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). Modern gas turbines have a lot of potencial, if you use them properly. Discover more about gas turbines.

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.

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.

Energy Audit – more wasted light energy

1.00 pm, Sunday, 18 January 2008, Kowloon Bay, Hong Kong

It is a beautiful bright sunny Sunday afternoon, the store is obviously closed, and the shutters are down. Yet all seven (7) exterior lamps are burning brightly, here is a photograph captured with my camera phone.

Did the owner forget? or believe it would not make a big difference? Did someone consider the extra coal that would be burnt at the power station and its resultant pollution to keep those lights on?

This raises the thorny issue, the true cost of power, can we continue to overlook the generation externalities? The social cost of pollution created by power generation in Hong Kong is presently estimated to be in the order of HK$ 6 billon (US$ 740 million) per year, but that cost is not priced into the consumers energy charge, its paid by the tax payers. The Hong Kong Government verbally advocates a polluters pay policy, however the reality is very different, often relying on the tax payer to foot the bill.

Green Bank – implementing energy audit findings

New Resource bank (in USA) is the country’s first “green” bank and they love helping in green people in green ways……. read the full article here

It is a positive step that at least one bank in the US is finally being to understand. However if you don’t have access to a green bank where do you turn? First ask your local energy consultant, they have the knowledge and contacts to point you in the right direction.

For economically viable large projects, let’s say US$ 10 million and up sourcing finance is not the major challenge, there are several options in the market. However, the important smaller schemes often struggle, and find difficulty to securing funding, in reality nobody is really interested due the transaction cost.

I have spent time explaining the an energy efficiency finance model to banks who seem to uninterested, prefering to opt or lets say demand upfront collateral, ignoring the efficicency savings as a future income stream. Luckily, we have an Mr Xu, an energy specialist at ADB Hong Kong, who we hope will help the re-education process.

Energy audit findings

Energy audit findings – the photograph above is a section of a damaged coil from an air conditioning unit. It is obviously a badly damaged, the aluminium fins have been stripped away, revealing the structure of the refrigeration tubing beneath, absolutely necessary for coolant-to-air heat exchange. However, since the air conditioning is still “technically working” it seems no repair is deemed necessary to restore the lost heat exchange area, and lost efficiency.

Specification Note: Actually this is a common problem, and easy to avoid – insist upon a heavy gauge, say 25mm x 25mm GI mesh over the exposed coil area to provide mechanical protection. With a large open grid, the mesh would not impede the air flow. It will protect the delicate fins from unintended damage.

sponsored by energy auditor

Green building its cheaper than you think

The cost of green building is lower than traditional building. For example, design the building envelope with decent solar shading immediately (and forever) reduces the space cooling load, therefore the building needs a smaller chiller.

But that is only half the story, along with a smaller chiller, all the associated distribution equipment including the air handing units, air moving equipment, piping, cooling towers, circulating pumps, switchgear, and cables are also smaller, and less expensive. This is a critical point often overlooked using integrated design – minimise the load, drives the need for small equipment, it is not only cheaper, but uses less space.

There is good news from Good Energies that found evidence from 146 green buildings in USA that the additional cost for green building was only 2% not 17%.  However, whether or not these buildings used integrated design principles mentioned above was not reported.

Additionally there is still no cost category to account of the “soft” benefits of building green. How customers have you lost because you don’t have green building? People have already discounted your building (or your product) because it’s does not have a green label, and is not energy efficient, and I guarantee they didn’t stop by to tell you where you went wrong.

I believe, finally, the market is beginning to understand the future, oil and gas is finite resource will not last forever, and the energy position of operating costs are inevitably rising.

After your staff costs, energy represents the largest proportion of the operating budget for buildings. In Hong Kong buildings are voracious, consuming 86% of all the electricity generated, and 33% of all electricity generated is used to power air conditioning systems.

Let’s face it, incremental improvement is pointless, single digit savings will barely stave off inflationary pressures – Use the integrated principals to save your CAPex today and your OPex tomorrow.

sponsored by building air balancing commissioning

Top Ten Energy Conservation Tips

Top ten list of energy smart decisions:

1. If you can’t measure it, how can you manage it? Regularly monitor and record on your electricity consumption, plus other fuels such as gas and oil. Provide and monitor sub-meters to record different systems and sub-systems.  Also don’t forget that utility companies are not infallible – remember to check that your bills relate to the fuel that you actually used rather than an “estimated” meter reading.

Incidentally, the fact that BEAM rewards a credit for energy sub-metering is an indication of the importance of energy awareness.

2. Switch off lights in empty rooms – sounds like common-sense doesn’t it? Turning off lights in unoccupied rooms and corridors especially at the end of the day. This can save up to 10% of your energy bill. And yes that includes fluorescent lighting fittings.

3. Use energy efficient light fittings – they use 25% less power and last six times longer. Switching to the last technology today will save the cost of the investment long before the old lamps have expired – recoup the savings today.

