Financing Energy Efficiency is EPC the answer?

While everyone seems to be pointing to the financial crisis I can see more opportunities to use creative financing techniques, like the Energy Performance Contract model to finance energy efficiency improvement projects.

An Energy Performance Contract (EPC) is a tried and tested method to fund capital expenditure for an energy efficiency improvement project from the future cost savings. First, let me say this is not a new idea, energy performance contracting has been around for decades, and today is probably the best option around where budgets are tight. Typically an EPC covers the entire project cost, including all the new equipment, cost of finance, measurement and verification, and maintenance all funded from the energy savings.

I was asked today is an EPC only suitable for replacing old and ageing equipment? Typically my answer would be yes, that is a good application because large energy efficiency improvements equate to significantly lower operating expenses.  However, here in Hong Kong, there is also the option for healthy air cooled chillers can be replaced today with water-cooled chillers under an EPC so facility owners can immediately enjoy the benefit of lower operating costs.

Energy efficiency improvements achieve cost reductions by improving facilities, for example a more efficient air conditioning system, but also create soft benefits too including lower maintenance costs and improved comfort for the building occupants. Facility owners have the new equipment installed so the risk to the owner is minimal, yet there is an overwhelming inertia for EPC’s to traction in this part of the world. The objections to be honest are not clearly defined.

Also an often overlooked benefit is the value gained by combining multiple technologies and payback periods, to achieve an overall package which will meet the project cash flow projections. EPC Projects are typically 3-5 years in length, although government bodies have been known to enter into lengthy contracts.

Nowadays, with the software and analysis tools available, EPC’s often include more complex systems such as central plant distribution loop modifications. These more complex upgrades could include plate and frame heat exchangers, variable frequency pumping, and controls.  Some contracts even include other sectors, such as water, grey water, and waste treatment.

There are seven model Energy Performance Contracts types, and clearly these will continue to evolve. In the current economic climate they might even reach critical mass.

John Herbert
Kelcroft E&M Limited

helping lower the cost and impact of doing business in Asia

Saving Energy in Steam Systems

Opportunities to lower operating costs for Steam systems using energy efficiency improvements – there are plenty opportunities to improve industrial energy efficiency for steam systems in China, and elsewhere in Asia. And some projects may also qualify to earn extra income from a carbon credit (officially known as CER – Certified Emission Reduction) under the Clean Development Mechanism (CDM).

I see the potential for the wider application  of CDM AM0017, which is the official CDM methodology for calculating the Steam system efficiency improvements by replacing steam traps and returning condensate.

System Systems
Steam is still a marvellous high density medium for transporting heat energy, and an essential part of industrial process needs, however a high pressure fluid, at temperatures up to 500 Deg C needs to be respected.  Twenty years ago I cut my teeth on steam projects in the United Kingdom, a typical hospital project demonstrates the utility of steam, where it is used for autoclaves, sterilising, catering, cleaning, domestic hot water, humidification, and also heating systems.

A steam system, consists of four main elements:

  1. Steam Generation
  2. Steam Distribution
  3. Steam Traps
  4. Condensate Return

energy efficient steam and condensate systems

Energy Audit Opportunities
An energy audit should examine the whole steam system, from generation through to point of use to identify wasted energy, and identify any cost effective improvements. You’ll notice immediately that unlike other piped systems, the steam flow and condensate return have to be handled separately.

Steam Generation
Steam generation means creating steam using fuel typically coal, oil, or gas, although electricity is sometimes used also.  Water is heated from atmospheric pressure to the designed steam pressure for use in the facility.  Operating boilers at maximum efficiently, including monitoring air flow, improved firing controls optimise the use of fuel and can yield good results. Power stations often use coal fired boilers, and naturally have a low thermal efficiency thirty percent is common, so there are opportunities to utilise that wasted heat energy for an local industrial process.  Opportunities for energy savings would include recovering any waste heat energy for example from flue gases, or blowdown to pre-heat the any fresh (raw) water. For large industrial plants it could be possible to use higher pressure steam to drive electricity generating turbine, and use that lower pressure exhaust for process purposes. You can contact Utility Saving Expert for expert advice on how to conserve electricity.

Steam Distribution
Steam distribution is the transfer of your steam now under high pressure from the boiler to the point of use with minimising losses, Steam is not mechanically pumped, its movement driven from the inherent pressure difference, high to low pressure.

It is important that the steam distribution system does not reduce or lower the quality (dryness) of the steam because that lowers the heat energy. Unlike other piped systems the steam can travel at high velocity, upto 30m/sec, and the self drainage of the steam pipework is critical to effectively deliver dry steam, and is air vented for start up conditions.

Piping configurations that dip under obstacles such as other services and beams would create a natural low point where condensate will accumulate impacting the steam quality, and provide a source for damage by water hammer. Particular care is required for the configuration of expansion joints to ensure they are self draining.

Opportunities for energy efficiency improvements in the steam distribution system include minimising heat losses, reducing piping routes, where possible design out low points, and economic insulation.

Steam Trapping

Although Steam trapping could be considered as part of Steam Distribution, or Condensate Return, the problems are so common and distinct Steam trapping deserves a separate section.

