Energy Efficiency Fundamentals Energy University Course Transcript

Slide 1 Welcome to Energy Efficiency Fundamentals Slide 2 For best viewing results, we recommend that you maximize your browser window now. The screen controls allow you to navigate through the eLearning experience. Using your browser controls may disrupt the normal play of the course. Click the Notes tab to read a transcript of the narration. Slide 3 At the completion of this course, you will be able to List the three simple reasons why energy is important Frame the energy dilemma and explain why energy efficiency is the best answer Define the four simple steps of an effective energy efficiency program Define passive and active energy efficiency List common and effective actions to improve energy efficiency in buildings, industry and residences Slide 4 Energy consumption and energy costs have been on the rise during the last 25 years. World energy consumption has risen 45% since 1980. It is predicted that by the year 2100, global energy consumption will reach 27.3 gigatons. Emerging markets like China and India will soon be consuming more energy than developed nations such as the US and Western Europe. These emerging markets account for more than 75% of new demand placing new pressures on global resources and aging infrastructure. This pressure will push up prices and create threats to the security of supply. While renewable energy supplies will increase, fossil fuel sources will grow even faster, and dependence on oil, gas and coal will still be strong. Carbon dioxide in the atmosphere has risen more than 33% since the industrial revolution and is now rising faster than ever before.

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Slide 5 In summary, there are three simple reasons why energy consumption cannot continue following current trends: 1. There are not enough readily available energy sources to meet the expected growth in demand and new sources and infrastructure will not be ready in time. 2. Fossil fuels cause pollution, which is damaging to the health of people, plants and animals. Just one example - in China, acid rain is estimated to cost the economy $13.3 billion US per year, according to joint research by the Chinese Institute of Environmental Science and the prestigious Qinghua University. 3. Fossil fuels also lead to climate change that has the potential to disrupt weather patterns, bringing droughts and floods to new areas with consequential hardship for inhabitants.

Slide 6 So the energy dilemma is both very simple and very complex to solve. At minimum, energy consumption, including electricity and other sources, will double in the next 40 years. Electricity will double by 2030. At the same time, climate specialists tell us we should divide emissions by 2 to avoid serious climatic changes. A dilemma is a situation where the evident courses of action are all unattractive. We cant allow energy demand to continue to rise unchecked the impact on our security, costs and planet dont allow that. Simultaneously we cant just cut all our activity in half. Countries will not agree to that impact on their economies and standards of living. So whats the way out?

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Slide 7 To do both, the world needs to improve its carbon intensity by a factor of 4. The world needs to do more, with less. We cant wait for new technologies to clean up generation and meet increased demand, and we dont have to, because energy efficiency solutions are available now, and they work. Energy efficiency is the way out of the dilemma. It allows users to still achieve their required levels of productivity and comfort, at lower cost, and with less pressure on infrastructure and resources. Slide 8 So if energy efficiency is the answer, where should we focus? If you look to the media, we hear a lot about the need for hybrid cars and less air travel. Transportation is often top of the agenda. Slide 9 But the reality is that the biggest part of our energy consumption is not when we travel. Its where we live, work, shop and study.

Industry, including industrial buildings, is responsible for 33% of all energy use. This is followed by transportation at 28%, residential at 21% and buildings at 18%. When you add industry, residential and commercial buildings, such as offices, schools, hospitals, and shops, you have 72% of all energy consumption. Thats almost three times as much as transportation. The main energy consumed in industry and buildings is used for heating, cooling, motors, lighting, electronics and appliances, and there are many solutions available to improve the efficiency of those applications. Returning to transportation for a moment, one of the developing areas for reducing emissions and improving fuel efficiency is via hybrids and electric cars. Battery charging will increase needs for electrical energy and place more demand on already overstretched electrical distribution networks. If we have to construct new

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power plants to support electric cars, much of the benefit will be lost. Energy efficiency in industry, buildings and residences will be a key enabler for energy efficiency in transportation. Slide 10 Mature markets, including North America and Europe, with increased demand and limited resources, will continue legislation to reduce demand, shift to alternatives, and improve energy security. This realization, couched with a shift in public opinion on climate change, will influence an acceleration of action in adapting and managing energy consumption, costs and pollution both voluntarily and through legislation.

