FEATURE ENVIRONMENT & ENERGY MANAGEMENT
EFFICIENCY SAVINGS WITH energy performance contracting
The landscape of industrial energy consumption has changed significantly over the past four decades. Brian Foster of Siemens Financial Services explains how manufacturers can make energy efficiency savings through energy performance contracting (EnPC)
he manufacturing sector in the UK is currently worth around £172 billion and accounts for 10% of economic output: improving efficiency would have wide-ranging benefits for both individual businesses and the UK as a whole. Energy efficiency in particular is an important topic that warrants particular attention. Third party research indicates that the sector is wasting up to £2.2 billion annually due to inefficient technology and old equipment. Moreover, according to the EEF the industrial price of gas has skyrocketed by 122% since 2002 alongside the increase of industrial electricity prices by 94% during the same timeframe. Such substantial price escalations for energy could have a significant financial impact on the energy-intensive manufacturing sector, in particular industries such as chemicals, aluminium and metal casting where energy accounts for as much as 20-60% of production costs. Given the levels of energy waste and
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rising energy costs implementing efficiency measures is a growing priority for manufacturers aiming to lower production costs and remain competitive in the global market. However, many are hesitant to commit to energy savings projects. Some are initially discouraged by a lack of detailed knowledge on possible energy efficiency measures and their suitability for production facilities.
Moreover, manufacturers often suffer
from a lack of access to trusted information that is considered relevant to their specific requirements. As a result, many are not in a position to properly identify and address areas with the greatest energy savings potential. In addition, the perceived cost barriers to accessing technology including installing a CHP unit or replacing the lighting system of an entire building complex can prove daunting. As a result initial investment intentions can’t be sidelined by management and fail to materialise. Fortunately, the lack of initial capital does not necessarily mean the end of investment plans. Alternative financing techniques are available in the market making technology investment still an achievable goal. Energy Performance Contracting (EPC) is one such example.
CASH FLOW BENEFITS This financing technique effectively recognises the benefits of long term financial savings made through energy savings achieved within the particular facility. Typically, following an initial assessment of the business concerned, the supplier of the technology guarantees that the predicted energy savings from the project will cover the financing costs of equipment and service over time and commits contractually to make up any financial shortcomings
SITE VS FACTORY TRANSFORMER REFURBISHMENT
There are advantages and risks to undertaking transformer refurbishments both on-site and in factory settings according to Elizabeth MacKenzie, technical director at Winder Power. The energy industry has in recent years realised
the money and time savings available by refurbishing existing transformer assets in tandem with their replacement strategy. In addition, new techniques and technologies allow regulators and end users to determine with more accuracy the real condition of the transformer which can confirm if it is suitable for refurbishment or needs replacing. However, with these developments has come the debate on the most appropriate location to carry out the work; on-site is typically one month shorter than a factory refurbishment because of having access to
8 MARCH 2016 | FACTORY EQUIPMENT
a full suite of tests and controlled conditions. “Extending the life of assets is good for customers
as long as it can be achieved without adding significant risk to the continuity of their electricity supply,” says MacKenzie. “It benefits customers because it results in lower levels of capital investment and hence lower bills. The method by which company’s prolong the life of a transformer in an on-site or factory setting needs to be decided on a case by case basis. There are clear advantages and risks to both settings but it is evident that our industry has come a long way in making responsible use of resources and demonstrating environmental sustainability by prolonging the life of transformers.”
www.winderpower.co.uk
between expected costs and actual costs of the installation. An EPC arrangement usually involves finance to cover both set-up and installation: payments only commence when the enhancements have begun to generate energy savings. This adds a cash flow benefit and the performance risk is borne by the supplier. EPC allows manufacturers to circumvent the often intricate and time-consuming aspect of acquiring information around possible energy savings measures that are suitable for their specific production activities With EPC the supplier carries out a preliminary assessment of a company’s energy usage to identify general areas where maximum energy savings can be made.
REGULAR MEASUREMENT/VERIFICATION CHECKS A more detailed analysis determines improvement measures that could make the most impact on the organisation’s bottom line (Investment Grade Audit). Following the installation of new equipment and the implementation of facility improvement measures there are regular measurement and verification checks to ensure savings are achieved as previously predicted. As the UK now makes it a priority to
revive its high value manufacturing sector in the new economic reality manufacturers have the opportunity to further enhance operational efficiency in order to stay competitive across the globe. In this regard, ensuring the most efficient use of energy in the production processes must be viewed as important along with further initiatives required to boost productivity and capacity. By leveraging solutions such as EPC
where providers take a vested interest in ensuring achievable and realistic energy savings, manufacturers can be confident in the knowledge that their farsighted action will deliver financially. Those who proactively examine and improve their energy management policy now are likely to stay ahead of their industrial peers.
Siemens Financial Services
www.siemens.com
/ FACTORYEQUIPMENT
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