Scientific Approach To Energy MGT

TRAINING MANUAL
SCIENTIFIC APPROACH TO ENERGY MANAGEMENT

CHAPTER 1
SCIENTIFIC APPROACH TO ENERGY MANAGEMENT
Introduction

We all are very much aware that energy cost is the second largest cost after labour
cost in the textile industry. The energy cost shares around 12-17% of the total
production cost. lobali!ation" fast changing mar#et conditions and technology
advancement have made the world mar#et highly competitive for textile industries.
$n the scenario of cut throat competition optimi!ation of production cost has
become the need of the hour. %ost of input resources li#e man power cost" energy &
raw material cost have ta#en a steep rise in recent times. 'n the other hand
achieving highest level of productivity and (uality in cost effective manner have
posed new challenges before the industry for the survival in the present scenario.
The other costs li#e labour" raw material" machine cost are difficult to reduce
because these costs are driven by mar#et conditions and many other related
factors. $n the above context the only alternative left for cost reduction is energy
conservation for reducing overall product cost. )cientific approach towards *nergy
management only can prove highly reliable and effective tool for achieving the
above goal.
+or reducing overall process cost" the management should have adopted a scientific
approach towards energy management covering the following aspects in a step-
wise manner.
Step 1 : Energy Mnge!ent nd Audit
The first step should have the detail energy auditing covering all the utilities i.e.
electrical" thermal" air-conditioning & humidification" compressor" , set operation"
etc. so that management could #now the areas where potential of improvements are
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SCIENTIFIC APPROACTH TO ENERGY MANAGEMENT
there. The energy audit report will also contain the techno economic details of all the
practical suggestions which will help the management to ta#e the future decisions.
Step " : Energy Action P#nning
-fter getting energy audit" the management should start energy action planning in
which they have to ma#e energy policy" formulation" presentation all the areas in
front of top management to get their support" formation of energy management
team" role and responsibility of energy manager" accountability" motivation for
employees" information system designing and barriers" strategies towards mar#eting
and communicating training and planning.
Step $ : Finnci# Mnge!ent
This is an important aspect in the process of energy management and investment is
re(uired for reducing the energy consumption of a process or utility. This step
covering many aspects i.e. investment - need" appraisal and criteria" financial
analysis techni(ues- simple pay bac# period" return on investment" net present
value" internal rate of return" cash flows" ris# and sensitivity analysis" financing
options" energy performance contracts and role of *)%'s.
Step % : Pro&ect Mnge!ent
-fter finali!ing the finance aspects the management has to decide about energy
pro.ects on priority basis. /nder the pro.ect management some important aspects
has to be considered i.e. scope of pro.ect" technical design" financing" contracting"
implementing and performance monitoring" implementation plan for top
management" planning budget" procurement procedures" construction"
measurement and verification.
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Step ' : Energy Monitoring nd Trgeting
The last approach is energy monitoring and targeting under which we have to cover
the different aspects i.e. elements of monitoring and targeting" data and information
analysis" techni(ue 0 energy consumption" production cumulative sum of
differences" comparison of actual and pro.ected data.
The details of all the steps of scientific approaches towards energy management are
given in later chapters.
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CHAPTER "
ENERGY MANAGEMENT AN( A)(IT
(e*inition nd O+&ecti,e- o* Energy Mnge!ent
The fundamental goal of energy management is to produce goods and provide
services with the least cost and least environmental effect.
The term energy management means many things to many people. 'ne
definition of energy management is1
The judicious and effective use of energy to maximize profits (minimize costs)
and enhance competitive positions.
2%ape 3art" Turner and 4ennedy" uide to *nergy 5anagement +airmont press
inc. 16677
-nother comprehensive definition is1
The strategy of adjusting and optimizing energy, using systems and procedures
so as to reduce energy requirements per unit of output whie hoding constant or
reducing tota costs of producing the output from these systems.
The ob.ective of *nergy 5anagement is to achieve and maintain optimum
energy procurement and utilisation" throughout the organi!ation and1
To minimise energy costs 8 waste without affecting production & (uality
To minimise environmental effects.
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Energy Audit: Type- And Met.odo#ogy
*nergy -udit is the #ey to a systematic approach for decision-ma#ing in the area
of energy management. $t attempts to balance the total energy inputs with its
use" and serves to identify all the energy streams in a facility. $t (uantifies energy
usage according to its discrete functions. $ndustrial energy audit is an effective
tool in defining and pursuing comprehensive energy management programme.
-s per the *nergy %onservation -ct" 2991" *nergy -udit is defined as :the
verification" monitoring and analysis of use of energy including submission of
technical report containing recommendations for improving energy efficiency with
cost benefit analysis and an action plan to reduce energy consumption;.
Need *or Energy Audit
$n any industry" the three top operating expenses are often found to be energy
2both electrical and thermal7" labour and materials. $f one were to relate to the
manageability of the cost or potential cost savings in each of the above
components" energy would invariably emerge as a top ran#er" and thus energy
management function constitutes a strategic area for cost reduction. *nergy
-udit will help to understand more about the ways energy and fuel are used in
any industry" and help in identifying the areas where waste can occur and where
scope for improvement exists.
The *nergy -udit would give a positive orientation to the energy cost reduction"
preventive maintenance and (uality control programmes which are vital for
production and utility activities. )uch an audit programme will help to #eep focus
on variations which occur in the energy costs" availability and reliability of supply
of energy" decide on appropriate energy mix" identify energy conservation
technologies" retrofit for energy conservation e(uipment etc.
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$n general" *nergy -udit is the translation of conservation ideas into realities" by
lending technically feasible solutions with economic and other organi!ational
considerations within a specified time frame.
The primary ob.ective of *nergy -udit is to determine ways to reduce energy
consumption per unit of product output or to lower operating costs. *nergy -udit
provides a : benchmar#; 2<eference point7 for managing energy in the
organi!ation and also provides the basis for planning a more effective use of
energy throughout the organi!ation.
Type o* Energy Audit
The type of *nergy -udit to be performed depends on1
+unction and type of industry
,epth to which final audit is needed" and
=otential and magnitude of cost reduction desired
Thus *nergy -udit can be classified into the following two types.
i7 =reliminary -udit
ii7 ,etailed -udit
Pre#i!inry Energy Audit Met.odo#ogy
=reliminary energy audit is a relatively (uic# exercise to1
*stablish energy consumption in the organi!ation
*stimate the scope for saving
$dentify the most li#ely 2and the easiest areas for attention
$dentify immediate 2especially no-8low-cost7 improvements8 savings
)et a >reference point?
$dentify areas for more detailed study8measurement
=reliminary energy audit uses existing" or easily obtained data.
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(eti#ed Energy Audit Met.odo#ogy
- comprehensive audit provides a detailed energy pro.ect implementation plan
for a facility" since it evaluates all ma.or energy using systems.
This type of audit offers the most accurate estimate of energy savings and cost.
$t considers the interactive effects of all pro.ects" accounts for the energy use of
all ma.or e(uipment" and includes detailed energy cost saving calculations and
pro.ect cost.
$n a comprehensive audit" one of the #ey elements is the energy balance. This is
based on an inventory of energy using systems" assumptions of current
operating conditions and calculations of energy use. This estimated use is then
compared to utility bill charges.
,etailed energy auditing is carried out in three phases1 =hase $" $$ and $$$.
=hase $ - =re -udit =hase
=hase $$ - -udit =hase
=hase $$$ - =ost -udit =hase
A Guide *or Conducting Energy Audit t G#nce
$ndustry-to-industry" the methodology of *nergy -udits needs to be flexible. -
comprehensive ten-step methodology for conduct of *nergy -udit at field level is
presented below. *nergy 5anager and *nergy -uditor may follow these steps to
start with and add8change as per their needs and industry types.
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Ten Step- Met.odo#ogy *or (eti#ed Energy Audit
Step
No/
P0AN OF ACTION P)RPOSE 1 RES)0TS
Step 1
P.-e I Pre Audit
P.-e
=lan and organi!e
Wal# through -udit
$nformal $nterview with
*nergy 5anager"
=roduction 8 =lant
5anager.
<esource planning" *stablish8 organi!e
a *nergy -udit team.
'rgani!e $nstruments and time frame.
5acro ,ata collection 2suitable to type
of industry7.
+amiliari!ation of process8plant
activities.
+irst hand observation and -ssessment
of current level operation and practices.
Step " %onduct of brief
meeting8 awareness
programme with all
divisional heads and
persons concerned
22-@ hrs.7
Auilding up cooperation.
$ssue (uestionnaire for each
department.
'rientation" awareness creation.
Step $
P.-e II Audit P.-e
=rimary data
gathering" =rocess
+low ,iagram and
*nergy /tility
,iagram.
3istoric data analysis" Aaseline data
collection.
=repare process flow charts.
-ll service utilities system diagram
2*xample1 )ingle line power distribution
diagram" water" compressed air and
steam distribution7.
,esign operating data and schedule of
operation.
-nnual *nergy Aill and *nergy
consumption pattern 2<efer manual" log
sheet" name plate" interview7.
Step % %onduct survey and 5easurements1 5otor survey"
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monitoring $nsulation" and Bighting survey with
portable instruments for collection of
more and accurate data. %onfirm and
compare operating data with design
data.
Step ' %onduct of detailed
trials8experiments for
selected energy
gu!!lers
Trials8*xperiments1
2C hours power monitoring 25," =+"
#Wh etc.7.
Boad variations trends in pumps" fan
compressors etc.
Aoiler8*fficiency trials for C-D hrs.
+urnace *fficiency trials.
*(uipments =erformance
experiments etc.
Step 2 -nalysis of energy use *nergy and 5aterial balance and
energy loss8waste analysis.
Step 3 $dentification and
development of
*nergy %onservation
2*E%'E7
opportunities
$dentification and consolidation *E%'E
measures.
%onceive" develop" and refine ideas.
<eview the previous ideas suggested
by unit personnel.
<eview the previous ideas suggested
by energy audit if any.
/se brainstorming and value analysis
techni(ues.
%ontact vendors for new8efficient
technology.
Step 4 %ost benefit analysis -ssess technical feasibility" economic
viability and prioriti!ation of *E%'E
options for implementation.
)elect the most promising pro.ects.
=rioritise by low" medium" long term
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measures.
Step 5 <eporting and
=resentation to the
Top 5anagement
,ocumentation" <eport =resentation to
the Top 5anagement.
Step 16
P.-e III Po-t Audit
P.-e
$mplementation and
+ollow-up
-ssist and $mplement *E%'E
recommendation measures and
5onitor the performance
-ction plan" )chedule for
implementation.
+ollow-up and periodic review.
Step
P.-e I Pre Audit P.-e Acti,itie-
- structured methodology to carry out an energy audit is necessary for efficient
wor#ing. -n initial study of the site should always be carried out" as the planning
of the procedures necessary for an audit is most important.
Initi# Site 7i-it nd Preprtion Re8uired *or (eti#ed Auditing
-n initial site visit may ta#e one day and gives the *nergy -uditor8*ngineer an
opportunity to meet the personnel concerned" to familiari!e him with the site and
to assess the procedures necessary to carry out the energy audit.
,uring the initial site visit the *nergy -uditor8*ngineer should carry out the
following actions1
,iscuss with the site?s senior management the aims of the energy audit.
,iscuss economic guidelines associated with the recommendations of the
audit.
-nalyse the ma.or energy consumption data with the relevant personnel.
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'btain site drawings where available 0 building layout" steam distribution"
compressed air distribution" electricity distribution etc.
Tour the site accompanied by engineering8production
T.e !in i!- o* t.i- ,i-it re: 9
To finalise *nergy -udit team.
To identify the main energy consuming areas8plant items to be surveyed
during the audit.
To identify any existing instrumentation8 additional metering re(uired.
To decide whether any meters will have to be installed prior to the audit
eg. #Wh" steam" oil or gas meters.
To identify the instrumentation re(uired for carrying out the audit.
To plan with time frame.
To collect macro data on plant energy resources" ma.or energy consuming
centers.
To create awareness through meetings8 programme.
P.-e II9 (eti#ed Energy Audit Acti,itie-
,epending on the nature and complexity of the site" a comprehensive audit can
ta#e from several wee#s to several months to complete. ,etailed studies to
establish" and investigate" energy and material balances for specific plant
departments or items of process e(uipment are carried out. Whenever possible"
chec#s of plant operations are carried out over extended periods of time" at
nights and at wee#ends as well as during normal daytime wor#ing hours" to
ensure that nothing is overloo#ed.
The audit report will include a description of energy inputs and product outputs
by ma.or department or by ma.or processing function" and will evaluate the
efficiency of each step of the manufacturing process. 5eans of improving these
efficiencies will be listed" and at least a preliminary assessment of the cost of the
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improvements will be made to indicate the expected paybac# on any capital
investment needed. The audit report should conclude with specific
recommendations for detailed engineering studies and feasibility analyses" which
must then be performed to .ustify the implementation of those conservation
measures that re(uire investments.
T.e in*or!tion to +e co##ected during t.e deti#ed udit inc#ude-1
*nergy consumption by type of energy" by department" by ma.or items of
process e(uipment" by end-use.
5aterial balance data 2raw materials" intermediate and final products"
recycled materials" use of scrap or waste products" production of by-
products for re-use in other industries" etc.7.
*nergy cost and tariff data.
=rocess and material flow diagrams.
eneration and distribution of site services 2e.g. compressed air" steam7.
)ources of energy supply 2e.g. electricity from the grid or self-generation7.
=otential for fuel substitution" process modifications" and the use of co-
generation systems 2combined heat and power generation7.
*nergy 5anagement procedures and energy awareness training
programs within the establishment.
*xisting baseline information and reports are useful to get consumption pattern"
production cost and productivity levels in terms of product per raw material
inputs. The audit team should collect the following baseline data1
Technology" processes used and e(uipment details
%apacity utilisation
-mount and type of input materials used
Water consumption
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+uel %onsumption
*lectrical energy consumption
)team consumption
'ther inputs such as compressed air" cooling water etc
Fuantity and type of wastes generated
=ercentage re.ection 8 reprocessing
*fficiencies 8 yield
Identi*iction o* Energy Con-er,tion Opportunitie-
Fue# -u+-titution:
$dentifying the appropriate fuel for efficient energy conversion.
Energy genertion:
$dentifying *fficiency opportunities in energy conversion e(uipment8utility such
as captive power generation" steam generation in boilers" thermic fluid heating"
optimal loading of , sets" minimum excess air combustion with boilers8thermic
fluid heating" optimising existing efficiencies" efficient energy conversion
e(uipment" biomass gasifiers" %ogeneration" high efficiency , sets" etc.
Energy di-tri+ution:
$dentifying *fficiency opportunities networ# such as transformers" cables"
switchgears and power factor improvement in electrical systems and chilled
water" cooling water" hot water" compressed air" etc.
Energy u-ge +y proce--e-:
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This is where the ma.or opportunity for improvement and many of them are
hidden. =rocess analysis is useful tool for process integration measures.
Tec.nic# nd Econo!ic *e-i+i#ity
The technical feasibility should address the following issues1
Technology availability" space" s#illed manpower" reliability" service etc.
The impact of energy efficiency measure on safety" (uality" production or
process.
The maintenance re(uirements and spares availability
The *conomic viability often becomes the #ey parameter for the management
acceptance. The economic analysis can be conducted by using a variety of
methods. *xample1 =ay bac# method" $nternal <ate of <eturn method" Eet
=resent Galue method etc. +or low investment short duration measures" which
have attractive economic viability" simplest of the methods" paybac# is usually
sufficient. - sample wor#sheet for assessing economic feasibility is provided
below.
S!p#e :or;-.eet *or Econo!ic Fe-i+i#ity
N!e o* Energy E**iciency Me-ure
1/ In,e-t!ent "/ Annu# operting co-t- $/ Annu# -,ing-
H *(uipments
H %ivil wor#s
H $nstrumentation
H -uxiliaries
H %ost of capital
H 5aintenance
H 5anpower
H *nergy
H ,epreciation
H Thermal *nergy
H *lectrical *nergy
H <aw material
H Waste disposal
Eet )avings 8Iear 2<s.8year7 =aybac# period in months
J 2-nnual savings-annual operating costs7 J 2$nvestment8net savings8year7 x 12
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C#--i*iction o* Energy Con-er,tion Me-ure-
Aased on energy audit and analyses of the plant" a number of potential energy
saving pro.ects may be identified. These may be classified into three categories1
1. Bow cost 0 high returnK
2. 5edium cost 0 medium returnK
@. 3igh cost 0 high return
Eormally the low cost 0 high return pro.ects receive priority. 'ther pro.ects have
to be analy!ed" engineered and budgeted for implementation in a phased
manner. =ro.ects relating to energy cascading and process changes almost
always involve high costs coupled with high returns" and may re(uire careful
scrutiny before funds can be committed. These pro.ects are generally complex
and may re(uire long lead times before they can be implemented. <efer
following Table for pro.ect priority guidelines.
