1.1   INTRODUCTION
Business, industry and government organizations have all been under tremendous economic and environmental pressures in the last few years. Being economically competitive in the global marketplace and meeting increasing environmental standards to reduce air and water pollution have been the major driving factors in most of the recent operational cost and capital cost investment decisions for all organizations. Energy management has been an important tool to help organizations meet these critical objectives for their short term survival and long-term success.

The problems that organizations face from both their individual and national perspectives include:

• Meeting more stringent environmental quality standards, primarily related to reducing global warming and reducing acid rain.
   
  Energy management helps improve environmental quality. For example, the primary culprit in global warming is carbon dioxide, CO2. A balanced chemistry equation involving the combustion of methane (natural gas is mostly methane), shows that 2.75 pounds of carbon dioxide is produced for every pound of methane combusted. Thus, energy management, by reducing the combustion of methane can dramatically reduce the amount of carbon dioxide in the atmosphere and help reduce global warming.
   
  Commercial and industrial energy use accounts for about 45 percent of the carbon dioxide released from the burning of fossil fuels, and about 70 percent of the sulfur dioxide emissions from stationary sources.
   
  Thus, 16 pounds of methane produces 44 pounds of carbon dioxide; or 2.75 pounds of carbon dioxide is produced for each pound of methane burned.
   
  Energy management reduces the load on power plants as fewer kilowatt hours of electricity are needed. If a plant burns coal or fuel oil, then a significant amount of acid rain is produced from the sulphur dioxide emitted by the power plant. Acid rain problems then are reduced through energy management.
   
  Less energy consumption means less petroleum field development and subsequent on-site pollution. Less energy consumption means less thermal pollution at power plants and less cooling water discharge. Reduced cooling requirements or more efficient satisfaction of those needs means less CFC usage and reduced ozone depletion in the stratosphere. The list could go on almost indefinitely, but the bottom line is that energy management helps improve environmental quality.
   
• Becoming or continuing to be economically competitive in the global marketplace, which requires reducing the cost of production or services, reducing industrial energy intensiveness, and meeting customer service needs for quality and delivery times.
  
  Significant energy and dollar savings are available through energy management. Most facilities (manufacturing plants, schools, hospitals, office buildings, etc) can save according to the profile shown in Figure 1.1. Even more savings have been accomplished by some programs.
  
  

  Low cost activities first year or two: 5 to 15% Moderate cost, significant effort, three to five years: 15 to 30% Long-term potential, higher cost, more engineering 30 to 50%

  Figure 1.1 Typical Savings Through Energy Management
   
  Thus, large savings can be accomplished often with high returns on investments and rapid paybacks. Energy management can make the difference between profit and loss and can establish real competitive enhancements for most companies.
  
  Energy management in the form of implementing new energy efficiency technologies, new materials and new manufacturing processes and the use of new technologies in equipment and materials for business and industry is also helping companies improve their productivity and increase their product or service quality.
  
  Often, the energy savings is not the main driving factor when companies decide to purchase new equipment, use new processes, and use new high-tech materials. However, the combination of increased productivity, increased quality, reduced environmental emissions, and reduced energy costs provides a powerful incentive for companies and organizations to implement these new technologies.
   
  Total Quality Management (TQM) is another emphasis that many businesses and other organizations have developed over the last decade. TQM is an integrated approach to operating a facility, and energy cost control should be included in the overall TQM program.
   
  TQM is based on the principle that front-line employees should have the authority to make changes and other decisions at the lowest operating levels of a facility. If employees have energy management training, they can make informed decisions and recommendations about energy operating costs.
   
• Maintaining energy supplies that are:
  — Available without significant interruption, and
  — Available at costs that do not fluctuate too rapidly.
   
  Once again, the country is becoming dependent on imported oil. During the time of the 1979 oil price crisis, the U.S. was importing almost 50% of the U.S. domestic total oil consumption. By 1995, the U.S. was again importing 50% of the U.S. domestic total oil consumption. By year 2006, U.S. is importing even more, and the oil price has dramatically increased. Thus, the U.S. is once again vulnerable to an oil embargo or other disruption of supply.
   
• Helping solve other national concerns which include:
  — Need to create new jobs
  — Need to improve the balance of payments by reducing costs of imported energy
  — Need to minimize the effects of a potential limited energy supply interruption
   
  None of these concerns can be satisfactorily met without having an energy efficient economy. Energy management plays a key role in helping move toward this energy efficient economy.

