INSIGHT REPORT Energy Efficiency

ENERGY EFFICIENCY AND ENERGY MANAGEMENT IN INDUSTRIAL COMPANIES

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T.A. Cook Consultants Insight Report 02 – 12/2010 | Energy efficiency and energy management in industrial companies

E d i t o r i a l

ENERGY EFFICIENCY AND ENERGY MANAGE-MENT IN INDUSTRIAL COMPANIES Many industrial companies are increasingly focusing on energy efficiency as a way to be sustainable. This Insight Report addresses this issue and explores a subject which is still new ground for many companies. When it comes to energy efficiency, much de-pends on a company’s ability to identify new approaches. Saving energy is not that difficult if plenty of energy is being wasted. This explains the scepticism among some experts about com-panies purchasing "green" energy. Most indus-try representatives consider this to be the wrong approach. They claim that it is much more important to stop wasting energy in order to boost one's own energy efficiency.

It is not particularly difficult for many companies to increase their energy efficiency. This begins when companies realise that their plants dis-charge energy, for example as heat, into the environment. This is an issue that has been somewhat neglected up to now. We often treat energy in much the same way as we did domes-tic and industrial waste just a few years ago, considering it as nothing but a byproduct to be disposed of. For business as well as environ-mental reasons change is necessary and will happen.

From disposal to utilisa-tion

Just like the waste disposal industry, many companies will also have to reinvent themselves with a view to energy efficiency. Although the physical items to be disposed of have not changed, they are now referred to as ‘secondary raw materials’ in a recycling industry. The dra-matic change in this industry is a good example of how the use of resources is developing in Germany and the EU. The main objective is to generate maximum value from the use of a particular resource, be it a secondary raw mate-rial or energy. Just as with physical waste re-processing, the key question now is how energy can be retained or re-used.

This question does not just extend to manufac-turing plants, but also to utility companies, where the first signs of significant energy saving are being seen. Most power stations in Germany and elsewhere operate cooling towers or cooling basins. What people perceive as rising steam is nothing but an enormous cloud of heat energy that is simply blown out into the atmosphere. Those who understand and accept this fact may come up with the idea of converting their own factory into a cooling tower in order to access this vast quantity of energy. Paper mills, for instance, are already adopting this method to feed their energy-intensive processes. Although this is a good energy supply concept, it is just the beginning of the possible value cycle.

Another example from the waste disposal sector might serve to explain this approach in more detail. Let us look at the paper industry, which today is intrinsically linked to waste disposal and recycling. Since the introduction of recycled paper, the value chain of this resource has wit-nessed dramatic progress. Whilst the only dis-tinction made in the early days was between paper and recycled paper, companies today distinguish between around 15 types of recycled paper. Each of these varieties represents a spe-cific grade of this raw material. The original resource - wood fibre – now has a spiral-shaped

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product life cycle. In this cycle, the spiral turns 15 times before the original wood fibre can no long-er be used. The end of the spiral is marked by ‘thermal utilisation’ – burning - when energy is recovered from the residual fibre. Com-pared to this, the use of a power plant’s residual energy in the example mentioned above represents just two cy-cles in a value spiral – the ener-gy being used once at the power station and ‘recycled’ once when the paper mill uses its residual steam as an energy source. However, here are potentially a much larger number of re-uses conceivable.

Economic efficiency and sustainability

Some companies have taken to heart not only the economic benefits of energy efficiency, but also the role of sustainability. Environmental responsibility and business reputation have an important role to play in this area. This is why companies are at times exploring projects where the return on investment takes five years or more to materialise. However, energy cost re-ductions remain the driving factor. Not surpris-ingly, there has been a strong correlation be-tween energy efficiency and the global econom-ic crisis in recent years. Slumping energy prices

had major repercussions on com-panies' efforts to boost efficien-cy. Now that energy prices are

picking up again, the energy efficiency issue is once again

entering centre stage for busi-ness leaders.

One can generally identify sev-eral elements that can be used to boost corporate energy efficien-cy. Besides almost trivial things, such as managing the lighting

or heating of business premises, ener-gy efficiency extends to the production process as well as the use of residual energy (energy recovery). Companies active in this field have already adopted a very proactive view of these elements. Companies will now also find it worthwhile to consider the engineering of their own plants, their production processes and even their own products’ construction in light of the energy efficiency issue.