T+#e Pro&ect Priority Guide#ine
Priority Econo!ic#
Fe-i+i#ity
Tec.nic#
Fe-i+i#ity
Ri-; 1
Fe-i+i#ity
A 9 Good Well defined and
attractive
*xisting technology
ade(uate
Eo <is# 8
3ighly feasible
< 9 My +e Well defined and only
marginally acceptable
*xisting technology
may be updated"
lac# of confirmation
5inor operating
ris# 8 5ay be
feasible.
C 9 He#d =oorly defined and
marginally
unacceptable
*xisting technology
is inade(uate
,oubtful
( 9 No %learly not attractive Eeed ma.or
brea#through
Eot feasible
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)nder-tnding Energy Co-t-
/nderstanding energy cost is vital factor for awareness creation and saving
calculation. $n many industries sufficient meters may not be available to measure
all the energy used. $n such cases" invoices for fuels and electricity will be useful.
The annual company balance sheet is the other sources where fuel cost and
power are given with production related information.
*nergy invoices can be used for the following purposes1
They provide a record of energy purchased in a given year" which gives a
base-line for future reference.
*nergy invoices may indicate the potential for savings when related to
production re(uirements or to air conditioning re(uirements8space heating
etc.
When electricity is purchased on the basis of maximum demand tariff
They can suggest where savings are most li#ely to be made.
$n later years invoices can be used to (uantify the energy and cost
savings made through energy conservation measures.
Fue# Co-t-
- wide variety of fuels are available for thermal energy supply. +ew are listed
below1
+uel oil
Bow )ulphur 3eavy )toc# 2B)3)7
Bight ,iesel 'il 2B,'7
Bi(uefied =etroleum as 2B=7
%'-B
B$E$T*
W'', etc.
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/nderstanding fuel cost is fairly simple and it is purchased in Tons or 4iloliters.
-vailability" cost and (uality are the main three factors that should be considered
while purchasing. The following factors should be ta#en into account during
procurement of fuels for energy efficiency and economics.
=rice at source" transport charge" type of transport
Fuality of fuel 2contaminations" moisture etc7
*nergy content 2calorific value7
Po=er Co-t-
*lectricity price in $ndia not only varies from )tate to )tate" but also city to city
and consumer to consumer though it does the same wor# everywhere. 5any
factors are involved in deciding final cost of purchased electricity such as1
5aximum demand charges" #G- 2i.e. Ho= *-t the electricity is usedL7
*nergy %harges" #Wh 2i.e." Ho= !uc. electricity is consumedL7
T', %harges" =ea#8Eon-pea# period 2i.e. :.en electricity is utili!ed L7
=ower factor %harge" =.+ 2i.e." Re# po=er u-e ,er-u- Apprent po=er
u-e *ctor7.
'ther incentives and penalties applied from time to time.
3igh tension tariff and low tension tariff rate changes.
)lab rate cost and its variation.
Type of tariff clause and rate for various categories such as commercial"
residential" industrial" overnment" agricultural" etc.
Tariff rate for developed and underdeveloped area8)tates.
Tax holiday for new pro.ects.
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E>!p#e: Purc.-ed Energy <i##
- typical summary of energy purchased in an industry based on the invoices.
T+#e
Type o* energy Origin# unit- )nit Co-t Mont.#y <i## R-/
*lectricity M"99"999 #Wh <s.C.998#Wh 29"99"999
+uel oil 299 #B <s.19"9998 #B 29"99"999
%oal 1999 tons <s.2"9998ton 29"99"999
Total N9"99"999
/nfortunately the different forms of energy are sold in different units e.g. #Wh of
electricity" liters of fuel oil" tonne of coal. To allow comparison of energy
(uantities these must be converted to a common unit of energy such as #Wh"
iga .oules" #%als etc.
*lectricity21 #Wh7 J DN9 #%al8#Wh 29.99@N O7
3eavy fuel oil 2ross calorific value" %G7J 19999 #%al8litre 2 9.9C11 O8litre7
%oal 2ross calorific value" %G7 J C999 #%al8#g 2 2D O8ton7.
<enc.!r;ing nd Energy Per*or!nce
Aenchmar#ing of energy consumption internally 2historical 8 trend analysis7 and
externally 2across similar industries7 are two powerful tools for performance
assessment and logical evolution of avenues for improvement. 3istorical data
well documented helps to bring out energy consumption and cost trends month-
wise 8 day-wise. Trend analysis of energy consumption" cost" relevant production
features" specific energy consumption" help to understand effects of capacity
utili!ation on energy use efficiency and costs on a broader scale.
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*xternal benchmar#ing relates to inter-unit comparison across a group of similar
units. 3owever" it would be important to ascertain similarities" as otherwise
findings can be grossly misleading. +ew comparative factors" which need to be
loo#ed into while benchmar#ing externally are1
)cale of operation
Gintage of technology
<aw material specifications and (uality
=roduct specifications and (uality
Aenchmar#ing energy performance permits
Fuantification of fixed and variable energy consumption trends vis-P-vis
production levels.
%omparison of the industry energy performance with respect to various
production levels 2capacity utili!ation7.
$dentification of best practices 2based on the external benchmar#ing data7.
)cope and margin available for energy consumption and cost reduction.
Aasis for monitoring and target setting exercises.
The benchmar# parameters can be1
ross production related
e.g. #Wh8#g yarn produced 2Textile unit7.
*(uipment 8 utility related
e.g. #W8ton of refrigeration 2on -ir conditioning plant7
e.g. % thermal efficiency of a boiler plant
e.g. % cooling tower effectiveness in a cooling tower
e.g. #Wh8E5@ of compressed air generated
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e.g. #Wh 8litre in a diesel power generation plant.
While such benchmar#s are referred to" related crucial process parameters need
mentioning for meaningful comparison among peers. +or instance" in the above
case1
+or a textile unit 0 average count" type of yarn i.e. polyester8cotton" is to
be reported along side #Wh8s(uare meter.
+or an -ir conditioning 2-8c7 plant 0 %hilled water temperature level and
refrigeration load 2T<7 are crucial for comparing #W8T<.
+or a boiler plant 0 fuel (uality" type" steam pressure" temperature" flow"
are useful comparators alongside thermal efficiency and more importantly"
whether thermal efficiency is on gross calorific value basis or net calorific
value basis or whether the computation is by direct method or indirect
heat loss method" may mean a lot in benchmar#ing exercise for
meaningful comparison.
%ooling tower effectiveness 0 ambient air wet8dry bulb temperature"
relative humidity" air and circulating water flows are re(uired to be
reported to ma#e meaningful sense.
%ompressed air specific power consumption 0 is to be compared at
similar inlet air temperature and pressure of generation.
,iesel power plant performance 0 is to be compared at similar loading %"
steady run condition etc.
P#nt Energy Per*or!nce
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=lant energy performance 2=*=7 is the measure of whether a plant is now using
more or less energy to manufacture its products than it did in the past1 a
measure of how well the energy management programme is doing. $t compares
the change in energy consumption from one year to the other considering
production output. =lant energy performance monitoring compares plant energy
use at a reference year with the subse(uent years to determine the improvement
that has been made.
3owever" a plant production output may vary from year to year and the output
has a significant bearing on plant energy use. +or a meaningful comparison" it is
necessary to determine the energy that would have been re(uired to produce
this year production output" if the plant had operated in the same way as it did
during the reference year. This calculated value can then be compared with the
actual value to determine the improvement or deterioration that has ta#en place
since the reference year.
Production *ctor
=roduction factor is used to determine the energy that would have been re(uired
to produce this year?s production output if the plant had operated in the same
way as it did in the reference year. $t is the ratio of production in the current year
to that in the reference year.
!urrent year"s production
#roduction factor $
%eference year"s production

Re*erence Yer E8ui,#ent Energy )-e
The reference year?s energy use that would have been used to produce the
current year?s production output may be called the :reference year energy use
e(uivalent; or :reference year e(uivalent; for short. The reference year
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e(uivalent is obtained by multiplying the reference year energy use by the
production factor 2obtained above7.
<eference year e(uivalent J <eference year energy use x =roduction factor.
The improvement or deterioration from the reference year is called :energy
performance; and is a measure of the plant?s energy management progress. $t is
the reduction or increase in the current year?s energy use over the reference"
and is calculated by subtracting the current year?s energy use from the reference
years e(uivalent. The result is divided by the reference year e(uivalent and
multiplied by 199 to obtain a percentage.
<eference year e(uivalent 0 %urrent year?s energy
=lant energy performance J
<eference year e(uivalent
x 199
The energy performance is the percentage of energy saved at the current rate of
use compared to the reference year rate of use. The greater the improvement"
the higher the number will be.
Mont.#y Energy Per*or!nce
*xperience however" has shown that once a plant has started measuring yearly
energy performance" management wants more fre(uent performance
information in order to monitor and control energy use on an on-going basis.
=*= can .ust as easily be used for monthly reporting as yearly reporting.
Mtc.ing Energy )-ge to Re8uire!ent
5ismatch between e(uipment capacity and user re(uirement often leads to
inefficiencies due to part load operations" wastages etc. Worst case design" is a
designer?s characteristic" while optimi!ation is the energy manager?s mandate
and many situations present themselves towards an exercise involving graceful
matching of energy e(uipment capacity to end-use needs. )ome examples
being1
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*liminate throttling of a pump by impeller trimming" resi!ing pump"
installing variable speed drives.
*liminate damper operations in fans by impeller trimming" installing
variable speed drives" pulley diameter modification for belt drives" fan
resi!ing for better efficiency.
5oderation of chilled water temperature for process chilling needs
<ecovery of energy lost in control valve pressure drops by bac#
pressure8turbine adoption.
-doption of tas# lighting in place of less effective area lighting.
M>i!i-ing Sy-te! E**iciency
'nce the energy usage and sources are matched properly" the next step is to
operate the e(uipment efficiently through best practices in operation and
maintenance as well as .udicious technology adoption. )ome illustrations in this
context are1
*liminate steam lea#ages by trap improvements
5aximise condensate recovery
-dopt combustion controls for maximi!ing combustion efficiency
<eplace pumps" fans" air compressors" refrigeration compressors" boilers"
furnaces" heaters and other energy consuming e(uipment" wherever
significant energy efficiency margins exist.
Opti!i-ing t.e Input Energy Re8uire!ent-
%onse(uent upon fine-tuning the energy use practices" attention is accorded to
considerations for minimi!ing energy input re(uirements. The range of measures
could include1
)huffling of compressors to match needs.
=eriodic review of insulation thic#ness.
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$dentify potential for heat exchanger networ#ing and process integration.
'ptimisation of transformer operation with respect to load.
Fue# nd Energy Su+-titution
Fue# -u+-titution:
)ubstituting existing fossil fuel with more efficient and less cost8less polluting fuel
such as natural gas" biogas and locally available agro-residues.
*nergy is an important input in the production. There are two ways to reduce
energy dependencyK energy conservation and substitution.
+uel substitution has ta#en place in all the ma.or sectors of the $ndian economy.
4erosene and Bi(uefied =etroleum as 2B=7 have substituted soft co#e in
residential use.
+ew examples of fuel substitution1
Eatural gas is increasingly the fuel of choice as fuel and feedstoc# in the
fertili!er" petrochemicals" power and sponge iron industries.
<eplacement of coal by coconut shells" rice hus# etc.
<eplacement of B,' by B)3)
+ew examples of energy substitution
<eplacement of electric heaters by steam heaters
<eplacement of steam based hot water by solar systems
C-e Study : E>!p#e on Fue# Su+-titution
- textile process industry replaced old fuel oil fired thermic fluid heater with agro
fuel fired heater. The economics of the pro.ect are given below1
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A: Tit#e o* Reco!!endtion : )-e o* Agro Fue# ?coconut c.ip-@ in
p#ce o* Furnce oi# in <oi#er
<: (e-cription o* E>i-ting
Sy-te! nd it- opertion
: - thermic fluid heater with furnace oil
currently. $n the same plant a coconut
chip fired boiler is operating continuously
with good performance.
C: (e-cription o* Propo-ed
-y-te! nd it- opertion
$t was suggested to replace the oil fired
thermic fluid heater with coconut chip
fired boiler as the company has the
facilities for handling coconut chip fired
system.
(: Energy S,ing C#cu#tion-
O#d Sy-te!
Type o* *ue# Firing
%G
-vg. Thermal *fficiency
3eat ,uty
'perating 3ours
-nnual +uel %ost
1
1
1
1
1
1
Furnce Oi# *ired .eter
19"299 #%al8#g
D2%
1M la#h #%al8hour
2M days x 12 month x 2C hrs J 7299 hrs.
<s.1@9 la#h 27299 x 1D99 <s.8hr.7
Modi*ied Sy-te!
Type o* *ue# -,ing
%G
-vg. Thermal *fficiency
3eat ,uty
-nnual 'perating %ost
-nnual )avings
-dditional -uxiliary =ower Q
5anpower %ost
Eet -nnual )aving
1
1
1
1
1
1
1
1
%oconut chips fired 3eater
C299 #%al8#g
72%
1M la#h #%al8hour
7299 x 799 <s.8hr J M9 la#h
1@9 0 M9 J <s.D9 la#h
<s.19 la#h
<s.79 la#h
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$nvestment for Eew %oconut
+ired heater
1 <s.@M la#h
Si!p#e py +c; period : 2 !ont.-
Energy Audit In-tru!ent-
The re(uirement for an energy audit such as identification and (uantification of
energy necessitates measurementsK these measurements re(uire the use of
instruments. These instruments must be portable" durable" easy to operate and
relatively inexpensive. The parameters generally monitored during energy audit
may include the following1
Aasic *lectrical =arameters in -% &,% systems 0 Goltage 2G7" %urrent 2$7" =ower
factor" -ctive power 2#W7" apparent power 2demand7 2#G-7" <eactive power
2#G-r7" *nergy consumption 2#Wh7" +re(uency 23!7" 3armonics" etc.
=arameters of importance other than electrical such as temperature & heat flow"
radiation" air and gas flow" li(uid flow" revolutions per minute 2<=57" air velocity"
noise and vibration" dust concentration" Total ,issolved )olids 2T,)7" p3"
moisture content" relative humidity" flue gas analysis 0 %'
2
" '
2
" %'" )'x" E'x"
combustion efficiency etc.
Aey in-tru!ent- *or energy udit re #i-ted +e#o=:
The operating instructions for all instruments must be understood and staff
should familiari!e themselves with the instruments and their operation prior to
actual audit use. +or example" Three phase =ower analy!er 2online monitoring7"
%ombustion analy!er" +uel efficiency monitor" +yrite" %ontact thermometer"
$nfrared thermometer" =ivot tube and monometer" Water flow meter" speed
measurement" lea# detector" Bux meter" p3 and T,) meter etc.
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CHAPTER $
ENERGY ACTION P0ANNING
Introduction

*nergy efficiency is extremely important to all organisations" especially those
that are energy intensive. The four vital re(uirements for a successful energy
management is shown in +igure below.
-ny successful energy management programme within an organisation needs
the total support of top management. 3ence" top management support is the #ey
re(uirement for success. Top management should give energy efficiency e(ual
importance in their corporate ob.ectives as manpower" raw materials" production
and sales. The other important re(uirements are a well charted strategy plan" an
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effective monitoring system and ade(uate technical ability for analysing and
implementing energy saving options.
Energy Mnge!ent Sy-te!
'rgani!ations see#ing financial returns from superior energy management
continuously strive to improve their energy performance. Their success is based
on regularly assessing energy performance" planning and implementing action
plans to improve energy efficiency. 3ence a sound energy management system
is a prere(uisite for identifying and implementing energy conservation measures"
sustaining the momentum and for effecting improvements on a continuous basis.
The various steps for energy action planning are shown in +igure below.
Figure : Step- in Energy Action P#nning
Top Mnge!ent Co!!it!ent nd Support
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Top management shall ma#e a commitment to allocate manpower and funds to
achieve continuous improvement. To establish the energy management
programme" leading organi!ations appoint energy manager" form a dedicated
energy team and institute an energy policy.