The steam trap is the gateway between the process outlet and the condensate piping system, very often the traps leak due to internal blockage.  Most steam traps have a small orifice that can easily become blocked by debris and fail in the open position. A failed steam trap wastes energy due to causes increased heat-up time, and lengthened the product cycle times because the potential latent energy in steam passes straight though the process and is lost in to the condensate system.

Condensate

Bad design or maintenance panic (just to get production running again) causes another common problem, the wrong type of steam trap, and facility operators are unaware that the wrong type of trap is wasting energy. In some circumstance, poor management can cause injury to operators.

Traditionally,  condensate steams were fitted with a special type of fitting known as a sight glass so operators had the opportunity to visually check that water, and not steam, was flowing in to the condensate line.

However, the sight glass had many disadvantages.  Over time the “glass” viewing port become obscured and unusable. Also some sight glasses were installed in such a location that the operators couldn’t physically access the sight glass to check it.  To overcome these shortfalls a different type of steam trap monitor was invented to provide remote monitoring of condensate or steam flow, for example, the Spira-Tech manufactured by Spriax Sarco, other companies provide similar systems.  This type of trap monitoring system immediately alerts the facility operator that they have a faulty trap, and importantly its exact location.

Condensate Return
After the steam has been used in the facility process to heat a product, what remains is the Condensate (hot water). It must be noted that still many industrial steam plants don’t have any condensate return system! Why is that a problem? because it millions of litres of hot water are wasted, in additional “cold” raw water needs to be purchased to replace it.

Where uncontaminated condensate can be captured, it can be sent through insulated piping back to to the boiler for reuse. In my experience, next comes the most commonly asked question “What percentage of condensate should be returned to the steam boiler plant?” In a perfect world 100%, yes, all the condensate should be returned to the boiler, since the condensate contains up to 20-30% of the heat energy used to create the steam, returning it to the boiler saves both fuel and raw water.

However, there are no targets written in stone, 100% is an ideal goal but it is simply not practical in the field, any system that returns less than 70%-80% condensate warrants investigation.  It is worth noting that condensate flow varies, during start-up approximately twice the flow rate of normal operating conditions is experienced so condensate handling must account for higher loads at start-up. Opportunities for energy efficiency improvements include increasing the quantity of condensate returned to the boiler, eliminating leakage, and economic thermal insulation for the condensate piping.

Carbon Credits
Energy efficiency improvements are driven by the economic imperative, lower facility operating costs. In addition to the lower costs, saving fuel also reduces the demand for finite fuel resources such as oil and gas.  Another potential income stream from energy efficiency improvement projects in developing countries is provided by the Clean Development Mechanism (CDM).  AM0017 is the CDM methodology for calculating the Steam System efficiency improvements from replacing steam traps and returning condensate. That means the saved energy can be translated into a carbon credit which has a real monetary value, and can be sold on the carbon market.

by John A. Herbert, Consultant

Current CO2 level in the Earth’s atmosphere

Energy Efficiency is by far the fastest, most benign to the environment, and cost effective weapon we have to tackle climate change – and time is running out for voluntary action.

Governments across the planet are finally realising that it is very much harder to the promised reach targets, although most were only modest goals and the next climate summit will be interesting.

Current chart and data for atmospheric CO2

It is reported here that within the US stimulus package approx. 3% has been allocated for energy efficiency projects-that is significant.  However, no single country, government, state, business, or individual can solve this problem alone, it is the big daddy of all global issues, requiring complete international cooperation.

We have already exceeded the danger threshold @ 350ppm, and CO2 is still increasing faster than ever before. At a local level, many business are preoccupied with the financial crisis, will likely overlook the quietly accumulating business risk (see the graph) until there weighty carbon tax demand note hits their mailbox.  By then it will be too late. Those who were are not already prepared will likely suffer the wrath of stakeholders and investors for ignoring the writing on the wall.

Still I remain optimistic, since there are many businesses are still unaware of the zero cost, low impact opportunities to embrace Energy Efficiency Improvements (EEI) using a performance contract, can be quickly implemented without upfront capital cost.

the misguided role of energy benchmarking?

The IPMVP blog has an interesting post from John Cowan, Chairman EVO regarding the misguided role of benchmarking. The argument is based on the notion that benchmarking is at the end of the day a pretty pointless exercise.

It is a good question since all most every energy audit RFQ demands a benchmark, even in sectors when a benchmark for that business type is not published, you need an apples to apples comparison. Comparing a hotel to commercial building is clearly pointless, hotel to hotel is certainly feasible, however comparing a hotels with integral casino, and shopping mall, etc. to those without is just futile.

Clearly he key advantage for a using benchmarking – its a shortcut, giving management access to simple index so that they can easily grasp their energy situation without delving into kwh charts. The reality of modern life is that we all need shortcuts, in the financial world listed companies are compared based on debt/equity ratios, P/E ratios, etc. it is not the full picture, its a snapshot summary for the finance side of particular business and practitioners know these need to be used wisely.