Many energy efficiency measures do not even require a budget to be implemented and pay off from the very first day. The only questions to be answered are: "To what extent are companies willing to give priority to energy efficiency?", and "What approaches will they adopt?"

CONTENTS Energy efficiency and energy management in industrial companies ............................................. 2

Seven steps to improving energy management at companies ...................................................... 4

Energy efficiency regulation tightens ......................................................................................... 5

16001 – and what comes next? ................................................................................................ 6

Internal and external influences in coming years - act vs react .................................................... 7

Energy efficiency analysis in practice ......................................................................................... 9

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P a r a m e t e r s o f e n e r g y e f f i c i e n c y

Seven steps to improving energy management at companies The discussion about the optimum energy use and the projects that have been implemented so far are so different that they show several approaches are available when it comes to boosting energy efficiency. The following discussion provides an overview of the individual steps to energy efficiency and optimisa-tion. Energy efficiency often starts with a company's executive management. Work on energy efficiency, however, often starts at middle management. Companies usually appoint an energy efficiency officer who often lacks detailed knowledge of the subject. The typical

approach is to take a simple look at energy efficiency measures available to a company. On the basis of the measures already implemented by active companies, seven steps can be identified which serve as the basis for a range

of measures. The steps towards energy efficiency are as follows:

I. Identify waste: Where is power used un-necessarily?

II. Avoid a throw-away mentality: How can residual energy be put to good use?

III. Load management: How can the compa-ny or its production processes realistically be organised to reduce peaks in energy demand?

IV. Production efficiency: How can plants and production lines be operated in the most energy efficient manner?

V. Machinery efficiency: Which machinery is the most energy efficient available?

VI. Process efficiency: Which production method minimises energy consumption in mak-ing the product?

VII. Product efficiency: How can I design my product in an energy-efficient manner?

Each of these steps can be considered and ap-plied individually. However, in practice most companies initially consider energy recovery and preventing energy waste before other steps are taken.

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L e g a l f r a m e w o r k

Energy efficiency regulation tightens Besides rising energy prices, legal requirements and regulatory mechanisms can also drive energy efficiency measures. There are several plans to regulate energy use on a German and EU level. „Political, social and environmental influences force you to address the issue of energy man-agement." Dr. Jörg Meyer (Head of the Energy & Climate Protection Unit, Siemens AG)

This statement suggests that, in addition to social influences and environmental aspects, political conditions will also become increasingly demanding. Apart from DIN EN 16001 and ISO 50001 standards (the subject matter of a separate article in this Insight Report), the first far-reaching interventions have already been made in one of industry’s sovereign areas:

product design. A widely known example is the gradual implementation of the ban on energy-inefficient light bulbs. With this regulatory intervention the issue of product efficiency, long neglected by many companies, is increasingly significant.

Pressure on other industries is also growing. The automotive industry has already committed itself to greater transparency in its energy consumption. Pressure from the consumer end has also increased significantly in recent years. This step seems to be long overdue considering that an energy consumption limit has been in use for several years in the electronics industry. In the automotive industry’s case it was in fact the US which pioneered regulation, where the "cash for clunkers programme" proved to be a trailblazing concept. Unlike in Germany, one of

the conditions for payment of the incentive in the US was the purchase of a low-consumption car model. This also offered an enormous competitive advantage for companies which had embarked on efficient models at an early stage. This shows that energy management can be considered as a competitive advantage.

"Energy management saves time so that companies are able to act rather than merely react," notes Dr. Jörg Meyer.

It seldom makes sense to lag behind official

rules. The current reluctance to implement the EU's energy goals suggests that regulations will become even more restrictive. Therefore an active energy strategy can only be advantageous.

Dr. Jörg Meyer, Head of the Energy & Climate Protection Unit, Siemens AG

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L e g a l f r a m e w o r k

16001 – and what comes next? No - this is not an outlook to the year 16001. Instead, it refers to the imple-mentation of the DIN EN 16001 standard for energy-intensive companies. It should not be long before this standard is implemented because it is currently triggering many questions for businesses. One particularly important question concerns the features of an energy management system that is certified ac-cording to DIN EN 16001.