Appoint n Energy Mnger
T.e t-;- o* energy !nger re -etting go#-B trc;ing progre--B nd
pro!oting t.e energy !nge!ent progr!/ An Energy Mnger .e#p- n
orgniCtion c.ie,e it- go#- +y e-t+#i-.ing energy per*or!nce -
core ,#ue/
The *nergy 5anager is not always an expert in energy and technical systems.
)uccessful *nergy 5anager understands how energy management helps the
organi!ation achieve its financial and environmental goals and ob.ectives.
,epending on the si!e of the organi!ation" the *nergy 5anager role can be a
full-time position or an addition to other responsibilities.
0oction o* Energy Mnger
The energy management function" whether vested in one :energy manager or
coordinator; or distributed among a number of middle managers" usually resides
somewhere in the organi!ation between senior management and those who
control the end-use of energy.
*xactly how and where that function is placed is a decision that needs to be
made in view of the existing organisational structure.
Energy Mnger: Re-pon-i+i#itie- nd (utie- to +e A--igned )nder T.e
Energy Con-er,tion Act/
Re-pon-i+i#itie-
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=repare an annual activity plan and present to management concerning
financially attractive investments to reduce energy costs
*stablish an energy conservation cell within the firm with management?s
consent about the mandate and tas# of the cell.
$nitiate activities to improve monitoring and process control to reduce
energy costs.
-naly!e e(uipment performance with respect to energy efficiency
*nsure proper functioning and calibration of instrumentation re(uired to
assess level of energy consumption directly or indirectly.
=repare information material and conduct internal wor#shops about the
topic for other staff.
$mprove disaggregating of energy consumption data down to shop level or
profit center of a firm.
*stablish a methodology how to accurately calculate the specific energy
consumption of various products8services or activity of the firm.
,evelop and manage training programme for energy efficiency at
operating levels.
%o-ordinate nomination of management personnel to external programs.
%reate #nowledge ban# on sectoral" national and inter-national
development on energy efficiency technology and management system
and information denomination.
,evelop integrated system of energy efficiency and environmental up
gradation.
%o-ordinate implementation of energy audit8efficiency improvement
pro.ects through external agencies.
*stablish and8or participate in information exchange with other energy
managers of the same sector through association
(utie-
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<eport to A** and )tate level ,esignated -gency once a year the
information with regard to the energy consumed and action ta#en on the
recommendation of the accredited energy auditor" as per A** +ormat.
*stablish an improved data recording" collection and analysis system to
#eep trac# of energy consumption.
=rovide support to -ccredited *nergy -udit +irm retained by the company
for the conduct of energy audit
=rovide information to A** as demanded in the -ct" and with respect to
the tas#s given by a mandate" and the .ob description.
=repare a scheme for efficient use of energy and its conservation and
implement such scheme #eeping in view of the economic stability of the
investment in such form and manner as may be provided in the
regulations of the *nergy %onservation -ct.
For! A (edicted Energy Te!
T.e t-;- o* energy te! re e>ecuting energy !nge!ent cti,itie-
cro-- di**erent prt- o* t.e orgniCtion nd en-uring integrtion o* +e-t
prctice-/
,ecisions affecting energy use are made every day by employees at all levels in
an organi!ation. %reating an energy team helps to integrate energy management
activities in an organi!ation.
$n addition to planning and implementing specific improvements" the energy
team measures and trac#s energy performance and communicates with
management" employees and other sta#eholders.
The si!e of the energy team will vary depending on the si!e of the organi!ation.
$n addition to the *nergy 5anager who leads the team and dedicated energy
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staff" the team can include a representative from each operational area that
significantly affects energy use" such as1
*ngineering
=urchasing
'perations and 5aintenance
Auilding8+acilities 5anagement
*nvironmental 3ealth and )afety
%ontractors and )uppliers
/tilities
*nergy team can encourage communications and the sharing of ideas between
various departments in an organi!ation. $t can serve to obtain agreements on
energy conservation pro.ects" which affect more than one department. $t can
provide a stronger voice to the top management than a single energy manager
normally could. The composition of the energy team will vary from one
organi!ation to another" depending on the existing management structure" the
type and (uantity of energy used and other company-specific factors.
The fre(uency of team meetings depend on the importance of energy costs in
the overall cost structure of the company and what pro.ects are in progress at
any time. Eormally a monthly meeting is usual" so that monthly production and
energy consumptions may be reviewed together by the committee. This review
would include a comparison of actual performance against previously set targets
and budget figures" as well as against previous months. 'ther items for the
agenda should be a review of the status of energy conservation investments in
progress or planned.
In-titute n Energy Po#icy
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Energy po#icy pro,ide- t.e *oundtion *or -etting per*or!nce go#- nd
integrting energy !nge!ent into n orgniCtionD- cu#ture nd
opertion-/
*nergy =olicy provides the foundation for successful energy management. $t
formali!es top managementRs support and articulates the organi!ationRs
commitment to energy efficiency for employees" shareholders" the community
and other sta#eholders.
- formal written energy policy acts both as1
- public expression of the organi!ation?s commitment to energy
conservation and environmental protection
- wor#ing document to guide the energy management practices and
provides continuity.
$t is in the companyRs best interest that support for energy management is
expressed in a formal written declaration of commitment accompanied by a set
of stated ob.ectives" an action plan for achieving them" and a clear specification
of responsibilities.
Typic# For!t o* n Energy Po#icy
,eclaration of top managementRs commitment to" and senior and middle
managementRs involvement in" energy management.
)tatement of policy.
)tatement of ob.ectives" separated into short and long-term goals.
Action-
3ave the %*' or head of the organi!ation officially issue the policy
$nvolve #ey people in policy development to ensure cooperation
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Tailor the policy to the organi!ationRs culture
5a#e it understandable to employees and public ali#e
%onsider the s#ills and abilities of management and employees
$nclude detail that covers day-to-day operations
%ommunicate the policy to all employees" and encourage them to get
involved.
)ample energy policies of various organi!ations are given at the end of this
chapter.
A--e-- Energy Per*or!nce-
/nderstanding current and past energy use helps an organi!ation identify
opportunities to improve energy performance and gain financial benefits.
-ssessing energy performance is the periodic process of evaluating energy use
for all ma.or facilities and functions in the organi!ation and establishing a
baseline for measuring future results of energy efficiency efforts.
4ey aspects include data collection and management" establishing baseline"
benchmar#ing" analysis and evaluation and conducting technical assessment
and audit.
(t Co##ection nd Mnge!ent
Co##ect nd trc; dt 9 Co##ect energy u-e in*or!tion nd docu!ent dt
o,er ti!e/
*valuating energy performance re(uires good information on how" when" and
where energy is being used. %ollecting and trac#ing this information is necessary
for establishing baselines and managing energy use.
The following steps are to be considered
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@ Co##ect dt
The data must be complete and accurate because it will be used for analysis and
goal setting. %onsider the following when collecting energy use data1
(eter!ine pproprite #e,e# o* deti# -The level and scope of data collection
will vary from organi!ation to organi!ation. )ome may choose to collect data
from submeters on individual processes while others may only loo# at a utility
bill.
Account *or ## energy -ource- 0 5a#e inventory of all energy purchased and
generated onsite 2electricity" gas" steam" waste fuels7 in physical units 2#Wh" #g
of steam" etc.7 and on a cost basis.
(ocu!ent ## energy u-e- -+or the sources identified above" assemble energy
bills" meter readings" and other use data. *nergy data may reside in the
accounting department" be held centrally or at each facility" or can be ac(uired
by contacting the appropriate utilities or energy service providers. ather at least
two years of monthly data or a more fre(uent interval if available. /se the most
recent data available.
Co##ect *ci#ity nd opertion# dt -To be able to normali!e and benchmar#"
it may be necessary to collect non-energy related data for all facilities and
operations" such as building si!e" production" operating hours" etc.
+@ Trc; (t
- system for trac#ing performance can range from a simple spreadsheet to
detailed databases and $T systems. $n developing an appropriate trac#ing
system for the organi!ation" consider the following1
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Scope -The design of the trac#ing system will be shaped" in large part" by the
level and scope of information that will be trac#ed and the fre(uency of data
collection.
Mintennce -Trac#ing systems must be easy to use" update" and maintain.
Reporting nd co!!unicting -/se trac#ing systems to communicate energy
performance to other parts of the organi!ation and motivate change. %onsider
developing formats that express energy performance information in ways that
are easily understandable across the organi!ation. - good trac#ing system
should ma#e such reporting easy.
Action-
%ollect data by fuel type at an individual building or facility level
%ollect data from submeters" if possible
/se data that is current and timely
/se trac#ing systems to develop (uarterly and annual reports that profile
energy performance.
/se trac#ing systems to allow facilities to compare their performance to
their peers.
c@ Nor!#iCe (t
The energy use of facilities varies greatly" partly due to factors beyond the
energy efficiency of the e(uipment and operations. These factors may include
weather or certain operating characteristics. Eormali!ing is the process of
removing the impact of various factors on energy use so that energy
performance of facilities and operations can be compared.
$n order to normali!e1
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(eter!ine nor!#iCtion *ctor- -,etermine #ey factors that need to be
addressed to effectively compare facilities. <elevant factors are fre(uently
organi!ation-specific.
+or industrial facilities common normali!ation factors include1
$nputs
=roduct type
'utput
=roduction processes
+or commercial and institutional buildings" common normali!ation factors
include1
%limate !one
+acility si!e
+uel choice
=rice8cost of energy
-ctual weather history
3ours of operation
'ccupancy levels
)pecial features
E-t+#i-.ing <-e#ine
E-t+#i-. +-e#ine- 9 (eter!ine t.e -trting point *ro! =.ic. to !e-ure
progre--/
5easuring energy performance at a specific time establishes a baseline and
provides the starting point for setting goals and evaluating future efforts and
overall performance. Aaselines should be established for all levels appropriate
to your organi!ation.
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The main steps involve using the data collected so far to1
E-t+#i-. +-e yer - *stablish a base year or an average of several historical
years. /se the most complete and relevant sets of data available.
Identi*y !etric- - )elect units of measurements that effectively and
appropriately express energy performance for the organi!ation. 2e.g. #cal8ton"
#cal8#Wh" total energy cost8ton7.
Pu+#i-. re-u#t- - -nnounce performance baselines to facilities" managers" and
other #ey sta#eholders in your organi!ation.
<enc.!r;
Co!pre t.e energy per*or!nce o* *ci#itie- to ec. ot.erB peer- nd
co!petitor-B nd o,er ti!e to prioritiCe =.ic. *ci#itie- to *ocu- on *or
i!pro,e!ent-/
Aenchmar#ing allows us to compare the energy performance of similar facilities
or an established level of performance. $t is a useful activity in energy
management because it can be used to develop relative measures of energy
performance" trac# change over time" and identify best energy management
practices. Aenchmar#ing can be done in variety of ways.
+acility or organi!ational performance may be benchmar#ed to1
P-t per*or!nce - - comparison of current versus historical performance.
Indu-try ,erge - Aased on an established performance metric" such as the
recogni!ed average performance of a similar group.
<e-t in c#-- -Aenchmar#ing against the best in the industry and not the
average.
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<e-t Prctice- -- (ualitative comparison against certain" established practices
considered to be the best in the industry.
The #ey steps in benchmar#ing include1
,etermine the level of benchmar#ing 2for example -e(uipment" process
line" facility or organi!ational7.
,evelop metrics.
%onduct comparisons.
Trac# performance over time.
An#y-i- nd E,#ution
An#yCe (t 9 )nder-tnd your energy u-e pttern- nd trend-/
-naly!ing data to determine energy use trends can help an organi!ation gain a
better understanding of the factors that affect energy performance and identify
steps for reducing energy consumption.
A--e--ing your energy per*or!nce .e#p- you to1
%ategori!e current energy use by fuel type" operating division" facility"
product line" etc.
$dentify high performing facilities for recognition and reuse of best
practices.
=rioriti!e poor performing facilities for immediate improvement.
/nderstand the contribution of energy expenditures to operating costs.
,evelop a historical perspective and context for future actions and
decisions.
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*stablish reference points for measuring and rewarding good
performance.
There are a variety of ways by which data can be analy!ed depending upon the
needs of the organi!ation. The following analyses provide a guideline1
@ Euntitti,e Re,ie=-
(e,e#op u-e pro*i#e- - $dentify energy consumption pea#s and valleys" and
determine how they relate to operations or #ey events.
Co!pre per*or!nce - %ompare the use and performance data of similar
facilities in your industry.
A--e-- t.e *innci# i!pct- - $dentify areas of high-cost energy use.
Identi*y dt gp- - ,etermine areas where more information is needed.
+@ Eu#itti,e Re,ie=-
Conduct inter,ie=- - )ee# informed opinions from colleagues" lessons learned"
systems-specific information 2e.g." 3G-%" lighting" refrigeration7" and in-house
audits or surveys.
Re,ie= po#icie- nd procedure- -<eview organi!ational policies and operating
procedures to determine their impact on energy use.
Conduct Tec.nic# A--e--!ent- F Audit-
E,#ute t.e operting per*or!nce o* *ci#ity -y-te!- nd e8uip!ent to
deter!ine i!pro,e!ent potenti#/
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4nowing the organi!ationRs baseline energy use and the relative performance of
entire portfolio is only part of the information needed. =eriodic assessment of the
performance of e(uipment" processes" and systems will help to identify
opportunities for improvement.
*nergy audits are comprehensive reviews conducted by energy auditors and8or
engineers that evaluate the actual performance of a facilityRs systems and
e(uipment against its designed performance level or against best available
technology. The difference between these is the potential for energy savings.
The main steps for conducting technical assessments and audits are1
A--e!+#e udit te! - *xpertise should cover all energy-using systems"
processes" and e(uipment. $nclude facility engineers" system specialists" and
other support. 'utside support may be helpful and provide an ob.ective
perspective or specific expertise.
P#n nd de,e#op n udit -trtegy - $dentify and prioriti!e systems for
evaluation" assign team members to tas#s" and schedule completion dates for
the activities. /se benchmar#ing results to identify poor-performing facilities
whose e(uipment and systems should be targeted for evaluation.
Crete udit report - Aased on the audit results" produce a detailed summary of
actual steps that can be ta#en to reduce energy use. The report should
recommend actions ranging from simple ad.ustments in operation to e(uipment
replacement. *stimates of resource re(uirements for completing actions should
also be included.
Set Go#-
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=erformance goals drive energy management activities and promote continuous
improvement. )etting clear and measurable goals is critical for understanding
intended results" developing effective strategies" and reaping financial gains.
Well-stated goals guide daily decision-ma#ing and are the basis for trac#ing and
measuring progress. %ommunicating and posting goals can motivate staff to
support energy management efforts throughout the organi!ation. The *nergy
5anager in association with the energy team typically develops goals.
Setting go#- .e#p- t.e Energy Mnger
)et the tone for improvement throughout the organi!ation.
5easure the success of the energy management program.
3elp the *nergy Team to identify progress and setbac#s at a facility level.
+oster ownership of energy management" create a sense of purpose" and
motivate staff.
,emonstrate commitment to reducing environmental impacts.
%reate schedules for upgrade activities and identify milestones.
Tool called force field analysis can be used to clarify the goals to be
achieved.
To develop effective performance goals" determine scope" estimate potential for
improvement and finally establish goals.
(eter!ine Scope
Identi*y orgniCtion# nd ti!e pr!eter- *or go#-/
The scope of performance goals can include multiple levels of the organi!ation
as well as various time periods for completion of specific goals.
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@ OrgniCtion# #e,e#
The level at which performance goals will be set depends on the nature of the
organi!ation and how it uses energy. %ommon organi!ational levels for setting
goals include1
OrgniCtion =ide - )etting goals at this level provides a big picture of how the
entire organi!ation wants to improve. 'rgani!ation-wide goals provide a
framewor# for communicating the success of energy management both internal
and external audiences.
+@ Fci#ity --t this level" goals may vary to ta#e into account the performance of
specific facilities based on benchmar#ing results or an energy audit. +acility level
goals are designed to help the broader organi!ation to meet its goals.
c@ Proce-- or e8uip!ent -)ome organi!ations may find it useful to establish
goals for specific process lines and e(uipment when energy use is concentrated
in specific areas.
Ti!e Period-
*stablishing appropriate and realistic target dates for goals ensures that they are
meaningful and promote change. - combination of short and long term goals can
be effective.
