 4. Analyse the results to determine the significance of the relationships described. At the Fair Dinkum Milk Company, there is insignificant gas consumption when the plant is not operating. Start-up processes and cleaning cycles are classified as a fixed consumption. The intercept is dependent on whether or not the Plant 1 drier is operating. - Intercept when Plant 1 drier is operating - Intercept when Plant 1 drier is not operating 90 GJ 0 GJ
The slope represents the additional amount of gas required to produce each additional unit of milk powder. The efficiency of the process can be established from the slope, that is: -Variable energy consumption rate (i.e. the gradient) = 1.8198 GJ gas/t milk powder The distribution (or scatter) of points (in this case, production days) represents the amount of gas required for the measured production rates. Gas usage varied from one production day to another, based not only on milk powder production, but also on other controllable (behavioural) and uncontrollable (operational) factors. 5. If necessary, add or remove variables from the analysis or gather more data to improve the significance of the relationships. Ambient air temperature was not included in the regression analysis. However, ambient air temperature affects the amount of air heating required, which in turn affects the amount of gas required. To improve the model, ambient air could be added as an input variable. The Fair Dinkum Milk Company considered the impact of the ambient air temperature on gas consumption to 33
be negligible relative to production rate, and opted to continue using the current regression. 6. Test the accuracy of the analysis performed. To test the model, the regression was used to model the gas consumption based on milk powder produced and compared with actual data over the same period. The production values for season one (first year using a model to estimate gas consumption) were input to the model. The model was then used to estimate the site gas consumption. The actual energy consumption was overlaid onto the modelled results.
Figure 1.9: Comparison of estimated and actual gas consumption in season one
Apr Season one Actual gas consumption (GJ/day) Estimated site gas (GJ/day)
Figure 1.7 shows the estimated gas consumption is a close fit to actual gas consumptionthis indicates the regression model provided a good estimate of the gas consumption; the regression model was thus used to model season two. The production forecast indicates a reduction in output. Entering the forecast production rate into the regression model establishes the forecast energy baseline. The production forecast stated an annual production of 28,925 t over 280 operating days. This resulted in a forecast energy baseline of 278 GJ/d. This is the reference point from which to estimate the savings from the opportunity. The method outlined in Section 3.4.1 was used to determine the accuracy of the forecast energy baseline. 1. 2. Evaluate the mean energy consumptionThe mean energy consumption was found by entering the average production rate and days operating into the regression equation. This resulted in 278 GJ/d. Evaluate either the lower or upper 95 percentile energy consumptionThis was done by entering the th production data and operating days into the coefficients for the lower 95 percentile. The energy consumption there was determined to be 270.04 GJ per operating day. Regression equation using the lower 95 percentile coefficients Gas consumption (GJ) = 86.5398a + 1.7763x where x = 28,925 milk powder produced in tonnes
th th
4. 5.
34
Adjusting the baseline for production changes over the implementation period
280 270 260
GJ/d
Key Element addressed in Section 1: Key Element 3.2: Data collection process
35
SECTION 2.0
Measuring, metering and capturing energy data
2.1 2.2 2.3 2.4 2.5 2.6 Overview of measuring, metering and capturing energy data Measuring, metering and capturing energy data How to develop an energy measurement system Energy metering and data capture systems Investing in energy measurement systems Section summary
36
Section outcomes
At the end of this section, you should: be able to develop a measurement system for a site to the required accuracy standards have an improved understanding of energy metering hardware including accuracy requirements be aware of common metering and data capture issues, and be able to implement solutions to overcome them be in a position to gather energy data of sufficient accuracy to meet EEO Program requirements for estimating, measuring, evaluating and tracking all opportunities.
Metering system Utility bills Monthly meter readings Monthly reading checked output to produce a specific energy ratio Monthly monitoring system based on submeters Weekly system based on sub-meters and targeted against output Automated real-time monitoring and management
Data management responsibility Finance/administration department Maintenance/engineering department Each production department according to some apportionment Each department according to metered consumption Each department, with adjustments made for output Integrated with production management and business information systems
Standard
Advanced
Best practice
Tip: Successful energy management is highly dependent on energy measurement. You cant control it if you dont measure it.
Using advanced metering systems to identify, estimate and measure energy savings opportunities
Well-developed metering systems capture energy data of sufficient density to produce high-resolution demand profiles. This in turn allows for a better breakdown of energy trends and rapid identification of anomalies that may be costing money. High-density energy data enables decision-makers to critically review operational performance and make the necessary changes to improve energy savings. Half-hourly data capture has become the most commonly used interval for advanced metering systems, and in many cases, data is captured even more frequently. Advanced metering enables the development of a suitable energy profile, and can demonstrate three key areas for energy reduction: 1. Fixed load reductions. The overall fixed load of the site can be studied and reduced (e.g. by identifying unnecessary, constant energy use). 2. Process optimisation. The profile can be used to identify which equipment is running and when. Altering start-up and shut-down times of key processes and equipment can reduce consumption by limiting the duration of high-energy usage at the start and end of working schedules. 3. Peak usage reduction. Analysing timing and frequencies will help to establish the causes of peaks in energy usage, and understanding of the causes in terms of specific activities or equipment.
38
Example
Company X operates department stores. Initially, electricity consumption data was only available on a monthly basis as determined by the suppliers actual or estimated readings. Remotely-read, half-hourly electricity meters have recently been installed at a number of the stores to allow the comparison of energy use to operating hours. Analysis of the half-hour electricity consumption enabled the company to quantify the specific reduction opportunities identified using the site energy-mass balance. The following half-hour-interval profile shows the electricity savings achieved at one store.
Figure 2.1: Consumption rates, before and after
Consumption
Before After
0:00
1:00
2:00
3:00
4:00
5:00
6:00
7:00
8:00
9:00
10:00
11:00
12:00
13:00
14:00
15:00
16:00
17:00
18:00
19:00
20:00
21:00
22:00
Time
1.
Fixed load reduction. The stores lighting system was made more efficient by optimising the number of lights and replacing incandescent bulbs with-low wattage compact fluorescents. This, combined with reducing the overnight display lighting, resulted in an overall decrease in the energy use (see arrow 1). Process optimisation. Reducing the need for store preheating minimised the electricity demand in the hours before the store opened. Additional lighting control switches enabled individual area lights to be turned on rather than for the entire floor. This minimised the lighting load until the full store lights went on at opening time. Combined, these changes shortened the high electricity demand period (see arrow 2). Peak usage reduction. The major contributor to the 8 am peak load (see circle 3) was identified as individual heating, ventilating and air conditioning (HVAC) units being set higher than required. The peak load was minimised by changing to a centrally operated HVAC system.
7
2.
3.
The Carbon Trust. Advanced metering for SMEs (CTC713), UK: The Carbon Trust, available from (note that free registration is required before being granted access to this publication): http://www.carbontrust.com/resources/reports/technology/advanced-metering-for-smes
39
23:00
40
practically possible. The following questions can be used as triggers when creating your measurement plan: Is it better to use in-house labour or sub-contract to an expert? If suitable metering experience is not available in-house, it may be worth investing in external professional advice. Ensure your team works alongside any contractors so their knowledge is captured by your organisation. What are the target timescale and data resolution capture rates? What measurement units are required? During commissioning, confirm that the units being measured and transmitted are actually representative of the physical process. How can data be best transmitted? Is remote reading a possibility? Is wireless technology a better application? Are there data transmission and storage constraints (i.e. is the density of the data too much)? If the meters are in rugged, dangerous or isolated environments, how will they be accessed? Troubleshooting or resolving data-handling requirements (such as cabling) will be required. What is the lifecycle of a meter? How often will a meter require recalibration? Maintenance requirements of meters are an important consideration.
Tip: Often, energy flows and usage are routinely estimated or assumed without confirmation by measurement. Exploration of the validity of estimates and assumptions is a powerful way of clarifying the value of improved information to drive improved process and system management.
Tip: Wireless communication may be a good application for sites with energy use distributed over large areas (e.g. mines) since it avoids the need to install cabling.
TecMarket Works Framework Team (2004). The California Evaluation Framework, Chapter 13. Prepared for the California Public Utilities Commission and the Project Advisory Group, available from: http://www.cee1.org/eval/CEF.pdf
42
Regular maintenance and calibration of meters are important. Calibration of energy meters is essential:
The suggested frequencies for quality control checks on metering accuracy are dependent on the size and nature of the energy flow and the type of meter. Contact meter manufacturers for details. Tip: The importance of calibration and maintenance of meters cannot be overemphasised. All the benefits of modern control systems are of little use if the eyes, ears and noses are not functioning correctly.
Features of the metering Simple and accurate Relatively cheap Poor turn-down ratio Majority of installation can be done while board is live Power factor can be determined from active and reactive power
Meter types Current and voltage Ammeters Boundary meter Utility meter Time-of-use meters Power factor
43
Features of the metering Can monitor a range of fluids Positive displacement meters are relatively cheap
Meter types Orifice plate Variable area Turbine Vortex shedding Electromagnetic Ultrasonic Rotating Rotary piston Diaphragm
Gas meters
Turbine Diaphragm Rotating lobe Orifice plate Variable area Vortex shedding Rotary shunt
0.5 to 1%
Steam meters
Relatively expensive Accurate sizing very important accuracy varies with flow Temperature and pressure correction essential High maintenance costs Easily damaged by water hammer
1 to 5%
Relatively expensive Pressure and temperature compensation needed High maintenance costs
Orifice plate Variable area Turbine Vortex shedding Turbine Rotary piston
1 to 2%
Oil meters
2 to 4%
*Based on manufacturer specifications for new meters installed and operated according to manufacturer instructions. Installation, calibration and operating range will impact on actual accuracy. Section 3.4 covers accuracy in more detail. Tip: Measurement of the amount of useful heat delivered to processes allows overall system efficiency to be estimated. Given the high cost and inaccuracy of some steam meters, a gas meter combined with a water meter on inlet water and condensate supply could provide data on the quantity of steam produced and energy input. A metering gap is a place or situation where more energy information is needed, but there are no means for gathering data. Metering gaps can be overcome through a number of strategies, and often without purchasing new hardware: use historical accounting or financial data for quantifying the process inputs/outputs identify a meter that is higher up the data stream (i.e. a boundary meter); estimating the proportional flow of energy to subsequent sub-processes will require inferences and assumptions establish a correlation with a parallel meterif there is insufficient metering to measure production units, it may be possible to develop an analogous relationship use data managed by a secondary party, such as an energy retailer or electrical lines company install temporary metering to establish consumption patterns
use virtual meters (example below). In some cases, these approaches may not be accurate enough to provide a permanent solution but may allow energy use to be estimated in anticipation of metering. 44
Figure 2.3: How to create a virtual meter Flow rate at virtual meter C = Flow rate at meter A Flow rate at Meter B.
Meter B
Downstream (sub-meter)
Example
Information was required for the evaluation of an identified opportunity at a mining site. There was no existing metering for the amount of rock being processed. Energy consumption is proportional to rock processing speed. Processed rock has a uniform density of four tonne/cubic metre. The only measurement system available was a meter recording the speed of a conveyor carrying processed rock. Estimations of production rates could be established by correlation, assuming that: the speed of the conveyor belt is directly proportional to the rate of process output the rock is delivered onto the conveyor at a uniform rate. Conveyor dimensions: conveyor width 1 m (approximate onlyshould use the cross-sectional area of the material as it sits on the conveyor belt to take into account the angle of repose of different materials) conveyor wall height 0.25 m conveyor speed 0.5 m/s (this is the metered parameter). To calculate the volume of rock processed per hour: Volume processed per second = area length travelled per second 1 m 0.25 m 0.5 m/s = 0.125 m /s = 450 m /hr To calculate rock processing rate: Mass processed per hour = volume processed density 450 m /hr 4 t/m = 1,800 t/hr These estimates were used during a first pass investigation for preliminary estimation of the benefits of the opportunity while improved measurement systems were developed. Where there are issues with metering, an action plan or solution needs to be developed. Table 2.3 presents possible solutions to common metering deficiencies.
3 3 3 3
45
Solution In the first stages of developing an energy-mass balance, estimates will need to be made based on data for different periods. Over the course of developing the energymass balance, arrange for data from the same period to be captured. Review sub-metering equipment and solutions to capture the data. In situations where equipment has incompatible communication protocols, it may be cheaper in the long-term to implement a new system. Switch on logging capability in SCADA.
Sub-meters in place, but no data loggers to store the data Sub-meters connected to a SCADA system, but data not logged Sub-meters in place, but not calibrated Sub-meters in place, but not connected to the correct load Data not managed to a central database
46
Process
A physical process is measured. This typically involves measuring a force and converting it into an electrical signal e.g. using a strain gauge.
Meter
PLC/SCADA Package
The meter produces a signal that is sent to the PLC. This signal is typically a pulse output or a 4-20mA signal. The Programmable Logic Controller (PLC) then turns this signal into an engineering unit. So that history can be stored, the real-time data on the PLC/SCADA are averaged into a longer time-scale.
Data are collated into useful information. This often involves rolling up data into daily/weekly figures. Budgets and targets are included at this point.
Energy reports
Analysts take information obtained from the energy report, investigate any anomalies, and report the results to management for further action.
Business documents
Appropriate monitoring frequency depends on the application. The monitoring frequency chosen must strike the correct balance between being able to detect important trends in performance and information overload leading to data storage issues. For energy-intensive processes, data should be collected on a daily basis at a minimum. Hourly or half-hourly averaged data is preferable. Intervals of less than half-hourly can lead to information overload, making it more difficult to discern energy trends. However, samples of high-frequency data records can be useful to increase understanding of details of operation (e.g. cycling of valves or start-up and shut-down phases). Samples of unusually high and low consumption should be reviewed to identify reasons for anomalies. If records of high consumption prove to be accurate representations, they should be investigated to identify and address causes of poor energy efficiency performance. For high-quality data collection, a process to systematically eliminate potential sources of error needs to be put in place.
Table 2.4: Solutions to common data collection issues
Data collection issue Presence of downstream production processes reduces overall output (e.g. generating loss or waste streams)energy use may not be directly related to output. Fuels (e.g. oil and coal) can be storedno direct link between energy purchase and use.
Energy use based on purchases instead of actual use Using process input rather than output as the basis for calculating energy
Quantify storage levels, add or subtract the change in level to the purchased amount to obtain energy use.
A lower specific energy consumption based on input may mask deteriorating performance.
Relate energy to output (that is ultimately where costs are recovered). Judgement required on the measure of production to use.
47
Type of data Production figures not synchronised with energy figures Changing calorific value of fuel
Data collection issue If energy and production data have not been recorded at the same time, it will be virtually impossible to establish a meaningful relationship between them. Fuels such as coal have a variable calorific valueapparent changes in specific energy consumption may be due to changing fuel grade and inappropriate conversion factors.
Solution Relate energy use to throughput at some point upstream if final output data not available.
Assumed calorific values and enthalpies should be checked. Compare against utility company data charging should be on an energy basis. Regular fuel sampling and laboratory analysis are recommended to determine calorific value variations over time. For constant energy use, use number of operating days as the basis. Be aware of weekends and holidays when a plant shuts down.
Monthly data
Not all months have the same number of days or weekends (e.g. in a five-week month, the fixed energy component is different for a fourweek data set). Check energy use has been correctly recordeda common error includes misreading meters (typically being out by a factor of 10). Inconsistency in type of unit used.
Data errors
Before reporting, run a common sense check on the data and, if enough metering is available, create some energy and/or mass balances to find discrepancies.