For these reasons, the drivers we have seen for the past 25 years have crossed a cost and political threshold. This is accelerating the action we must take - we must learn to adapt and manage energy consumption, costs, and pollutants. When energy was cheap, conserving it was unimportant. Now the growing cost of energy means its not just an overhead any more. For many building owners, energy costs have become second only to healthcare costs. Its a growing part of the budget for industrials and data centers too. Today, energy is more than expensiveits a liability. Its fluctuating cost, and your reliance on it, is putting the future of your business at risk. The good news: you can reduce future risk, and control that cost, through energy efficiency. * IBM Global survey Nov 2007 Slide 11 A significant proof of this commitment is the stimulus packages. Governments are responding with an unprecedented mobilisation of funds to boost the worldwide economy. At the end of 2009, global packages totalled 2.4 trillion US dollars. Thats about 3% of the annual world Gross Domestic Product - GDP) On average 20% of these packages are dedicated to green measures, such as clean energy generation sources, infrastructures, and energy efficiency. In China, the proportion rises up to 38%, in the European Union, 60%. Slide 12 Facing the energy dilemma by using energy more efficiently has many advantages. First of all, energy efficiency reduces greenhouse gases. Through a combination of different energy efficiency actions, up to

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30% efficiency can be achieved immediately. Compared to any other solution, efficiency is a cheaper, quicker and cleaner option. Slide 13 Generation efficiency and clean fuel technology are key but end use avoidance yields greater benefits. Due to losses in the generation and transmission of electrical energy, saving one unit on the demand side saves 3 units on the supply side in the form of the oil or coal necessary to produce that electricity. For that reason, saving one unit of electricity at the end user is more effective than building a power plant that is twice as efficient as todays plants. Renewable energy sources can be volatile. Wind and sun are not available 24 hours per day, 365 days per year. This means the energy grid of the future will have to be adaptable to variations, and energy efficiency at the point of use has to be part of that strategy. Slide 14 Energy efficiency does not mean ineffectiveness, reduced production or reduced comfort. Energy conservation is the practice of decreasing the quantity of energy used. It may be achieved by reduced consumption of energy, which implies doing less in order to obtain the saving, or through energy efficiency, in which case energy use is decreased while achieving a similar outcome. For example: If you switch off a light bulb, you saved energy because you reduced your consumption. But the outcome is not the same, because the room is now dark. If you replace the light bulb with a more efficient one, you also saved energy. And the outcome is the same because the room is illuminated. If there was no need for the light to be on in the room, it is better to turn the light off, because the energy is being wasted. But if the light is needed, it is better to use an energy-efficient bulb. Slide 15 We are in tough economic times, so it would be easy to say that now is not the time to invest in energy efficiency. The reverse is true. We need the cost savings that energy efficiency will bring us. If your business has an energy bill of 60M per year, a 10% reduction would yield around 6M per year in lower costs. Lets imagine that instead of going for cost reduction, you try to increase sales instead. If your pre-tax earnings margin is 15%, then you would have to increase sales by 40 million per year to get the same impact. And how would you do it? Most of the time you cant be certain that the actions you would take to boost sales will deliver the expected results. You might be left with expensive advertising campaigns and new product development, and insufficient payback.

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Energy saving projects are low risk. The solutions are proven in practice so you can invest with a high degree of confidence in obtaining the expected return. Often there are actions you can take for nothing, and short payback projects that totally make sense at this time. Slide 16 You cant avoid the cost of energy efficiency by doing nothing. If your site is wasting 20% of its energy, youre paying for that, every single day. Its like a tax and theres never a rebate. If you start to invest in energy efficiency, one day you can stop paying the tax. Slide 17 But the longer you wait, the more you waste. When you put off energy projects, you keep on paying year after year for energy that was inefficiently used. Energy costs themselves continue to increase, and projects become more expensive due to rising prices. On the other hand, if you invest immediately, energy savings can compound over time if you re-invest them in further improvements.