@ S.ort9ter! go#- - -nnual goals provide the necessary mar#ers for trac#ing
and reporting progress on a regular and on going basis.
+@ 0ong9ter! go#- - Bong-term goals are usually organi!ation-specific and may
be shaped by1
$nternal rates of return
$nternal planning hori!ons and guidelines
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'rgani!ational strategic plans
%ommitments to voluntary environmental initiatives
E-ti!te Potenti# *or I!pro,e!ent
Re,ie= +-e#ine-B +enc.!r; to deter!ine t.e potenti# nd order o*
upgrde-B nd conduct tec.nic# --e--!ent- nd udit-/
To set goals" it is important to have a good estimate of what level of performance
is achievable and the amount of resources needed.
There are a variety ways to determine potential. The method we choose will
depend on a number of factors" such as1 available resources" time" the nature of
energy use at your facilities" and how the energy program is organi!ed.
5ethods used by leading energy programs include1
Re,ie=ing per*or!nce dt - -ssessing performance and setting baselines
should help to identify differences in energy use between similar facilities" giving
a limited" point-in-time view of your potential improvement. =erformance data
covering a longer period of time will be more useful for understanding
improvement potential.
<enc.!r;ing - Aenchmar#ing provides a yardstic# for evaluating improvement
opportunity when enough data is available to show trends in energy use.
E,#uting p-t pro&ect- nd +e-t prctice- - *valuate past pro.ects and best
practices at higher-performing facilities to determine the feasibility of transferring
these practices to other parts of the organi!ation.
Re,ie=ing tec.nic# --e--!ent- nd udit- - $dentify opportunities to
reduce energy use identified during technical assessments and audits of poorer
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performing facilities to serve as a strong basis for (uantifying the potential for
improvement.
Co!pring go#- o* -i!i#r orgniCtion- - <eviewing performance goals of
other organi!ations can help to guide and inform you of the potential for your
own organi!ation.
0in;ing to orgniCtion9=ide -trtegic go#- - )trategic as well as operational
goals" such as cost reductions" can also help inform the goal setting process
E-t+#i-. Go#-
Crete nd e>pre-- c#erB !e-ur+#e go#-B =it. trget dte-B *or t.e
entire orgniCtionB *ci#itie-B nd ot.er unit-/
'nce the potential for improvement has been estimated" goals can be
established at the appropriate organi!ational levels. *nergy performance goals
should be formally established and recogni!ed by senior management as a
mission for the whole organi!ation.
*stimating potential for improvement should provide us with a starting point for
what is possible. 3owever" some organi!ations set their final energy
performance goals based on organi!ational factors other than what is technically
feasible. )uch factors will affect how energy performance goals are expressed.
%ommon ways for establishing goals include1
(e*ined reduction - oals are presented in terms of a specific (uantity or
percentage decrease in energy use" such as decrease of @99 tons of furnace oil
or19 percent reduction of furnace oil.
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<e-t9in9c#-- - This goal aims for a certain level of performance compared to an
established benchmar#.
E**iciency i!pro,e!ent - oals are expressed as a function of reducing the
energy intensity of a specific performance indicator" such as M #Wh per unit of
product.
En,iron!ent# I!pro,e!ent -This goal translates energy savings into pollution
prevention or reduction goals.
Action-
When setting goals" be sure to use the *nergy TeamRs wide range of #nowledge
to help set aggressive" yet realistic goals.
3ave management review your goals to enlist their feedbac# and support.
Force Fie#d An#y-i-
Aefore creating the action plan" it can be a useful exercise to clarify the goal to
be achieved" and to assess what barriers must be overcome and what influences
exist in the organi!ation that wor# towards the achievement of the goal. These
barriers and influences can be thought of as negative and positive forces
respectively. +orce field analysis is a simple tool that can be used to gain
additional insight about the change process to be pursued. The steps involved in
force field analysis are1
Stte t.e orgniCtion# go# and indicate the direction 2say" left to right7 that
signifies moving towards that goal1 for example" the goal might be :improve
energy efficiency in the assembly plant; or :reduce energy consumption in the
facility for current occupancy levels;.
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Identi*y +rrier- that tend to wor# against the achievement of the goal1 these
may be internal to the organi!ation 2for example" a lac# of expertise related to
energy management7 or external 2for example" energy rate structures or
government regulation7.
Identi*y po-iti,e in*#uence- or forces that tend to wor# towards achievement of
the goalK these may also be internal or external.
E-ti!te t.e re#ti,e -trengt. of the negative and positive forces 2for simplicity"
we may want to identify them as low" medium and high strength7.
PrioritiCe those forces that can be strengthened or wea#ened through your
action plan with the greatest effect on achieving the goal 2Tip1 $t is usually more
effective to attempt to minimi!e negative forces than to try to strengthen forces
that are already positive7. - typical force field analysis chart is shown in +igure
below.
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Crete Action P#n
With goals in place" the organi!ation is now ready to develop a roadmap to
improve energy performance.
)uccessful organi!ations use a detailed action plan to ensure a systematic
process to implement energy performance measures. /nli#e the energy policy"
the action plan is regularly updated" most often on an annual basis" to reflect
recent achievements" changes in performance" and shifting priorities.
While the scope and scale of the action plan is often dependent on the
organi!ation" the steps below outline a basic starting point for creating a plan.
(e*ine Tec.nic# Step- nd Trget-
E,#ute tec.nic# --e--!ent- nd udit re-u#t- - $dentify gaps between
current performance and goals" by reviewing the results of the technical
assessments and audits or progress evaluations.
(eter!ine tec.nic# -tep- - $dentify the steps necessary for upgrading and
moving facilities from current performance to the desired level of performance as
defined by the goals.
Crete per*or!nce trget- for each facility" department" and operation of the
organi!ation to trac# progress towards achieving goals.
Set ti!e#ine- for actions" including regular meetings among #ey personnel to
evaluate progress" completion dates" milestones and expected outcomes.
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E-t+#i-. trc;ing system to trac# and monitor the progress of action items.
This system should trac# and measure energy use and pro.ect8program
activities.
(eter!ine Ro#e- nd Re-ource-
Get gree!ent *ro! !nge!ent nd ## orgniCtion# re- **ected +y
t.e ction p#n +e*ore *in#iCing it/ :or; =it. t.e Energy Te! to
co!!unicte t.e ction p#n to ## re- o* t.e orgniCtion/
(eter!ine Ro#e-
Identi*y intern# ro#e- - ,etermine who should be involved and what their
responsibilities will be. ,epending on your organi!ation and action plan" this
might include departments such as1
+acility and operations management
+inancial management -capital investments" budget planning
3uman resources -staffing" training" and performance standards
5aintenance
)upply management -procurement procedures" energy purchasing and
e(uipment and materials
Auilding and plant design
*ngineering
Eew product8process development teams
%ommunications 5ar#eting
*nvironment" 3ealth and )afety
Identi*y e>tern# ro#e- - ,etermine the degree to which consultants" service
providers" vendors" and other product providers will be used. )ome
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organi!ations may choose to outsource entire aspects of their action plan while
others may only want to contract with specific vendors for limited pro.ects.
E-t+#i-. per*or!nce !etric- *or contrctor- - $f contractors will be used"
determine what standards will be used to evaluate bids and incorporate these
metrics into agreements with contractors.
(eter!ine Re-ource-
(e*ine re-ource- need- - +or each pro.ect or program in the action plan"
estimate the cost for each item in terms of both human resources and
capital8expense outlay.
Secure re-ource- - ,evelop the business case for .ustifying and gaining
funding approval for action plan pro.ects and resources need.
Action-
%reating an inclusive strategy that establishes roles and actions throughout the
organi!ation can help to integrate good energy management practices. When
developing an action plan" consider1
Arainstorming with various departments to identify ways they can
contribute.
3olding a competition to see# ideas for energy efficiency from across the
organi!ation.
athering recommendations from the *nergy Team and other #ey
personnel.
I!p#e!ent Action P#n
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=eople can ma#e or brea# an energy program. aining the support and
cooperation of #ey people at different levels within the organi!ation is an
important factor for successful implementation of the action plan in many
organi!ations/
<eaching your goals fre(uently depends on the awareness" commitment" and
capability of the people who will implement the pro.ects defined in the action
plan.
$n addition to implementing the technical aspects of the action plan" consider the
following1
%reate communication plan - ,evelop targeted information for #ey
audiences about your energy management program.
<aise awareness - Auild support at all levels of your organi!ation for
energy management initiatives and goals.
Auild capacity - Through training" access to information" and transfer of
successful practices" procedures" and technologies" you can expand the
capacity of your staff.
5otivate - %reate incentives that encourage staff to improve energy
performance to achieve goals.
Trac# and monitor - /sing the trac#ing system developed as part of the
action plan to trac# and monitor progress regularly.
Crete Co!!uniction P#n
Good co!!uniction doe- not &u-t .ppen/ It re8uire- cre*u# p#nning
nd i!p#e!enttion.
To communicate strategically" you will need to identify #ey audiences" determine
the information that they need" and adapt your messages appropriately for each
one.
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Ri-e A=rene--
E,eryone .- ro#e in energy !nge!ent/ E**ecti,e progr!- !;e
e!p#oyee-B !nger-B nd ot.er ;ey -t;e.o#der- =re o* energy
per*or!nce go#- nd inititi,e-B - =e## - t.eir re-pon-i+i#ity in crrying
out t.e progr!/
%ommunications strategies and materials for raising awareness of energy use"
goals and impacts should be tailored to the needs of the intended audience. To
raise awareness" consider doing the following1
@ Incre-e gener# energy =rene--
5ost people are unaware of how their everyday actions and activities at home
and wor# affect energy use and impact the environment. $ncreasing overall
awareness can be an effective way to gain greater support for energy initiatives.
$ncreasing general awareness of energy use can be accomplished through1
Ne= e!p#oyee orienttion progr!- - =rovide basic information on
organi!ational and individual energy use to new employees.
Po-ter c!pign- - ,evelop attractive and informative posters for change
rooms" bulletin boards" etc" that discusses energy use.
+@ I!pro,e *ci#ity energy =rene--
$ndividuals wor#ing in or even managing a facility may have little understanding
of the energy performance of the facility or its impact on the organi!ation and
environment. Targeted efforts designed to increase awareness of facility energy
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use can help build support for energy management programs. Bi#e general
awareness efforts" facility-oriented energy awareness can ta#e many forms. $n
developing facility energy awareness programs" consider using the following
types of information1
Energy dt -tti-tic- - /se general facility energy facts and +igures" such as
overall energy costs" costs to operate e(uipment" environmental information
related to energy use" and so on.
Energy u-e o* e8uip!ent - =rovide information on the energy performance of
e(uipment or processes that employees regularly use as part of their .obs.
c@ Gin !nge!ent -upport
+re(uently" managers who are not directly involved in energy management are
not aware of how energy use effects the organi!ation. $ncreasing the awareness
of managers can help to build support for energy management initiatives.
<ui#d Cpcity
$nvesting in training and systems to share successful practices helps ensure the
success of the action plan by building the overall organi!ational capacity. 5any
organi!ations have found that informed employees are more li#ely to contribute
ideas" operate e(uipment properly" and follow procedures" helping to guarantee
that capital investments in energy improvements will reali!e their potential.
Trining
/sing training to help staff understand the importance of energy performance
provides the information necessary to ma#e informed decisions. Training also
provides an excellent opportunity for gathering employee feedbac# and
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evaluations. The type and nature of training will vary by organi!ation and your
specific action plan. %ommon training programs include1
Opertion# nd procedur# trining - =rovides instruction on new operating
methods or procedures designed to reduce energy use. )uch training is typically
targeted towards specific audiences" such as facility managers" operations" and
maintenance staff.
Ad!ini-trti,e trining - $ncludes reporting" monitoring" data collection" and
other administrative efforts that support energy management.
Speci#iCed trining - ives specific instructions on using and maintaining
e(uipment or tools to ensure more efficient operation.
Ano=#edge nd Mnge!ent In*or!tion Sy-te!-
%omputer-based information systems provide a robust means for sharing
information on best practices" technologies" and operational guidance. While
these systems can range from complex databases to a simple intranet site" they
are a centrali!ed and accessible place to store and transfer energy management
information within an organi!ation.
Moti,te
'ffering incentives for energy management is one way many organi!ations
create interest in energy initiatives and foster a sense of ownership among
employees.
*xamples of how organi!ations motivate staff and employees include1
Intern# co!petition: /se trac#ing sheets" scorecards" etc. to compare
performance of similar facilities and foster a sense of competition.
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Recognition: 3ighlight and reward accomplishments of individuals"
departments" and facilities.
Finnci# +onu- nd priCe-: 'ffer cash bonuses and other rewards if goals are
met.
En,iron!ent# re-pon-i+i#ity: /se environmental messages to promote a
sense of environmental and social responsibility.
Finnci# re-pon-i+i#ity: /se financial messages to promote a sense of
fiduciary responsibility.
Per*or!nce -tndrd-: Tie employee performance standards to energy goals.
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Trc; F Monitor
- trac#ing system is the means by which an energy programRs activities are
monitored. The system should be centrali!ed and available for all to use in
gauging progress toward established targets" milestones" and deadlines.
5aintaining a trac#ing system enables you to assess necessary steps" corrective
actions" and identify successes. =eriodic review of the activities outlined in the
action plan is critical to meet energy performance goals.
Per*or! regu#r updte- - - system is only effective if the information it
contains is current and comprehensive. ,ata needs to be collected and
incorporated into the system at an interval of time effective to the program. 5any
organi!ations perform wee#ly and monthly updates to their trac#ing systems.
Conduct periodic re,ie=- - =eriodic reviews of your progress in meeting
interim goals and milestones should be conducted with the management team"
the energy team" and selected groups of employees. The fre(uency of these
reviews will vary depending upon the audience. )uch reviews should focus on
progress made" problems encountered" and potential rewards.
Identi*y nece--ry correcti,e ction- - - trac#ing system is a good way to
determine whether a program is performing well. $t will help identify when a
specific activity is not meeting its expected performance and is in need of review.
E,#ute Progre--
*valuating progress includes formal review of both energy use data and the
activities carried out as part of the action plan as compared to your performance
goals.
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4ey aspects are measuring results and reviewing action plans.
Me-ure re-u#t-
%ompare current performance to established goals. ather energy use data and
compare results to goals to determine accomplishments.
4ey steps in measuring results include1
Gt.er trc;ing dt
<eview energy use and cost data 2capital and operating expenses7
'rgani!e reports and data from trac#ing and monitoring efforts
-naly!e energy efficiency achievements based on your established
performance metrics.
<enc.!r;
%ompare energy performance to baselines
%ompare performance against established goals for1
environmental performance
financial savings
%ompare energy performance to peers and competitors to establish a relative
understanding of where your performance ran#s.
Re,ie= ction p#n
/nderstand what wor#ed well and what didnRt in order to identify best practices.
-fter reviewing performance data" the next steps are to understand the factors
affecting the results as well as the additional benefits of the improved energy
performance.
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<egular evaluation of energy performance and the effectiveness of energy
management initiatives also allow energy managers to1
5easure the effectiveness of pro.ects and programs implemented
5a#e informed decisions about future energy pro.ects
<eward individuals and teams for accomplishments
,ocument additional savings opportunities as well as non-(uantifiable
benefits that can be leveraged for future initiatives.
This review should loo# at the effectiveness of your action plan. Where activities
and pro.ects were successful" document best practices to share throughout the
organi!ation.
Where goals were not met" many organi!ations determine the cause and decide
what corrective or preventive actions should be ta#en.
4ey steps in reviewing the action plan include1
Get *eed+c; - et feedbac# and ideas on the plan from the energy team"
implementation staff" and other departments.
A--e-- =rene-- - -ssess changes in employee and organi!ational
awareness of energy issues.
Identi*y critic# *ctor- - $dentify factors that contributed to surpassing or
missing targets.
Eunti*y -ide +ene*it- - $dentify and (uantify" if possible" side benefits arising
from energy management activities such as employee comfort" productivity
improvement" impact on sales" reduced operation and maintenance expenses"
or better public8community relations.
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-ction plan review involves a commitment of resources" but also has many
advantages1
%reates insight for new actions 2technologies8practices8programs7.
-voids repeating failures by identifying activities that were not as effective
as expected.
-ssesses the usefulness of the trac#ing system and other administrative
tools to ensure better management and evaluation.
=rovides staff the opportunity to contribute to and understand the process
of energy management.
=rovides specific success stories and financial results to communicate to
sta#eholders inside and outside the organi!ation.
