Save Energy, Save the Economy: Michael Forhez, Infosys Consulting
By Baljeet Chhazal, Michael Forhez and Anil Pahwa, Infosys Consulting
There is no question that high energy costs are a drag on organizational budgets and that inefficient energy practices have a negative impact on our environment. And, it should come as no surprise to anyone that energy costs have soared in the last few years. In fact, according to Energy Information Administration (EIA) the average price of electricity has increased by 8.8 percent between November 2007 and November 20081. While the price of oil has declined recently, it was at record high levels not more than a year ago. And as world carbon dioxide levels rise to the highest in 650,000 years5, the long-term negative impact of using fossil fuels on the environment is even larger than that on the pocketbook.
To combat high energy costs and reduce their environmental impact, organizations across all sectors are trying to figure out ways to reduce energy consumed by basic utilities such as lighting and Heating, Ventilating and Air Conditioning (HVAC), to the assets that enable their critical business operations, like manufacturing equipment and refrigeration coolers. While cost reduction is perhaps the primary motivator for reducing energy consumption in current economic conditions; organizations continue to focus on reducing energy consumption as part of their sustainability initiatives.
The Problem
An EIA study forecasts that at the current rate of growth, world energy demand will increase by 50 percent between 2005 and 20303. As high as that might sound, consumption growth in developed economies lags far behind developing economies. A study conducted by McKinsey found that China's energy consumption growth rate is four times that of the United States4. For U.S. companies this means prospects of greenhouse gas (GHG) emissions and energy prices rising more rapidly than they have in the past.
While energy conservation is one solution to stem rapidly growing demand, with everything else being equal, it can also lead to lost productivity. This is certainly not an acceptable solution in an environment where prosperity in many ways is directly related to growth in production. Also, even as the use of alternative energy is growing, it has certainly not reached the level of maturity to make a significant dent in demand growth at a reasonable cost. It is due to these reasons, among others, that the response to the rise in demand has been to put up more and more traditional fossil fuel burning plants, whether for production or power, that spew millions of tons of greenhouse gasses.
The Solution
Responding to growth in the demand for energy by building more fossil fuelled plants is like adding more mainframe computers with vacuum tubes to meet the increasing needs of computing power. As we look to both the near and long term, manufacturers need to consider new ideas for solving the world's growing hunger for energy.
Among evolving approaches is included the concept of "negawatts." The idea essentially revolves around producing the same or more output while using lower energy input by improving energy productivity seen as the most cost-effective way to abate the growth in demand while offering attractive returns.
The McKinsey study, mentioned earlier, found that boosting efficiency could help eliminate at least half the world energy demand growth by 20204. This demand elimination would come from employing the best existing methods and technologies to produce goods and services more efficiently. Efficiency guru Amory Lovins told Yale Environment360 (an online publication from the Yale School of Forestry & Environmental Studies that focuses on environment issues) in a recent interview that in the United States we could save at least half the oil and gas and three-quarters of the electricity we use, and that efficiency investment would cost only about an eighth of what we now pay for those forms of energy5. Some of these savings will come over time by use of innovative design to build more energy efficient equipment and buildings, but there are other things that we can do today that could yield significant energy savings. These cost effective measure are described in detail in the subsequent sections.
What to Do
Improving energy productivity falls in three basic buckets:
> Reducing wastage
> Upgrading plants and equipment
> Instituting "Predictive Maintenance" processes and procedures
Reducing Wastage -- Reducing wastage, a.k.a energy conservation, entails taking proactive action to ensure that energy is used only when it is needed. Some examples include controls to turn off and regulate equipment when not needed and/or to ensure optimized energy consumption to production levels. These methods have been successfully employed to reduce energy consumption by up to 30 percent, and range from installing automated systems to turn down heating and lighting during nights and days when buildings are expected to be empty to automatically shutting down servers when computing needs are low. Want specifics? A simple activity, requiring no more than ten to fifteen man-days effort, for automatically shutting off computer monitors while not in use can potentially save 1000 megawatt hours and $100,000 per year for an organization of 1000 users.