Units
Standardised units are especially important when measuring gaseous flow ratesthe basis adopted by the Australian gas industry for measuring natural gas flows is at standard conditions (Sm/h), determined at 101.325 kPa and 15C.
48
Meter and installation costs are proportionately lower for higher-volume processes. The EEO Program suggests that 1.5% of a sites annual energy spend should be apportioned to improve metering and data storage. This recommendation provides a practical starting point for budgeting of metering and installation costs. Metering and installation costs can vary due to market factors and geographic location, so actual costs may be higher. Tip: Accurate reporting of energy consumption and energy savings is of increasing importance to comply with state and federal legislation; especially now that emissions costs are priced. Investment in quality metering and energy management systems will enable improved reporting outcomes for the board, the public and the government.
Example
A process consumes $100,000 worth of electricity per year from a 400 V AC switchboard (Motor Control Centre MCC-A). The company is considering installing a power monitor. The monitor will be used to develop a baseline electrical demand profile for the process. From this baseline, it will be possible to accurately monitor changes to the process (motor upgrades). For a power monitor to be justified, it would have to offer everything needed to monitor an electrical supply voltage, current, harmonics, kVA and power factor. Using the EEO Industry Guidelines for appropriate metering expenses (~1.5% over a five-year assessment cycle) for the annual energy spend for the process, an investment of $7,500 in metering equipment should provide suitable coverage for all the metering costs. There are several existing conditions with the switchboard: the switchboard already has voltage and current gauges on the front so existing current transformers and voltage fuses can be used existing current transformers and voltage fuses, multi-drop RS485 communications via MODBUS between power monitor and energy management information system (EMIS) sufficient spare space in the MCC for the power monitor unit.
The following costs could be justifiably incurred: Power monitor Engineering and design Installation and commissioning Communications and EMIS configuration Total investment cost $1,250 ea $2,250 $1,360 $2,500 $7,360
49
2.5.1 Using energy measurement systems to identify opportunities at a paint additive manufacturer
Example
A paint additive manufacturer has an annual energy utility bill of $2.7 million. The original energy measurement and management systems provided only basic measurement for energy flows. The senior management team desired improved energy management practices to meet new environmental standards. An improved energy measurement system was designed to enable: each of the 25 different product lines to be monitored weekly capture of higher-resolution energy data for energy baseline development the development of energy reporting systems for departmental managers. Several changes were made to the measurement and management system, with an investment cost of $60,000. Additions to the system included installation of: five more electricity meters (60 meters originally) three more water meters. The new energy measurement systems delivered improved energy performance monitoring. Through the monitoring of energy flows, several identified energy efficiency opportunities were investigated in detail and implemented. These opportunities included: optimal scheduling of process plant rationalisation of steam distribution mains improvement in efficiency of the compressed air system introduction of routine leakage checks on the water distribution system. Investment in the energy measurement and management system enabled detailed energy savings, costs and benefits from the opportunities to be presented to site management. The implemented opportunities resulted in cost savings of $120,000 per year. These opportunities result from changes to operational practice and consequently the cost of implementation was negligible. The payback scenario for the investment in the energy measurement system is: investment cost = $ 60,000 annual benefits resulting from investment = $120,000 (4.5% of annual energy bill) payback = 0.5 years.
50
2.5.2 Using energy measurement systems to drive improved energy performance at a rubber processing plant
Example
A brewery has an annual utility bill of $1.3 million. A total of $96,000 was invested in upgrading the energy measurement and management system to identify and accurately measure efficiency opportunities. The key changes to the energy measurement and management system included: electricitysub-metered into 20 units, based on departments and main services steamfour meters installed to monitor each main department water/effluent16 meters installed, including five hot liquor meters to monitor heat recovery around the hot liquor system. The improved system provided the capacity to measure electricity consumption for each department. The greater monitoring capability facilitated the generation of weekly utility reports, (reviewed in weekly production meetings). New energy savings targets were also set by senior management. The targets were based on actual performance, and comparisons were made to the Brewers Association energy targets. Through the desire to meet the Brewers Association energy targets, several additional savings opportunities were implemented: better control of the hot liquor system reduced water consumption improvements in boiler efficiency, compressed air, refrigeration and process heat recovery. The improved energy monitoring capability enabled site management to quantify precisely the benefits of implementing these opportunities. Annual savings of $42,000 were achieved, which translated to a reduction in costs of 6% through reduced energy consumption. This investment had a payback period of 2.3 years.
Key Elements addressed in Section 2: Key Element 3.2: Data collection process Key Element 3.3: Energy analysis
51
SECTION 3.0
Determining and improving accuracy
3.1 3.2 3.3 3.4 3.5 Overview of accuracy in opportunity evaluation Integrating accuracy into evaluations Statistics overview Determining accuracy Section summary
52
Section outcomes
At the end of this section, you will be: able to define the uncertainty range for each energy analysis familiar with the key analyses that determine whether the estimated savings are statistically significant able to determine the accuracy in energy modelling, process sampling, and energy measurement prepared to meet the EEO Program requirements by quantifying accuracy tolerances.
53
Example
The following two confidence levels and precision ranges are for the same expected energy saving: Expected energy savings 20% at a 95% confidence level. There is a 95% chance the savings fall between 20%. Expected energy savings 8.5% at a 40% confidence level. There is a 40% chance the savings fall between 8.5%.
3.3.2
Y
Yi N n S s % Ab
2
54
SE t-statistic
Standard error for estimating precision Provides a method of assessing whether the means of two groups are statistically different from each other. Values of the t-statistic are tabulated for a given degree of freedom (df = number of measurements minus 1) and probability (or p-value). The t-statistic is also referred to as the t-value. Initial estimate of sample size Coefficient of variance for sample Precision requirement for sample The confidence interval represents a range within which a proportion of values would be expected to lie. For a normal distribution, the t-statistic for a given confidence level indicates the number of standard deviations (s) on either side of the mean that are required to give a certain level of confidence such as 95%. The probability that the true population mean will lie within the boundaries of the confidence interval. The common standard confidence level for stating the accuracy of metering and measurement equipment is 95%. Normal distribution value for the desired confidence level and infinite samples. Degree of freedom, which equals n1 (for a sample distribution) or (n - p - 1) for a regression model, where n is the sample size and p is the number of regression model variables. Probability value (p-value or observed significance level)the minimum probability that a test value will be outside the range predicted by the regression (i.e. the null hypothesis would be rejected).
n0 Cv e Confidence interval
Confidence level
z df
Coefficient of determinationthe estimate of how well a model approximates the real data points (e.g. how well a regression line approximates real data). Regression model coefficient
55
Y=
Y
n
Variance (S )the variance of a population determines the amount the measured values differ from each other. The greater the variance, the greater the uncertainty in the mean. The difference from the mean is squared to allow for values that are both greater and less than the mean value:
(Y
n 1
Standard deviation (s)square root of the variance to return a measure of variability, in the same units as the data:
s=
S
s n
Standard error (SE)the standard deviation divided by the square root of the number of sample points (n) used to state precision:
SE =
Precisionthe measure of the range in which the true value is expected to occur. This is stated in conjunction with a level of confidence, which is the probability that the quoted range contains the estimated variable. Absolute precision (Ab)determined from t SE t-statisticprovides a method of assessing whether the means of two groups are statistically different from each other. To calculate precision in the units of the data, a t-value (t-statistic) is derived from a t-distribution table. A t-distribution table (see Table 3.1 below) shows t-values for a given degree of freedom (dfequals n1 (for a sample distribution) or (n - p - 1) for a regression model, where, n is the sample size and p is the number of regression model variables.) and probability (or p-value). After the mean ( Y ),variance (S ), standard deviation (s) and standard error (SE) are calculated, the degree of freedom (n) and the required confidence level are used to select a t-distribution value from the t-distribution table. This t-value, multiplied by the SE, gives the absolute precision of the mean value at the specified confidence level. Selecting the t-value using varying confidence levels changes the precision of the mean value. If the confidence level is increased, the statement of the mean value will be less precise, and vice versa. Tip: The t-value is particularly important to multiple-linear regressions. If a variable has a low t-value (< 1), then that variable has so little effect that the regression is likely to be more accurate if that variable is omitted. The lower the t-value, the greater the likelihood that two variables are statistically independent of one another (i.e. there is a lower probability that the two variables are related). Regression analysis software packages, such as Microsoft Excel, provide t-statistic and p-values as an output of regression analysis.
Table 3.1: The t-distribution table
2
1.376
2.414
6.314
12.706
25.452
63.657
127.321
1273.239
1.061
1.604
2.920
4.303
6.205
9.925
14.089
44.705
0.978
1.423
2.353
3.182
4.177
5.841
7.453
16.326
56
0.941
1.344
2.132
2.776
3.495
4.604
5.598
10.306
0.920
1.301
2.015
2.571
3.163
4.032
4.773
7.976
0.906
1.273
1.943
2.447
2.969
3.707
4.317
6.788
0.896
1.254
1.895
2.365
2.841
3.499
4.029
6.082
0.889
1.240
1.860
2.306
2.752
3.355
3.833
5.617
0.883
1.230
1.833
2.262
2.685
3.250
3.690
5.291
10
0.879
1.221
1.812
2.228
2.634
3.169
3.581
5.049
11
0.876
1.214
1.796
2.201
2.593
3.106
3.497
4.863
12
0.873
1.209
1.782
2.179
2.560
3.055
3.428
4.716
13
0.870
1.204
1.771
2.160
2.533
3.012
3.372
4.597
14
0.868
1.200
1.761
2.145
2.510
2.977
3.326
4.499
15
0.866
1.197
1.753
2.131
2.490
2.947
3.286
4.417
16
0.865
1.194
1.746
2.120
2.473
2.921
3.252
4.346
17
0.863
1.191
1.740
2.110
2.458
2.898
3.222
4.286
57
18
0.862
1.189
1.734
2.101
2.445
2.878
3.197
4.233
19
0.861
1.187
1.729
2.093
2.433
2.861
3.174
4.187
20
0.860
1.185
1.725
2.086
2.423
2.845
3.153
4.146
30
0.854
1.173
1.697
2.042
2.360
2.750
3.030
3.902
0.842
1.150
1.645
1.960
2.241
2.576
2.807
3.481
58
Example
Measurements were taken from a steam meter. The t-distribution table is used to analyse the data.
Table 3.2: t-distribution data analysis
2
Reading
Steam mass flow rate (t/h) 250 225 300 298 240 286 254 229 294 234 2,610 261
Readingmean
(Readingmean)
11 36 39 37 21 25 7 32 33 27
121 1,296 1,521 1,369 441 625 49 1,024 1,089 729 8,264
(Y
n 1
8,246 2 = 918 10 1
S
n
= 918 = 30t / hr
30 10
= 9.6t / hr
Using the t-distribution Table (Table 3.1) for 10 measurements (degree of freedom = n1 = 9), and a confidence level of 95% (p = 0.05): t = 2.262 Absolute error (precision): t SE = 2.262 9.6 = 21.72 t/h Relative error (precision):
So it can be stated that, with 95% confidence, that the true mean steam consumption is 261 t/h 8.3%.
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Description Significant factor/s not included in the analysis. Can be caused by lack of process knowledge, a decision to limit the complexity of the model, or lack of available data.
Effect If a significant variable is not included, the model will not provide an accurate value of energy consumption.
Solutions A good understanding of the process will indicate which variables are relevant. Develop a more complex model or eliminate other less significant factors. Gather data for any variable suspected of having been omitted, and use in the analysis. Perform the analysis again, discarding the irrelevant factors.
Factor/s that do not have a relationship with energy consumption are included in the analysis. The model is built using data that does not represent the normal energy consumption. Can be caused by including data beyond the range of reasonable values. Modelling a non-linear relationship with a linear function. rd Modelling 3 order st relationships with a 1 order function. Process equipment not fully understood. Sampling frequency not high enough to capture relationships, or time period too short to cover all variations (e.g. seasonal variation).
If irrelevant factors are related to the relevant variables, the results may be biased.
Inaccurate predictions because the model is trying to predict normal operation based on data points that include errors.
Incorrect function
Use process knowledge understanding to identify nonlinear relationships and examine the form of the relationships to see if a higher order function might be appropriate. Consult equipment manufacturer for latest energy consumption data. Increase data capture frequency or reduce data averaging interval. Capture data to cover as many operating scenarios as possible.
Insufficient data
The functions developed will not have the detail required to identify the relationships. The functions will only be able to predict energy consumption for a specific subset of the operational hours.
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SE
In this equation, b is the regression model coefficient that is the statistical estimate of the true relationship between an individual variable and the dependent variable (in this case, energy consumption). The variables b and SEb are outputs from statistics tools for each regression analysis calculation. (Refer to Section 12.1.4 for a list of useful tools in performing a regression analysis.) Once a baseline calculation (developed using a regression) is evaluated for a given period, the actual values of the outputs can be used to express the accuracy of the results in terms of precision and confidence level. There are five key steps in evaluating the accuracy of the regression: 1. Evaluate the mean energy consumptionusing the coefficients from the regression and input variables describing the period you are analysing. 2. Evaluate the energy consumptionusing the coefficients for either the lower 95 percentile or upper 95 percentile (for a symmetrical distribution) by entering the input variables used in step 1. These coefficients represent the upper and lower bounds of the confidence interval at confidence level of 95%. 3. Calculate the differencebetween the mean value and the 95% value. This is the absolute precision of the energy consumption. 4. Convert to a relative precision (% value). 5. State the resultin terms of mean value precision at the 95% confidence level.
th th
61
Example
A regression is performed on the historical electricity consumption data of a process. A regression that relates electricity to operating days and throughput is developed. The output from the analysis is:
So the equation of the form, using the first column of the regression output table, becomes:
Elec
+95
Elec+95 = 10,204 MWh Absolute precision = (10,204 - 8,908) MWh Absolute precision = 1,296 MWh Note that using the lower 95% values would have given the same answer. Finally: Relative precision = 8,908 *100 % Relative precision = 14.5% The statement of accuracy is: Electricity consumption for the process is projected to be 8,908 MWh 14.5% at a 95% confidence level
1,296
Tip: The results of a regression analysis may only be valid in situations where the input variables are of a similar magnitude to the data analysed. For example, a regression to determine the heat transfer rate through pipe-work insulation at low flow-rates will not be valid for much higher fluid flow-rates.
n , the number of x.
samples taken. Increasing the sample size by a factor of x will increase the accuracy by a factor of The California Evaluation Framework discusses sampling in detail (see 12.2.1 Notes [7]).
Sample size
Increasing the proportion of the population included in the sample (n/N) improves the accuracy, but will also increase the cost. The final sample size may be limited to a maximum number of samples for cost reasons, and this may result in the accuracy being less than the original confidence and precision levels stipulated. Estimating and evaluating energy efficiency opportunities often involves a complex interaction of factors. Careful analysis of the 62
sampling results is required to ensure that the required accuracy level is being achieved. Table 3.3 discusses key factors that should be considered when sampling a population.
Table 3.4: Solutions for issues when determining accuracy in sample sizes
Description A population can be made up of one or more identifiable groups based on product, season, occupancy, route etc. Each must be sampled fairly to avoid bias. Requirements for confidence and precision will influence sample size.
Effect Many samples are required to represent the entire population. The sampling method may favour one group over another.
Higher confidence levels and greater precision requirements require larger samples (e.g. to improve the precision from 20% to 10% requires four times the number of samples). Creates a starting point for calculation of sample size. Note that the time period for the measurements should be sufficient to cover known sources of variation in the data, such as seasonal variation.
Review the required confidence and precision levels in relation to the scale of the opportunity and keep the costs of sampling in proportion.