RecogniCe Ac.ie,e!ent-
Pro,iding nd -ee;ing recognition *or energy !nge!ent c.ie,e!ent-
i- pro,en -tep *or -u-tining !o!entu! nd -upport *or your progr!/
=roviding recognition to those who helped the organi!ation achieve these results
motivates staff and employees and brings positive exposure to the energy
management program.
<eceiving recognition from outside sources validates the importance of the
energy management program to both internal and external sta#eholders" and
provides positive exposure for the organi!ation as a whole.
@ Intern# Recognition
<ecogni!ing the accomplishments of individuals and teams is #ey to sustaining
support and momentum for energy management initiatives. <ewarding particular
efforts sets the example for what constitutes success and helps motivate
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employees through increased .ob satisfaction. <ecognition can strengthen the
morale of everyone involved in energy management.
4ey steps are1
(eter!ine recognition #e,e#- 9 The decision about who should receive
recognition in your organi!ation will li#ely be shaped by the purpose for providing
recognition and your organi!ational culture. %ommon recognition levels include1
Indi,idu# - -c#nowledges the contributions and accomplishments of specific
people.
Te!- - <ecogni!es the achievements of teams" departments" and other distinct
groups within the organi!ation.
Fci#ity - <ewards the accomplishments or performance of an entire facility.
E-t+#i-. recognition criteri - %reate criteria for recognition and communicate
these criteria and any process eligibility re(uirements. <ecognition criteria might
include thresholds of achievement such as1
'ffered the best energy savings ideas
-chieved the greatest energy use reduction
$ncreased savings by (uantified amount
(eter!ine recognition type
There are a variety of ways to provide recognition and rewards. ,epending on
the purpose of the recognition program and your organi!ational culture" forms of
recognition can range from formal ac#nowledgements and certificates" to salary
increases and cash bonuses" to simple forms of appreciation such as shields or
energy program shirts.
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Action-
-s# senior management to provide the recognition.
/se a formal means for providing recognition" such as an award
ceremony.
/se progress evaluations to inform the recognition process.
+@ E>tern# Recognition
ood wor# deserves to be ac#nowledged. <ecognition from a third party can
provide validation for an organi!ationRs energy management program. Eot only
does it provide satisfaction to those involved in earning the recognition" but it can
also enhance an organi!ationRs public image. - solid reputation contributes to
your competitive advantage by ma#ing your organi!ation more attractive to
customers" students" current and potential employees" lenders" business
partners and other sta#eholders.
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CHAPTER %
FINANCIA0 MANAGEMENT
Introduction
$n the process of energy management" at some stage" investment would be
re(uired for reducing the energy consumption of a process or utility. $nvestment
would be re(uired for modifications8retrofitting and for incorporating new
technology. $t would be prudent to adopt a systematic approach for merit rating
of the different investment options vis-P-vis the anticipated savings. $t is essential
to identify the benefits of the proposed measure with reference to not only
energy savings but also other associated benefits such as increased productivity"
improved product (uality etc.
The cost involved in the proposed measure should be captured in totality vi!.
,irect pro.ect cost.
-dditional operations and maintenance cost.
Training of personnel on new technology etc.
Aased on the above" the investment analysis can be carried out by the
techni(ues explained in the later section of the chapter.
In,e-t!ent NeedB Appri-# nd Criteri
To persuade your organi!ation to commit itself to a program of investment in
energy efficiency" you need to demonstrate1
The si!e of the energy problem it currently faces.
The technical and good house#eeping measure available to reduce waste.
The predicted return on any investment.
The real returns achieved on particular measures over time.
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The need for investments in energy conservation can arise under following
circumstances1
+or new e(uipment" process improvements etc.
To provide staff training
To implement or upgrade the energy information system
Criteri
-ny investment has to be seen as an addition and not as a substitute for having
effective management practices for controlling energy consumption throughout
your organi!ation.
)pending money on technical improvements for energy management cannot
compensate for inade(uate attention to gaining control over energy
consumption. Therefore" before you ma#e any investments" it is important to
ensure that1
Iou are getting the best performance from existing plant and e(uipment.
Iour energy charges are set at the lowest possible tariffs.
Iou are consuming the best energy forms 0 fuels or electricity 0 as
efficiently as possible.
ood house#eeping practices are being regularly practiced.
When listing investment opportunities" the following criteria need to be
considered1
The energy consumption per unit of production of a plant or process
The current state of repair and energy efficiency of the building design"
plant and services" including controls
The (uality of the indoor environment 0 not .ust room temperatures but
indoor air (uality and air change rates" drafts" under and overheating
including glare" etc.
The effect of any proposed measure on staff attitudes and behaviour.
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Energy Propo-#- 7- Ot.er Co!petiti,e Propo-#-
'ne of the most difficult problems which many energy managers face is
.ustifying why their organi!ation should invest money in increasing its energy
efficiency" especially when there are other" seemingly more important priorities
for the use of its capital.
'rgani!ation typically give priority to investing in what they see as their
core or profit ma#ing activities in preference to energy efficiency.
*ven when they do invest in saving energy" they tend to demand faster
rates of return than they re(uire from other #inds of investment.
In,e-t!ent Appri-#
*nergy manager has to identify how cost savings arising from energy
management could be redeployed within his organi!ation to the maximum effect.
To do this" he has to wor# out how benefits of increased energy efficiency can be
best sold to top management as"
<educing operating 8production costs
$ncreasing employee comfort and well-being
$mproving cost-effectiveness and8or profits
=rotecting under-funded core activities
*nhancing the (uality of service or customer care delivered
=rotecting the environment
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Finnci# An#y-i-
$n most respects" investment in energy efficiency is no different from any other
area of financial management. )o when your organi!ation first decides to invest
in increasing its energy efficiency it should apply exactly the same criteria to
reducing its energy consumption as it applies to all its other investments. $t
should not re(uire a faster or slower rate of return on investment in energy
efficiency than it demands elsewhere.
The basic criteria for financial investment appraisal include1
Si!p#e Py+c; 0 a measure of how long it will be before the investment
ma#es money" and how long the financing term needs to be
Return on In,e-t!ent ?ROI@ nd Intern# Rte o* Return ?IRR@ 0
measure that allow comparison with other investment options
Net Pre-ent 7#ue ?NP7@ nd C-. F#o= 0 measures that allow financial
planning of the pro.ect and provide the company with all the information
needed to incorporate energy efficiency pro.ects into the corporate
financial system.
$nitially" when you can identify no or low cost investment opportunities" this
principle should not be difficult to maintain. 3owever" if your organi!ation decides
to fund a rolling program of such investments" then over time it will become
increasingly difficult for you to identify opportunities" which conform to the
principle. Aefore you?ll reach this position" you need to renegotiate the basis on
which investment decisions are made.
$t may re(uire particular thoroughness to ensure that all the costs and benefits
arising are ta#en into account. -s an approximate appraisal" simple paybac# 2the
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total cost of the measure divided by the annual savings arising from it expressed
as years re(uired for the original investment to be returned7 is a useful tool.
-s the process becomes more sophisticated" financial criteria such as
,iscounted %ash +low" $nternal <ate of <eturn and Eet =resent Galue may be
used. $f you do not possess sufficient financial expertise to calculate these
yourself" you will need to ensure that you have access" either within your own
staff or elsewhere within the organi!ation" to people who can employ them on
your behalf.
There are two (uite separate grounds for arguing that" at least towards the later
part of your energy management program" your organi!ation could begin to
apply a slower rate of return to its investments in energy efficiency than it applies
elsewhere.
The benefits arising from some energy saving measures may continue long after
their paybac# periods. )uch measure does not need to be written off using fast
discounting rates but can be regarded as adding to the long term value of the
assets. +or this reason" short term paybac# can be an inade(uate yardstic# for
assessing longer term benefits. To assess the real gains from investing in saving
energy" you should use investment appraisal techni(ues" which accurately reflect
the longevity of the returns on particular types of technical measures.
Protecting Energy In,e-t!ent
$t is essential to #eep a careful watch on your organi!ation?s maintenance policy
and practices in order to protect any investment already made in reducing your
organi!ation?s energy consumption. There is a clear dependence relationship
between energy efficiency and maintenance. This operates at two levels1
$nitially" improving energy efficiency is most cost-effectively done in
existing facilities through normal maintenance procedures.
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)ubse(uently" unless maintenance is regularly underta#en" savings from
installed technical measure" whether in new-build or existing facilities"
may not be reali!ed.
Finnci# An#y-i- Tec.ni8ue-
$n this chapter" investment analysis tools relevant to energy management
pro.ects will be discussed.
Si!p#e Py <c; Period:
)imple =aybac# =eriod 2)==7 represents" as a first approximationK the time
2number of years7 re(uired to recover the initial investment 2+irst %ost7"
considering only the Eet -nnual )aving1
The simple paybac# period is usually calculated as follows1
&irst cost
'impe pay(ac) period $
*eary (enefits + *eary costs
E>!p#e-
)imple paybac# period for a continuous ,eodori!er that costs <s.N9 la#hs to
purchase and install" <s.1.M la#hs per year on an average to operate and
maintain and is expected to save <s. 29 la#hs by reducing steam consumption
2as compared to batch deodori!ers7" may be calculated as follows1
,-
'impe pay(ac) period $ $ . years . months
/- + 0.1
-ccording to the paybac# criterion" the shorter the paybac# period" the more
desirable the pro.ect.
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Ad,ntge-
- widely used investment criterion" the paybac# period seems to offer the
following advantages1
$t is simple" both in concept and application. 'bviously a shorter paybac#
generally indicates a more attractive investment. $t does not use tedious
calculations.
$t favours pro.ects" which generate substantial cash inflows in earlier
years" and discriminates against pro.ects" which bring substantial cash
inflows in later years but not in earlier years.
0i!ittion-
$t fails to consider the time value of money. %ash inflows" in the paybac#
calculation" are simply added without suitable discounting. This violates
the most basic principle of financial analysis" which stipulates that cash
flows occurring at different points of time can be added or subtracted only
after suitable compounding8discounting.
$t ignores cash flows beyond the paybac# period. This leads to
discrimination against pro.ects that generate substantial cash inflows in
later years.
To illustrate" consider the cash flows of two pro.ects" - and A1
$nvestment <s. 2199"9997 <s.2199"9997
)avings in Iear C-. F#o= o* A C-. F#o= o* <
1 M9"999 29"999
2 @9"999 29"999
@ 29"999 29"999
C 19"999 C9"999
M 19"999 M9"999
N - N9"999
The paybac# criterion prefers -" which has a paybac# period of @ years" in
comparison to A" which has a paybac# period of C years" even though A has
very substantial cash inflows in years M and N.
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$t is a measure of a pro.ect?s capital recovery" not profitability.
,espite its limitations" the simple paybac# period has advantages in that it
may be useful for evaluating an investment.
Ti!e 7#ue o* Money
- pro.ect usually entails an investment for the initial cost of installation" called the
capital cost" and a series of annual costs and8or cost savings 2i.e. operating"
energy" maintenance" etc.7 throughout the life of the pro.ect. To assess pro.ect
feasibility" all these present and future cash flows must be e(uated to a common
basis. The problem with e(uating cash flows which occur at different times is that
the value of money changes with time. The method by which these various cash
flows are related is called discounting" or the present value concept.
+or example" if money can be deposited in the ban# at 19% interest" then a
<s.199 deposit will be worth <s.119 in one yearRs time. Thus the <s.119 in one
year is a future value e(uivalent to the <s.199 present value.
$n the same manner" <s.199 received one year from now is only worth <s.69.61
in todayRs money 2i.e. <s.69.61 plus 19% interest e(uals <s.1997. Thus <s.69.61
represents the present value of <s.199 cash flow occurring one year in the
future. $f the interest rate were something different than 19%" then the e(uivalent
present value would also change. The relationship between present and future
value is determined as follows1
+uture Galue 2+G7 J E=G 21 Q i7
n
or E=G J +G 8 21Qi7
n
2here
&3 $ &uture vaue of the cash fow
4#3$ 4et #resent 3aue of the cash fow
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i $ 5nterest or discount rate
n $ 4um(er of years in the future
Return on In,e-t!ent ?ROI@
<'$ expresses the Sannual returnS from the pro.ect as a percentage of capital
cost. The annual return ta#es into account the cash flows over the pro.ect life
and the discount rate by converting the total present value of ongoing cash flows
to an e(uivalent annual amount over the life of the pro.ect" which can then be
compared to the capital cost. <'$ does not re(uire similar pro.ect life or capital
cost for comparison.
This is a broad indicator of the annual return expected from initial capital
investment" expressed as a percentage1
-nnual Eet %ash +low
<'$ J x 199
%apital %ost
<'$ must always be higher than cost of money 2interest rate7K the greater the
return on investment better is the investment.
0i!ittion-
$t does not ta#e into account the time value of money.
$t does not account for the variable nature of annual net cash inflows.
Net Pre-ent 7#ue
The net present value 2E=G7 of a pro.ect is e(ual to the sum of the present
values of all the cash flows associated with it. )ymbolically"
%+
9
%+
1
%+
n
n %+
t
E=G J -------------- Q -------------- Q - - - Q ------------- J -----------
21 Q # 7
9
2 1 Q # 7
1
2 1 Q # 7
n
t J 9 2 1 Q # 7
t
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where E=G J Eet =resent Galue
%+
t
J %ash flow occurring at the end of year >t? 2tJ9"1"T.n7
n J life of the pro.ect
# J ,iscount rate
The discount rate 2#7 employed for evaluating the present value of the expected
future cash flows should reflect the ris# of the pro.ect.
E>!p#e
To illustrate the calculation of net present value" consider a pro.ect" which has
the following cash flow stream1
$nvestment <s. 21"999"9997
)aving in Iear %ash flow
1 299"999
2 299"999
@ @99"999
C @99"999
M @M9"999
The cost of capital" #" for the firm is 19 per cent. The net present value of the
proposal is1
1"999"999 299"999 299"999
E=G J 9 -------------- Q -------------- Q ---------------
21.197
9
21.197
1
21.197
2
@99"999 @99"999 @M9"999
Q ------------ Q ------------- Q --------------- J 2M"27@7
21.197
@
21.197
C
21.197
M
The net present value represents the net benefit over and above the
compensation for time and ris#.
3ence the decision rule associated with the net present value criterion is1
:-ccept the pro.ect if the net present value is positive and re.ect the pro.ect if the
net present value is negative;.
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Ad,ntge-
The net present value criterion has considerable merits.
$t ta#es into account the time value of money.
$t considers the cash flow stream in its pro.ect life.
Intern# Rte o* Return
This method calculates the rate of return that the investment is expected to yield.
The internal rate of return 2$<<7 method expresses each investment alternative
in terms of a rate of return 2a compound interest rate7. The expected rate of
return is the interest rate for which total discounted benefits become .ust e(ual to
total discounted costs 2i.e net present benefits or net annual benefits are e(ual to
!ero" or for which the benefit 8 cost ratio e(uals one7. The criterion for selection
among alternatives is to choose the investment with the highest rate of return.
The rate of return is usually calculated by a process of trial and error" whereby
the net cash flow is computed for various discount rates until its value is reduced
to !ero.
The internal rate of return 2$<<7 of a pro.ect is the discount rate" which ma#es its
net present value 2E=G7 e(ual to !ero. $t is the discount rate in the e(uation1
%+
9
%+
1
%+
n
n %+
t
9 J -------------- Q -------------- Q TT Q ------------- J ----------- 27.17
21 Q # 7
9
2 1 Q #7
1
2 1 Q # 7
n
t J 9 2 1 Q #7
t
where %+
t
J cash flow at the end of year :t;
# J discount rate
n J life of the pro.ect.
CF
t
,#ue =i## +e negti,e i* it i- e>penditure nd po-iti,e i* it i- -,ing-/
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$n the net present value calculation we assume that the discount rate 2cost of
capital7 is #nown and determine the net present value of the pro.ect. $n the
internal rate of return calculation" we set the net present value e(ual to !ero and
determine the discount rate 2internal rate of return7" which satisfies this condition.
