Charge ahead: Industry Trends & Analysis

Managing energy costs and improving energy performance requires an ongoing commitment.

Over the last 30 years, energy prices have risen significantly. Crude oil prices have risen 300 percent since 1983, according to the U.S. Energy Information Administration (see graph on page 65). The sharpest increase has been over the past 10 years. Experts project global energy consumption will continue to increase by as much as 49 percent from 2007 to 2035. With this in mind, there is no better time to examine your operations and commit to better management of energy consumption and costs.

The Correct Approach

Two approaches to managing energy and improving energy performance are typically employed. With the traditional approach, someone within an organization becomes aware of high energy costs and implements one or two simple, cost-effective energy saving activities.

Unfortunately, soon after that everyone resumes business as usual, costs creep up and the cycle continues. With this approach, there is little to no awareness of the value energy management provides. The result is generally about a 5 percent reduction in overall energy costs.

The second approach is more structured and applies “best practices” in energy management. It typically involves support from top management, commitment to resources and a budget, naming of an active energy manager who heads a team that is accountable for success, a detailed energy efficiency audit, and set policies, objectives, targets and actions.

Even though more effort and investment is required with this approach, it has several benefits. Arguably, the most important are financial. A best practices energy management organization will typically see initial energy cost reductions of 10 to 20 percent by identifying the most lucrative energy saving measures, followed by a commitment to invest resources for successful implementation of these improvements. Operational improvements will typically require an investment in time and personnel resources, while equipment improvements will require an additional capital investment.

Furthermore, with a structure in place that fosters continuous improvement, the organization will continue to drive down energy costs, leading to additional cost reductions of 3 to 5 percent annually for many years.

Another benefit of structured energy management is it creates enthusiasm and awareness for energy conservation and corporate responsibility, which improves employee morale, reduces the organization’s carbon footprint and improves the corporate image.

Suggested First Steps

The initial steps in a best-practices energy initiative are to establish an energy baseline, conduct an energy management review and perform an energy efficiency assessment.

To establish an energy baseline, the organization must compile monthly energy and production data going back at least 2 years, preferably 3, for each of the facilities under management. The data includes consumption, cost and demand for major sources of energy, such as electricity, natural gas, steam, coal and chilled water.

Also, monthly production data should be collected for the same time period. A baseline year is chosen and the energy consumption for that baseline year typically becomes the reference for measuring energy performance improvement.

Because production is usually proportional to energy consumption, it helps to develop a metric, such as Btu per pound of production output, as a way to normalize the measurement for production. Then, this metric is used to develop specific targets for energy performance.

The second step is to conduct an energy management review. This is a gap assessment that evaluates where the organization is today in its energy management practices compared to a best-practices approach. Here, management practices such as procurement, level of executive support, policymaking, organizational structure and awareness activities are examined. By way of this review, the organization can determine its current energy status, the financial value of moving forward with a structured energy management program and its energy management goals.

The third step is to perform an energy efficiency assessment. Different from the energy management review, this is a
detailed, on-site audit of the facility’s energy systems. The audit examines and models the major energy systems, such as compressed air, steam/boiler, process heating and HVAC, to determine their contribution to plant energy consumption.

The main goal of the audit is to describe and quantify the most economically beneficial energy saving measures within the plant. This provides the organization with 10 to 20 activities, or projects, that can yield lucrative energy savings, ranging from an immediate to a 4- or 5-year payback.