"16001 merely sets the basic parameters. It is left to the companies them-selves to decide how to implement these parame-ters. A car maker will ap-proach this issue differently from, say, a fan manufac-turer." Sylvia Wahren (Fraunhofer Institute for Manufacturing Engineering and Automation, TEEM)

This statement summarises the underlying idea of this standard. 2009 marked the beginning for energy-intensive companies. Since then, they have been able to benefit from a compen-sation rule via the Renewa-ble Energies Act. The legis-lator has made this benefit contingent upon the intro-duction of an EnMS (energy management system). Companies consider this aspect to be the most diffi-cult issue because such a system must be certified. Readers interested in more detailed information in this respect are well advised to take a first look at the guide for companies and organisations published by the German Federal Environmental Agency (DIN EN 16001: "Energiemanagementsysteme in der Praxis"; source: www.umweltbundesamt.de). Many questions are answered there.

The Renewable Energies Act offers three differ-ent ways of having an energy management

system certified. It can be achieved either through a functioning environmental management system that is certified according to ISO 14001 or through an eco-management and audit scheme (EMAS). The third option is the provision of proof in another suitable form. This is contingent upon appropriate data capture as well as evalua-tion of the savings potential according to ecological and economic criteria. Since 1 July 2009, the DIN EN 16001 standard has been offering companies the ability to certify their own environmental man-agement systems. The stand-ard sets out the framework for such a system. Furthermore, DIN EN 16001 is also a good basis for companies when it comes to obtaining future certification according to the international requirements of ISO 50001.

Although regulators have granted relatively ample lee-

way, there is still a high degree of uncertainty among companies who do not yet know what features an energy management system must have in order to qualify for additional DIN EN 16001 certification as an environmental man-agement system. In addition, there are only a few systems available that can be implemented "out of the box" and already include certifica-tion.

Sylvia Wahren, Fraunhofer Institute for Manu-facturing Engineering and Automation, TEEM

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I n f l u e n c e p a r a m e t e r

Internal and external influences in coming years - act vs react Corporate energy efficiency and energy management are subject to a host of influences. Besides energy costs as the most important influence, further ex-ternal and internal forces influence the development of this issue.

Experts agree on one point: There will be strong demand for energy efficiency measures in the years to come.

Many companies already regard energy management as a competitive advantage. This not only applies to competition between the individual players on the market; energy

efficiency also has a role to play when it comes to competition between geographic areas. Energy efficiency can also prevent sites from losing their competitiveness to competitors in low-wage countries. The competition factor consequently influences a company's energy management strategy not just through internal, entrepreneurial interests, but also through external influences.

It goes without saying that the legal conditions mentioned earlier also constitute an important external factor. Just like energy prices and com-petition, the legal framework also has a positive

impact on the development of corporate energy efficiency. Other influences include an increas-ing scarcity of raw materials, new production methods, more efficient processes and the cost of replacements.

All companies are equally exposed to these factors, no matter whether or not a company

has an energy management system. The question is not so much whether a company will

address the energy issue but when this will happen. A company’s strategy might be active or reactive to circumstance; either strategy can

be right or wrong. Simply put, an active strategy is, for instance,

chiefly suitable for energy-intensive companies and not for companies where energy

is a relatively minor cost item. The latter can afford to merely respond

to regulatory intervention and hence to limit their

action to what is absolutely

necessary in this respect.

The pressure to-wards efficiency puts an additional burden on small

energy consumers whilst energy-intensive

companies can use it as a new way to play an active role in the market. The pioneers will inev-itably force the field to follow suit.

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Technical papers available on demand More detailed technical papers on corporate energy efficiency and energy management are now available on demand.

O n D e m a n d

Selected technical papers presented by leading companies at our technical conference on "In-dustrial Energy Efficiency and Energy Management", 27 to 28 October 2010, were rec-orded live. Did your schedule prevent you from attending our event, or do you want to revisit selected talks? With our "On-demand special", we give you the opportunity. Make use of this opportunity, and you will also receive the digital conference material (on CD) in addition to your personal access to the recorded talks. Under the following link www.UnityLivestream.com/TACookDemo you can examine the record-ing quality and view short clips from some papers.

http://www.unitylivestream.com/TACookDemo

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E n e r g y e f f i c i e n c y a n a l y s i s

Energy efficiency analysis in practice Before implementing an energy management system, a company should first perform an efficiency analysis. WKW Automotive and Amcor Flexibles Singen are good examples of successful implementation projects.