This analysis shows an example building with an annual utility bill of $600,000. The cost to the owner of delaying the energy project is shown by the blue line, If the owner delays for 5 years, the costs of delay from continuing to pay for inefficient energy use, and the increased project cost, amount to over $2 million dollars.

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Slide 18 Energy upgrades are among the best investments you can make. A study of The Investment Risk in Whole Buildings Energy-Efficiency Upgrade Projects by the American Council for an Energy Efficient Economy found that energy efficiency projects have significantly better payback and lower risk than many stock market investments.

Slide 19 You can see the effect on this chart. Energy efficiency programs consistently outperform other popular investments.

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Slide 20 And since energy costs continue to increase, paybacks continue to improve. Consider a commercial building having an energy saving project costing $1M. Electricity savings is anticipated to be 3500MWh. Even with project cost and energy savings fixed, payback time has decreased 30% over 5 years due to increase in energy prices.

Slide 21 Where should we seek to make the savings? To fully account for energy use in a facility you must consider all types of energy including water, air, gas, electric and steam, commonly known as WAGES. Slide 22 There are nine major systems that consume energy in buildings and industry. They are: Building envelope HVAC systems Electrical supply systems Lighting Boiler and steam systems Domestic hot water systems Compressed air systems Motors (including those used to drive elevators and lifts) Special purpose process equipment Slide 23 Most buildings, like residences, use energy for environmental conditioning - air conditioning, space heating and ventilation. They also, unlike residences, have high consumption for lighting and plug loads, such as computers, copiers, and other things you plug into the wall. If a building has a dining area, significant energy may go into food preparation, refrigeration and dishwashing. An athletic facility requires considerable energy to make hot water for showers. In certain types of facilities the typical energy users are completely overshadowed by the energy required for process based activities. Examples would be data processing centers and industrial plants. Lighting, heating and cooling are by far the largest energy expense and therefore may be the first place to find savings. However, the energy use profile will vary greatly depending on the facility.

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Slide 24 In industry, over 60% of electricity is consumed by motors. 25% savings in this area would save 7% of the worlds electricity. In data centers, computer servers consume large amounts of power and also have tremendous needs for cooling the equipment. In buildings, heating, ventilation and air conditioning is a big energy consumer. Products are available to improve the efficiency of these systems, and also building management systems that can control heating and air conditioning to keep the building comfortable, and at the same time minimize the energy used. Lighting is another major area of cost where efficiency can make a difference. At home, lighting, heating and cooling are responsible for most of the energy bill. Here, too, products are available that can have an impact on these costs. Now, lets discuss some basic energy topics and measurements as a foundation for a good understanding of energy principles. Slide 25 There are two distinct approaches to energy efficiency. Both have their place in your program. Passive energy efficiency depends on devices and materials that intrinsically use less energy to perform their function. Examples include replacing existing equipment with lower consumption devices, fixing leaks and adding insulation. Oftentimes energy efficient lighting upgrades are among the first projects undertaken, largely because of their quick return on investment. Also, adding insulation in major heat loss areas is one of the easiest and most effective areas for improvement. These actions are called passive because once implemented, they silently save energy as they are used. By itself, passive energy efficiency can generate savings of 10% and 15%, but there is more to do. An energy efficient light bulb will still waste energy if it is left switched on when it is not needed. Insulation will not save money if people open the windows and let heat out during the winter, or let cold air out during the summer. Active energy efficiency is needed to maximize and sustain the gains from passive energy efficiency, and bring additional savings too. Slide 26 Active energy efficiency seeks to use energy more intelligently, to achieve the same results with less. Through automation and regulation you can ensure that equipment only works as hard as it needs to and not more. Many of these measures are relatively easy to implement and pay back in less than 2 years. Lots of energy efficiency programs start by improving employee awareness and behaviour such as shutting down production equipment and lighting when not in use to reduce energy. Thats a good way to start at little or no cost, but it leaves you vulnerable to human errors. Automation reduces that risk, turning off devices when not needed and regulating motors or heating at the optimized level. A permanent monitoring and maintenance program locks in the savings. Monitoring also gives you the information you need to find more savings.