Can use test measurements or previous data to obtain values for Cv.
z CV
2 2
S Y
(until samples are taken 0.5 can be used as an estimate of Cv) e = precision requirement z = normal distribution value for the desired confidence level, taken from the t distribution Table using an infinite sample size. Allowance for small population size If the population is less than 20 times the sample size, the number of samples can be reduced. The sample size estimate (n0) is based on an assumed Cv. Once samples have been taken, early calculations can create the opportunity to reduce the number of samples or extend the sampling to achieve the required accuracy. Reduced sampling reduces cost. Adjust estimate.
An underestimated Cv compared to the sample value will require more samples to achieve the accuracy objective. An overestimated Cv will achieve the required accuracy in less than the estimated number of samples.
Calculate a Cv for the sampling as it progresses, adjusting the sampling program to achieve the required accuracy. The maximum sample size will most likely be limited by cost.
63
Example
The example of steam meter readings (included in Section 3.3.3) will be used to step through the process of determining the number of samples needed to determine a mean value that meets accuracy requirements. For this example, the requirement is to evaluate the mean with an accuracy of 10% at a 90% confidence level. Estimating the number of samples required uses the following equation from Table 5.3:
n0 = z 2 Cv e2
2
z = t value for p = 0.1 (90% confidence) = 1.645, n = Cv = 0.5 (estimate before samples are taken) e = 0.1 (10% precision) Evaluating this formula gives: n0 = 68 The initial estimate of the number of samples required to estimate the mean steam flow value to an accuracy of 10% at a 90% confidence level is 68.
Description Meters need to be regularly tested and calibrated to maintain their accuracy. Meters should be correctly sized for the range of values likely to be measured. The meter itself can affect the variable being measured. In poor location (e.g. placed too close to pipe elbow) or not
Incorrect sizing
Oversized meters may not be as accurate at the lower end of their range; similarly, undersized meters may not be able to capture the highest values. Installation of a flow meter can add restriction to a system and change the flow.
Process understanding is required to estimate the measurement range before installing meters.
Meter installation
Use manufacturers data to calculate the change to the system and, if the effect is significant, consider another method of measurement. Physically check meter location against manufacturers recommendations. Use energy-mass balance diagrams to assist in
Incorrect location
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Error source
Effect
Monitor data continuity, perform sense checks against higher-level data and process knowledge, and use a consistent sample rate for data.
Example
The capital cost estimates prepared for a beverage manufacturing site using the standard process were analysed to assess the relationship to the actual project costs when implemented. The information gathered is shown in the following table:
Table 3.6: Capital cost analysed to assess relationship to project cost Item
Description
Target +/-
Estimation
Actual
Act/Est %
Act/Estmean
(Act/Est-mean)
1 2 3 4 5 6 7 8 9 10
Variable speed drive compressor Pump control system Air/air heat recovery Economiser boiler 1 Turning vanes ventilation duct Pump replacement Air leak detection survey + repair Steam trap survey + repair Regeneration on main air fan Chilled service storage tank
30% 30% 30% 30% 30% 30% 30% 30% 30% 30%
$900,000 $30,000 $1,500,000 $350,000 $15,000 $25,000 $50,000 $120,000 $110,000 $260,000
$725,000 $22,000 $2,100,000 $435,000 $22,000 $22,000 $35,000 $128,000 $77,000 $189,000
80.6% 73.3% 140.0% 124.3% 146.7% 88.0% 70.0% 106.7% 70.0% 72.7%
-16.7% -23.9% 42.8% 27.1% 49.4% -9.2% -27.2% 9.4% -27.2% -24.5%
0.0278 0.0571 0.1830 0.0733 0.2445 0.0085 0.0741 0.0089 0.0741 0.0602
0.8114
Variance Standard deviation Standard error Degree of freedom Probability t-value Absolute precision Relative precision
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The accuracy of process used to develop the capital estimates can now be stated: The actual project cost will be 97.2% of the estimated project value, 19.9% at a 95% confidence level.
Traffic light
X k SE , where k is the value of the t- statistic for the sample size (n) used for the regression at the 95% confidence level for degrees of freedom of (n-1)
X k SE ,
where k is the value of the t statistic for the sample size (n) used for the regression at the 95% confidence level for degrees of freedom of (n-1) where is the instrument tolerance or uncertainty provided by the manufacturer, plus an allowance for human error (e.g. parallax error) if appropriate. For utility figures such as gas bills, is the magnitude of the smallest figure provided e.g. if a figure is 323.7GJ, the uncertainty would be 323.72(0.1) = 323.70.2 where is the uncertainty provided by the source
Measured result when several measurements of the same process are taken (e.g. n meter results for HVAC system air flow).
This assumes a normal distribution about the mean, and is statistically valid if that is the case.
Measured result from single metered measurement (e.g. from a utility provider).
X 2 ,
This does not deliver a statistically valid level of confidence, but may provide a first pass estimate if only one reading is available.
Published data, academic or trade journal or handbook figure with indicated error, or error margin provided by expert opinion.
X 2 ,
This does not deliver a statistically valid level of confidence, but may provide a reasonable estimate if only one figure is available. If the change in a parameter value does not affect the viability of an opportunity, or a certain option or range of options is consistently better than others, then the analysis is robust. Otherwise, further investigation and more rigorous valuation may be
Sensitivity analysis - to explore the possible effects of changes in parameter or variable values through the expected range. Sensitivity analysis provides a deeper understanding of which parameters are of primary importance in the evaluation, and also identifies where breakeven points and other milestones lie. One possible approach is Monte Carlo simulation, allows complex consideration
9
Evaluates the change in energy savings, costs or benefits as relevant variables or parameters are changed. Provides an indication of variation, but not a formal confidence level.
Taylor, B N and Kuyatt, C E (1994). Guidelines for Evaluating and Expressing the Uncertainty of NIST Measurement Results, National Institute of Standards and Technology, US Department of Commerce, NIST Technical Note 1297, see http://physics.nist.gov/Pubs/
66
of many different parameters, allowing M&V design to focus expenditures where most needed to improve the overall accuracy of savings reports. Published data or handbook result without indicated error where is the order of magnitude of the smallest significant figure e.g. annual rainfall = 5762mm number of trips = 20,300200 engine efficiency = 0.250.02
X 2 ,
This does not deliver a statistically valid level of confidence and is not valid for reporting purposes. It should be further investigated and refined. This method is not acceptable for reporting purposes.
Combining accuracy
Usually, more than one component is combined to calculate reported savings. To be able to make a statement about accuracy of savings, the accuracy of each contributing component must also be combined. This approach is particularly useful where a combination of analytical estimates or theoretical models and statistical analysis are used to estimate energy use. This approach can equally be applied to estimate the accuracy of a total when combining components of opportunity costs and benefits. Tip: Accuracy of components can only be combined if they are independent; that is, if the random errors affecting one component do not affect the other components.
Product
Where the energy savings are the result of the product of several individual components (Y=Y1 Y2 Yz), the standard error (SE) of the energy savings can be estimated by:
Or, using relative precision: (2) Accuracy _ Pr oduct (%) = Y1 (%) 2 + Y2 (%) 2 + ... + Yz (%) 2
Sum or difference
Where the energy savings are the result of the sum or difference of several individual components (Y=Y1Y2Yz), the standard error (SE) of the combined energy savings can be estimated by: (3) SE (energy _ savings) =
(SE ) + (SE )
2 Y1 Y2
+ ... +
(SE )
Yn
Or, using absolute precision: (4) Accuracy _ Sum( AP) = Y1 ( AP) 2 + Y2 ( AP) 2 + ... + Yz ( AP) 2
General functions
If the mathematical relationships between quantities are more complex, the general formula that may be used is the generic function Y = f(y1, y2,...yn): ______________________ (5) SE = (y1)2 + (y2)2 + ... + (yn)2, where Yi = (yi/Y)SEyi for all i = 1...n, the product of the partial derivative and standard error for each variable 10.
10 TecMarket Works Framework Team (2004). The California Evaluation Framework, Chapters 7 and 12. Prepared for the California Public Utilities Commission and the Project Advisory Group, available from: http://www.cee1.org/eval/CEF.pdf
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Example
The following sets out how an estimate of the accuracy of the energy savings calculated for the Organic Rankine Cycle (ORC) heat recovery system (Section 9.4) would be performed. Accuracy (at 95% confidence level): RP (Tc), Relative precision clinker cooler air temp 1.5% RP (Qc), Relative precision clinker cooler air flow 5% RP ( c), Relative precision ORC system efficiency 10% These three components combined give an estimate of the accuracy for the ORC output using formula (1) above.
2 SE Qc + ... SEc SE (output ) = SE Tc + Q T c c c
2
SE (output ) =
AP T
Tc
t +
2
AP
t + Qc
Qc
AP
Where: SE(Y) = Standard error AP(Y) = Absolute precision Tc = Temperature of clinker cooler exhaust (C) Qc = Clinker cooler exhaust flow rate (kg/s)
SE (output ) =
= 0.058MW
AP(output) = SE(output) t = 0.11 MW So, the ORC output value of 1.05MWe is predicted to be 1.05 MWe .0.11 MW or 10% at the 95% confidence level.
Tip: Evaluation and tracking of accuracy and the assumptions made throughout the opportunity development process allow sensitivity analysis to be performed. When individual components are combined, the accuracy of the combined total must be evaluated. This section describes a method to estimate the accuracy of this total. Combining the accuracy of the components of both opportunity costs and benefits is very similar. The following example is taken from the minerals processing worked example in Section 8.3, and illustrates the calculation of accuracy when components are combined in a sum.
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Example
Cement manufacturer, Greystone Cement, is investigating the possibility of recovering waste heat from the clinkering process. It will be a major capital project to install the equipment required to capture the waste heat and convert it into electrical energy. The costs for the installed equipment have been estimated at $2 million 15% at 95% confidence level. Installation of the new equipment will involve the shutdown of the cement kiln for a period of three weeks. Two of these weeks will be timed to coincide with the annual maintenance shutdown of the plant, so the project will only cause one week of lost production. The return on cement is $20/t, the clinker production rate 2000t/day 10%, and clinker makes up on average 92% of final cement composition. Production losses = 2000t/day 0.92 t clinker/t cement 7 days $20/t Production losses = $304,348 10% Total project costs = $2.0m + $304,348 = $2,304,348 with an average annual cost over four years of: $500,000 + $76,087 = $576,087 To estimate the accuracy of the combined average, use the formula (4) above for the sum of accuracies:
Accuracy _ Sum( AP) = Y1 ( AP) 2 + Y2 ( AP) 2 + ... + Yz ( Ap) 2
Converting back into relative precision: Annual project cost = $576,087 13% The installation of the new heat recovery and electricity generation equipment will incur additional maintenance costs, which have been estimated at $20,000 20% per year; with 3% inflation, the average annual maintenance cost increase is $20,918. Similarly, the annual maintenance costs and accuracies can be combined with the project costs: Total annual costs = $576,087 13% + $20,918 20% = $597,005 13%
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Example
A mining company is planning a second plant, and is investigating an energy efficiency opportunity to replace compressed air use in a mixing process with a mechanical alternative. The current compressed air system does not have the capacity to supply the existing plants demand as well as the new plant; however, if the mechanical mixing opportunity is implemented, a new compressor will not be required. To justify the implementation of the mechanical alternative, the avoided costs of the purchase, installation and maintenance of the new air compressor will be included as non-energy benefits. This is expected to improve the companys sustainability credentials, which should result in a quantifiable improvement in the share price.
Maintenance savings
The estimated annual maintenance savings from avoiding the installation of a new compressor = $200,000 50%. Share price improvement: This is estimated at $50,000 80%
Combined savings
Using the method described in Section 5.3.4 for combining sums: Total annual savings = $390,000 33% The accuracy of the total savings lies outside the EEO Program requirement for energy savings, opportunity costs and non-energy benefits to be evaluated to an accuracy of 30%. To improve this estimate and to bring it into compliance with the EEO Program, one or more of the components will need to be evaluated to an improved level of accuracy. It was decided to improve the capital estimate of the compressor plant installation. The revised estimate resulted in a capital cost of $1,150,000 30% which equates to an annual cost of $161,000 30%. The total annual savings ($411,000 29%) and the evaluation now comply with the EEO Program requirements for accuracy.
3.4.8 Project estimation methods: rules of thumb for capital cost uncertainty
Project estimation and costing guidelines can provide a useful indication of the accuracy of estimates. The following summary is adapted from Humphreys (2004), and generally applies to capital cost estimates, rather than energy 11 savings estimates.
12 The American National Standards Institute (ANSI, 1991) defines three types of estimates: order-of-magnitude, budget, and definitive:
1.
Order-of-magnitude estimates have an expected accuracy between +50% and -30%. These are generally based on cost-capacity curves and cost capacity ratios (i.e. rules of thumb) without any preliminary design work. Budget estimates are based on flowsheets, layouts, and preliminary equipment descriptions and specifications and have an accuracy range of +30% to -15%. Design generally must be 5% to 20% complete to permit such an estimate to be performed. Definitive estimates require defined engineering data, such as site data, specifications, basic drawings, detailed sketches, and equipment quotations. Design is generally 20% to 100% complete, and estimate accuracy should be within +15% to -5%.
2.
3.
The Association for the Advancement of Cost Engineering International (AACE) extended the ANSI estimate 13 classifications to five expected accuracy levels based on the extent of project definition, as discussed in Box 1.
Kenneth K . Humphreys, (2004), Project and Cost Engineers' Handbook, Fourth Edition, CRC Press, Pages 5786. ANSI Z94.01989. (1991). American National Standard Industrial Engineering Terminology. rev. ed. McGraw Hill Inc., New York and Institute of Industrial Engineers: Norcross, GA.
12 11
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Box 1. AACE Accuracy levels for project estimation (adapted from Humphreys (2004))
Accuracy of estimates hinges on the technological complexity of the project, appropriate reference information, and accounting for contingencies. The revised classifications are: 1. Class 5 estimates are very much a first-pass, order-of-magnitude estimate based on very limited informationproject definition is 2% or lesssuch as the proposed plant type, location, and capacity. Expected accuracy is -20% to -50% on the low side and +30% to +100% on the high side. Class 4 estimates are used for project screening, feasibility determinations, concept evaluation, and preliminary budget approval. Engineering is only 1% to 5% complete, withat a minimumplant capacity, block schematics, indicated plant layout, process flow diagrams (PFDs) for the main process systems, and preliminary lists of engineered process and utility equipment. Accuracy ranges are -15% to -30% on the low side, and +20% to +50% on the high side. This class of estimate falls into the ANSI budget estimate classification. Class 3 estimates form the basis for budget authorisation, appropriation, and/or funding, with project definition (i.e., completed engineering) 10% to 40% complete. At a minimum, this includes: process flow diagrams, utility flow diagrams, preliminary piping and instrument diagrams, plot plans, developed layout drawings, and essentially complete engineering process and utility equipment lists. Accuracy ranges for this class of estimate are -10% to -20% on the low side, and +10% to +30% on the high side. This class of estimate also falls into the ANSI budget estimate classification. Class 2 estimates fall into the ANSI definitive estimate category. Class 2 estimates are generally prepared to form detailed control baselines against which all project work is monitored in terms of cost and progress control. For contractors, this class of estimate is often used as the bid estimate. Typically engineering is 30% to 70% complete and comprises, at a minimum: process flow diagrams, utility flow diagrams, piping and instrument diagrams (P&IDs), heat and material balances, final plot plans, final layout drawings, complete lists of engineered process and utility equipment, single line electrical diagrams, electrical equipment and motor schedules, vendor quotations, detailed project execution plans, resourcing and work force plans, etc. Accuracy ranges are much tighter, from the low side they are -5% to -15%. On the high side, the ranges are +5% to +20%. Class 1 estimates are the most accurate category of estimates. Class 1 estimates are generally prepared for discrete parts or sections of the total project rather than for the entire project. The parts of the project estimated at this level of detail are typically used by subcontractors for bids, or by owners for check estimates. The estimate is often termed the current control estimate and becomes the new baseline for cost/schedule control of the project. Typically engineering is 50% to 100% complete and comprises virtually all engineering and design documentation of the projects, and complete project execution and commissioning plans. Accuracy ranges from -3% to -10% on the low side and +3% to +15% on the high side.