To illustrate the calculation of internal rate of return" consider the cash flows of a
pro.ect1
Yer 9 1 2 @ C
C-. *#o= 2199"9997 @9"999 @9"999 C9"999 CM"999
The internal rate of return is the value of : # ; which satisfies the following
e(uation1
@9"999 @9"999 C9"999 CM"999
199"999 J ------------ Q ------------- Q --------------- Q ---------------
21 Q #7
1
2 1 Q #7
2
2 1 Q # 7
@
2 1 Q # 7
C
The calculation of :#; involves a process of trial and error. We try different values
of :#; till we find that the right-hand side of the above e(uation is e(ual to
199"999. Bet us" to begin with" try # J 1M per cent. This ma#es the right-hand
side e(ual to1
@9"999 @9"999 C9"999 CM"999
------------ Q ------------- Q --------------- Q --------------- J 199"D92
21.1M7 21.1M7
2
21.1M7
@
21.1M7
C
This value is slightly higher than our target value" 199"999. )o we increase the
value of # from 1M per cent to 1N per cent. 2$n general" a higher # lowers and a
smaller r increases the right-hand side value7. The right-hand side becomes1
@9"999 @9"999 C9"999 CM"999
------------ Q ------------- Q --------------- Q --------------- J 6D"NC1
21.1N7 21.1N7
2
21.1N7
@
21.1N7
C
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)ince this value is now less than 199"999" we conclude that the value of # lies
between 1M per cent and 1N per cent. +or most of the purposes this indication
suffices.
Ad,ntge-
- popular discounted cash flow method" the internal rate of return criterion has
several advantages1
$t ta#es into account the time value of money.
$t considers the cash flow stream in its entirety.
$t ma#es sense to businessmen who prefer to thin# in terms of rate of
return and find an absolute (uantity" li#e net present value" somewhat
difficult to wor# with.
0i!ittion-
The internal rate of return figure cannot distinguish between lending and
borrowing and hence a high internal rate of return need not necessarily be
a desirable feature.
E>!p#e
%alculate the internal rate of return for a economi!er that will cost <s.M99"999"
will last 19 years" and will result in fuel savings of <s.1M9"999 each year.
+ind the i that will e(uate the following1
<s.M99"999 J 1M9"999 x =G 2- J 19 years" i J L7
To do this" calculate the net present value 2E=G7 for various i values" selected by
visual inspectionK
E=G 2M% J <s.1M9"999 x @.M71 0 <s.M99"999
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J <s.@M"NM9
E=G @9% J <s.1M9"999 x @.962 0 <s. M99"999
J -<s. @N"299
+or i J 2M per cent" net present value is positiveK i J @9 per cent" net present
value is negative. Thus" for some discount rate between 2M and @9 per cent"
present value benefits are e(uated to present value costs. To find the rate more
exactly" one can interpolate between the two rates as follows1
i J 9.2M Q 29.@9-9.2M7 x @MNM9 8 2@MNM9 Q @N2997
J 9.27M" or 27.M percent
C-. F#o=-
enerally there are two #inds of cash flowK the initial investment as one or more
installments" and the savings arising from the investment. This over simplifies
the reality of energy management investment.
There are usually other cash flows related to a pro.ect. These include the
following1
%apital costs are the costs associated with the design" planning"
installation and commissioning of the pro.ectK these are usually one-time
costs unaffected by inflation or discount rate factors" although" as in the
example" installments paid over a period of time will have time costs
associated with them.
-nnual cash flows" such as annual savings accruing from a pro.ect" occur
each year over the life of the pro.ectK these include taxes" insurance"
e(uipment leases" energy costs" servicing" maintenance" operating
labour" and so on. $ncreases in any of these costs represent negative
cash flows" whereas decreases in the cost represent positive cash flows.
+actors that need to be considered in calculating annual cash flows are1-
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Taxes" using the marginal tax rate applied to positive 2i.e. increasing
taxes7 or negative 2i.e. decreasing taxes7 cash flows.
-sset depreciation" the depreciation of plant assets over their lifeK
depreciation is a :paper expense allocation; rather than a real cash flow"
and therefore is not included directly in the life cycle cost. 3owever"
depreciation is :real expense; in terms of tax calculations" and therefore
does have an impact on the tax calculation noted above. +or example" if a
<s.19"99"999 asset is depreciated at 29% and the marginal tax rate is
C9%" the depreciation would be <s.299"999 and the tax cash flow would
be <s.D9"999 and it is this later amount that would show up in the costing
calculation.
$ntermittent cash flows occur sporadically rather than annually during the
life of the pro.ect" relining a boiler once every five years would be an
example.
Sen-iti,ity nd Ri-; An#y-i-
5any of the cash flows in the pro.ect are based on assumptions that have an
element of uncertainty. The present day cash flows" such as capital cost" energy
cost savings" maintenance costs" etc can usually be estimated fairly accurately.
*ven though these costs can be predicted with some certainty" it should always
be remembered that they are only estimates. %ash flows in future years normally
contain inflation components which are often Sguess-timatesS at best. The pro.ect
life itself is an estimate that can vary significantly.
)ensitivity analysis is an assessment of ris#. Aecause of the uncertainty in
assigning values to the analysis" it is recommended that a sensitivity analysis be
carried out - particularly on pro.ects where the feasibility is marginal. 3ow
sensitive is the pro.ectRs feasibility to changes in the input parametersL What if
one or more of the factors in the analysis is not as favourable as predictedL 3ow
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much would it have to vary before the pro.ect becomes unviableL What is the
probability of this happeningL
)uppose" for example" that a feasible pro.ect is based on an energy cost saving
that escalates at 19% per year" but a sensitivity analysis shows the brea#-even is
at 6% 2i.e. the pro.ect becomes unviable if the inflation of energy cost falls below
6%7. There is a high degree of ris# associated with this pro.ect - much greater
than if the brea#-even value was at 2%.
5any of the computer spreadsheet programs have built-in Swhat ifS functions that
ma#e sensitivity analysis easy. $f carried out manually" the sensitivity analysis
can become laborious - rewor#ing the analysis many times with various changes
in the parameters.
)ensitivity analysis is underta#en to identify those parameters that are both
uncertain and for which the pro.ect decision" ta#en through the E=G or $<<" is
sensitive. )witching values showing the change in a variable re(uired for the
pro.ect decision to change from acceptance to re.ection are presented for #ey
variables and can be compared with post evaluation results for similar pro.ects.
+or large pro.ects and those close to the cut-off rate" a (uantitative ris# analysis
incorporating different ranges for #ey variables and the li#elihood of their
occurring simultaneously is recommended. )ensitivity and ris# analysis should
lead to improved pro.ect design" with actions mitigating against ma.or sources of
uncertainty being outlined.
The various micro and macro factors that are considered for the sensitivity
analysis are listed below.
Micro *ctor-
'perating expenses 2various expenses items7
%apital structure
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%osts of debt" e(uity
%hanging of the forms of finance e.g. leasing
%hanging the pro.ect duration
Mcro *ctor-
5acro economic variables are the variable that affects the operation of the
industry of which the firm operates. They cannot be changed by the firm?s
management.
5acro economic variables" which affect pro.ects" include among others1
%hanges in interest rates.
%hanges in the tax rates.
%hanges in the accounting standards e.g. methods of calculating
depreciation.
%hanges in depreciation rates.
*xtension of various government subsidi!ed pro.ects e.g. rural
electrification.
eneral employment trends e.g. if the government changes the salary
scales.
$mposition of regulations on environmental and safety issues in the
industry.
*nergy =rice change.
Technology changes.
The sensitivity analysis will bring changes in various items in the analysis of
financial statements or the pro.ects" which in turn might lead to different
conclusions regarding the implementation of pro.ects
Finncing Option-
There are various options for financing in-house energy management
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1. +rom a central budget
2. +rom a specific departmental or section budget such as engineering
@. Ay obtaining a ban# loan
C. Ay raising money from stoc# mar#et
M. Ay awarding the pro.ect to *nergy )ervice %ompany 2*)%'7
N. Ay retaining a proportion of the savings achieved.
Se#*9Finncing Energy Mnge!ent
'ne way to ma#e energy management self-financing is to split savings to
provide identifiable returns to each interested party. This has the following
benefits1
-ssigning a proportion of energy savings to your energy management
budget means you have a direct financial incentive to identify and (uantify
savings arising from your own activities.
)eparately identified returns will help the constituent parts of your
organi!ation.
understanding whether they are each getting good value for money
through their support for energy management.
$f operated successfully" splitting the savings will improve motivation and
commitment to energy management throughout the organi!ation since
staff at all levels will see a financial return for their effort or support.
Aut the main benefit is on the independence and longevity of the energy
management function.
En-uring Continuity
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-fter implementation of energy savings" your organi!ation ought to be able to
ma#e considerable savings at little cost 2except for the funding needed for
energy management staff7. The important (uestion is what should happen to
these savingsL
$f part of these easily achieved savings is not returned to your budget as energy
manager" then your access to self-generated investments funds to support future
activities will be lost. -nd later in the program" it is li#ely to be much harder for
you to ma#e savings.
3owever" if" an energy manager" has access to a proportion of the revenue
savings arising from staff?s activities" then these can be reinvested in1
+urther energy efficiency measures
-ctivities necessary to create the right climate for successful energy
management which do not" of themselves" directly generate savings
5aintaining or up-grading the management information system.
Energy Per*or!nce Contrcting and Ro#e o* ESCOS
$f the pro.ect is to be financed externally" one of the attractive options for many
organi!ations is the use of energy performance contracts delivered by energy
service companies" or *)%'s.
*)%'s are usually companies that provide a complete energy pro.ect service"
from assessment to design to construction or installation" along with engineering
and pro.ect management services" and financing. $n one way or another" the
contract involves the capitali!ation of all of the services and goods purchased"
and repayment out of the energy savings that result from the pro.ect.
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$n performance contracting" an end-user 2such as an industry" institution" or
utility7" see#ing to improve its energy efficiency" contracts with *)%' for energy
efficiency services and financing.
$n some contracts" the *)%'s provide a guarantee for the savings that will be
reali!ed" and absorbs the cost if real savings fall short of this level. Typically"
there will be a ris# management cost involved in the contract in these situations.
$nsurance is sometimes attached" at a cost" to protect the *)%' in the event of
a savings shortfall.
*nergy efficiency pro.ects generate incremental cost savings as opposed to
incremental revenues from the sale of outputs. The energy cost savings can be
turned into incremental cash flows to the lender or *)%' based on the
commitment of the energy user 2and in some cases" a utility7 to pay for the
savings.
:.t re per*or!nce contrct-G
=erformance contracting represents one of the ways to address several of the
most fre(uently mentioned barriers to investment. =erformance contracting
through an *)%' transfers the technology and management ris#s away from the
end-user to the *)%'.
+or energy users reluctant to invest in energy efficiency" a performance contract
can be a powerful incentive to implement a pro.ect. =erformance contracting also
minimi!es or eliminates the up-front cash outlay re(uired by the end-user.
=ayments are made over time as the energy savings are reali!ed.
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CHAPTER '
PROHECT MANAGEMENT
Introduction
=ro.ect management is concerned with the overall planning and co-ordination of
a pro.ect from conception to completion aimed at meeting the stated
re(uirements and ensuring completion on time" within cost and to re(uired
(uality standards.
=ro.ect management is normally reserved for focused" non-repetitive" time-
limited activities with some degree of ris# and that are beyond the usual scope of
operational activities for which the organi!ation is responsible.
Step- in Pro&ect Mnge!ent
The various steps in a pro.ect management are1
1. =ro.ect ,efinition and )cope
2. Technical ,esign
@. +inancing
C. %ontracting
M. $mplementation
N. =erformance 5onitoring
Pro&ect (e*inition nd Scope
:.t i- Pro&ectG
6 project is a one7shot, time7imited, goa7directed, major underta)ing, requiring
the commitment of varied s)is and resources.
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- pro.ect is a temporary endeavor underta#en to create a uni(ue product or
service. - pro.ect is temporary in that there is a defined start 2the decision to
proceed7 and a defined end 2the achievement of the goals and ob.ectives7.
'ngoing business or maintenance operations are not pro.ects. *nergy
conservation pro.ects and process improvement efforts that result in better
business processes or more efficient operations can be defined as pro.ects.
=ro.ects usually include constraints and ris#s regarding cost" schedule or
performance outcome.
Four <-ic E#e!ent- o* Pro&ect Mnge!ent
- successful =ro.ect 5anager must simultaneously manage the four basic
elements of a pro.ect1 resources" time" cost" and scope. *ach element must be
managed effectively. -ll these elements are interrelated and must be managed
together if the pro.ect" and the pro.ect manager" is to be a success.
Mnging Re-ource-
- successful =ro.ect 5anager must effectively manage the resources assigned
to the pro.ect. This includes the labor hours of the pro.ect team. $t also includes
managing labor subcontracts and vendors. 5anaging the people resources
means having the right people" with the right s#ills and the proper tools" in the
right (uantity at the right time.
3owever" managing pro.ect resources fre(uently involves more than people
management. The pro.ect manager must also manage the e(uipment 2cranes"
truc#s and other heavy e(uipment7 used for the pro.ect and the material 2pipe"
insulation" computers" manuals7 assigned to the pro.ect.
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Mnging Ti!e nd Sc.edu#e
Time management is a critical s#ill for any successful pro.ect manager. The most
common cause of bloated pro.ect budgets is lac# of schedule management.
+ortunately there is a lot of software on the mar#et today to help you manage
your pro.ect schedule or timeline.
-ny pro.ect can be bro#en down into a number of tas#s that have to be
performed. To prepare the pro.ect schedule" the pro.ect manager has to figure
out what the tas#s are" how long they will ta#e" what resources they re(uire" and
in what order they should be done.
Mnging Co-t-
'ften a =ro.ect 5anager is evaluated on his or her ability to complete a pro.ect
within budget. The costs include estimated cost" actual cost and variability.
%ontingency cost ta#es into account influence of weather" suppliers and design
allowances.
Ho= t.e 461"6 Ru#e cn .e#p pro&ect !ngerG
The D9829 <ule means that in anything a few 229 percent7 are vital and many 2D9
percent7 are trivial. )uccessful =ro.ect 5anagers #now that 29 percent of the
wor# 2the first 19 percent and the last 19 percent7 consumes D9 percent of your
time and resources.
Pro&ect Mnge!ent 0i*e Cyc#e
The process flow of =ro.ect management processes is shown in +igure below.
The various elements of pro.ect management life cycle are1
a7 Eeed identification
b7 $nitiation
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c7 =lanning
d7 *xecuting
e7 %ontrolling
f7 %losing out

Figure: Proce-- F#o= o* Pro&ect Mnge!ent Proce--
@ Need Identi*iction
The first step in the pro.ect development cycle is to identify components of
the pro.ect. =ro.ects may be identified both internally and externally1
$nternal identification ta#es place when the energy manager
identifies a pac#age of energy saving opportunities during the day-
to-day energy management activities" or from facility audits.
*xternal identification of energy savings can occur through
systematic energy audits underta#en by a reputable energy auditor
or energy service company.
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$n screening pro.ects" the following criteria should be used to ran#-order
pro.ect opportunities.
%ost-effectiveness of energy savings of complete pac#age of
measures 2$nternal rate of return" net present value" cash flow"
average paybac#7
)ustainability of the savings over the life of the e(uipment.
*ase of (uantifying" monitoring" and verifying electricity and fuel
savings.
-vailability of technology" and ease of adaptability of the
technology to $ndian conditions.
'ther environmental and social cost benefits 2such as reduction in
local pollutants" e.g. )'
x
7.
+@ Initition
$nitiating is the basic processes that should be performed to get the
pro.ect started. This starting point is critical because those who will deliver
the pro.ect" those who will use the pro.ect" and those who will have a
sta#e in the pro.ect need to reach an agreement on its initiation. $nvolving
all sta#eholders in the pro.ect phases generally improves the probability of
satisfying customer re(uirements by shared ownership of the pro.ect by
the sta#eholders.
The success of the pro.ect team depends upon starting with complete and
accurate information" management support" and the authori!ation
necessary to manage the pro.ect.
c@ P#nning
The planning phase is considered the most important phase in pro.ect
management. =ro.ect planning defines pro.ect activities that will be
performedK the products that will be produced" and describes how these
activities will be accomplished and managed. =ro.ect planning defines
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each ma.or tas#" estimates the time" resources and cost re(uired" and
provides a framewor# for management review and control. =lanning
involves identifying and documenting scope" tas#s" schedules" cost" ris#"
(uality" and staffing needs.
The result of the pro.ect planning" the pro.ect plan" will be an approved"
comprehensive document that allows a pro.ect team to begin and
complete the wor# necessary to achieve the pro.ect goals and ob.ectives.