WKW Automotive (aluminium processing) and Amcor Flexibles Singen (manufacturer of primary packaging) are demonstrating how an efficiency analysis can be successfully carried out. In WKW's case, a successful implementation enabled a return on investment for the entire project in eight months. Careful performance of an analysis can be the foundation for a quick return on investment.

Different approaches can be taken for an analysis. Many companies, for instance, rely on their own, company-specific solutions. Other companies, such as Amcor Flexibles Singen, rely on standard methods, such as Six Sigma in order to analyse their energy demand. A sound database is vital in either case. Companies first need to identify their energy consumption from different sources and integrate these into an energy data management system. Every significant energy load should be fitted with a dedicated metering unit; measurements at fifteen minute intervals tend to work well for tracking load curves. Many companies need to invest in an IT infrastructure composed of meters and data capture points. This may well mean a five-digit investment. But such an investment can pay off even if no energy is saved at all.

In the case of WKW, for instance, an analysis enabled a better distribution of the company's energy load curve so that peak load demand could be reduced. If a company manages to reduce its peak load by one MW through changing its load distribution pattern, this generates savings of around €7,000 per month without a reduction in energy consumption. This peak load reduction also generates a certain measure of sustainability. The price of energy in Germany could be significantly reduced if companies managed to handle their peak loads better, as utilities’ activities to balance peak loads are a particularly significant cost factor.

Furthermore, an efficiency analysis can also help to identify incorrect energy bills.

How can an analysis cause changes in load distribu-tion?

WKW learnt from its efficiency analysis that the energy consumption of a plant or line is dependent not just upon the load (i.e., the plant or line), but also upon the product that is currently being manufactured. WKW Automotive quotes two practical examples:

Curing ovens

"Certain products need more energy than others in the oven. Once we understood this, production of energy-intensive products can be shifted to the night shift when energy is cheaper and the load curve low. However, the human factor is important here. It would be no use if all the ovens entered the heating-up phase simultaneously. Needless to say, they have to start in succession” Ulrich Leutgeb (WKW Automotive)

Ulrich Leutgeb, WKW Automotive

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Extrusion presses

"Certain alloys require more power in the press. These alloys were previously often produced during the day. Without an energy management system, this consumption would not have been visible” Ulrich Leutgeb (WKW Automotive)

These two examples show to what extent an efficiency analysis can affect operational structures and the possibilities which this opens up for companies. With such an analysis, WKW Automotive managed to optimise its own production without changing the product or delivery times. At Amcor Flexibles Singen, an analysis formed the basis for redesigning and optimising the factory's entire lighting system.

The benefits at a glance

Apart from the above-mentioned benefits of an analysis, further advantages include:

The introduction of the energy management system leads to a clearly reduced load curve. The peak load can be reduced by more than 10%.

The measures described enable a significant reduction in the price per kWh.

The results generated can also be used when it comes to investing in new assets.

Demonstrable and transparent reductions in overall energy consumption can be achieved in certain areas.

Expert advice

Practitioners offer several tips and suggestions for implementing a corporate energy analysis.

Some of these are shown below:

“You need several people who really support and promote the whole thing!” Ulrich Leutgeb (WKW Automotive)

"It's no use telling production what they have to achieve. The only function of management accounting is to create and communicate transparency. Production itself must decide what makes sense and what doesn't. At the end of the day,

delivering to customers is what matters. The onus does not have to be left entirely

to production. As soon as consumption is transparent, they will develop their own ideas and identify their savings potential." Ulrich Leutgeb (WKW Automotive)

"You do not always need direct KPIs for Six Sigma. You may also use somewhat less exact KPIs as long as there is enough potential because you can achieve a lot in this way.” Peter Ritter (Amcor Flexibles Singen)

“Quick wins are possible even without Six Sigma.” Peter Ritter (Amcor Flexibles Singen)

For further practical examples, please refer to the Xing discussion forum on "Efficient Energy Management at Companies and Administrations".

Peter Ritter, Amcor Flexibles Singen

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INSIGHT REPORT Energy Efficiency