2.
3.
4.
5.
Key Elements addressed in Section 3: Key Element 3.2: Data collection process Key Element 4.3: Investigation of opportunities
13 AACE International Recommended Practice No. 18R97. (1997). Cost Estimate Classification Systemas Applied in Engineering, Procurement, and Construction for the Process Industries. AACE International, Morgantown, WV.
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72
SECTION 4.0
Estimating energy savings for an opportunity
4.1 4.2 4.3 4.4 4.5 Overview of estimating energy savings Estimating energy savings Methods for estimating energy savings Estimating energy savings for the Fair Dinkum Milk Company Section summary
73
Section outcomes
At the end of this section, you will be able to: select and implement a strategy for estimating energy savings accurately estimate energy savings for each opportunity.
74
75
Example 1
A company is replacing its fleet of cars with more fuel-efficient models. It has been calculated that the current cars consume 10 litres of fuel per 100 km. Step 1Analyse the opportunity Expressing the fuel-use relative to distance allows the fuel saving due to this opportunity to be isolated from other fuel reductions which may occur over the savings period. However, this metric is only applicable if the fuel remains the same. If the opportunity involves changing from petrol to diesel a more appropriate metric would be GJ/100 km. Step 2Forecast the post-implementation energy consumption A fuel efficiency of 6.5 L/100 km for the new cars was provided by the manufacturer. Step 3Estimate energy savings Value Current fuel efficiency Forecast fuel efficiency Estimated fuel savings Estimated energy savings, based on energy content of petrol 10 6.5 3.5 103 Units L/100 km L/100 km L/100 km MJ/100 km
The calculation used will depend on the nature of the opportunity and the energy type involved, such as heat, electricity or fuel. Forecasting the post-implementation energy use may involve manufacturer specifications, industry standards and/or engineering principles and calculations. If the opportunity involves new technology investments, the experience of suppliers with the technology and results achieved on previous installations can be used as benchmarks.
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Example 2
A plant currently heats hot water to 80C using steam. An opportunity has been identified which would preheat the water to 45C to reduce the steam required. The following table calculates the current energy baseline. The operating hours of the system vary significantly, so the steam consumption is expressed in t/h. The heating required is calculated using the engineering equation Q=mCpT, with the variables tabulated below. Value Inlet water temperature Target water temperature Temperature change (T) Water flow (m) Specific heat of water (Cp) Heating required (Q) Steam enthalpy Steam required Step 1Analyse the opportunity It is assumed that there will be no changes to this system other than the opportunity implementation. In the absence of external influences on energy use, this becomes the forecast energy baseline. Step 2Forecast the post-implementation energy consumption The next step is to estimate the steam requirement post implementation. This is essentially the same calculation that was used to establish the energy baseline, but using the post-implementation inlet water temperature of 45C. 18 80 62 12,000 4.18 3.11 2400 1.296 Units C C C kg/h kJ/kg C GJ/h kJ/kg t/h =3.11 GJ/h (2400 kJ/kg 1000 kg/t 1000000 kJ/GJ) =mCpT Calculation
Value Inlet water temperature (forecast) Target water temperature Temperature change (T) Water flow (m) Specific heat water (Cp) Heating required (Q) Steam enthalpy Steam required Step 3Estimate energy savings 45 80 35 12 4.18 1.76 2400 0.733
The forecast energy consumption post-implementation is 0.733 t/h. To estimate the energy savings, calculate the difference between the baseline steam use and this forecast of post-implementation steam use.
Value Baseline steam required Forecast steam required Estimated steam saving Estimated energy saving 1.296 0.733 0.563 1.35
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For some opportunities, the energy savings can be estimated directly. When this can be done, a comparison between energy forecast with and without opportunity implementation is not required. However, the postimplementation energy consumption can be estimated by back calculation.
Example 3
A wide range of equipment (air motors in hand tools, spray guns, drills and grinders) used in a manufacturing workshop are powered by compressed air. To operate at optimum performance the equipment requires air at 6 bar. However, it was found that the compressed air system was operating at over-charged pressure of 7.0 bar. This was done to be on the safe side during rarely occurring pressure dips. An opportunity exists to improve energy efficiency by reducing the compressor air pressure. Step 1Analyse the opportunity The manufacturing work shop uses a 100 kW compressor. The compressor operates for 2,000 hours per year. Step 2Forecast the post-implementation energy consumption In this example the energy savings can be estimated directly and there is no need to forecast the postimplementation energy consumption. However, the post-implementation energy use can be back calculated once the energy savings have been estimated. Step 3Estimate energy savings Operating the system at the required 6 bar will reduce the system pressure by 1 bar. International research suggests that by reducing system air pressure by 1 bar, air compressor power consumption can be reduced by 810%. The company assumed conservative savings of 8% per bar. The energy saving can be estimated directly by using basic engineering calculations: Value Compressor power Annual operation Annual energy consumption Air compressor power reduction Estimated annual energy savings 100 2,000 200 8 16 Units kW hours MWh % MWh =200 MWh 8% =100 kW 2000 h 1000 kW/MW Calculation
The post-implementation energy consumption is estimated to be 184 MWh (i.e. 200 MWh 16 MWh = 184 MWh). An example of estimating energy savings using calculated savings is contained in the minerals processing worked example, in Section 8.3 of this guide. The National Greenhouse and Energy Reporting System (NGER) Determination Section 6.2 contains information for calculating energy savings due to changes in fuel consumption.
These methods usually involve the following steps: 1. Develop a study: - the pilot study may involve implementing the opportunity to one process, or studying the implementation of the opportunity on other processes or sites - the bench-test facility may be developed by your company or by equipment suppliers. 2. Analyse the results to determine: - appropriateness of the technology (can the technology be transferred?) - comparability with the opportunity (can the results be transferred?) - scale of use within the company (number of applications, volume of product processed and running hours) - energy savings. 3. Estimate the energy savings of implementing the opportunity: - the pilot study may be implemented numerous times - the bench tests may be scaled to a variety of sizes.
79
Example
The Dreamt-Up Drink Company identified an opportunity to reduce the amount of energy used to heat water. Increasing the inlet water temperature using a pre-heater reduces the amount of water heating required downstream. The Dreamt-Up Drink Company already has an existing energy-mass balance that can be used to estimate the opportunitys energy savings. The opportunity reduced the water heating required by 5 C. The new water heating requirement was entered into the existing energy-mass balance to create a post-implementation scenario. The following table is a summary from the full energy-mass balance for the Dreamt-Up Drink Company. Parameter Existing energymass balance 436,506,971 Postimplementation scenario Unit Data source
436,506,971
kg/year
28.4
23.4
4.18
4.18
kJ/kg C
physical parameter
51,819
42,696
GJ/year
9,123
GJ/year
The estimated energy savings is the difference between the two scenarios. The estimated annual savings for the opportunity is 9,123 GJ.
Description Using engineering calculations and principles to estimate the energy consumption post-implementation.
Common applications - when it is a proven technology - when there is a high degree of process knowledge - where supplier-promoted opportunities exist (relies on suppliers experience). Performance guarantees may be available to indicate savings. - for replication of savings opportunities, where comparable operating conditions needed - when energy savings from the first installation can be used to estimate savings for further installations, e.g. upgrading motors to variable speed drive - when energy savings from implementing the opportunity at another site can be used to estimate savings for an installation under similar circumstances at your site. - when the opportunity involves novel technologies or the unproven application of the technology - instances of major process change - new technology when a supplier is able to use their small-
Pilot study
Operating (continuously or temporarily) an example of the equipment being considered. Monitor the change in energy use from the baseline. Extrapolate to plant/site/company scale.
Bench test
Operating a small-scale version of the equipment or the process to assess performance. Useful where there is risk in applying the option to production plant.
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scale model to estimate energy savings - an experimental process change that could first be trialled in the laboratory. Modelling/ simulation Extension of baseline energy consumption model to simulate energy efficiency opportunities. - processes with variable energy use - when there is a high degree of process knowledge - complex sites where implementation of the opportunity will affect energy use over a range of processes.
4.4 Estimating energy savings for an opportunity for the Fair Dinkum Milk Company
This section continues the analysis of the Fair Dinkum Milk Companys identified opportunity to recover heat from the Plant 1 evaporators to heat the Plant 1 drier air and produce an associated reduction in gas consumption. The gas savings were estimated by applying engineering first principles through redesign of the process.
Exhaust
Ambient air
17 C 1400 t/d
184 C
Drier 1
Gas
Figure 4.3: Proposed process for heating of Plant 1 air into the drier
30 C
Exhaust
Ambient air
17 C 1400 t/d
Pre-heater
35 C
184 C
Drier 1
Gas
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2. Forecast the post-implementation energy consumption. The calculation of the gas required by the main heater for the proposed opportunity (Figure 9.5) is shown in Table 4.2. The gas consumption postimplementation is forecast to be 248 GJ/d.
Table 4.2: Gas consumption forecast
Parameter
Symbol
Value
Units
Calculation
T inlet T outlet Temperature change Air specific heat Air flow Heat flow Heater efficiency Gas required
T1 T2 T Cp m Q
C C C kJ/kg.C T = T2T1
1.00 % 1.61%
14 3.39
1.61%
3.98
GJ/d
3. Estimate energy savings. The estimated energy savings, shown in Table 4.3, represent the difference between current operation and the forecast energy consumption post-implementation.
Table 4.3: Estimated gas saving*
Parameter
Value
Units
Forecast gas consumption without opportunity implementation Forecast gas consumption with opportunity implementation Estimated gas saving Operating days per year Estimated gas saving
278
2.75%
GJ/d
248
1.61%
3.99
GJ/d
30 280 8,400
28.73%
8.62
GJ/d days/year
28.73%
2,413
GJ
* Refer to Sections 3.3 3.4 for further information regarding precision calculations
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Summary: The Fair Dinkum Milk Company estimated energy savings using the calculated savings method from Section 4.3.1. The results are shown on the following graph. The forecast energy consumption post-implementation was estimated to be 248 GJ/d 1.61%. The energy savings for implementing the opportunity are estimated at 30 GJ/d 28.73%, which meets accuracy requirements of 30% for energy savings under the EEO Program.
Figure 4.4: Drier 1 air pre-heater opportunity Estimating energy savings 280 270 260
GJ/d
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SECTION 5.0
Evaluating an opportunity
5.1 5.2 5.3 5.4 5.5 5.6 5.7 5.8 Overview of evaluating an opportunity Financial analysis Valuing whole-of-business costs and benefits Prioritising the implementation of opportunities Developing business cases for decision makers Allocation of resources to evaluate energy efficiency opportunities Evaluating an opportunity for the Fair Dinkum Milk Company Section summary
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Section outcomes
At the end of this section, you will: be able to identify and quantify, where possible, the whole-of-business costs and benefits resulting from an implemented opportunity be able to complete a financial analysis of an opportunity and calculate its payback period be able to account for a range of future changes that are likely to affect the financial return and viability of a project have a system for prioritising all the evaluated opportunities to maximise the value of energy savings.
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Example
Heat recovery from the flue of a boiler is forecast to reduce gas use by 3.8 GJ/h, but will consume an additional 150 kW of electricity. Marginal costs of energy are gas at $4/GJ and electricity at $50/MWh. Annual plant operating hours are 6,000 hours/year. Value Gas reduction Marginal gas cost Annual gas saving Electricity increase Marginal electricity cost Annual electricity cost Energy savings 3.8 4 91,200 150 50 45,000 46,200 Units GJ/h $/GJ $ kW $/MWh $ $ 150 kW 1,000 kW/MW 50 $/MWh 6,000h/year Annual gas saving annual electricity cost 3.8 GJ/h 4 $/GJ 6,000h/year Calculation
Other factors may have to be considered to ensure the energy saving is valued correctly. For example, electricity saving measures often reduce peak demand charges, which are typically charged separately in energy billssuch savings should also be included.
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The initial capital cost is the price of the opportunity that must be paid before or at the time of implementation (including costs of metering etc. discussed in Section 5.2.2). The net annual savings are the savings within a year due directly or indirectly to energy savings (such as reduced fuel costs or increase in output), less the ongoing costs 87
to the business within that corresponding year (such as additional personnel costs, maintenance or metering costs). If the annual future cash flows are not uniform, the above equation will give inaccurate results. If, for example, the investment benefits are seen earlier on in the project, then the simple payback equation will overestimate the payback period, as demonstrated in the example below. While the converse can also occur, it should be noted that the simple payback equation must nevertheless be used for Energy Efficiency Opportunities program reporting purposes. Worksheet 25 of the Assessment Handbook shows a template for recording inputs into the payback calculation.
Example
A project investment is estimated to be $40,000. The whole-of-business savings estimates are as follows: Year 1 savings $20,000 Year 2 savings $15,000 Year 3 savings $15,000 Year 4 savings $10,000 Average $15,000
Payback = $40,000 / $15,000 = 2.7 years Greater savings are due in the earlier years, hence 2.7 years is an over estimate of the payback period. Actual payback = 2 years + $5,000/$15000 = 2.3 years
that can be remedied if the project is well-managed and adequate monitoring is in place for problem diagnosis. Energy costs (inflation, tariffs). Energy prices continue to rise in the long run. This is an important consideration during the calculation of payback periods. Energy contracts may provide an indication of future pricing. Financial discount rates (interest rates). The fluctuating value of money is a significant factor in realising capital projects. It is imperative to factor in potential interest rate changes and associated finance fees. Rising capital costs. Large capital projects have a wide range of suppliers and inputs. Project costs tend to increase with time. A sufficient contingency allowance should be integrated into capital costs to allow for increasing component costs, tighter delivery times and budget overruns. Site and company changes. Companies, plants and teams are dynamic entities. Team changes or changes in company strategy may result in altered production scenarios or focus within a business. These changes impact on operating conditions and, ultimately, financial returns. Product changes (quality, value). Altering the product mix has ramifications for the determination of savings. Changes in product may affect plant operational parameters, financial performance and payback periods. Plant reliability/availability changes. The implementation of a significant capital project (which may be unrelated to energy) may change the nature and balance of the plant/process. This can be avoided by ensuring that the energy efficiency opportunity is designed so that any negative impact on the existing plant is avoided. Appropriate monitoring and measurement systems can provide the necessary information to separate out the impacts of the energy efficiency measure from other changes. Production impacts, including production rate changes. Generally, lower production rates will reduce energy savings, although measures that reduce standby energy use or fixed energy overheads, or improve efficiency of low-load operation, will help to manage energy costs during times of lower production. Longer periods on standby, or low-load could increase the benefit of efficiency measures that reduce waste in these operating modes.
Tip: Long run energy prices have generally been increasing at rates well above general inflation. An allowance for future energy price inflation should be built into the analysis for any long-term project.
visible to decision-makers. Analysis of a large number of industrial energy efficiency projects and case studies has identified many nonenergy or whole-of-business benefits which can be divided into five broad categories or common themes, including (not in order of importance): reduced waste lower emissions improved maintenance and operating costs increased production better product quality an improved working environment.