The pro.ect plan will address how the pro.ect team will manage the pro.ect
elements. $t will provide a high level of confidence in the organi!ation?s
ability to meet the scope" timing" cost" and (uality re(uirements by
addressing all aspects of the pro.ect.
d@ E>ecuting
'nce a pro.ect moves into the execution phase" the pro.ect team and all
necessary resources to carry out the pro.ect should be in place and ready
to perform pro.ect activities. The pro.ect plan is completed and base lined
by this time as well. The pro.ect team and the pro.ect manager?s focus
now shifts from planning the pro.ect efforts to participating" observing" and
analy!ing the wor# being done.
The execution phase is when the wor# activities of the pro.ect plan are
executed" resulting in the completion of the pro.ect deliverables and
achievement of the pro.ect ob.ective2s7. This phase brings together all of
the pro.ect management disciplines" resulting in a product or service that
will meet the pro.ect deliverable re(uirements and the customers need.
,uring this phase" elements completed in the planning phase are
implemented" time is expended" and money is spent.
$n short" it means coordinating and managing the pro.ect resources while
executing the pro.ect plan" performing the planned pro.ect activities" and
ensuring they are completed efficiently.
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e@ Contro##ing
=ro.ect %ontrol function that involves comparing actual performance with
planned performance and ta#ing corrective action to get the desired
outcome when there are significant differences. Ay monitoring and
measuring progress regularly" identifying variances from plan" and ta#ing
corrective action if re(uired" pro.ect control ensures that pro.ect ob.ectives
are met.
*@ C#o-ing out
=ro.ect closeout is performed after all defined pro.ect ob.ectives have
been met and the customer has formally accepted the pro.ect?s
deliverables and end product or" in some instances" when a pro.ect has
been cancelled or terminated early. -lthough" pro.ect closeout is a routine
process" it is an important one. Ay properly completing the pro.ect
closeout" organi!ations can benefit from lessons learned and information
compiled. The pro.ect closeout phase is comprised of contract closeout
and administrative closure.
Tec.nic# (e-ign
+or a pro.ect to be ta#en up for investment" its proponent must present a sound
technical feasibility study that identifies the following components1
The proposed new technologies" process modifications" e(uipment
replacements and other measures included in the pro.ect.
=roduct8technology8material supply chain 2e.g." locally available" imported"
reliability of supply7
%ommercial viability of the complete pac#age of measures 2internal rate
of return" net present value" cash flow" average paybac#7.
-ny special technical complexities 2installation" maintenance" repair7"
associated s#ills re(uired.
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=reliminary designs" including schematics" for all ma.or e(uipment
needed" along with design re(uirements" manufacturer?s name and
contact details" and capital cost estimate.
'rgani!ational and management plan for implementation" including
timetable" personnel re(uirements" staff training" pro.ect engineering" and
other logistical issues.
Finncing
When considering a new pro.ect" it should be remembered that other
departments in the organi!ation would be competing for capital for their pro.ects.
3owever" it is also important to reali!e that energy efficiency is a ma.or
consideration in all types of pro.ects" whether they are1
=ro.ects designed to improve energy efficiency.
=ro.ects where energy efficiency is not the main ob.ective" but still plays a
vital role.
The funding for pro.ect is often outside the control of the pro.ect manager.
3owever" it is important that you understand the principles behind the provision
of scarce funds.
=ro.ect funds can be obtained from either internal or external sources.
$nternal sources include1
,irect cash provision from company reserves
+rom revenue budget 2if paybac# is less than one year7
Eew share capital
+unding can become an issue when energy efficiency pro.ects have previously
been given a lower priority than other pro.ects. $t is worth remembering that while
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the prioriti!ation of pro.ects may not be under our control" the (uality of the
pro.ect submission is.
*xternal sources of funds include1
Aan# loans
Beasing arrangement
=ayment by savings i.e. - deal arranged with e(uipment supplier
*nergy services contract
=rivate finance initiative
The availability of external funds depends on the nature of your organi!ation.
The finance charges on the money you borrow will have a bearing on the validity
of your pro.ect.
Aefore applying for money" discuss all the options for funding the pro.ect with
your finance managers.
$t is reiterated that energy savings often add substantially to the viability of other
non-energy pro.ects.
Contrcting
)ince a substantial portion of a pro.ect is typically executed through contracts"
the proper management of contracts is critical to the successful implementation
of the pro.ect. $n this context" the following should be done.
The competence and capability of all the contractors must be ensured.
'ne wea# lin# can affect the timely performance of the contract.
=roper discipline must be enforced among contractors and suppliers by
insisting that they should develop realistic and detailed resource and time
plans that are matching with the pro.ect plan.
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=enalties may be imposed for failure to meet contractual obligations.
Bi#ewise" incentives may be offered for good performance.
3elp should be extended to contractors and suppliers when they have
genuine problems.
=ro.ect authorities must retain independence to off-load contracts
2partially or wholly7 to other parties where delays are anticipated.
$f the pro.ect is to implemented by an outside contractor" several types of
contract may be used to underta#e the installation and commissioning.
Trdition# Contrct1 -ll pro.ect specifications are provided to a contractor who
purchases and installs e(uipment at cost plus a mar#-up or fixed price.
E>tended Tec.nic# Gurntee1Ser,ice1 The contractor offers extended
guarantees on the performance of selected e(uipment and 8 or service8
maintenance agreements.
E>tended Finncing Ter!-1 The contractor provides the option of an extended
lease or other financing vehicle in which the payment schedule can be based on
the expected savings.
Gurnteed S,ing Per*or!nce Contrct1 -ll or part of savings is guaranteed
by the contractor" and all or part of the costs of e(uipment and8or services is paid
down out of savings as they are achieved.
S.red S,ing- Per*or!nce Contrct1 The contractor provides the financing
and is paid an agreed fraction of actual savings as they are achieved. This
payment is used to pay down the debt costs of e(uipment and8or services.
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I!p#e!enttion
The main problems faced by pro.ect manager during implementation are poor
monitoring of progress" not handling ris#s and poor cost management.
a7 Poor !onitoring o* progre--: =ro.ect managers some times tend to
spend most of their time in planning activity and surprisingly very less time
in following up whether the implementation is following the plan. -
proactive report generated by pro.ect planner software can really help the
pro.ect manager to #now whether the tas#s are progressing as per the
plan.
b7 Not .nd#ing ri-;-: <is#s have an uncanny habit of appearing at the
least expected time. $n spite of the best efforts of a pro.ect manager they
are bound to happen. <is#s need immediate and focused attention. ,elay
in dealing with ris#s cause the problem to aggravate and has negative
conse(uences for the pro.ect.
c7 Poor co-t !nge!ent: - pro.ect managerRs success is measured by
the amount of cost optimi!ation done for a pro.ect. 5anagers fre(uently
do all the cost optimi!ation during the planning stages but fail to follow
through during the rest of the stages of the pro.ect. The cost graphs in
the =ro.ect planner software can help a manager to get a update on
pro.ect cost overflow. The cost variance 2The difference between
approved cost and the pro.ected cost should be always in the minds of the
pro.ect managers7.
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Pro&ect P#nning Tec.ni8ue-
The three basic pro.ect planning techni(ues are antt chart" %=5 and =*<T. -ll
monitor progress and costs against resource budgets.
Gntt C.rt
antt charts are also called Aar charts. The use of antt charts started during
the industrial revolution of the late 1D99Rs. -n early industrial engineer named
3enry antt developed these charts to improve factory efficiency.
antt chart is now commonly used for scheduling the tas#s and trac#ing the
progress of energy management pro.ects. antt charts are developed using bars
to represent each tas#. The length of the bar shows how long the tas# is
expected to ta#e to complete. ,uration is easily shown on antt charts.
)e(uence is not well shown on antt %harts 2<efer +igure below7.
Figure : Gntt C.rt
$f" for example" the start of Tas# % depends on both -ctivity A and -ctivity *" then
any delay to Tas# * will also delay Tas# %. We .ust donRt have enough
information on the antt chart to #now this information.
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CPM 9 Critic# Pt. Met.od
,u=ont developed a Critic# Pt. Met.od 2%=57 designed to address the
challenge of shutting down chemical plants for maintenance and then restarting
the plants once the maintenance had been completed.
%omplex pro.ect" li#e the above example" re(uire a series of activities" some of
which must be performed se(uentially and others that can be performed in
parallel with other activities. This collection of series and parallel tas#s can be
modeled as a networ#.
%=5 models the activities and events of a pro.ect as a networ#. -ctivities are
shown as nodes on the networ# and events that signify the beginning or ending
of activities are shown as arcs or lines between the nodes. The +igure below
shows an example of a %=5 networ# diagram1
Figure : CPM (igr!
Step- in CPM Pro&ect P#nning
1. )pecify the individual activities.
2. ,etermine the se(uence of those activities.
@. ,raw a networ# diagram.
C. *stimate the completion time for each activity.
M. $dentify the critical path 2longest path through the networ#7
N. /pdate the %=5 diagram as the pro.ect progresses.
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1/ Speci*y t.e indi,idu# cti,itie-
-ll the activities in the pro.ect are listed. This list can be used as the basis
for adding se(uence and duration information in later steps.
"/ (eter!ine t.e -e8uence o* t.e cti,itie-
)ome activities are dependent on the completion of other activities. - list
of the immediate predecessors of each activity is useful for constructing
the %=5 networ# diagram.
$/ (r= t.e Net=or; (igr!
'nce the activities and their se(uences have been defined" the %=5
diagram can be drawn. %=5 originally was developed as an activity on
node networ#.
%/ E-ti!te cti,ity co!p#etion ti!e
The time re(uired to complete each activity can be estimated using past
experience. %=5 does not ta#e into account variation in the completion
time.
'/ Identi*y t.e Critic# Pt.
The critical path is the longest-duration path through the networ#. The
significance of the critical path is that the activities that lie on it cannot be
delayed without delaying the pro.ect. Aecause of its impact on the entire
pro.ect" critical path analysis is an important aspect of pro.ect planning.
The critical path can be identified by determining the following four
parameters for each activity1
*) - earliest start time1 the earliest time at which the activity can
start given that its precedent activities must be completed first.
*+ - earliest finish time" e(ual to the earliest start time for the
activity plus the time re(uired to complete the activity.
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B+ - latest finish time1 the latest time at which the activity can be
completed without delaying the pro.ect.
B) - latest start time" e(ual to the latest finish time minus the time
re(uired to complete the activity.
The sac) time for an activity is the time between its earliest and latest
start time" or between its earliest and latest finish time. )lac# is the
amount of time that an activity can be delayed past its earliest start or
earliest finish without delaying the pro.ect.
The critical path is the path through the pro.ect networ# in which none of
the activities have slac#" that is" the path for which *)JB) and *+JB+ for
all activities in the path. - delay in the critical path delays the pro.ect.
)imilarly" to accelerate the pro.ect it is necessary to reduce the total time
re(uired for the activities in the critical path.
2/ )pdte CPM digr!
-s the pro.ect progresses" the actual tas# completion times will be #nown
and the networ# diagram can be updated to include this information. -
new critical path may emerge" and structural changes may be made in the
networ# if pro.ect re(uirements change.
CPM <ene*it-
=rovides a graphical view of the pro.ect.
=redicts the time re(uired to complete the pro.ect.
)hows which activities are critical to maintaining the schedule and
which are not.
CPM 0i!ittion-
While %=5 is easy to understand and use" it does not consider the time
variations that can have a great impact on the completion time of a
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complex pro.ect. %=5 was developed for complex but fairly routine
pro.ects with minimum uncertainty in the pro.ect completion times. +or
less routine pro.ects there is more uncertainty in the completion times"
and this uncertainty limits its usefulness.
PERT
The #rogram 8vauation and %eview Technique 2=*<T7 is a networ# model that
allows for randomness in activity completion times. =*<T was developed in the
late 16M9Rs for the /.). EavyRs =olaris pro.ect having thousands of contractors.
$t has the potential to reduce both the time and cost re(uired to complete a
pro.ect.
T.e Net=or; (igr!
$n a pro.ect" an activity is a tas# that must be performed and an event is a
milestone mar#ing the completion of one or more activities. Aefore an activity
can begin" all of its predecessor activities must be completed. =ro.ect networ#
models represent activities and milestones by arcs and nodes.
=*<T is typically represented as an activity on arc networ#" in which the
activities are represented on the lines and milestones on the nodes. The +igure
below shows a simple example of a =*<T diagram.
The milestones generally are numbered so that the ending node of an activity
has a higher number than the beginning node. $ncrementing the numbers by 19
allows for new ones to be inserted without modifying the numbering of the entire
diagram. The activities in the above diagram are labeled with letters along with
the expected time re(uired to complete the activity.
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Figure : PERT C.rt
Step- in t.e PERT P#nning Proce--
=*<T planning involves the following steps1
1. $dentify the specific activities and milestones.
2. ,etermine the proper se(uence of the activities.
@. %onstruct a networ# diagram.
C. *stimate the time re(uired for each activity.
M. ,etermine the critica path.
N. /pdate the =*<T chart as the pro.ect progresses.
1/ Identi*y cti,itie- nd !i#e-tone-
The activities are the tas#s re(uired to complete the pro.ect. The
milestones are the events mar#ing the beginning and end of one or more
activities.
"/ (eter!ine cti,ity -e8uence
This step may be combined with the activity identification step since the
activity se(uence is #nown for some tas#s. 'ther tas#s may re(uire more
analysis to determine the exact order in which they must be performed.
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$/ Con-truct t.e Net=or; (igr!
/sing the activity se(uence information" a networ# diagram can be drawn
showing the se(uence of the serial and parallel activities.
%/ E-ti!te cti,ity ti!e-
Wee#s are a commonly used unit of time for activity completion" but any
consistent unit of time can be used.
- distinguishing feature of =*<T is its ability to deal with uncertainty in
activity completion times. +or each activity" the model usually includes
three time estimates1
9ptimistic time (9T) - generally the shortest time in which the
activity can be completed. 2This is what an inexperienced manager
believesU7
:ost i)ey time (:T) - the completion time having the highest
probability. This is different from expected time. )easoned
managers have an ama!ing way of estimating very close to actual
data from prior estimation errors.
#essimistic time 2=T7 - the longest time that an activity might
re(uire.
The expected time for each activity can be approximated using the
following weighted average1
*xpected time J 2'T Q C x 5TQ =T7 8 N
This expected time might be displayed on the networ# diagram.
Gariance for each activity is given by1 V2=T - 'T7 8 NW2
'/ (eter!ine t.e Critic# Pt.
The critical path is determined by adding the times for the activities in
each se(uence and determining the longest path in the pro.ect. The
critical path determines the total time re(uired for the pro.ect.
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$f activities outside the critical path speed up or slow down 2within limits7"
the total pro.ect time does not change. The amount of time that a non-
critical path activity can be delayed without delaying the pro.ect is referred
to as sac) time.
$f the critical path is not immediately obvious" it may be helpful to
determine the following four (uantities for each activity1
*) - *arliest )tart time
*+ - *arliest +inish time
B) - Batest )tart time
B+ - Batest +inish time
These times are calculated using the expected time for the relevant
activities. The *) and *+ of each activity are determined by wor#ing
forward through the networ# and determining the earliest time at which an
activity can start and finish considering its predecessor activities.
The latest start and finish times are the latest times that an activity can
start and finish without delaying the pro.ect. B) and B+ are found by
wor#ing bac#ward through the networ#. The difference in the latest and
earliest finish of each activity is that activityRs slac#. The critical path then
is the path through the networ# in which none of the activities have slac#.
The variance in the pro.ect completion time can be calculated by summing
the variances in the completion times of the activities in the critical path.
iven this variance" one can calculate the probability that the pro.ect will
be completed by a certain date.
)ince the critical path determines the completion date of the pro.ect" the
pro.ect can be accelerated by adding the resources re(uired to decrease
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TRAINING MANUAL
the time for the activities in the critical path. )uch a shortening of the
pro.ect sometimes is referred to as project crashing.
2/ )pdte - pro&ect progre--e-
5a#e ad.ustments in the =*<T chart as the pro.ect progresses. -s the
pro.ect unfolds" the estimated times can be replaced with actual times. $n
cases where there are delays" additional resources may be needed to
stay on schedule and the =*<T chart may be modified to reflect the new
situation.
<ene*it- o* PERT
=*<T is useful because it provides the following information1
*xpected pro.ect completion time.
=robability of completion before a specified date.
The critical path activities that directly impact the completion time.
The activities that have slac# time and that can lend resources to critical
path activities.
-ctivities start and end dates.
