10 March 2014
Counting the cost: Why Energy Efficiency matters for Industry
Energy – and its cost – is once again dominating the headlines. Arguments between energy suppliers and politicians, as well as concerns about dwindling safety margins around supply and consumption, are ensuring the impact of energy use remains a hot topic. It is also an area clouded by confusion, heavy regulation and numerous Government-led policy initiatives which can make substantial energy users such as the manufacturing community hesitant as they try to establish a long term strategic approach to managing their energy needs better and reducing their cost base. Such confusion can lead to general apathy and a lack of action - whereas the real solution is for companies to grasp the cost effective energy efficiency opportunities that currently exist. Steve Barker, Head of Energy Efficiency and Environmental Care at Siemens Industry highlights some of the key issues facing industry today. The consumption and cost of energy is becoming an ever more important consideration in industry – especially those operating in the manufacturing sector where high energy use means its rising cost is having a significant impact on the bottom line. Currently, many issues are influencing the on-going energy debate. These include political and policy divisions, increasing regulatory responsibilities, the search for new generation sources or pressures around supply and demand. The current energy-related debate - often played out in the media - between energy suppliers and politicians concerning ‘green taxes’ and energy supplier profits is an argument carrying much greater resonance with the public and has in many ways crowded out many pertinent messages regarding energy efficiency. Indeed, the ‘noise’ around green taxes has failed to give a complete picture on government subsidies to energy sources - especially fossil fuels which still benefits from significant indirect subsidies. In addition, whilst it is correct that the UK should investigate upcoming alternative sources of fossil fuels such as shale gas, it is unlikely that this will yield dramatically lower energy prices in the near future. Not surprisingly we are looking towards the USA and see the positive effect that shale extraction has had there and assume the UK will get the same benefit. Likewise, there is currently a vast amount of regulation and legislation facing energy users such as manufacturers. Initiatives such as the CRC, CCL, CCA and EU ETS in the main cause end users to focus on ‘compliance’ issues rather than seeking out tangible opportunities to become more energy efficient A prime example is the forthcoming UK implementation of the EU Energy Efficiency Directive and specifically ‘Article 8’ on mandatory energy audits for large UK organisations. It is covered by ESOS (Energy Saving Opportunity Scheme) but looks like it will be a missed opportunity due to a number of exclusions and weak audit requirements. ESOS should have been seen as a substantial cost reduction opportunity, not an unwelcome compliance issue imposed by the European Union. Finally, in the background, energy companies are continuing their power station closure programmes as required by the EU large combustion plant directive, meaning the safety margin between peak consumption and demand is becoming ever smaller. This places even greater emphasis around future energy security issues for all. It all unfortunately adds up to a confusing and challenging energy landscape for UK industry trying to deal with current energy pressures and plan for an uncertain energy future. What can be done?For industry, and manufacturing operations in particular, it still remains a fact that the quickest and most effective source of lower energy bills is currently underexploited and this is energy efficiency. Siemens Industry’s findings from thousands of energy audits undertaken across all areas of industry, reveals that most organisations can still yield 15 - 20% reductions in energy consumption by applying cost effective measures that have a three year payback overall. Indeed the estimated 30% return on investment is much better than can be achieved elsewhere in the business. The answer is to apply a professional and systematic energy analysis supported by specific expertise to identify real opportunities for energy reduction. A fundamental step is to enable appropriate visibility of energy consumption across the plant and to apply the correct energy management analysis to the data that can be gathered. Many on site or web-based tools are available for this very purpose, including Siemens Industry’s Energy Analytics process which takes this analysis to a higher level by providing this as a managed service for manufacturers. All forms of heating and cooling are always a rich source of energy reduction opportunities and should be carefully analysed in this respect. With electrical energy, motor driven systems are the largest consumers of energy and they should be closely assessed to see what higher efficiency options are available. These could include the introduction of variable speed drives, high efficiency gearboxes, high efficiency motors and motor management systems to name just a few technologies. Likewise, lighting is the second largest user of electricity and offers the most visible energy conservation measure (but don’t just assume LED is the solution!). One key point with any energy reduction project is the importance that sufficient care is taken to verify proposed energy reductions to give confidence for on-going programmes. Critical tools such as IPMVP (International Performance, Measurement and Verification Protocol) should be correctly applied to support this. Whilst access to credit can be an on-going issue, in principle, finance for energy efficiency programmes can be very attractive. Providers such as Siemens Financial Services (SFS) offer robust positive cash flow finance models that can mean energy efficiency investment can be made without the requirement to fund from often pressurised budgets. In the right circumstances and with a true collaborative approach, energy performance contracts can also be a valuable tool to assist end users release substantial energy and cost savings. In summary, whilst many industrial companies are taking some positive action, substantial energy efficiency opportunities for manufacturers still remain. Applying a systematic and professional energy analysis strategy and then implementing a continuous improvement programme is the right way to proceed. Standards such as ISO 50001 offer a good starting point. Effective energy analytics is a fundamental prerequisite to maximising energy reductions and all areas of consumption should be analysed. All heating and cooling applications should be carefully considered and electrical energy, motor driven systems and lighting offer some of the easiest wins. High energy users such as manufacturers should seek to rise above the noise of compliance and strive to achieve maximum energy efficiency and with it, profitability.