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There are other benefits outside these categories, as shown in Table 5.1 (below).
Table 5.1: Non-energy benefits from energy efficiency improvements
Waste
Emissions
Use of waste as fuels, heat, gas Reduced product waste Reduced waste water Reduced hazardous waste Materials reduction
Reduced need for engineering controls Lowered cooling requirements Increased facility reliability Reduced wear and tear on equipment/machinery Reductions in labour requirements
Production
Working environment
Other
Increased product output/yields Improved equipment performance Shorter process cycle times Improved product quality/purity Increased reliability in production
Reduced need for personal protective equipment Improved lighting Reduced noise levels Improved temperature control Improved air quality
Decreased liability Improved public image Delaying or reducing capital expenditures Additional space Improved worker comfort/morale
Many non-energy or whole-of-business benefits (and costs) can be quantified. For example, social and environmental costs and benefits beyond those with an associated, well-recognised market value can be quantified usually in terms of the economic value of damage caused or avoided. A study of more than 50 industrial energy efficiency projects has shown that a 4.2-year payback based on energy savings can fall to a 1.9-year payback when the full productivity impacts of a project are included. If such costs or benefits are thought to constitute a significant component of benefits, then advice from appropriately qualified professionals should be sought. The value of possible business costs and benefits from implementing an energy efficiency opportunity is highly opportunity-specific and situation-specific. Therefore a structured approach to identifying and valuing potential costs and benefits is recommended so that wider business aspects are captured and valued effectively. The recommended approach is to conduct a framing workshop. One possible approach for evaluating the productivity (non-energy) benefits of energy efficiency technologies is laid out in the steps below. This approach begins by asking broadly: aside from energy conservation, what impacts does this technology have on the production process? In order to incorporate these factors into an economic analysis, the impacts need to be translated into economic terms wherever possible. This framework is useful for making the cost-benefit calculations and makes the evaluation process more transparent for the analyst. The steps are:
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Worrell, E, Laitner, J A, Ruth, M and Finman, H. (2003). Productivity benefits of industrial energy efficiency measures, Energy 28, pp. 1081 1098
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1. Identify and describe the productivity benefits associated with a given measure. This involves listing all the significant impacts of a measure aside from energy savings. These benefits will fall into the general categories listed in Table 5.1. Descriptions should be as specific as possible. 2. Quantify these impacts as much as possible. The benefits identified above should be quantified in the most direct terms possible. For example, if one benefit is the extended lifetime of electrodes in electric steelmaking, estimate the change in lifetime, or the reduced electrode consumption, per tonne of steel. Some benefits may be deemed non-quantifiable. For example, although adopting a technology may enhance the company reputation as an innovator and leader, this may be too intangible to quantify. 3. Identify all the assumptions needed to translate the benefits into cost impacts. The quantities identified in the first two steps should be direct measures of benefits, but these may not be directly related to the production costs of the firm. Making this connection to production costs will require certain assumptions or intermediate values. For reductions in electrode consumption, the cost of electrodes must be known. Other assumptions may involve greater uncertainty. 4. Calculate cost impacts of productivity benefits. Relying on the assumptions listed in the above step, the magnitude of the productivity benefits can be calculated in cost terms and incorporated into the cost calculation for the efficiency measure or technology. By following the framework detailed above, the cost evaluation of productivity benefits is formalised and transparent. Since there are sometimes ambiguities in the evaluation of productivity benefits, a transparent evaluation framework is important both to give credibility to the calculation and to provide flexibility.
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Tip: It is often not possible or practical to isolate the effect of each opportunity. This can be due to interactions between opportunities, or because it is cost-prohibitive to individually monitor results for each project, especially where the benefits of the project are small. It is recommended that opportunities are investigated even when their affects cannot be separately measured. Such opportunities can be reported together under a broad headline such as Improved driving techniques for iron ore trucking (savings would then be estimated based on reductions in overall site or fleet energy use). A range of direct benefits or costs can be identified as resulting from energy efficiency projects and these can usually be calculated with reasonable accuracy.
Cost reduction
Often the implementation of an opportunity will save other resources in addition to energy. Resources that can be conserved include: water consumables waste treatment and disposal repairs and maintenance labour.
Example
Increased heat recovery will enable the decommissioning of a cooling tower. The savings are in electricity (a 15 kW fan and a 37 kW pump, both operating at 90% of their maximum specified 3 3 power, with electricity price of 5c/kWh), water (200 m /d at a price of $0.50/m ), chemicals ($7,000 /year) and maintenance ($7,000 /year). Operating hours 6,000 /year, 250 d /year. Total savings = energy savings + water savings + chemical savings + maintenance savings = 3 3 ((fan [kW] + pump [kW]) electricity price [$] operating hours [h]) + (water flow rate [m /d] water price [$/m ] operating days [days/year]) + chemicals [$] + maintenance [$] = ((15 + 37) 0.9 0.05 6,000) + (200 0.5 250) + 7,000 + 7,000 = $53,040/year Implementing an energy efficiency project may result in an increase in the use of some resources that should be factored into the evaluation. In the preceding example, if the new heat recovery equipment required regular cleaning, then the additional costs of labour, chemicals, water and waste treatment would need to be included in the costs component of the evaluation. The management of chemicals will also have implications for occupational health and safety practices and costs.
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Example
Continuing the cooling tower example: The decommissioned cooling tower has a salvage value of $10,000. There is a $10,000 credit to the energy efficiency project in the year in which the salvage value is realised.
Example
Minimisation of inappropriate air use (by installing a dedicated blower) means a new air compressor is not required to run a new packing line. The avoided capital cost of $125,000 for the new air compressor is factored in as a benefit in the air blower project in the year in which the capital expenditure is spent.
Productivity improvements
Implemented energy efficiency opportunities may lead to productivity improvements. On sites where energy supply is the capacity constraining factor, reducing energy consumption in one part of the operations can enable a capacity increment elsewhere. Such productivity improvement is likely to be a valuable result of the energy efficiency opportunity. An example of an opportunity with multiple benefits is provided in the Lucky Mining industry example in Section 8.4. On occasion, an energy efficiency opportunity may cause a productivity decrease. This should be foreseeable, and be presented as a cost in the evaluation process. Undertaking a detailed energy-mass balance helps to identify and quantify such interactions between energy efficiency opportunities and other processes at a site. For reporting purposes, pre-existing energy efficiency projects, or energy savings which result from business as usual production efficiencies, should not be reported under the EEO Program. The Program guidelines provide specific guidance on which projects should be reported.
Example
The purchase of a new truck, which has a more energy efficient engine, should not be included as an opportunity for reporting purposes under the EEO Program legislation, unless the purchasing decision arose directly from the energy efficiency assessment process. Although there is an energy efficiency improvement resulting from the newer engine, this should only be counted if the EEO assessment recommended accelerated vehicle replacement or altered the choice of vehicle.
Groover, M, (2001). Automation, Production Systems, and Computer-Integrated Manufacturing, Upper Saddle River: Prentice Hall, Chapter 20.
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Example
The scenarios that follow relate to the cooling tower decommissioning examples already discussed. Total energy savings were 280,800 kWh per year, which equated to $53,000. Using an average emissions factor for grid electricity of 1.06 kg CO2-e / kWh (as in NSW), and shadow emissions costs of $25, $30 and $40/t CO2-e per year: Total emissions saved = 280,800 kWh 1.06 kg CO2-e/kWh 0.001 (kg/t) = 298 t CO2-e/year Cost of emissions = 298 t CO2-e $25/t CO2-e = $7,450 /year at $25/t CO2-e At $30/t CO2-e, the corresponding value of emissions saved would be $8,940, which would rise to $11,920 for an emissions cost of $40/t CO2-e. Depending on the emissions cost per tonne, these emissions savings correspond to between 14% and 22% of the energy savings of $53,000 per year calculated previously. The indirect costs of CO2-e emissions are more difficult to calculate, and depend on the nature and complexity of the manufacturing chain for the input and amount of embodied carbon it contains. Prices for products with significant embodied energy and process carbon emissions would be expected to be most sensitive to the cost per tonne of carbon emissions. The possible impacts of the indirect CO2-e emissions costs can be examined using sensitivity analysis. Reductions in other non-energy consumables from implementing the energy efficiency opportunity, including the value of their indirect carbon costs, should also be included in the whole-of-business analysis. Greenhouse gas emissions will have both direct and indirect financial impacts. Direct financial impacts will be experienced through energy or other input costs increasing. Indirect financial impacts occur around the perception of the companys greenhouse gas emissions management, the level of investment risk, public perceptions of corporate social responsibility and business sustainability. Perceptions that companies are not responding to the need to reduce emissions can affect both share prices and capital availability, imposing financial costs. These latter impacts are more difficult to quantify, but should be articulated in the business case for energy efficiency improvements. Both direct and indirect financial impacts are likely to vary over time, and thus represent changing business risks.
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The role of energy efficiency in developing a greenhouse gas emissions reduction strategy
As discussed above, there are many drivers for companies to reduce their greenhouse gas emissions. Energy efficiency is the first and usually most cost-effective manner to reduce greenhouse gas emissions, and forms the first strategic approach in a greenhouse gas reduction strategy. There is an old adage that the cheapest energy is the energy you dont use and in the same way the cheapest greenhouse gas emissions are the ones you dont generate. International experience shows that the greenhouse gas reduction strategies with the most community credibility consist of four elements: the four Rs. In order of preferred implementation priority these are: Reduce the amount of energy used, or greenhouse gases produced in the process. The reduction can occur from either the use of a different technology/process or operational/behaviour change. This component of the strategy is the focus of the EEO Program. Replace carbon intensive energy or process feedstock with those with lower carbon content. This includes the use of renewable energy, and alternative feedstock, such as using biomass as a reductant in industrial processes such as iron and steel production. Remove the emitted carbon dioxide by locking it up in bio-sequestration (forests or plantations) or geosequestration sinks. Reconcile any remaining emissions with recognised offsets or credits. Analysis and experience has shown that energy efficiency usually has the lowest marginal abatement cost, with this often being negativemeaning it generates a profit. The indicative marginal cost of various greenhouse gas abatement options can be presented using a marginal cost of abatement curve. Note that costs for renewable energy vary substantially depending on the technology chosen and location, and tend to decline over time as technology improves and economies of scale are obtained. According to the International Energy Agency, energy efficiency measures offer some of the least-cost abatement options in industry. Implementation of best available technology could reduce current emissions by 12% to 23% for 16 various industries relative to 2006 levels . Analysis of government reports submitted by EEO Program companies indicates that energy efficiency opportunities have yielded net financial benefits of around $100 per tonne of emissions abated, including all net annual benefits. Investment in energy efficiency opportunities not only demonstrates a companys commitment to address the root cause of its emissions (rather than just paying its costs or purchasing offsets) but will usually be the most costeffective form of greenhouse gas abatement. Energy efficiency investments can therefore be a powerful indicator of management performance for stakeholders.
Security of supply
Reduced energy consumption can reduce the reliance on external fuel supplies or minimise the need for operation of inefficient, site-based generation to manage peak loads. If the frequency of disruption can be identified, it may be possible to quantify the value of supply disruptions in terms of lost output or delayed cash flows.
16 Canada. Canadian Industry Program for Energy Conservation (CIPEC) (2000). Energy Management Information SystemsAchieving Improved Energy Efficiency. Ottawa: Office of Energy Efficiency of Natural Resources Canada. Available from: http://oee.nrcan.gc.ca/publications/industrial/EMIS/8569
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Regulatory approvals
Example
A manufacturing site is planning an expansion by adding a new processing plant. This plant requires 75 m /min of compressed air for operation. The existing equipment on site uses 520 m /min of air. The company decides to invest in a compressed air energy efficiency initiative to reduce consumption by 15% and allow the new plant to be supplied with the existing equipment. The implementation of energy efficiency opportunities may lead to easier approvals for future projects or expansions. This can occur in two ways: Approval from industry regulators. Energy efficiency improvements can provide evidence to regulators that the company has sound processes in place, which could facilitate approvals. Approval from utility suppliers for plant expansion. Plant expansion may require an increased energy supply to the facility. If the facility is energy-constrained, improved energy efficiency may permit expansion. The potential benefits resulting from easier and/or more expedient approvals range from the obvious (e.g. gaining approval where otherwise it may not have been possible) to the less obvious (e.g. reduction/elimination of delays and increased productivity). These benefits can be relatively simple to calculate in terms of improved productivity and financial returns.
3 3
Example
A petrochemical company, Company A, is assessing whether to undertake certain energy efficiency measures. Recently, a similar-sized petrochemical company, Company B, running a similar facility received bad press after poor energy conservation was highlighted in an audit conducted by regulators. Company Bs share prices dropped by 3% immediately following this bad press. Company A estimates that the potential severity and likelihood of bad publicity (and a corresponding drop in share price) from not undertaking efficiency measures, and hence being viewed as a company with high environmental risks, is likely to be approximately 30% of that experienced by Company B. This represents a possible loss of 1% of share price, and consequently 1% of market capitalisation (currently $50,000,000). Value (benefit) = 1% of $50,000,000 = $500,000 Company A makes the decision to invest $500,000 in energy efficiency, and creates a fund to support energy efficiency initiatives. Any savings from projects implemented under the scheme are returned to the fund to sustain future initiatives.
ability to attract employees wanting to work for an environmentally responsible company. This may alleviate resource issues and reduce recruitment costs.
Example
The human resources department of a large employer estimates that implementation of energy efficiency opportunities will significantly raise the companys profile in terms of corporate and environmental responsibility. Putting in place these measures could reduce turnover by approximately five team members per year. Turnover costs are estimated by HR to be $75,000 per employee lostin terms of lost productivity, recruitment fees, team handover and training of new team members. Saving (benefit) = 5 employees $75,000/employee = $375,000 The accuracy to which whole-of-business benefits are quantified will depend on the nature of the saving (some are easier to quantify more accurately than others) and the potential magnitude of the saving (resources expended should be proportionate to the projected saving). Experience has shown that calculating the whole-of-business benefits and including them can greatly enhance the business case for an opportunity. This benefit will, however, need to be balanced against the additional effort required to quantify the business case. Whether they are quantified or not, it is always helpful to identify and include any additional whole-of-business benefits in any business case for energy efficiency opportunities.
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Value
Complex complex
Simple simple
Ease of implementation
Screening is the process of deciding whether or not to allow an idea to proceed to the next step in the project development process. If the idea is highly unlikely to obtain a four-year payback, it may be screened out for the purposes of the EEO Programs requirements. Screening should occur at key steps in the development of a project. However, it is worth keeping a register of projects which have been screened out. These projects should be reassessed later if the conditions or assumptions used to evaluate the opportunities change, or if longer payback periods are also consistent with business objectives. Tip: Consider implementing low and no-cost measures first. These initiatives can generally be implemented much more quickly than capital projects, and will give decision-makers confidence that energy saving projects will be successful. Often, the savings can be used to provide finance for capital investment in energy efficiency. Prioritising is the ranking of opportunities that pass screening. Screening and prioritising can use the same criteria and system. Factors to consider may include: alignment of opportunity to business priorities economics and financial feasibilitythe payback period ease/difficulty of implementation magnitude of energy and greenhouse gas emission savings the level of technical risk in proposed changes, which impacts on evaluation of costs and benefits. Other factors that may be of use when prioritising include: magnitude of capital investment resources required impact of other license to operate, regulatory compliance, and occupational health and safety issues environmental impacts impact on wider stakeholders. The energy-mass balance and other parts of the evaluation will help provide the information needed on many of these factors. It is important that ideas and opportunities are screened and prioritised based on valid data rather than historical or personal assumptions. The form of the prioritising system could be a spreadsheet or a database. For a small company, a spreadsheet would likely be more suitable, while for a large company, a database would be ideal. It is preferable for the prioritising system to be built into the project register (see Section 10.3 for an example opportunity tracking register). The project register should provide the dual benefits of holding information currently in use and keeping historical records. A prioritisation system should be customised to meet the needs of your company and should be consistent with the criteria used for core business decision-making. Each identified energy efficiency opportunity may be ranked in order to give a priority to each project.