Studies have shown us already that merely public posting of neighbours energy bills creates a competitive environment in the neighbourhood to lower energy consumption. So there are needed, if only for self comparison, but practitioners need to apply then carefully.

A lower carbon economy preaching or practice

Nowadays greenwashing is a commonly recognised term, it evolved from unscrupulous advertisers and marketers using fake, or at the very least uncertain green and environmentally friendly claims to support products that were clearly not friendly to the environment, few if any had any real green credentials.

Much has been said about the future low carbon economy, and I wonder if we faced with a Carbonwashed future.

Lets take a look at the Symposium for Electrical and Mechanical Safety & Energy Efficiency organised here in Hong Kong, to be held on 23-24 February 2009 (http://www.emsd.gov.hk/emsd/e_download/wnew/Symposium2009Leaflet.pdf). Not withstanding the confusing mix of topics, the sub-title sounds inviting Innovating for a Safe and Green Environment.

Surely such an event that will cover all the benefits of energy efficiency, and explain the governments low carbon economy policy would be a carbon neutral event?  I spoke with the event manager today Ms April Li and her answer was a disappointing negative.

It’s unfair to pick out just one event right? However, I do comment upon all carbon, energy, and sustainable events, with unsustainable practices. Last year, Sustainable Development forum organised by the BEC (Business Environment Council) used hundred of paper cups comes to mind.  Back to the symposium, this particular event is heavily sponsored by the Hong Kong tax payers!! And Hong Kong Government is busy preaching about the benefit of a lower carbon economy and then doesn’t heed its own advice.

What is clear, more individuals, and sponsors need to ask more questions before attending these conferences and events.

US – China Cooperation on Energy and Climate Change

A Source For EE Quotes

I know it is hard to find good quote for your EE presentations, so the report report by the The Asia Society  A Roadmap for U.S.-China Cooperation on Energy and Climate Change is welcome.

However, it is worth noting that the fixation with CCS (Carbon Capture and Sequestration) as a solution remains as strong as ever. Now bear in mind that over the years it was another promised solution, yet as the report recognises, nobody has as managed to build a working facility. The reports first recommends further US-China cooperation to develop CCS projects.

Yes, Energy Efficiency improvement is mentioned as part of the solution, so we must be grateful. From page 32…….

2. Improving Energy Efficiency and Conservation
To reduce greenhouse gas emissions, enhance national energy security, and save money, the United States and China both need to prioritize and expand energy efficiency and conservation efforts.

In the near term, the most significant step that the United States and China can take to reduce their emissions and enhance their energy security is to reduce energy demand through greater efficiency and conservation. In many cases, these efforts also promise significant economic benefits, with only modest upfront investments returning substantial long-term savings through lower energy costs.

Indeed, energy efficiency measures are often characterized as “negative cost” opportunities, meaning that they result in positive economic returns over the lifetime of the investment. A recent McKinsey study estimates that 40 percent of emissions abatement opportunities in the United States could be achieved at “negative” cost by, for instance, improving building insulation and lighting, and by using more fuel-efficient vehicles and appliances. However, these potential gains often remain unrealized because of market inefficiencies, lack of information, government neglect, and shortages of upfront capital. More targeted government policies are needed in both countries to overcome these market barriers.

energy efficiency Japanese style….part II

solar roof panels and vending machines

solar roof panels and vending machines

In the places I visited, namely Tokyo, and in the countryside in Hakone Prefecture, a few solar panels were spotted handling self contained signage duties.

In Hakone, where you would think that the wide open countryside would encourage spacious living areas, the hotel rooms are even smaller than Tokyo, and the corridor is littered with 1m wide fluorescent Emergency Escape lighting fittings as shown below.

Although it looks similar to the standard signs, actually the base of the sign has a polycarbonate transparent section designed to light the corridor at the same time I wonder?

more later.

energy efficiency Japanese style

I was excited to have the opportunity travel to Japan over the lunar new holiday, it was to be my first visit, and besides the tourist must dos and sightseeing, and the like I was looking forward to a first hand view of the much cited Japanese efficiency, and particularly their efforts in the energy efficiency sector.

The good news, if you are in the Japanese energy efficiency business there are still countless opportunities in Japan.

Sure, Tokyo has adopted some improvment measures, for example LED traffic signals, and CFL (Compact fluorescent Lamps) however the energy wastage is still obvious.  Tokyo’s extensive communtor rail and subway system is noteworthy not only because of the extensive network, operated by several different companies,  but also the countless rows upon row of T12 lamps, with magnetic ballasts, that littered every subway station I visited.

Then there are Japan’s infamous vending machines, there are everywhere. Indoors, outdoors, on the street, in railway stations, on the concourse, on the platform, in hotels, there are everywhere.  Just behind the Star hotel in Shinjuki, Tokyo sits a row of eight vending machines lining the road offering a vast array of hot and cold beverages, the lighting is bright, bright enough to illuminated the street at night, they eliminate the need for street lamps in that area.  As far as I could tell, I didn’t personally conduct 24 hour surveillance, these machines burn electricity all day, all night, 365 days a year.

Japan has plenty of energy efficiency opportunities no doubt.