Upgrading Plant and Equipment -- While sustainability initiatives in most organizations are recent, the equipment installed in their facilities can be several decades old. Many companies are now retrofitting or replacing some of the equipment in their facilities to reduce energy consumption. These initiatives can be broadly broken down in two categories.
The first is replacing older, energy inefficient equipment with more energy efficient ones. Some examples include installing fluorescent lighting, which uses 75 percent less power than traditional bulbs; installing more reliable steam traps that are less prone to leakage, and replacing old equipment with "Energy Star" rated equipment, like state-of-the-art refrigerators that are three times as efficient as older models.
The second category involves retrofitting facilities to be more energy efficient. This includes improving building insulation, reducing leaks and using natural lighting where possible. These efforts, while not particularly high-tech, can provide significant energy savings with technology that exists today.
Predictive Asset Maintenance -- Traditionally, asset maintenance activities have focused on ensuring that equipment availability is maximized. No, or very little, emphasis has been placed on how much electricity, heat or water a piece of equipment consumes to produce a unit of output. Only recently, due to the sharp increase in the cost of energy and government regulations around environmental accountability, have companies begun to focus on this aspect. Recent studies have found however, that asset performance management can reduce energy consumption by 6 percent to 11 percent6 by integrating energy consumption within an enterprise asset management strategy.
In large facilities, identifying efficiency related problems can be expensive. A choked filter for the HVAC system or leaky steam trap might be hard to detect, but can lead to a major loss in energy efficiency. Investment in a system that monitors consumption and predicts energy inefficiency, based on exception situations, can be more cost effective than scheduling routine inspections more frequently.
A new breed of enterprise asset management (EAM) software is emerging that addresses these sustainability needs by integrating efficiency related KPI's into the traditional plant maintenance process. An asset sustainability layer developed for this purpose leverages the inherent capabilities of EAM systems to detect exception situations and trigger alerts and maintenance work orders. If an organization has already made an investment in plant maintenance software, incorporating sustainability capabilities could yield significant ROI.
Conclusion
Consider that while demand for goods and services that require energy inputs continues to grow, our response to this fact does not necessarily have to mean an increase in energy production and consumption, which has traditionally been the case. Furthermore, as economic constraints dovetail with the sustainability movement, it is in the best interest of the enterprise, as well as the environment, that strategic growth plans make provision for minimizing environmental impacts and improving energy efficiency.
As a society we are now beginning to invest heavily in alternative and renewable sources of energy. As one of many energy consumers, business also has a role to play which is to explore all the possibilities for how energy is used while producing products with greater efficiently.
In the end, by themselves, energy efficiency initiatives might not be able to save the economy but they can certainly help the bottom line and they just might save the environment in the bargain.
About the Authors:
Michael Forhez, Senior Principal, Consumer Products & Retail Practice, Infosys Consulting
Anil Pahwa, Senior Principal, Retail, CPG and Logistics (RCL), Infosys Consulting
Baljeet Chhazal, Senior Engagement Manager, Infosys Technologies
Sources:
1. Energy Information Administration - Total Electric Power Industry Summary Statistics http://www.eia.doe.gov/cneaf/electricity/epm/tablees1a.html
2. NOAA's Global Monitoring Division reports http://climateprogress.org/2009/02/13/noaa-global-carbon-dioxide-co2-levels-2008/
3. International Energy Outlook 2008 http://www.eia.doe.gov/oiaf/ieo/highlights.html
4. The Case for Investing in Energy Productivity February 2008 http://www.compete.org/images/uploads/File/ESIS%20Progressive%20Downloads/Rogers,%20McKinsey%20Presentation.pdf
5. Energy Efficiency is the Key http://e360.yale.edu/content/feature.msp?id=2091
6. Terry Wireman; Benchmarking Best Practices in Maintenance Management ISBN: 0-8311-3168-3
There is no question that high energy costs are a drag on organizational budgets and that inefficient energy practices have a negative impact on our environment. And, it should come as no surprise to anyone that energy costs have soared in the last few years. In fact, according to Energy Information Administration (EIA) the average price of electricity has increased by 8.8 percent between November 2007 and November 20081. While the price of oil has declined recently, it was at record high levels not more than a year ago. And as world carbon dioxide levels rise to the highest in 650,000 years5, the long-term negative impact of using fossil fuels on the environment is even larger than that on the pocketbook.