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Strategic alignment
Ask the question Is the opportunity aligned to the business priorities? If the response is yes, the opportunity remains live. If no, the opportunity status changes to not to be implemented. Table 5.2 provides an example of typical values scores for a strategic alignment test range from 04.
Table 5.2: Strategic alignment test
Strategic alignment Total alignment with business priorities Strong alignment with business priorities Some alignment with business No alignment with business priorities Counter to business priorities
Score 4 3 2 1 0
An example of an opportunity having strong alignment with business priorities is an opportunity that has a significant occupational health and safety benefit, complementing a company-wide initiative to reduce accidents and injuries.
Economic viability
Payback is used to apportion a priority to the energy efficiency opportunity according to the economic viability of capital investment. It is a quantitative measure and simple to understandthe lower the payback, the higher the rating. Table 5.3 presents a possible prioritisation scoring system based on payback.
Table 5.3: Economic viability test
Score 3 2 1 0
Under the EEO Program, all opportunities with a four year payback or better must be reported and tracked.
Difficulty of implementation
This measure is designed to indicate the effort required to implement an opportunity.
Table 5.4: Difficulty of implementation test
Score
Suggested guidelines
3 2 1
Technically simple, easy to implement. Moderate technical difficulty, some plant and operating changes. Serious technical change, major plant and operating change.
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Score
Suggested guidelines
4 3
Energy savings of > 10% of site energy use Energy savings of 3 10% of site energy use Energy savings of 1 3% of site energy use Energy savings of < 1% of site energy use
Medium Low
2 1
Level of risk
Evaluate risks inherent in the assumptions and calculations underpinning the estimated energy savings, benefits and costs of the opportunity.
Table 5.6: Risk test
Risk Low
Score 3
Suggested guidelines Easy to assess benefits and costs, little risk that energy efficiency opportunity will not be realised or costs increased. Moderate effort to assess benefits and costs, reasonable uncertainty in proposed energy efficiency. Significant research needed to assess benefits and costs. Significant unknowns in proposed energy efficiency outcome. Some manageable risk to plant, process or production. Significant risk to safety, plant, process or production.
Medium
High
Extreme
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Prioritisation score
The scores for the different factors are multiplied to give the prioritisation score. The higher the score, the better the assessed prospects of the opportunity.
Example
A company has identified three energy efficiency opportunities: Project A is the insulating of a siloa 4.5-year payback. Project B is air compressor automationa 1.7-year payback. Project C is photovoltaic panels for forklift recharginga 7-year payback. For each opportunity, the total points column is the product of the scores for each of the criteria. Project Strategic alignment 1 1 1 Payback Difficulty of implementation 3 3 2 Magnitude of Risk energy savings 1 2 1 3 3 2 Total points 9 54 2 Priority
A B C
1 3 0.5
3 1 2
From the prioritisation table, the company decided that Project B, air compressor automation, should be the first energy efficiency opportunity to be implemented.
Tip: Prioritisation systems often multiply the various factors, placing the opportunities in order of value. This does not provide an indication of the relative value of each opportunity. For example, an opportunity with a score of 80 does not necessarily provide 10 times the value of a score of eight.
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This Savings Bulletin has been prepared to support the application for $90,000 of capital funding. Approval for this opportunity is being sought at site manager level and in this case the site manager has an approval limit of $100,000.
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Business cases must be developed for all opportunities that will be progressed to the capital expenditure or implementation phase. The important function of any business case is to take the data from the evaluation and turn it into reliable business information, presented in a way that allows decision-makers to assess the merits of each opportunity or combination of opportunities. The seven key steps in the preparation of the business case are: 1. Prioritise the opportunities. Use a process that encompasses all the key factors affecting the business decision. 2. Identify the best opportunities for development of business cases. Use the priority rating. 3. Identify the decision maker. Tailor the business case to suit the level of approval required. 4. Review the opportunity to identify how the opportunity affects the risks profile of the company. Which risks are mitigated, minimised or reduced? 5. Investigate barriers to approval. Why have energy efficiency opportunities not been implemented in the past? 6. Consider aggregating opportunities. A combination of energy efficiency opportunities may deliver a benefit more effectively than other initiatives. 7. Gather support as the opportunity progresses through the approval process. Try to find a champion at each level to support the application. A business case should contain the following information about the opportunity: locationsite, plant, process naturepeople, process etc. fuel type being savedelectricity, gas, coal amount of energy savedGJ and $ CO2 emissions avoided and how the emissions profile of the company will be affected potential for this opportunity or a combination of opportunities to achieve an important strategic goal cost to implement the opportunity
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analysis of project risks (including the benefits of any risk reduction impact) wider business costs and benefits. The supporting document created for each opportunity will form the basis for the business case, but its important to consider who may be reviewing and making the decision on the business case. Operational or low-cost opportunities are likely to be within the approval level of the maintenance or engineering manager, although for process changes it is likely that approval will be needed from the operational side of a business. To achieve maximum support from these people, anticipate any technical questions that may arise especially in relation to the effect on the operation of the plantdowntime required, maintainability, and nonenergy costs and benefits. Minor capital opportunities usually fall under the responsibility of the engineering or site manager, who will expect that prior approval has been gained from the operations and maintenance functions. In addition, information may be required that puts the opportunity into context within the site energy system and the organisation as a whole. This could include how this opportunity can combine with other opportunities to deliver an aggregated benefit to the business. The site energy-mass balance can be used to analyse these interactions. Major capital expenditure will generally have to be approved at CEO or board level, and that may require additional consideration of how the opportunity can help the business achieve its key strategic goals. These goals could be measurable (e.g. reduce energy intensity by 10% within three years) or aspirational (e.g. become more sustainable). Addressing these goals requires awareness of the businesss strategic goals, but also awareness of other initiatives being developed within the business. Generally, capital is limited within a given financial year, so other initiatives that deliver similar benefits to energy efficiency may be competing for the same funding. At all approval levels, the information needs to be delivered in a way that clearly shows the benefit of the opportunity or combination of opportunities. If competing for funding, it can be useful to provide a graphical presentation of the benefits of the energy efficiency opportunity versus other options. This will allow decisionmakers to weigh up the relative merits on a wide range of costs and benefits, and make a decision not based purely on financial returns. The following carbon abatement chart (Figure 5.4) indicates the cost and amount of greenhouse gas abatement from a range of opportunities on a food manufacturing site.
Figure 5.3: Marginal cost of abatement curve for various energy efficiency opportunities
Tip: For more information about developing a business case refer to the Canadian Industry Program for Energy Conservation 17 (CIPEC): Energy Management Information SystemsAchieving Improved Energy Efficiency .
17
International Energy Agency (IEA) (2009). Energy Technology Transitions for Industry: Strategies for the Next Industrial Revolution, OECD/IEA, Paris: Section 1
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To consider the potential effect of carbon pricing on the opportunity, the CO2-e savings were also evaluated at rates 105
of $50 and $100 per tonne. Under these scenarios, the forecast CO2e savings are $21,550 and $43,100 respectively. This opportunity meets the strategic direction of the company, because it delivers energy and cost savings for Plant 1, and could also be deployed at similar sites within the wider group of the Fair Dinkum Milk Company.
= $150,000/$61,729 =
(30 2 + 29.67 2 )
= 1.03 years If the calculations for alternative CO2e costs of $50 and $100 per tonne are adopted for the payback analysis using the previous 3% inflation figure for energy and emissions, then the paybacks are 1.99 and 1.53 years respectively. The Fair Dinkum Milk Company evaluated the energy savings, implementation costs and non-energy costs and benefits to an accuracy of 30%, and the payback met the company criteria of having less than a four year payback. Taking into consideration the wider business benefits from the opportunity (reduced environmental compliance costs and a reduction in the plants carbon footprint), the Fair Dinkum Milk Company decided to proceed with the implementation of the project. As this is an opportunity requiring significant capital expenditure to implement, the next step is to evaluate the energy savings, implementation costs and non-energy costs and benefits to an accuracy of 10%, before making a capital expenditure application. Summary: The financial savings of the opportunity include the gas saving and the associated CO2e emissions reduction. The total annual savings are estimated at $59,020. The capital cost of implementing the opportunity has been estimated at $150,000giving an expected payback of 2.43 years.
Key Element addressed in Section 5: Key Element 4.3: Investigation of opportunities & whole-of-business costs and benefits
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SECTION 6.0
Measuring energy savings for an opportunity
6.1 6.2 6.3 6.4 6.5 Overview of measuring energy savings Measuring energy savings Methods for measuring energy savings Measuring energy savings for the Fair Dinkum Milk Company Section summary
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Section outcomes
At the end of this section, you will be able to: select and implement a suitable method for measuring energy savings accurately measure energy savings for each opportunity.
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This method is similar to partial measurement except that all parameters are measured. Depending on the level of measurement, metering and data system developed (see Section 2), this method is potentially the simplest. The steps involved are: 1. Measure energy use to ensure this is an accurate reflection of post-implementation consumption. 2. Measure energy savings by comparing post-implementation energy consumption with the forecast energy use if the opportunity was not implemented. This principle is shown in Figure 6.1. If there have been multiple opportunities implemented at once, it can be difficult to separate the energy savings attributed to each individual opportunity. Extending the boundary to incorporate the entire process or site will enable measurement of the whole-of-process savings using this method.
Example
An oversized pump was identified as an energy efficiency opportunity. The pump was resized to reduce its electricity use. Pre-implementation: A short-term meter was installed and the pumps electricity use measured for one month. During the month, the outlet flow was also recorded. The pump energy intensity is stated in 3 terms of kW/m of fluid pumped. Post-implementation: Again, the short-term meter was installed and the pumps electricity use measured for a month. Flow data for the same period was collected. The difference between the two energy intensity measurements is the measured energy savings. Energy intensity was selected as the best measurement of energy use for the pump. Focusing on the intensity rather than the total electricity used during the month isolates the savings due to resizing the pump from any changes to operating hours.
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Example
Monthly electricity billing data was available for the base year for a particular building in the Northern Territory. A number of energy efficiency opportunities were implemented, and billing data analysed for one year postimplementation. Total annual consumption for 200405 (kW) Total annual consumption for 200506 (kW) Energy saving (kWh) 1,605,138 1,597,135 8,000
On the surface, it would appear that the total consumption has reduced by 8,000 kWh (0.5%) relative to the base year. However, examination of weather data showed a considerable increase in the total annual cooling degree days (CDD) in the reporting year relative to the base reference year, indicating that the summer in the base year was much cooler than in the reporting year. As a result, the baseline energy consumption needs to be adjusted to take into account the influence of the climate. Linear regression was used to define the relationship between electricity consumption and temperature. The overall relationship between monthly consumption and the number of CDDs was represented by the following baseline equation: Baseline (kWh/month) = 471.08 No. of Days + 1,026.24 number of CDDs The model was used to adjust the base year data to the same weather conditions as in the reporting year. The actual annual energy saving is thus calculated as follows: Total weather-corrected annual baseline energy for 200405 (kWh) Total annual consumption for 200506 (kWh) Energy saving (kWh) 1,775,546 1,597,135 178,411
Adjusting the baseline energy consumption allowed the energy savings due to the opportunity to be isolated from the total change in energy consumption. The resultant corrected saving attributable to the implemented opportunities was 178,411 (10%) relative to the base year.
Common applications
Engineering calculations using shortWhere the cost of measurement is not term or continuous measurements, plus justified by the value of the improved accuracy. estimates of the other factors that influence energy use. Engineering calculations using shortterm or continuous measurements. Where metering exists to record energy use as per the defined boundary of the opportunity. Where all relevant performance and operational factors affecting energy use can be measured.
Full measurement
Adjusted base-year energy consumption Where limited metering and/or pre-project measurement data are available. and demand are generated by a simulation model. To isolate opportunity savings where complex relationships exist.
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6.4 Measuring energy savings for the Fair Dinkum Milk Company
To determine the gas saving, the Fair Dinkum Milk Company compares the actual gas consumption in the postimplementation period to a revised energy baseline if the project had not been implemented. The revised energy baseline, had the project not been implemented, is determined by entering actual post-implementation production data into the original regression equation.
Baseline measurement
The forecast energy baseline needs to be revised by entering actual production rates post-implementation. This is required to isolate the opportunitys gas savings from the overall gas consumption changes during the savings period. Applying the original regression equation to post-implementation production rates provides the revised energy baseline, which represents what the gas consumption would have been if the heat recovery system had not been installed. The revised energy baseline becomes the reference point from which energy savings are to be measured. The energy baseline was forecast to be 278 GJ/d based on the production forecast available. The actual production rates had dropped further than originally forecast. The revised energy baseline is 275 GJ/d.
Value Revised energy baseline (GJ/d) Measured energy consumption (GJ/d) Measured energy savings (GJ/d) 275 247 28
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Figure 6.2: Comparison of the measured gas consumption and the revised energy baseline for the Fair Dinkum Milk Company
400 350 300 250 200 150 100 50 0 Jun Jul Aug Sep Oct Nov Season 2 Season 2 - Measured Gas Consumption Season 2 - Revised Energy Baseline Dec Jan Feb Mar Apr
The shaded area on Figure 6.2 (early October through to November) shows a period when there appears to be no gas savings. The production team investigated and found that during that time, the pre-heater had not been operated. This period of data was removed from the analysis, as it did not reflect the true postimplementation scenario where the pre-heater will operate continuously. The difference between the measured post-implementation energy consumption (247 GJ/d) and the revised energy baseline (275 GJ/d) is the measured energy savings (28 GJ/d). The measured energy savings of 28 GJ/d is lower than the estimated value of 30 GJ/d. The net annual savings resulting from implementing the opportunity can be calculated based on 280 operating days per year: The annual cost savings are based upon a gas price of $6.00/GJ: = 7,840 GJ $6.00/GJ 28.43 % $47,040.00 $2,229
Average savings
Error calculation =
(30
+ 28.432
If this project continues to deliver energy savings at the current rate, the energy efficiency project will have fully refunded itself within four years. This is a great result for the Fair Dinkum Milk Company.
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Summary: The energy baseline was revised by entering actual post-implementation data into the original regression equation to determine what the energy consumption would have been had the opportunity not been implemented. This was compared to the metered gas use post-implementation to give the measured energy savings of 28GJ/d. This resulted in a payback of 2.6 years.
Figure 6.3: Drier 1 air pre-heater opportunity
GJ/d
247
Key Elements addressed in Section 6: Key Element 3.2: Data collection process Key Element 3.3: Energy analysis Key Element 4.3: Investigation of opportunities & whole-of-business costs and benefits
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SECTION 7.0
Tracking energy savings for an opportunity
7.1 7.2 7.3 7.4 7.5 7.6 Overview of tracking energy efficiency opportunities Tracking the energy savings outcome Establishing an opportunity tracking register Managing energy performance Energy monitoring for the Fair Dinkum Milk Company Section summary
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Reporting
Tracking the energy savings of implemented projects is critical to meeting the reporting requirements of the EEO Program. The EEO legislation stipulates that evaluated opportunities and their associated energy savings be reported to the business decision makers, the companys board, the public and government. This involves tracking the energy savings outcome for each opportunity and aligning the reporting of its progress with the EEO Programs reporting requirements.