 
1.2 THE ENERGY MANAGEMENT PROFESSION
Energy management skills are important to people in many organizations, and certainly to people who perform duties such as energy auditing, facility or building management, energy and economic analysis, and maintenance.

The number of companies employing professionally trained energy managers is large and growing. A partial list of job titles is given in Figure 1.2. Even though this is only a partial list, the breadth shows the robustness of the profession.

Plant Energy Manager Building/Facility Energy Manager Utility Energy Auditor Utility Energy Analyst State Agency Energy Analyst Federal Energy Analyst Consulting Energy Manager Consulting Energy Engineer DSM Auditor/Manager

For some of these people, energy management will be their primary duty, and they will need to acquire in depth skills in energy analysis as well as knowledge about existing and new energy using equipment and technologies. For others such as maintenance managers, energy management skills are simply one more area to cover in an already full plate of duties and expectations.

Fifteen years ago, few university faculty members would have stated their primary interest was energy management, yet today there are numerous faculty who prominently list energy management as their principal specialty. In 2000, there were 30 universities throughout U.S. listed by DOE as Industrial Assessment Centers or Energy Analysis and Diagnostic Centers.

Other Universities offer coursework and/or do research in energy management but do not have one of the above centers. Finally, several professional Journals and Magazines now publish exclusively for energy managers while we know of none that existed 15 years ago.

The Federal Energy Management Program (FEMP) started during the Bush Administration but it received a significant boost on June 3, 1999 when President Clinton issued Executive Order 13123. A brief summary of the requirements of that order is given in Figure 1.3.

Reduce energy consumption per square foot in federal buildings by 10% between 1985 and 1995 Reduce energy consumption per square foot in federal buildings by 20% by 2000 Reduce energy consumption per square foot in federal buildings by 30% by 2005 Reduce energy consumption by square foot in federal buildings by 35% by 2010 Reduce energy consumption in federal agency industrial facilities by 20% between 1990 and 2005 Reduce greenhouse gas emissions by 30% (compared to 1990) Provide for federal agency participation in DSM services offered by utilities

This program should dramatically reduce government expenditures for energy and water. Like energy management itself, utility DSM programs have had their ups and downs. DSM efforts peaked in the late 80s and early 90s, and have since retrenched significantly as utility deregulation and the movement to retail wheeling have caused utilities to reduce staff and cut costs as much as possible. This shorten cost cutting is seen by many utilities as their only way to become a competitive low-cost supplier of electric power. Once their large customers have the choice of their power supplier, they want to be able to hold on to these customers by offering rates that are competitive with other producers around the country. In the meantime, the other energy services provided by the utility are being reduced or eliminated in this corporate downsizing effort.

This reduction in electric utility incentive and rebate programs, as well as the reduction in customer support, has produced a gap in energy service assistance that is being met by a growing sector of equipment supply companies and energy service consulting firms that are willing and able to provide the technical and financial assistance that many organizations previously got from their local electric utility. New business opportunities and many new jobs are being created in this shift away from utility support to energy service company support. Energy management skills are extremely important in this rapidly expanding field, and even critical to those companies that are in the business of identifying energy savings and providing a guarantee of the savings results. Thus, the future for energy management is extremely promising. It is cost effective, it improves environmental quality, it helps reduce the trade deficit, and it helps reduce dependence on foreign fuel supplies. Energy management will continue to grow in size and importance.

1.3 SOME SUGGESTED PRINCIPLES OF ENERGY MANAGEMENT
If energy productivity is an important opportunity for the nation as a whole, it is a necessity for the individual company. It represents a real chance for creative management to reduce that component of product cost.

Those who have taken advantage of these opportunities have done so because of the clear intent and commitment of the top executive. Once that commitment is understood, managers at all levels of the organization can and do respond seriously to the opportunities at hand. Without that leadership, the best designed energy management programs produce few results. In addition, we would like to suggest four basic principles which, if adopted, may expand the effectiveness of existing energy management programs or provide the starting point of new efforts.