4. Use the light you need. Bright corridors? delamp (remove) or switch off alternate lighting fittings.

5. Use daylight it’s free, so regularly clean your windows.

6. Clean light fittings regularly – Dirt reduces lighting levels, encouraging people to switch on more lights.

7. Too cold, set the room thermostat at comfort levels say 24°.  Air conditioning consumes forty percent (40%) of buildings energy. For example, every 1° decrease in room temperature, the energy cost increases by approximately eight percent (8%) .

8. If humidity and condensation is not a risk, don’t pay for cooling unused space e.g. empty offices, storerooms, corridors, etc. turn off the air conditioning.

9. Check that your thermostats are property sited, out of draughts and away from cold or hot spots. Consider installing remote sensing or wireless. Bonus tip – horrified, I saw a the air conditioning thermostat installed next the hand dryer – please don’t.

10. Keep equipment such as air conditioners and filters clean. Dirt reduces efficiency and lowers output.

Bonus Tip

Top eleven tips just didn’t sound right, so here is a bonus tip, it is so critical that I can’t possibly leave it out – Lead by example.

If management and senior managers are “seen” to ignore the new corporate energy measures, I guarantee that your efforts will fail. It is human nature, people follow visual cues for seventy five percent (75%) of their information – we watch and learn. Actively demonstrating energy conservation will do more to promote energy conservation campaign within your organisation or business than a memo will ever achieve. Plan to ensure that your employees see your energy strategy.

Out of Service

Three vending machines all using energy, a closer look reveals the unit in the middle is out of service, see the photo below.  Didn’t anyone think about turning off the electricity completely? As you can see some of the lamps are still on, still burning electricity.

Powering an appliance that can’t or does not serve its intended purpose is an egregious waste of energy.

The lights are ON but nobody is home

I recently conducted an energy audit of a building discovering an entire floor of unoccupied plant rooms with the lights in every room switched “ON”.

The photograph below, is typical, yet another unoccupied plant room with the lights burning fuel late into the night.

Is it safe to assume there is a disconnect here? Actually, it is a common problem. The firms which are employed to operate our buildings don’t actually pay the energy bill every month, so there is no financial or other incentive to switch off unnecessary lighting fittings.

We know penalties don’t work, a system of positive incentives are needed here.

Energy Efficiency As A Global Concern

31 October 2008 – I was honoured to be invited by HKTDC to give a speech at the 2008 ECO ASIA EXPO regarding Energy Efficiency. Special thanks for HKDTC’s Mr Matthew Ip for his gracious introduction.

Here are some more photographs from the venue.

Sadly, especially considering this was an environmenal exhitbition, each of the exhibition booths had several spotlights with 100 watt incandescent lamps – hardly a shining example of efficiency for the exhibitors and delegates.

Building Energy Efficiency Book

energy efficiency book kelcroft

I was one of the many experts that contributed to the book titled Building Energy Efficiency – Why Green Buildings Are Key to Asia’s Future published by the Asia Business Council. This book covers energy issues and building energy codes in different Asian countries – worth reading. I understand a Chinese language version will be launched in the near future (end of 2008).

Its key point, learn from history and avoid repeating past mistakes. The PDF version is available FREE to download visit this page

Who is designing your Green building?

kelcroft, john herbert, green building

I attended the Enviroseries 08 conference, the topic was energy efficiency. What has become increasing transparent is that the business as usual approach to buildings, and green building is just not working.

For green buildings who designs them?  It seems clear to me that when the overriding consideration is the TCO (Total Cost of Ownership)  that is the on-going fuel and energy costs for the life of a building (claims of upto 70% of the cost are often cited) outweigh other considerations in terms of sustainability. So the question must be asked why are architects leading?

An architect can’t calculate the primary metric KWH/sqm/PA, the cooling and heating loads for a particular aspect, zone or elevation, and the architect can’t tell you the right glazing balancing the cost of solar reflection and creating a perimeter day lighting zone, or the water impact, etc. etc. the list is long an tedious – so you have to ask the question where is the value? Notwithstanding companies like RENEW ENERGY, which manufacture the best solar equipment, the above questions would still stay germane, as that only partly slices off a sliver of the problem.

green building, kelcroft, john herbert

Conference Brochure

it seems clear that Building developers are asking the wrong people to create green buildings, the architect is the middle man, needing the advice from a legion of E&M engineers. It’s the E&M engineers that do the heavy lifting, calculating the energy metrics of building envelope, assessing the operating cost, modelling energy savings for a green roof or cool roof, not the architect. Its the engineers that need to specify the performance of the building materials if energy costs are to be controlled.

Buildings in Hong Kong and elsewhere designed under the old method with a lead architect, those buildings consume 86% of all the electricity generated – business as usual?

The lion share of the future energy and ownership costs of building is too often determined by an architect, and that needs to change if our goal of lowering GHG emissions is to be met.

Energy Efficiency Presentation by John Herbert

I was honoured to give an energy efficiency presentation to Hong Kong Trade Development Council (HKTDC) committee regarding energy efficiency opportunities for Hong Kong business, lower business operating costs and improve profits.

Energy Efficiency

View SlideShare presentation or Upload your own. (tags: p2e2 efficiency)