0i!ittion- o* PERT
The following are some of =*<TRs limitations1
The activity time estimates are somewhat sub.ective and depend on
.udgment. $n cases where there is little experience in performing an
activity" the numbers may be only a guess. $n other cases" if the person or
group performing the activity estimates the time there may be bias in the
estimate.
The underestimation of the pro.ect completion time due to alternate paths
becoming critical is perhaps the most serious.
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Per*or!nce Monitoring
'nce the pro.ect is completed" performance review should be done periodically
to compare actual performance with pro.ected performance. +eedbac# on pro.ect
is useful in several ways1
a7 $t helps us to #now how realistic were the assumptions underlying the
pro.ect.
b7 $t provides a documented log of experience that is highly valuable in
decision ma#ing in future pro.ects.
c7 $t suggests corrective action to be ta#en in the light of actual performance
d7 $t helps in uncovering .udgmental biases
e7 $t includes a desired caution among pro.ect sponsors.
=erformance $ndicators 2=$s7 are an effective way of communicating a pro.ect?s
benefits" usually as part of a performance measuring and reporting process.
=erformance $ndicators are available for a wide range of industries and allow a
measure of energy performance to be assigned to a process against which
others can be .udged.
,epending on the nature of the pro.ect" savings are determined using
engineering calculations" or through metering and monitoring" utility meter billing
analysis" or computer simulations.
I!p#e!enttion P#n *or Top Mnge!ent
-s a result of energy audit" many energy saving opportunities would emerge.
These could be classified broadly as measures with and without investment.
3ouse #eeping measures and moderate cost measures need no intervention
Page 102 of 118
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from top management. 3owever" top management need to be appraised of these
measures.
$n case of pro.ects where considerable investment are re(uired" pro.ect manager
has to ran# the list of pro.ects based on the technical feasibility and financial
analysis indicated in the previous chapter 2)imple paybac#" $<<" <'$ etc.7 and
submit the same to the top management for appraisal and approval. This will
help top management in allocating resources and other facilities.
P#nning <udget
Audget re(uirement varies depending upon the duration and si!e of the pro.ect.
+or pro.ects involving long duration with multiple tas#s and procurements"
resources have to be allocated .udiciously as and when re(uired. Top
management should ensure that this is done to ensure successful completion of
pro.ect.
Procure!ent Procedure-
3aving identified the material and e(uipment re(uired for the pro.ect" the next
step is to identify the various vendors" provide specifications" invite (uotations"
and carryout discussions with select vendors. +or medium to high value items"
tendering process can be adopted. Tenders have to be evaluated for technical
and financial aspects. $t would be desirable to have purchase manager as part of
energy efficiency team to facilitate smooth procurement process.
Con-truction
,uring the construction phase" plant may need to be shutdown. %areful planning
is re(uired" so that the tas# is carried out without affecting the production. =ro.ect
manager has to be aware of the annual maintenance schedule" holidays" annual
maintenance or any ma.or brea#down period during which anyway plant will be
Page 103 of 118
TRAINING MANUAL
shutdown. %onstruction activity should be carefully supervised by energy and
pro.ect manager so as to ensure (uality and safety.
Me-ure!ent F 7eri*iction ?MF7@
+acility energy savings are determined by comparing the energy use before and
after the installation of energy conservation measures. The :(efore; case is
called the baselineK the :after; case is referred to as the post-installation or
performance period. =roper determination of savings includes ad.usting for
changes that affect energy use but that are not caused by the conservation
measures. )uch ad.ustments may account for differences in capacity utili!ation"
raw material (uality" product mix and other parameters" between the baseline
and performance periods.
$n general"
)avings J 2Aaseline *nergy /se7
ad.usted
- =ost-$nstallation *nergy /se
+or example in a paper mill a variety of products depending on thic#ness 2rams
per )(uare meter7 are made. $f energy consumption is evaluated as #%als or
#Wh per tonne of paper the figures could be misleading. /nder these
circumstances the measurement and verification system is to be designed
accounting for these variations.
C-e E>!p#e
<eplacing an existing boiler with an energy efficient boiler.
Acti,ity
Code
Acti,ity (urtion
in dy-
(epend- on
- =repare technical specifications 19 -
A Tender processing 2M -
% <elease of wor# orders @ A
, )upply of Aoiler e(uipment N9 %
* )upply of -uxiliaries 29 %
+ )upply of =ipes and =ipe fittings 19 %
%ivil Wor# 1M %
3 $nstallation of -uxiliary e(uipment M *" + &
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and piping
$ $nstallation of Aoiler 19 , & 3
O Testing and %ommissioning 2 $
Gntt C.rt
The +igure below shows a antt chart for a simple energy management pro.ect"
i.e. <eplacing an existing boiler with an energy efficient boiler.
-s already mentioned" antt chart is the simplest and (uic#est method for formal
planning. antt charts can be very useful in planning pro.ects with a limited
number of tas#s and with few inter-relationships. This chart typically depicts
activities as hori!ontal lines whose length depends on the time needed to
complete the activities. These lines can be progressively overprinted to show
how much of activity has been completed.
,rawing a antt chart re(uires information on1
The logic of the tas#sK
The duration of the tas#sK
The resources available to complete the tas#s.
Figure : Si!p#e Gntt C.rt *or <oi#er Rep#ce!ent
Page 105 of 118
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PERT 1 CPM Tec.ni8ue:
A PERT1CPM net=or; *or <oi#er Rep#ce!ent ?Re*er Figure +e#o=@
Acti,ity on Arro=: -ctivity and duration of the activity are shown in arrow.
161161 $n this Eumerator denotes the *arliest *vent 'ccurrence Time and
,enominator is the Batest *vent 'ccurrence Time.
The %ritical =ath for this networ# is1 A9<9C9(9I9H/
The events on the critical path have !ero slac#.
,ummy activity has no duration
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The total duration for the completion of the pro.ect is 119 days based on
the critical path.
CHAPTER 2
ENERGY MONITORING AN( TARGETING
(e*inition
*nergy monitoring and targeting is primarily a management techni(ue that uses
energy information as a basis to eliminate waste" reduce and control current
level of energy use and improve the existing operating procedures. $t builds on
the principle Iyou cnJt !nge =.t you donJt !e-ure;. $t essentially
combines the principles of energy use and statistics.
While" monitoring is essentially aimed at establishing the existing pattern of
energy consumption" targeting is the identification of energy consumption level
which is desirable as a management goal to wor# towards energy conservation.
5onitoring and Targeting is a management techni(ue in which all plant and
building utilities such as fuel" steam" refrigeration" compressed air" water"
effluent" and electricity are managed as controllable resources in the same way
that raw materials" finished product inventory" building occupancy" personnel and
capital are managed. $t involves a systematic" disciplined division of the facility
into *nergy %ost %enters. The utilities used in each centre are closely
monitored" and the energy used is compared with production volume or any
other suitable measure of operation. 'nce this information is available on a
regular basis" targets can be set" variances can be spotted and interpreted" and
remedial actions can be ta#en and implemented.
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The 5onitoring and Targeting programs have been so effective that they show
typical reductions in annual energy costs in various industrial sectors between M
and 29%.
E#e!ent- o* Monitoring F Trgeting Sy-te!
The essential elements of 5&T system are1
Recording -5easuring and recording energy consumption
An#y-ing -%orrelating energy consumption to a measured output" such
as production (uantity
Co!pring -%omparing energy consumption to an appropriate standard
or benchmar#
Setting Trget- -)etting targets to reduce or control energy consumption
Monitoring -%omparing energy consumption to the set target on a regular
basis.
Reporting -<eporting the results including any variances from the targets
which have been set.
Contro##ing -$mplementing management measures to correct any
variances" which may have occurred.
=articularly 5&T system will involve the following1
C.ec;ing the accuracy of energy invoices
A##octing energy costs to specific departments 2*nergy -ccounting
%entres7.
(eter!ining energy performance8efficiency
Recording energy use" so that pro.ects intended to improve energy
efficiency can be chec#ed.
Hig.#ig.ting performance problems in e(uipment or systems
A Rtion#e *or MonitoringB Trgeting nd Reporting
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The energy used by any business varies with production processes" volumes
and input. ,etermining the relationship of energy use to #ey performance
indicators will allow you to determine1
Whether your current energy is better or worse than before
Trends in energy consumption that reflects seasonal" wee#ly" and other
operational parameters.
3ow much your future energy use is li#ely to vary if you change aspects
of your business.
)pecific areas of wasted energy.
%omparison with other business with similar characteristics - This
:benchmar#ing; process will provide valuable indications of effectiveness
of your operations as well as energy use.
3ow much your business has reacted to changes in the past.
3ow to develop performance targets for an energy management program
$nformation related to energy use may be obtained from following sources1
=lant level information can be derived from financial accounting systems -
utilities cost center.
=lant department level information can be found in comparative energy
consumption data for a group of similar facilities" service entrance meter
readings etc.
)ystem level 2for example" boiler plant7 performance data can be
determined from submetering data.
*(uipment level information can be obtained from nameplate data" run-
time and schedule information" sub-metered data on specific energy
consuming e(uipment.
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The important point to be made here is that all of these data are useful and can
be processed to yield information about facility performance. The +igure D.1
shows the various steps involved in a comprehensive energy monitoring and
targeting system.
(t nd In*or!tion An#y-i-
*lectricity bills and other fuel bills should be collected periodically and analysed
as below. - typical format for monitoring pant eve information is given below in
the Table.
T+#e : Annu# Energy Co-t S.eet
5onth Thermal *nergy Aill *lectricity Aill Total
*nergy
Aill
<s.
Ba#h
+uel
1
+uel
2
+uel
@
Total
<s.
Ba#h
,ay
#Wh
Eight
#Wh
5aximum
,emand
Total
<s.
Ba#h
1
2
@
C
M
N
7
D
6
19
11
12
)ub-
Total
%
-fter obtaining the respective annual energy cost" a pie chart 2see +igure below7
can be drawn as shown below1
Page 110 of 118
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Figure : K S.re o* Fue#- <-ed on Energy <i##
Pie C.rt on Energy Con-u!ption
-ll the fuels purchased by the plant should be converted into common units such
as #%al. The following Table is for that purpose.
T+#e : Fue# Con,er-ion (t
Energy -ource Supp#y unit Con,er-ion Fctor to ;C#
*lectricity #Wh DN9
3), 4g 19"M99
+urnace 'il 4g 19"299
B= 4g 12"999
-fter conversion to a common unit" a pie chart can be drawn showing the
percentage distribution of energy consumption as shown in +igure below.

Figure : KS.re o* Fue#- <-ed on Con-u!ption in ;C#-
Page 111 of 118
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Re#ting Energy Con-u!ption nd Production/
Grp.ing t.e (t
- critical feature of 5&T is to understand what drives energy consumption. $s it
production" hours of operation or weatherL 4nowing this" we can then start to
analyse the data to see how good our energy management is.
-fter collection of energy consumption" energy cost and production data" the
next stage of the monitoring process is to study and analyse the data to
understand what is happening in the plant. $t is strongly recommended that the
data be presented graphically. - better appreciation of variations is almost
always obtained from a visual presentation" rather than from a table of numbers.
raphs generally provide an effective means of developing the energy-
production relationships" which explain what is going on in the plant.
)-e o* <r C.rt
The energy data is then entered into a spreadsheet. $t is hard to envisage what
is happening from plain data" so we need to present the data using bar chart.
The starting point is to collect and collate 2C812 months of energy bills. The most
common bar chart application used in energy management is one showing the
energy per month for this year and last year 2see +igure below7 0 however" it
does not tell us the full story about what is happening. We will also need
production data for the same 2C812-month period.
3aving more than twelve months of production and energy data" we can plot a
moving annua tota. +or this chart" each point represents the sum of the
previous twelve months of data. $n this way" each point covers a full range of the
seasons" holidays" etc.
Page 112 of 118
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Figure: Energy Con-u!ption :Current Yer?"666@ 7-/ Pre,iou- yer?1555@
The +igure below shows a moving annual total for energy and production data.

Figure : Mo,ing Annu# Tot# Energy nd Production
This techni(ue also smoothens out errors in the timing of meter readings. $f we
.ust plot energy we are only seeing part of the story 0 so we plot both energy and
production on the same chart 0 most li#ely using two y-axes. Boo#ing at these
charts" both energy and productions seem to be :trac#ing; each other 0 this
suggests there is no ma.or cause for concern. Aut we will need to watch for a
deviation of the energy line to pic# up early warning of waste or to confirm
whether energy efficiency measures are ma#ing an impact.
Page 113 of 118
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+or any company, we also #now that energy should directly relate to production.
4nowing this" we can calculate )pecific *nergy %onsumption 2)*%7" which is
energy consumption per unit of production. )o we now plot a chart of )*% 2see
+igure below7.
-t this point it is worth noting that the (uality of your 5&T system will only be as
good as the (uality of your data 0 both energy and production. The chart shows
some variation 0 an all time low in ,ecember 66 followed by a rising trend in
)*%.

Figure : Mont.#y Speci*ic Energy Con-u!ption
We also #now that the level of production may have an effect on the specific
consumption. $f we add the production data to the )*% chart" it helps to explain
some of the features. +or example" the very low )*% occurred when there was a
record level of production. This indicates that there might be fixed energy
consumption 0 i.e. consumption that occurs regardless of production levels.
<efer +igure below.
Page 114 of 118
TRAINING MANUAL
Figure : SEC :it. Production
The next step is to gain more understanding of the relationship of energy and
production" and to provide us with some basis for performance measurement. To
do this we plot energy against production 0 $n 5icrosoft *xcel Wor#sheet" this is
an XI chart option. We then add a trend line to the data set on the chart. 2$n
practice what we have done is carried out a single variable regression analysisU7.
The +igure below shown is based on the data for 1666.
Figure : Energy ,- Production
Page 115 of 118
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We can use it to derive a :standard; for the up-coming year?s consumption. This
chart shows a low degree of scatter indicative of a good fit. We need not worry if
our data fit is not good. $f data fit is poor" but we #now there should be a
relationship" it indicates a poor level of control and hence a potential for energy
savings.
$n producing the production8energy relationship chart we have also obtained a
relationship relating production and energy consumption.
Energy con-u!ed *or t.e period L C M M > Production *or -!e period
Where 5 is the energy consumption directly related to production 2varia(e7 and
% is the :fixed; energy consumption 2i.e. energy consumed for lighting"
heating8cooling and general ancillary services that are not affected by production
levels7. /sing this" we can calculate the expected or :standard; energy
consumption for any level of production within the range of the data set.
We now have the basis for implementing a factory level 5&T system. We can
predict standard consumption" and also set targets 0 for example" standard less
M%. - more sophisticated approach might be applying different reductions to the
fixed and variable energy consumption. -lthough" the above approach is at
factory level" the same can be extended to individual processes as well with sub
metering.
-t a simplistic level we could use the chart above and plot each new month?s
point to see where it lies. -bove the line is the regime of poor energy efficiency"
and below the line is the regime of an improved one.
C)S)M
Page 116 of 118
TRAINING MANUAL
%umulative )um 2%/)/57 represents the difference between the base line
2expected or standard consumption7 and the actual consumption points over the
base line period of time. This useful techni(ue not only provides a trend line" it
also calculates savings8losses to date and shows when the performance
changes.
- typical %/)/5 graph follows a trend and shows the random fluctuation of
energy consumption and should oscillate around !ero 2standard or expected
consumption7. This trend will continue until something happens to alter the
pattern of consumption such as the effect of an energy saving measure or"
conversely" a worsening in energy efficiency 2poor control" house#eeping or
maintenance7.
%/)/5 chart 2see +igure below7 for a generic company is shown. The %/)/5
chart shows what is really happening to the energy performance. The formula
derived from the 1666 data was used to calculate the expected or standard
energy consumption.
Figure : C)S)M C.rt
+rom the chart" it can be seen that starting from year 2999" performance is better
than standard. =erformance then declined 2line going up7 until -pril" and then it
Page 117 of 118
TRAINING MANUAL
started to improve until Ouly. 3owever" from Ouly onwards" there is a mar#ed"
ongoing decline in performance 0 line going up.
When loo#ing at %/)/5 chart" the changes in direction of the line indicate
events that have relevance to the energy consumption pattern. %learly" site
#nowledge is needed to interpret better what they are. +or this sample company
since we #now that there were no planned changes in the energy system" the
change in performance can be attributed to poor control" house#eeping or
maintenance.
Page 118 of 118

Scientific Approach To Energy MGT

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TRAINING MANUAL

SCIENTIFIC APPROACH TO ENERGY MANAGEMENT

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