The first of these is to control the costs of the energy function or service provided, but not the Btu of energy. As most operating people have noticed, energy is just a means of providing some service or benefit. With the possible exception of feedstocks for petrochemical production, energy is not consumed directly. It is always converted into some useful function. The existing data are not as complete as one would like, but they do indicate some surprises. In 1978, for instance, the aggregate industrial expenditure for energy was $55 billion. Thirty-five percent of that was spent for machine drive from electric motors, 29% for feedstocks, 27% for process heat, 7% for electrolytic functions, and 2% for space conditioning and light.

In addition to energy costs, it is useful to measure the depreciation, maintenance, labor, and other operating costs involved in providing the conversion equipment necessary to deliver required services. These costs add as much as 50% to the fuel cost. It is the total cost of these functions that must be managed and controlled, not the Btu of energy. The large difference in cost of the various Btu of energy can make the commonly used Btu measure extremely misleading.

Availabilities also differ and the cost of maintaining fuel flexibility can affect the cost of the product. The average annual price increase of natural gas has been almost three times that of electricity. Therefore, an energy management system that controls Btu per unit of product may completely miss the effect of the changing economics and availabilities of energy alternatives and the major differences in usability of each fuel. Controlling the total cost of energy functions is much more closely attuned to one of the principal interests of the executives of an organization—controlling costs.

A second principle of energy management is to control energy functions as a product cost, not as a part of manufacturing or general overhead. It is surprising how many companies still lump all energy costs into one general or manufacturing overhead account without identifying those products with the highest energy function cost. In most cases, energy functions must become part of the standard cost system so that each function can be assessed as to its specific impact on the product cost.

The minimum theoretical energy expenditure to produce a given product can usually be determined enroute to establishing a standard energy cost for that product. The seconds of 25-hp motor drive, the minutes necessary in a 2200F furnace to heat a steel part for fabrication, or the minutes of 5V electricity needed to make an electrolytic separation, for example, can be determined as theoretical minimums and compared with the actual figures. As in all production cost functions, the minimum standard is often difficult to meet, but it can serve as an indicator of the size of the opportunity.

In comparing actual values with minimum values, four possible approaches can be taken to reduce the variance, usually in this order:

1. An hourly or daily control system can be installed to keep the function cost at the desired level.
2. Fuel requirements can be switched to a cheaper and more available form.
3. A change can be made to the process methodology to reduce the need for the function.
4. New equipment can be installed to reduce the cost of the function.

The starting point for reducing costs should be in achieving the minimum cost possible with the present equipment and processes. Installing management control systems can indicate what the lowest possible energy use is in a well-controlled situation. It is only at that point when a change in process or equipment configuration should be considered. An equipment change prior to actually minimizing the expenditure under the present system may lead to over sizing new equipment or replacing equipment for unnecessary functions.

The third principle is to control and meter only the main energy functions—the roughly 20% that make up 80% of the costs. It is important to focus controls on those that represent the meaningful costs and aggregate the remaining items in a general category. Many manufacturing plants in the United States have only one meter, that leading from the gas main or electric main into the plant from the outside source. Regardless of the reasonableness of the standard cost established, the inability to measure actual consumption against that standard will render such a system useless. Submetering the main functions can provide the information not only to measure but to control costs in a short time interval. The cost of metering and submetering is usually incidental to the potential for realizing significant cost improvements in the main energy functions of a production system.

The fourth principle is to put the major effort of an energy management program into installing controls and achieving results. It is common to find general knowledge about how large amounts of energy could be saved in a plant. The missing ingredient is the discipline necessary to achieve these potential savings. Each step in saving energy needs to be monitored frequently enough by the energy manager or first-line supervisor to see noticeable changes. Logging of important fuel usage or behavioral observations are almost always necessary before any particular savings results can be realized. Therefore, it is critical that an energy director or committee have the authority from the chief executive to install controls, not just advise line management.

Those energy managers who have achieved the largest cost reductions actually install systems and controls; they do not just provide good advice. As suggested earlier, the overall potential for increasing energy productivity and reducing the cost of energy services is substantial. To quote the energy director of a large chemical company: “Long-term results will be much greater.” Although no one knows exactly how much we can improve productivity in practice, the American Physical Society indicated in their energy conservation study that it is theoretically possible to achieve an eightfold improvement of the energy / production ratio.

Most certainly, we are a long way from an economic saturation of the opportunities (The common argument that not much can be done after a 15% or 20% improvement has been realized ought to be dismissed as baseless. Energy productivity provides an expanding opportunity, not a last resort.

 
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