Section outcomes
At the end of this section of the guide, you will: be capable of establishing a tracking system to track implemented opportunities be able to sustain energy savings over time through effective energy performance monitoring be able to meet EEO Program reporting requirements.
Producing a specific project close-out report is recommended as it promotes learning within the organisation and recognition of achieved energy savings. A specific project close-out report often becomes a useful reference for future projects. A close-out report should typically: describe the individual opportunity or range of opportunities implemented if savings have been determined at a whole facility level summarise the energy savings achieved by energy type report on the benefits associated with the implemented opportunity, especially by taking into account actual utility charge-out rates to show the total cost savings to the company report on the final costs associated with implementation of the opportunity show the final payback result explain any variation in actual and estimated costs and benefits, and the reasons for these variations include recommendations for future energy efficiency projects. Close-out reports are necessary in that they demonstrate the success of an energy efficiency project and allow project outcomes to be reported to meet both internal and external reporting requirements. Close-out reports also ensure that evidence is gathered and maintained for verification and auditing purposes. As EEO is a mandatory program, it is important for companies to ensure they meet an appropriate standard in the way assessments are conducted and the accuracy of the information reported. This will also ensure that when companies are selected for verification, all of the relevant information is recorded clearly and efficiently to demonstrate compliance with program requirements. The figure below provides an example of the type of information typically included in a close-out report.
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118
Tip: Variation can be positive or negative. It is just as important to investigate a good result as it is to investigate a bad result. This can help highlight an improvement that can be isolated and repeated at a further energy saving opportunity. As teams learn from past experiences, improve their evaluation skills and understanding of processes while revising incorrect assumptions, the variation in expected energy savings outcomes should reduce. To gain the confidence of business decision-makers, lessons learnt need to be documented to refine future assumptions and avoid repeating past errors.
Identification
A unique project identifier or numbering system. Use something that will stand the test of time (e.g. Energy Efficiency Opportunities0001). A project name. Include a brief, clear name, possibly including the site location. A short but detailed description of the project. Once the number of projects starts to increase, this will be important for ease of project identification and understanding. A location. Identify the factory, site, process area or a more specific locator (whatever is appropriate for the project and the size of the operation).
Current status
Current status. The status of the project should be defined along the lines of identified, under investigation, to be implemented, implementation commenced, implemented, not to be implemented. A more detailed list could be used if greater segmentation is desired. Comments on current status. There is value in being able to enter project-specific comments (e.g. Awaiting health and safety approval of design). Next steps. An indication of the next stages required to progress the opportunity.
Non-energy costs and savings. The balance of whole-of-business costs and savings ($ value). Economic analysis. Calculate the payback period from the capital costs, energy savings and other savings. Accuracy. A summary of the accuracy ( %) of calculations. Prioritisation record. The project rating from the prioritisation assessment: high, medium or low. Greenhouse gas emissions. Including the expected value of emission costs saved. Source of ideas. Explain how the ideas for the implemented projects were generated. Post-implementation review. Record actual performance and actual savings, and compare against forecasts. Tip: The business case for implementing the opportunity may have involved perceived benefits such as reduced maintenance costs or improved productivity. After implementation it may also be necessary to track wider business savings that result from the opportunity. The tracking of these benefits is equally important from a financial perspective. See Section 12.3 for an example of an opportunity tracking register.
18 This section has been developed with reference to an unpublished working draft ISO standard, ISO/CD 50006, Measuring Energy Performance using Energy Baselines and Energy Performance Indicators General Principles and Guidance, being developed under the ISO Energy Management technical committee.
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Example KPI Specific energy consumption Specific energy consumption Specific energy consumption Coefficient of performance
It is vital to set a target for each KPI developed. The target can be based on previous best performance from historical data, accepted industry goals, benchmarking against similar plants, or set against ideal performance. Target selection is important. Targets that are too easily achieved can result in a relaxation in energy performance. Conversely, an unrealistic energy target makes reporting against such a goal meaningless and can also be de-motivating for staff. One KPI may have several targets. The target for the KPI may vary with process conditions such as seasonality, product specifications and mode of operation (i.e. operation, start up, cleaning cycles). A target should be regularly reviewed to ensure it remains appropriate. When monitoring energy performance, the energy KPI can be expressed as a percentage of the target: Less than 100% indicates that actual consumption is below the target. (When examining target energy performance, the target is the budgeted/anticipated amount. Thus consumption below target represents a positive energy savings resultless energy was consumed than was budgeted for.) Greater than 100% represent consumption above the target. (Consumption above the target represents a negative energy savings resultmore energy was consumed than was budgeted.)
Example
A manufacturing company uses traffic light colour-coding to express energy performance. The immediately recognisable colours indicate status: green = consumption is below the target amber = consumption is moving above the target red = consumption is significantly above the target.
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Site Electricity 98% of target Plant 1 Electricity 98% Steam 96% Steam 101% of target Plant 2 Electricity 97% Steam 105%
During the report period, the sites electricity consumption is below target, indicated by green. The sites steam consumption is not yet critical but has moved above the target, indicated by amber. Within the site, Plant 1 is performing well, the green colour indicating that the plants energy consumption is below target for both electricity and steam. Electricity consumption is also below target for Plant 2. However, Plant 2 steam usage is above target, indicated by red. Factors contributing to high steam use in Plant 2 should be investigated. Energy consumption trends will highlight energy patterns and detect exceptions and anomalies in site or plant performance. When an exception or anomaly is detected in the overall energy performance, an investigation should be instigated to find out the cause. The report recipient, or the person responsible for energy consumption in the relevant area, will need to examine the process and energy data to determine the cause. The aim is to bring the actual performance back in line with expected values within the shortest possible time frame.
Example
The actual electricity use for a plant is reported on a daily basis. The actual performance is shown as a percentage of the target electricity consumption. The following control chart shows an exception on 11 October. Investigation of the maintenance logs on these date revealed an intermittent fault with an item of equipment. The faulty equipment drew elevated levels of electricity. Energy performance improved once the fault was identified and repaired.
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Actual 12,526 m
$ var
Gas to site
253 GJ
336 GJ
75%
$376
200% 175%
$500 $0
25 Sep
26 Sep
27 Sep
28 Sep
29 Sep
30 Sep
Commentary:
Key Elements addressed in Section 7: Key Element 5.2Evidence showing decisions of management Key Element 5.3Allocation of timelines, resources and accountabilities Key Element 6.1Presentation to the Board
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SECTION 8.0
Energy-mass balance development
8.1 8.2 8.3 8.4 8.5 8.6 Introduction Defining energy-mass balance How to develop an energy-mass balance Dreamt-up Drink Company worked example Additional energy-mass balance examples Section summary
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8.1 Introduction
Purpose of this section
This section provides guidance on how to develop an energy-mass balance (EMB). An EMB is an analysis of the energy and mass flows for a site or fleet. One of the most challenging parts of an EEO assessment is the collection of data and analysis of energy and material flows through the site or fleet and its processes, systems and equipment (using an EMB or similar technique appropriate to the type of activity). The section explains the impact of energy and material flows within a site on energy savings. An EMB is one method that can be used to break down and model processes to produce detailed energy savings estimates that incorporate the interactions between the various processes at a site. The EMB can also be used to establish an energy baseline and as a tool (model) for estimating and measuring energy savings. An EMB can be developed for any site or process, depending on where the system boundaries are set. This section focuses on quantifying the energy flows within a site or process to develop an EMB. Most companies will have developed a preliminary site EMB to identify energy efficiency opportunities during the initial assessment phase. The EEO legislation requires the site energy and mass flow analysis (or EMB) to cover 80% of site energy use and all processes not already included which consume 0.1 PJ of energy per year or more. The EMB must be defined to an accuracy of 5%. There is scope for error margins wider than 5% for some flows or items of equipment at a site, provided the overall assessment data accuracy requirement is met. Wider error margins will typically apply for those energy and material flows that cannot be accurately measured and therefore may require engineering calculations or estimates. For example, data on the heat released from furnaces, grinding mills and boilers might have higher error margins. Accuracy requirements should not be seen as a disincentive to detailed investigation of energy and material flows. An EMB can be developed for any site or process, depending on where the system boundaries are set. Developing an EMB is an excellent way to achieve a comprehensive understanding of energy consumption. Well-developed EMBs will provide a robust basis from which to measure energy savings. EMBs can be used at several stages in the assessment process outlined in the guide: as a method of establishing an opportunitys energy baseline (Section 1.4) to identify current metering gaps and necessary measurement locations (Section 2) as a modelling method to estimating an opportunitys energy savings (Section 4.3.3) as a modelling method to measuring an opportunitys energy savings (Section 6.3.3).
the EMB can be used to estimate and measure project savings; its a way of modelling your processes. Data needs to be collected over a time period sufficient to incorporate the full range of process conditions. Factors such as seasonality, start-up and shut-down transients, product changes and other process conditions should be considered.
Wasted energy
Raw materials
Sub-process 1
Sub-process 2
Sub-process 3
Capital Energy
Labour
Control
The raw materials and energy enter the system boundary. Outputs from the boundary are the desired products, by-products, wastes and energy. The mass flow in and out of a control box (through a physical or virtual boundary) must be equal.
Table 8.1: Typical data sets for participants in the manufacturing sector
Quantifiable parameter Incoming to site Discharge to sewer Water flows in each process and individual equipment Process streams Raw material purchased Ingredients produced in factory Material flows through each processing stage Waste product Finished product
Units m /y m /y
3 3
m /y t/y t/y
t/y t/y t/y C C C C kWh/y t/y GJ/year or 3 m /year kWh/year m /year kWh/year m /year
3 3
Energy balance
Process water
Process streams
Electricity Steam
Hot water
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Table 8.2: Typical data sets for participants in the mining and mineral processing sectors
Quantifiable parameter Bore field Plant Process water Rainfall Surface run-off Mine dewatering Electricity Automotive consumption Electricity Automotive diesel oil Lubricants Tyres Spare parts / Consumables Explosives Cement For instance drills, rock bolts, mesh, etc Explosives Cement Mined material Surface ore Underground ore Transfer Recycle Ore transferred to treatment plant Used tyres to off-site recycle Used lubricants to off-site recycle Waste Mullock, dust Waste to landfill Waste to incineration Sewage Mine water
Units m /year m /year m /year m /year m /year kWh/year L/year L/year t/year t/year GJ/year t/year t/year t/year t/year t/year t/year L/year t/year t/year t/year m /year m /year
3 3 3 3 3 3 3
Outputs
Extraction Recovery
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Table 8.3: Typical data sets for participants in the transport sector
Quantifiable parameter Number of trucks, vans, cars, air freights, etc. Individual/total vehicle depot fuel Individual/total vehicle on-road fuel purchases
Distance
Individual/total vehicle distance and distance each item or passenger is transported Travel time Idle time
Time
Goods moved
People moved
Category Electricity
Quantifiable parameter Lighting Pumping Fans Heating Cooling Office equipment Catering equipment Ventilation Lifts and escalators
Units kWh/y kWh/y kWh/y kWh/y kWh/y kWh/y kWh/y kWh/y kWh/y
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Category Gas
Units m /y m /y m /y m /y m /y
3 3 3 3 3
Water
It is important to investigate the accuracy of the mass and energy flows for each process. This check is done to ensure that the energy-mass balance is accurately representing the actual process. Examples of causes of inaccuracies include: unaccounted losses (e.g. steam in the distribution system or heat loss from components) incorrect assumptions use of poor data during the calculations faulty or poorly calibrated meters. These causes of error should be systematically identified and eliminated wherever possible. This may require reviewing some, or all, of the Steps 2 to 6 of the EMB development. The accuracy of the EMB the difference between inputs and outputsshould be determined. If the percentage is too high, the analysis should be revisited.
Key Elements addressed in Section 8: Key Element 3.1Data collection plan Key Element 3.2-3.3Energy and material flows
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SECTION 9.0
Appendices
9.1 9.2 Useful benchmarking and calculation tools Citations
NOTE: The Australian Government Department of Resources, Energy and Tourism has provided links to external websites purely for the assistance of the reader. The Department has no direct control over the content of any linked websites, or the changes that may occur to the content of those websites. Links to external websites are provided in good faith, but it is the responsibility of the user to make their own decisions about the accuracy, currency, reliability and correctness of their information. Accordingly, all readers should independently verify the contents of the sites, currency, completeness, and relevance for their own individual purposes, and should obtain appropriate professional advice before making any decision based on the information and tools. Links to external websites do not constitute an endorsement or a recommendation by the Department of the information, tools, products or services provided by that person or organisation or of any third party information, tools, products or services offered by, from or through, those websites. The Department does not consider this to be an exhaustive list of information, tools, products or services available to the market. Users of links provided by this website are responsible for being aware of which organisation is hosting the website they visit. These links are correct as of January 2013. 9.3 9.4 Example of an opportunity tracking register Other financial analysis methods
9.5 How the guide can be used in conjunction with the National Greenhouse and Energy Reporting Scheme (NGERS)
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14 March 2013 12:36 PM
9.1.4 PumpSave Energy Saving Calculation Tool and FanSave Energy Saving Calculation Tool
Location: www.abb.com/ Application of tool: ABB has developed the following calculation tools for estimating the energy savings that become available when applying electric speed control to certain flow machines: PumpSave Energy Saving Calculation Toolfor comparing AC drive control against throttling, on/off and hydraulic coupling control in pumps. FanSave Energy Saving Calculation Toolfor comparing AC drive control against traditional flow control methods in fans.
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These tools are directly applicable to ABB drives, but may be used to provide an indicative figure for other brands of drives. Refer to manufacturers data to determine whether these tools will suit your needs. The tools may also be used to provide financial figures for assessing the profitability of purchasing an ABB drive. PumpSave and FanSave run in Microsoft Excel and use VBA macros.
9.2 Citations
9.2.1 Notes
1. 2. 3. 4. 5. (p.14) All corporations must assess at least 80% of their corporate energy use and all sites that use more than 0.5 PJ of energy per year in their first five-year cycle. This increases to 90% of energy use for subsequent cycles. (p.23) Clean Development Mechanism (CDM) Approved Baseline and Monitoring Methodologies are available from: http://cdm.unfccc.int/methodologies/ (p. 23) TecMarket Works Framework Team (2004). The California Evaluation Framework, Prepared for the California Public Utilities Commission and the Project Advisory Group, available from: http://www.cee1.org/eval/CEF.pdf (p. 23) This section has been developed with reference to an unpublished working draft ISO standard, ISO/CD 50006, Measuring Energy Performance using Energy Baselines and Energy Performance Indicators General Principles and Guidance, being developed under the ISO Energy Management technical committee. (p. 26) Canada. Canadian Industry Program for Energy Conservation (CIPEC) (2000). Energy Management Information SystemsAchieving Improved Energy Efficiency. Ottawa: Office of Energy Efficiency of Natural Resources Canada. Available from: http://oee.nrcan.gc.ca/publications/industrial/EMIS/8569
136
6. 7. 8. 9.