To combat high energy costs and reduce their environmental impact, organizations across all sectors are trying to figure out ways to reduce energy consumed by basic utilities such as lighting and Heating, Ventilating and Air Conditioning (HVAC), to the assets that enable their critical business operations, like manufacturing equipment and refrigeration coolers. While cost reduction is perhaps the primary motivator for reducing energy consumption in current economic conditions; organizations continue to focus on reducing energy consumption as part of their sustainability initiatives.
The Problem
An EIA study forecasts that at the current rate of growth, world energy demand will increase by 50 percent between 2005 and 20303. As high as that might sound, consumption growth in developed economies lags far behind developing economies. A study conducted by McKinsey found that China's energy consumption growth rate is four times that of the United States4. For U.S. companies this means prospects of greenhouse gas (GHG) emissions and energy prices rising more rapidly than they have in the past.
While energy conservation is one solution to stem rapidly growing demand, with everything else being equal, it can also lead to lost productivity. This is certainly not an acceptable solution in an environment where prosperity in many ways is directly related to growth in production. Also, even as the use of alternative energy is growing, it has certainly not reached the level of maturity to make a significant dent in demand growth at a reasonable cost. It is due to these reasons, among others, that the response to the rise in demand has been to put up more and more traditional fossil fuel burning plants, whether for production or power, that spew millions of tons of greenhouse gasses.
The Solution
Responding to growth in the demand for energy by building more fossil fuelled plants is like adding more mainframe computers with vacuum tubes to meet the increasing needs of computing power. As we look to both the near and long term, manufacturers need to consider new ideas for solving the world's growing hunger for energy.
Among evolving approaches is included the concept of "negawatts." The idea essentially revolves around producing the same or more output while using lower energy input by improving energy productivity seen as the most cost-effective way to abate the growth in demand while offering attractive returns.
The McKinsey study, mentioned earlier, found that boosting efficiency could help eliminate at least half the world energy demand growth by 20204. This demand elimination would come from employing the best existing methods and technologies to produce goods and services more efficiently. Efficiency guru Amory Lovins told Yale Environment360 (an online publication from the Yale School of Forestry & Environmental Studies that focuses on environment issues) in a recent interview that in the United States we could save at least half the oil and gas and three-quarters of the electricity we use, and that efficiency investment would cost only about an eighth of what we now pay for those forms of energy5. Some of these savings will come over time by use of innovative design to build more energy efficient equipment and buildings, but there are other things that we can do today that could yield significant energy savings. These cost effective measure are described in detail in the subsequent sections.
What to Do
Improving energy productivity falls in three basic buckets:
> Reducing wastage
> Upgrading plants and equipment
> Instituting "Predictive Maintenance" processes and procedures
Reducing Wastage -- Reducing wastage, a.k.a energy conservation, entails taking proactive action to ensure that energy is used only when it is needed. Some examples include controls to turn off and regulate equipment when not needed and/or to ensure optimized energy consumption to production levels. These methods have been successfully employed to reduce energy consumption by up to 30 percent, and range from installing automated systems to turn down heating and lighting during nights and days when buildings are expected to be empty to automatically shutting down servers when computing needs are low. Want specifics? A simple activity, requiring no more than ten to fifteen man-days effort, for automatically shutting off computer monitors while not in use can potentially save 1000 megawatt hours and $100,000 per year for an organization of 1000 users.