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Slide 27 We can see the effects of combining these approaches here. You could save 10 to 15% of your consumption with passive energy efficiency measures dealing with efficient devices and installation. You could take that further with automation and regulation to optimize the usage of those devices another 5 to 15%. Then, your monitoring program could bring another 2 8%, by noticing deviations and allowing you to correct them quickly. Depending on your facility, you could readily save 30%.

However, you can lose these savings quickly if you dont keep your monitoring and maintenance program in place. Automated systems can drift away from optimal performance as small adjustments are made over time. People can slip back into energy-wasting behavior if deviations are undetected and expectations are not reinforced. Power reliability is also an important contributor efficiency gains can be lost quickly if there are unplanned, unmanaged shutdowns of equipment and processes. Without proper monitoring, each year 8% of savings can be lost. Slide 28 Energy efficiency is not a one-time project; its a continuous cycle. And thats good, because it means we can approach the problem gradually and phase our actions according to our available budget. You need to start from a firm foundation. Beginning with an energy audit allows you to prioritize your actions effectively. At the beginning simple data from the utility bill and some expert observations can discover a lot. If you have more detailed measurements available, that can increase confidence in the choices that you make. Temporary measurements may be enough to kick-start your program. Generally, your energy audit will identify some low-hanging fruit in the area of passive energy efficiency. Fix the basics like mending air leaks, or insulating steam pipes. Passive energy efficiency would also include things such as high-efficiency motors, but those actions tend to require greater investments and cause more disruption when they are implemented. This may be hard to justify if the equipment to be replaced is relatively new. When the equipment approaches end-of-life, analysis of the total cost of ownership can help support replacement with high-efficiency equipment.

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When you have fixed all the basics that make sense at the time, more low hanging fruit can be found in active energy efficiency. Optimise through automation and regulation. Lock in your savings by not relying on people. Monitoring and maintenance are how you will save more. As you learn about how and when energy is consumed in the plant, you will find new ways to adjust practices to save more. This gives you the inputs for the next turn of the cycle.

Lets examine the solutions that would be be included at each step in more detail. Slide 29 Taking a systematic approach maximizes savings and avoids unnecessary cost. It ensures you create utility savings without compromising facility reliability, comfort or safety. A facility audit will provide you with a comprehensive energy analysis. Experts examine the energy usage patterns and demands of a facility and identify the best opportunities to improve energy efficiency. Projects are then prioritized based on the initial cost and expected payback period, and those with the greatest potential savings and quickest payback should be among the first to be undertaken. Without this, you may select the wrong project and make expensive mistakes. A critical input to your energy program is energy data. You may be able to get started with analysis from utility bills, but quickly you will find they lack the detail crucial to effective analysis and decision making. Investment in meters now can prevent errors later. Slide 30 Once the audit has identified the low-hanging fruit, the next step is to fix the basics. Examples of this are employing energy efficient light bulbs and fixtures with lighting retrofits, high-efficiency motors, adding insulation, and replacing windows. It is also important to address power quality and power reliability issues. Low power factor may be impacting your bill, and the effective utilization of the capacity of your electrical network. Harmonics may put you at risk of unexpected shutdowns, and shorten the life of your equipment. Slide 31 Its good to have low consumption devices, but that doesnt mean you have to leave them on all day! Good resolutions to shut off HVAC systems and lights when you leave a room or office tend to fade away when distraction intervene - hence the need for automation. Some examples of automation include: Building Management Systems Lighting Control Systems Motor control systems Home control systems These systems can ensure that equipment is only on when it needs to be on. And sometimes, you can save on cost by changing when you use energy. These systems can schedule consumption at times of day when cost is lower. Slide 32 If you never maintain your car, it will consume more and more fuel. The same is true for your electrical installation, HVAC system, boilers, process heating equipment and automation systems. Continuous commissioning practices, such as monitoring and improvement, ensure that the results achieved are here to

