Energy Savings Add Up – Improving Industrial Carbon Footprint
Businesses know they can significantly improve their bottom line by reducing operating costs. One way to reduce costs and carbon footprint is through energy efficiency upgrades – particularly in an industrial environment. Energy cost savings directly impact the bottom line and can increase profit margins. For example, 5% to 15% annual energy cost reductions can be realized by conducting a retro-commissioning project to optimize your facility’s mechanical systems. The up-front cost of the retro-commissioning project is normally within a 1 to 2-year simple payback. So, to realize these financial benefits, here are some general tips demonstrating the benefits of implementing energy cost-saving projects.
Let’s start with a simple example. Say a company has a net profit of 5% and would like to increase its net profit. There are generally two ways to do this; either increase revenue or decrease costs. If your business were to look at reducing costs by implementing an energy project that would save them $1,000 annually, that would be equivalent to otherwise earning an additional $20,000 in revenue ($1000/0.05 = $20,000). An energy efficiency project of this type has the same impact on profits as increasing sales 20:1.
If the energy project has a return greater than the borrowing rate, then you can finance the project, and you may improve cash flow with relatively little risk. Let’s say a business finances an energy project with a $100,000 loan for 15 years at an interest rate of 10%. Your business has no up-front cost, but pays ~$13,100 each year for 15 years. The energy project you were considering was calculated to generate ~$14,900 each year in annual energy cost savings. Since the energy cost savings exceed the financed payments, the project exhibits a net-positive cash flow of $1,800 annually with no upfront costs.
Simple payback is an important financial consideration under many circumstances in conjunction with the Internal Rate of Return (IRR). If an energy project has an IRR greater than your business’s profit margin, energy cost-savings projects are where you should invest money. For example, suppose a business has determined they will consider energy projects with a 2% return above their net profit of 4.0% (i.e., anything >6.0%). In that case, an energy project with a lifespan of 20 years and an IRR of 6.5% fits their financial goals. In this scenario, the project’s simple payback is irrelevant to the goal of returning an established minimum IRR. Had the company insisted on a 2- to 3-year simple payback, an opportunity that could have far exceeded their financial expectations, would have been overlooked.
Consider looking at energy costs differently than currently viewing them. Energy savings realized from a potential energy project are conversely an existing waste stream (a penalty). By doing nothing, the excess energy consumption continues to drain your operating cash every month, not to mention the impact on your carbon footprint. Reducing energy costs and eliminating energy waste can add to a business’s operations’ efficiencies and impress shareholders looking for a lower carbon footprint.
How can you realize energy and cost savings benefits without knowing where to turn next? The first step under the umbrella of energy management is to perform a formal study to identify energy savings opportunities accomplished through an Energy Assessment. The Energy Assessment looks at how energy is consumed at your facility and, through the formal process, will provide you with the fundamental knowledge you need to make a case for implementing energy cost-saving projects. From there, you can work with the decision-makers to prioritize energy savings in your business. Below are a few ideas that may make sense for your business and lower your carbon footprint:
Building system performance can decline, and energy consumption can increase over time, even when performing routine maintenance on equipment. However, you can increase productivity, improve work environments, and reduce maintenance costs while saving money by conducting an energy assessment and investing in your business’s discovered energy savings opportunities.
About the authors:
Sam Cooke, PE, CEM, is a Vice President and Project Director at SCS Engineers. He has over 40 years of engineering experience specializing in manufacturing energy management assessments and implementation projects. Sam was the technical lead for projects involving the performance of energy assessments at over 100 manufacturing companies, including compressed air audits, compressed air leak surveys, process heating assessments, manufacturing HVAC assessments, lighting assessments/replacement, refrigeration efficiency assessments, etc.
Tony Kriel, PE, LEED AP, is SCS Engineers’ National Expert on Facility Energy Management. He has 13 years of consulting experience as a mechanical engineer. His project experience includes specializing in Cx, RCx, ASHRAE Level I-III energy audits, and other design-related energy services. Tony has managed multiple large (>million square foot) projects and has worked with industrial, commercial, military, federal, state, municipal, and solid waste clients. He is a LEED Accredited Professional AP BD+C, and LEED AP O+M. His projects include Commissioning (Cx), Retro-Commissioning (RCx), ASHRAE Energy Audits, Energy Modeling, Geothermal Feasibility and Design, and Solar PV.
Compressed air powers thousands of industrial applications and processes. It is vital to nearly every industry. For example in the printing industry, compressed air is
used for presses, cleaning machinery, hoisting stereotype plates, powering pneumatic tools, packaging, and automating equipment.
Ensure you’re not losing value from your compressed air systems. Don’t let leaks drive up operating costs. Use this advice to keep your systems running at their peak performance.
Did you know that the overall efficiency of a typical compressed air system is between 10 percent and 15 percent? While that seems low, compressed air may be your best choice. However, carefully evaluate each application to make sure it makes business sense.
For example, if you are using compressed air as your energy source for a motor, consider that the annual energy costs for a 1 hp. air motor vs. a 1 hp. electric motor, operating five days per week, over two shifts, at $0.10/kWh would potentially cost the facility $2,330 (compressed air) vs. $390 (electric).
A properly managed system uses compressed air for appropriate applications.
Did you know that a ¼-inch leak can cost the typical facility $8,382 per year in wasted electricity? The chart below shows the calculated cost of leaks in a typical compressed air system.
Leaks cause a drop in system pressure, which can make equipment or systems function less efficiently and adversely affect production. Leaks can shorten the life of nearly all system components by forcing the equipment to cycle more frequently. Increased running time also can lead to additional maintenance requirements and increased downtime.
Audits show that operators have a tendency to add expensive and unnecessary air compressor capacity instead of addressing leaks. Make sure you’re regularly checking for and repairing leaks. Systems with leaks waste money.
A typical air compressor system that has not been well maintained could have a leak rate
between 20 percent and 50 percent of total compressed air production capacity. Leakage can come from any part of the system. Here are some of the most common sources of leaks:
A good leak prevention program will include the following components: identification (including tagging) of leaks, tracking, repair, verification, and overall system re-evaluation. We recommend that all facilities with compressed air systems establish an aggressive leak prevention program. You can include it as part of an overall program aimed at improving the performance of the facility’s compressed air system, or energy use.
For every 2 psig. reduction in system pressure, the energy consumed by the system reduces by 1 percent. Increasing system pressure increases leakage rates and compounds friction losses associated with a poor piping design or poorly maintained, clogged filters.
Check the system pressure and resist the urge to turn up the pressure.
Compressed Air System Assessment
A comprehensive air compressor system assessment can identify the true costs of
compressed air and identify opportunities to improve efficiency and productivity. Generally, a fully instrumented audit, which can take 3-7 days, can identify between 30 percent and 50 percent energy savings opportunities.
A comprehensive compressed air system assessment should include an examination of both the supply side, demand side, and the interaction between the two. Auditors typically measure the output of a compressed air system, calculate energy consumption in kilowatt-hours, and determine the annual cost of operating the system. Third-party leak surveys also can be performed.
Losses and poor performance caused by inappropriate uses, system leaks, inappropriate system controls, poor system design, and total system dynamics are evaluated, and a written report with a recommended course of action is provided.
Author: Tony Kriel, an SCS Professional Engineer with more than a decade of experience specializing in energy saving projects. He is a Sustaining Member Representative in SAME and has been a Member of ASHRAE for 10 years. His project experience includes compressed air system assessments, energy audits, commissioning, retro-commissioning, energy modeling, and renewable energy technology analysis.