Upgrading Plant and Equipment -- While sustainability initiatives in most organizations are recent, the equipment installed in their facilities can be several decades old. Many companies are now retrofitting or replacing some of the equipment in their facilities to reduce energy consumption. These initiatives can be broadly broken down in two categories.
The first is replacing older, energy inefficient equipment with more energy efficient ones. Some examples include installing fluorescent lighting, which uses 75 percent less power than traditional bulbs; installing more reliable steam traps that are less prone to leakage, and replacing old equipment with "Energy Star" rated equipment, like state-of-the-art refrigerators that are three times as efficient as older models.
The second category involves retrofitting facilities to be more energy efficient. This includes improving building insulation, reducing leaks and using natural lighting where possible. These efforts, while not particularly high-tech, can provide significant energy savings with technology that exists today.
Predictive Asset Maintenance -- Traditionally, asset maintenance activities have focused on ensuring that equipment availability is maximized. No, or very little, emphasis has been placed on how much electricity, heat or water a piece of equipment consumes to produce a unit of output. Only recently, due to the sharp increase in the cost of energy and government regulations around environmental accountability, have companies begun to focus on this aspect. Recent studies have found however, that asset performance management can reduce energy consumption by 6 percent to 11 percent6 by integrating energy consumption within an enterprise asset management strategy.
In large facilities, identifying efficiency related problems can be expensive. A choked filter for the HVAC system or leaky steam trap might be hard to detect, but can lead to a major loss in energy efficiency. Investment in a system that monitors consumption and predicts energy inefficiency, based on exception situations, can be more cost effective than scheduling routine inspections more frequently.
A new breed of enterprise asset management (EAM) software is emerging that addresses these sustainability needs by integrating efficiency related KPI's into the traditional plant maintenance process. An asset sustainability layer developed for this purpose leverages the inherent capabilities of EAM systems to detect exception situations and trigger alerts and maintenance work orders. If an organization has already made an investment in plant maintenance software, incorporating sustainability capabilities could yield significant ROI.
Conclusion
Consider that while demand for goods and services that require energy inputs continues to grow, our response to this fact does not necessarily have to mean an increase in energy production and consumption, which has traditionally been the case. Furthermore, as economic constraints dovetail with the sustainability movement, it is in the best interest of the enterprise, as well as the environment, that strategic growth plans make provision for minimizing environmental impacts and improving energy efficiency.
As a society we are now beginning to invest heavily in alternative and renewable sources of energy. As one of many energy consumers, business also has a role to play which is to explore all the possibilities for how energy is used while producing products with greater efficiently.
In the end, by themselves, energy efficiency initiatives might not be able to save the economy but they can certainly help the bottom line and they just might save the environment in the bargain.
About the Authors:
Michael Forhez, Senior Principal, Consumer Products & Retail Practice, Infosys Consulting
Anil Pahwa, Senior Principal, Retail, CPG and Logistics (RCL), Infosys Consulting
Baljeet Chhazal, Senior Engagement Manager, Infosys Technologies
Sources:
1. Energy Information Administration - Total Electric Power Industry Summary Statistics http://www.eia.doe.gov/cneaf/electricity/epm/tablees1a.html
2. NOAA's Global Monitoring Division reports http://climateprogress.org/2009/02/13/noaa-global-carbon-dioxide-co2-levels-2008/
3. International Energy Outlook 2008 http://www.eia.doe.gov/oiaf/ieo/highlights.html
4. The Case for Investing in Energy Productivity February 2008 http://www.compete.org/images/uploads/File/ESIS%20Progressive%20Downloads/Rogers,%20McKinsey%20Presentation.pdf
5. Energy Efficiency is the Key http://e360.yale.edu/content/feature.msp?id=2091
6. Terry Wireman; Benchmarking Best Practices in Maintenance Management ISBN: 0-8311-3168-3