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stay and that your new installation is profitable and sustainable. Energy management software or remote monitoring systems are critical you cant manage what you dont measure. Further investment in metering will reveal more detail to help you continue the improvement cycle. Lets move on to look at how to get the ball rolling. Slide 33 An energy program cannot succeed without effective leadership. Success starts with a commitment from executive management and a powerful indication of that commitment is appointing a champion of energy efficiency. This person will be the driving force behind the project, the person who will consistently monitor and maintain progress. Executive management must formulate, communicate, and embrace an energy management policy. The champion, then, is the person committed and responsible for achieving the results Collecting, analysing, and reporting energy information Prioritizing projects, securing approval and driving implementation Ensuring that energy considerations are integrated into decision making for new facilities and purchases Obtaining ideas and feedback from building occupants or employees, and sharing celebration of the success Slide 34 Getting approval to undertake energy efficiency projects is not always an easy task. Find out ahead of time what financial model is used to make investment decisions in your company, then present projects within that framework. Be sure to include any rebates or incentives that you may be eligible for. Also be sure to explain other advantages such as reduced maintenance costs, increased comfort, and indoor air quality. It may be easy to get approval if there is an existing goal to reduce energy consumption. But if there isnt, you might need to get a little more creative. For example, a company might have a mandate to reduce error rate by x percent. If that company is considering a lighting retrofit, a potential side benefit is a reduced error rate due to a higher quality of light. You should be sure to articulate that this proposed project will reduce energy consumption AND help meet production error rate goals. You should also translate proposed savings into environmental goals such as potential greenhouse gas (GHG) reductions. Dont forget to show that energy efficiency is considered a safer investment with higher returns than most financial options. Documenting these side benefits increases your chances of getting approval for energy efficiency projects and services. Slide 35 Financial models are used to make investment decisions. Return on investment and simple payback are typical industry measurements. Simple ROI is calculated by dividing annual savings by the initial investment and is represented by a percentage. It is the inverse of simple payback which shows how long it will take for an investment to begin making money. Internal rate of return (IRR) compares the net present value to the initial cost of the project. IRR is usually calculated using financial tables and takes into account the effects of

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inflation and interest rates. A hurdle rate is a companys minimum acceptable IRR for a project. Expanding your vernacular to include financial models is essential when presenting projects that relate to energy costs. Slide 36 Schneider Electrics mission is to be the global specialist in energy management. We do this by delivering active energy efficiency products and comprehensive energy management solutions. As energy manager, we offer metering, monitoring, control solutions and cost optimization services. As energy expert we offer consultative services, technical and behavioral energy action plans and implementation services. Slide 37 Lets summarize what we have learned today. Energy is important because Ever-increasing energy demand impacts price and security Renewables will not replace fossil fuels in time to prevent environmental disaster, including pollution and climate change. These issues have tangible costs The energy dilemma requires us to meet a doubled demand for energy but with half of the greenhouse gas emissions Energy efficiency is the answer. Energy efficiency is the act of reducing consumption while achieving the same results We saw the four simple steps of an effective energy efficiency program, and the common and effective actions to improve energy efficiency in buildings, industry and residences And we learned the difference between passive and active energy efficiency Slide 38 72% of energy consumption comes from industry, residences and tertiary buildings. Energy efficiency is the cleanest and quickest solution to the energy dilemma. Cleanest because the greenest unit of energy is the energy you didn't need to use. Quickest because with solutions that are available today, you can save up to 30%. Slide 39 Thank you for participating in this Energy University course.

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