(p. 29) USA. Department of Energy, Efficiency Valuation Organization (EVO) (2007). International Performance Measurement and Verification Protocol (IPMVP) Springfield: US Department of Commerce, Volume 1, Section 1.4. (p. 39) The Carbon Trust. Advanced metering for SMEs (CTC713), UK: The Carbon Trust, available from (note that free registration is required before being granted access to this publication): http://www.carbontrust.com/resources/reports/technology/advanced-metering-for-smes (p. 42) The California Evaluation Framework (Note 3), Chapter 13 (p. 68) Taylor, B N and Kuyatt, C E (1994). Guidelines for Evaluating and Expressing the Uncertainty of NIST Measurement Results, National Institute of Standards and Technology, US Department of Commerce, NIST Technical Note 1297, see http://physics.nist.gov/Pubs/
10. (p. 70) The California Evaluation Framework (note 2), Chapters 7 and 12 11. (p. 72) Kenneth K . Humphreys, (2004), Project and Cost Engineers' Handbook, Fourth Edition, CRC Press, pp. 5786. 12. (p. 72) ANSI Z94.01989. (1991). American National Standard Industrial Engineering Terminology. rev. ed. McGraw Hill Inc., New York and Institute of Industrial Engineers: Norcross, GA. 13. (p. 73) AACE International Recommended Practice No. 18R97. (1997). Cost Estimate Classification Systemas Applied in Engineering, Procurement, and Construction for the Process Industries. AACE International, Morgantown, WV. 14. (p. 92) Worrell, E, Laitner, J A, Ruth, M and Finman, H. (2003). Productivity benefits of industrial energy efficiency measures, Energy, 28, pp. 1081 1098 15. (p. 97) Groover, M, (2001). Automation, Production Systems, and Computer-Integrated Manufacturing, Upper Saddle River: Prentice Hall, Chapter 20. 16. (p. 98) Energy Management Information SystemsAchieving Improved Energy Efficiency (Note 3). http://oee.nrcan.gc.ca/publications/industrial/EMIS/8569 17. (p. 108) International Energy Agency (IEA) (2009). Energy Technology Transitions for Industry: Strategies for the Next Industrial Revolution, OECD/IEA, Paris: Section 1 18. (p. 125) This section has been developed with reference to an unpublished working draft ISO standard, ISO/CD 50006, Measuring Energy Performance using Energy Baselines and Energy Performance Indicators General Principles and Guidance, being developed under the ISO Energy Management technical committee.
9.2.2 References
Canada. Canadian Industry Program for Energy Conservation (CIPEC) (2002). Energy Efficiency Planning and Management Guide Ottawa: Office of Energy Efficiency of Natural Resources Canada. Available from: http://oee.nrcan.gc.ca/publications/industrial/cipec/efficiency/761 Canada. Canadian Industry Program for Energy Conservation (CIPEC) (2003). Energy Management Information SystemsAchieving Improved Energy Efficiency. Ottawa: Office of Energy Efficiency of Natural Resources Canada. Available from: http://oee.nrcan.gc.ca/publications/industrial/EMIS/8569 The Carbon Trust (2005). Good Practice Guide 352: Introductory Guide to Energy Performance AssessmentAnalysing Your Own Performance (GPG352). United Kingdom: The Carbon Trust. [Note: this guide is no longer available, has been replaced by other publications at: http://www.carbontrust.com/resources/guides/energyefficiency/technology-and-energy-management-publications] The Carbon Trust (1996). Good Practice Guide 112: Monitoring and Targeting in Large Companies. United Kingdom: The Carbon Trust. [Note: this guide is also no longer available, has been replaced by other publications at: http://www.carbontrust.com/resources/guides/energyefficiency/technology-and-energy-management-publications] Clean Development Mechanism (CDM)Executive Board (2006). Methodology for improved electrical energy efficiency of an existing submerged electric arc furnace used for the production of SiMn, Approved baseline and monitoring methodology AM0038, UNFCCC/CCNUCC. Available from: http://cdm.unfccc.int/methodologies/PAmethodologies/approved.html
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Commonwealth of Australia and the Australian Energy Performance Contracting Association (AEPCA) (2004). A Best Practice Guide to Measurement and Verification of Energy SavingsA companion document to A Best Practice Guide to Energy Performance Contracts. Canberra: Department of Innovation, Industry, Science and Research. Available from: www.eec.org.au/UserFiles/File/docs/Best%20practice%20guide%20to%20measurement%20and%20verification.pdf Commonwealth of Australia. BMRC, The Centre for Australian Weather and Climate Research, Global Guide to Tropical Cyclone Forecasting: Chapter 9: Ready Reckoner. Available from: www.bom.gov.au/bmrc/pubs/tcguide/ch9/ch9_6.htm Commonwealth of Australia. Department of Resources, Energy and Tourism (2006). Energy Efficiency Opportunities Assessment Handbook. Canberra: Department of Resources, Energy and Tourism. Available from: www.energyefficiencyopportunities.gov.au Commonwealth of Australia. Department of Resources, Energy and Tourism (2006). Energy Efficiency Opportunities Industry Guidelines. Canberra: Department of Resources, Energy and Tourism. Available from: www.energyefficiencyopportunities.gov.au Ernst Worrell, John A. Laitner, Michael Ruth and Hodayah Finman (2003). Productivity benefits of industrial energy efficiency measures, Energy, 28, pp. 1081 1098 National Greenhouse and Energy Reporting Determination 2008. Part 1.3, Division 1.3.3. National Greenhouse and Energy Reporting Determination 2008, Section 6.2. TecMarket Works Framework Team (2004). The California Evaluation Framework, Prepared for the California Public Utilities Commission and the Project Advisory Group. Available from: www.cee1.org/eval/CEF.pdf USA. Bonneville Power Administration, Portland. Impact of Interior Lighting Power Reductions on Commercial Building Energy Use. International Building Performance Simulation USA. Available from: www.ibpsa.org/proceedings/BS1989/BS89_060_67.pdf USA. Department of Energy, Efficiency Valuation Organization (EVO) (2002). International Performance Measurement and Verification Protocol. Springfield: US Department of Commerce. Available from: www.nrel.gov/docs/fy02osti/31505.pdf USA. Department of Energy, Federal Energy Management Program (2000). M&V Guidelines: Measurement and Verification for Federal Energy Projects (Version 2.2). Springfield: US Department of Commerce. Available from: www.nrel.gov/docs/fy00osti/26265.pdf World Business Council for Sustainable Development website: http://www.wbcsd.org Note: the above links are correct as of 17 January 2013.
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EEO0003 East
Steam
139
Project ID
Site
Project title
Current status
Comment
Next steps
Total Energy Net other Total energy (GJ) savings ($) savings ($) savings ($)
Payback (years)
Priority Carbon Post -implementation (tCO2-e) Actual Actual Actual Actual capital savings savings payback (GJ) ($)
Approved, but must be implemented in tandem with motor control centre replacement (not yet approved)
M Green
$50,000 0
300
1,080
$15,000
$2,000
$17,000
2.9
180
M Green
$45,000 6,400
6,400
$51,300
$5,000
$56,300
0.8
333
Not to be implemented
K White
$0
Implemented
J Brown $25,000 0
$0
$8,000
$8,000
3.1
$21,000 0
$5,000
4.2
K White $75,000 0
500
2,180
$30,000
$0
$30,000
2.5
360
140
Project ID
Site
Project title
Current status
Comment
Next steps
Total Energy Net other Total energy (GJ) savings ($) savings ($) savings ($)
Payback (years)
Priority Carbon Post -implementation (tCO2-e) Actual Actual Actual Actual capital savings savings payback (GJ) ($)
EEO0011 East
L Black
$0
6,250
$50,000
$3,300
$53,300
1.9
325
EEO0013 North Plant heat recovery project EEO0014 South Micro turbine on pipeline from water dam EEO0015 West Drier air preheat
To be implemented
Implementation J Brown $750,000 50,000 in next shutdown $ savings but not GJ KW to discuss with supplier first K White
150
49,460
$392,500
$392,500 1.9
2510
Idea
Idea
MG evaluation
M to commence in Green 1 month Electrical saving plus possible OH&S benefit M Green 0
141
Project ID
Site
Project title
Current status
Comment
Next steps
Total Energy Net other Total energy (GJ) savings ($) savings ($) savings ($)
Payback (years)
Priority Carbon Post -implementation (tCO2-e) Actual Actual Actual Actual capital savings savings payback (GJ) ($)
Some labour
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Table 9.1: Indicative cash flows for Project A for MFC Inc.
Table 9.2: Indicative cash flows for Project B for MFC Inc.
1 - 28,750
2 2,000
3 4,000
4 28,600
Total 5,850
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Example
MFC Inc.s benchmark for returns on investments using average rate of return has been set at 40%. Applying this technique to the cash flows in Tables 9.1 and 9.2 the average rates of return are calculated as follows: Project A Net cash flows per year: Year 2 Year 3 Year 4 = Average net cash flow $ 11.200 9,450 5,350 $8,666 Project B $ 2000 4,000 28,600 $11,533
Average rate of return: Cost of energy saving asset Cost of asset Average rate of return $8,666 $20,750 41.75% $11,533 $26,750 43.1%
Based on the average rate of return, Project B appears to be a better project and would probably be selected over Project A if no other evaluation methods were applied.
t = time period of cash flow from time zero (number of years) Note that the net present value is highly sensitive to the chosen discount rate, especially for longer term investments. At high discount rates, savings made well into the future approach zero, as the example below demonstrates. Other methods of project evaluation will therefore be needed for longer term capital investments.
Example
The net present value calculations for MFC Inc.s initial cash flows provided in Tables 12.1 and 12.2 are as follows. This example assumes a discount rate of 10%. Given the calculations, Project A and B have a negative discounted cash flow of ($739) and ($2,138) respectively. Because these are negative, neither project seems to meet the investment standards of the business at a rate of 10%. Project A Net present value = (discounted cash flows) (initial cost of the project)
11,200 5,350 22,750 3 1 1.1
(1.1) (1.1) ( )
1 2
9.450
= $ -739 Project B Net present value = (discounted cash flows) (initial cost of the project)
2,000 28,600 28,750 3 1 1.1
(1.1) (1.1) ( )
1 2
4,000
= $ -2,138
PROJECT A Interest rate Year Net cash flow Present value factor Present value of cash flow Cumulative present value Net present value 10% 0 (22,750) 100% (22,750) (22,750) (739) 1 11,200 91% 10,182 (12,568) 2 9,450 83% 7,810 (4,758) 3 5,350 75% 4,020 (739)
PROJECT B Interest rate Year Net cash flow Present value factor Present value of cash flow Cumulative present value Net present value 10% 0 (28,750) 100% (28,750) (28,750) (2,138) 1 2,000 91% 1,818 (26,932) 2 4,000 83% 3,306 (23,626) 3 28,600 75% 21,488 (2,138)
If we assume a revised benchmark rate of 7%, Projects A and B would be assessed as follows. Project A Net present value = (discounted cash flows) (initial cost of the project)
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11,200
(1.07) (1.07) (
1 2
9.450
= $ 338 Project B Net present value = (discounted cash flows) (initial cost of the project)
2,000
(1.07) (1.07) (
1 2
4,000
= $ 41 Based on this analysis, the best investment decision would be to accept Project A (at a discount rate of 7%) and reject Project B.
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Example
The internal rate of return calculations for MFC Inc.s initial net cash flows provided in Tables 12.1 and 12.2 are as follows:
Net cash flows 0 Project A Project B (22,750) (28,750) 1 11,200 2,000 2 9,450 4,000 3 5,350 28,600 Total 3,250 5,850
Looking first at project A, the internal rate of return can be calculated by solving the following equation:
22,750 =
11,200 9,450 5,350 + + The iterative solutions are tabulated below for Projects A and B. (1 + r )1 (1 + r )2 (1 + r )3
7% Year 0 (22,750) 100% (22,750) (12,283) 8% 7% Year 0 (28,750) 100% (28,750) (26,881) 7% 2,000 93% 1,869 5,363 11,200 93% 10,467 18,721 PROJECT A 1 9,450 87% 8,254 12,621 2 5,350 82% 4,367 4,367 3
Cost of capital Net cash flow Present value Present value of Net present value Internal rate of
return
Cost of capital Cash flow Present value factor Present value of cash Net present value Internal rate of
flow
return
Project A gives an internal rate of return of 7.94% and Project B results in an internal rate of return of 6.96%. Project A has an internal rate of return greater than the cost of capital, while Project Bs internal rate of return only equals the cost of capital. If the business benchmark was greater than 7.94%, then both projects would be rejected; as the net present value of cash flows is negative, and hence the benchmark has not been achieved. If however, the benchmark was 7% then Project A would be accepted and Project B rejected, as project B would not have reached the required benchmark.
Conclusion
Based on the various financial analyses, Project A would appear to result in greater returns on investment over Project B. MFC Inc. would proceed to further evaluate Project A using sensitivity analysis and other whole-of-business factors. The example illustrates that it is important to use various analytical tools in the process of making a business case for an energy efficiency opportunity from the point of view of an investment decision. The tools used in this section are by no means exhaustive.
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9.5 How the guide can be used in conjunction with the National Greenhouse and Energy Reporting Scheme (NGERS)
9.5.1 Introduction
The National Greenhouse and Energy Reporting Act 2007 establishes a national framework for corporations to report greenhouse gas emissions and energy consumption and production. The Act makes registration and reporting mandatory for corporations whose energy production, energy use or greenhouse gas emissions meet specified thresholds. Those corporations that have met the specified thresholds are required to collect, and report, the following data from facilities they control: the energy consumed, by energy type the energy produced, by energy type the activity data for greenhouse gas emissions, by source.
Corporations are expected to prepare their estimates of greenhouse gas emissions and energy production and consumption in accordance with the following principles: a. Transparency. Emissions estimates must be documented and verifiable. b. Comparability. Emissions estimates using a particular method and produced by a registered corporation in an industry sector must be comparable with the emissions estimates produced by similar corporations in that industry sector using the same method and consistent with the emissions estimates published by the Clean Energy Regulator in the National Greenhouse Accounts. c. Accuracy. Having regard to the availability of reasonable resources by a registered corporation and the requirements of the Determination, uncertainties in emission estimates must be minimised and any estimates must neither be over nor under estimates of true values at a 95% confidence level. d. Completeness. All identifiable emission sources within the energy, industrial process and waste sectors identified by the National Greenhouse Inventory Report must be accounted for. While prepared for the EEO Program, the methods in this guide are consistent with, and could be used to help prepare, a companys responses to the energy consumption component of the NGER Program. In particular, the following methods, and sections of the guide, are of relevance: 1. Section 8Developing an energy-mass balance. The development of an energy-mass balance for a facility will assist in identifying and quantifying energy use and generation in the facility. This will help meet the principle of Completeness in relation to energy consumption, generation, and energy related emissions. Identifying the mass flows, and associated processes will also assist to identify non energy emissions sources such as industrial process and waste related emissions. 2. Section 2Measuring, metering and capturing energy data. Accurate energy data is a requirement of the EEO Program, and underpins the estimation, evaluation, measurement and tracking of energy efficiency opportunities. This section of the guide provides very useful information on using and improving existing metering and data capture systems to obtain accurate energy consumption and generation data, which will assist in meeting the reporting requirements for the NGER scheme. This will help meet the principle of Accuracy in relation to energy consumption, generation, and energy related emissions. 3. Section 3Determining and improving accuracy. All estimates and measurements have a level of uncertainty associated with them. Accuracy in relation to energy consumption, generation, and energy related emissions is a requirement of the NGER scheme. The guidance and methods in this section on how to determine, and improve, the level of accuracy for the energy savings, costs and benefits associated with each energy efficiency opportunity are relatively generic. Therefore it provides methodologies and guidance for assessing and improving the accuracy of the energy consumption and generation, and emissions data for the NGER. Further information regarding the specific requirements of the NGER Scheme is accessible at: www.cleanenergyregulator.gov.au
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