1. Energy Aspect of Auto
Industry
By Avijit Choudhury
Associate General Manager & Business Head-
Energy
UL-DQS India
Presented to SGS Tekniks Manufacturing Pvt.
Ltd on 25th February, 2014
2. UL-DQS India 2
Auto industry at a glance
• Auto industry, world over, under tremendous
pressure because of sluggish economy and
escalating fuel prices.
• Under present circumstances, more than 75% of
new demand is from emerging markets like
India, Brazil, China etc.
• Over all 11.0 million vehicles (all types) are sold
in India out of which 1.2 million cars and 2.6
million commercial vehicles are manufactured
every year in India.
• Therefore auto industry plays a pivotal role in
our overall GDP.
• Hence sustainability of this sector is crucial for
our economy
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Nature of operation
• Auto industry is complex with highly fragmented
supply chain.
• Major operations like procuring raw materials
(like steel, aluminum, plastic, glass etc.), forming
& producing parts, assembling parts into finished
products are done by various vendors/ suppliers.
• According to one global estimate only 12% of
automobile manufacturing energy is consumed
by the OEM in assembly while a whopping 88%
consumption occurs in supply chain.
• Hence training and capacity building of the
supply chain is essential for the overall
achievement of sustainability of this sector.
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How important is energy?
• If we consider three major production costs-
man, material & energy: 10 – 15% cost comes
from the energy at present.
• Then why should we really bother for this?
• Reasons are manifold-
a) Sustainability of Energy Price.
b) GHG emission norms.
c) Earning of CER, white certificate etc.
d) Enhanced brand value &
e) Enhanced share price.
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Sustainability of energy price
• Three major types of energy are used by the
auto industry- electricity, natural gas or LPG and
HSD or FO or LDO.
• More than 70% of our indigenous power
generation comes from coal based thermal
power plants.
• Due to high ash content and lower GCV of
Indian coal, power producers are heavily
dependent on imported coal.
• Price of imported coal in international bidding
has just become double in recent days.
• Average price of imported coal comes around
Rs 6500- 8000/- per ton (CIF).
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Sustainability of energy price-2
• For petroleum products we are heavily
dependent on import. More than 73% of our
crude requirement is met by import.
• International crude price has gone up by 5 times
in last 10 years. Nymex crude which was $
23.71/ barrel in 2002 has become $ 109.32/
barrel in 2012.
• Our currency Rupee has add to our misery.
From Rs 51.80/ $ in last February, it had jumped
to 68.73/ $ in last August.
• Under such international price rise and worst
performing currency- be prepared to pay 1.5 to 2
times more price in near future.
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Sustainability of energy price-3
• Price of indigenous natural gas is decided by
Petroleum Ministry in consultation with
empowered GoM.
• The single largest producer of NG, M/s Reliance
Industry is demanding just the double of the
existing price $ 4.21/ MBtu.
• It is predicted that the energy cost of auto sector
which is 10-15% at present may become 19 to
26% in the next five years time.
• Just think- Can you afford to increase your
production cost by another 10% under such
fierce competition in the market?
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Restriction on GHG emission
• Environment has been given prime importance
in our legislation. Even constitution of India has
two distinctive articles on this-
i. Article 48 A : “The state shall endeavor to
protect improve and safeguard the forest &
wildlife of the country”.
ii. Article 51 A : “ It shall be the duty of every
citizen of India to protect and improve the
natural environment including forest, lakes,
rivers & wild life and to compassion for living
creatures”.
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Mitigation of GHG emission and
Prevention of climate change
• Six major green house gases covered by Kyoto
Protocol are-
a. Carbon dioxide (CO2)
b. Methane (CH4)
c. Nitrous oxide (N2O)
d. Sulfur hexafluoride (SF6)
e. Hydro fluorocarbons (HFCs) &
f. Per fluorocarbons (PFCs)
These gases cause global warming which results
into climate change and loss of bio-diversity.
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Direct relation between Energy &
Emission
• Use of energy or burning of any kind of fossil
fuel finally emits CO2 & water vapour (H2O) in
the environment.
• CO2 alone contributes around 60% of the total
Green House Gases present in the atmosphere.
• European countries and Japan have mandatory
emission norms for the industries.
• In India we have different acts/ rules to control
the emission- “The Water Act, 1974”, “The Air
Act, 1981” & “The Environment Protection Act,
1986”.
• Predominantly we control emission by
controlling energy consumption.
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Incentives on Emission Reduction
• Emission Trading: Applicable between the
countries that have made commitments to
reduce green house gas emission. The surplus
emission allowances are sold to the countries
where it is expensive to achieve the emission
target.
• Joint Implementation (JI): One industrial country
can invest in other industrial country (Annex-I of
Kyoto Protocol) to reduce GHG emission at a
lower cost.
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Incentives on Emission Reduction-2
• Clean Development Mechanism (CDM): Annex-I
countries can invest in emission reduction
projects in other countries who don’t have any
mandatory emission reduction target. For
example a company in UK can invest in a
company of India and take back the CERs
(certified emission reduction) for entire period of
CDM project cycle. CERs can also be auctioned
in various carbon exchanges.
• White Certificate: Many European countries like
Italy, Germany etc. issue white certificates to the
industries who implement EnMS and obtain ISO-
50001 certification. White certificate allows
industry to claim rebate in corporate tax.
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Brand Value & Share Price
• The era of judging the performance of any
company by its financial balance sheet alone
has gone. New methodology has been
developed based on triple bottom line approach-
1) Environmental
2) Social &
3) Financial
A company is considered to be “Sustainable” if it
performs in all the above three fronts. Companies
are required to publish their sustainability report
(GRI-III accounting standard).
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Products of EnMS
• ISO 50001 Certification: Obtain DAKKS, ANAB,
UKCAS etc. accredited certificate.
• Better CDP Leadership Index: Get a higher
scoring and better position in CDP annual
report.
• Better carbon index (CARBONEX of BSE):
Initiative started in Bombay Stock Exchange.
• Solid carbon foot print reporting : Prevalent in
EU countries.
15. New Company Act, 2013 & CSR
• When President of India gave his assent to the
company bill, 2013, India became the first
country in the world to mandate the spend on
CSR activities through a statutory provision.
• The act says- “Every company having a net
worth of Rs 500 crores or more or turnover of Rs
1000 crore or more or net profit of Rs 5 crore or
more during any financial year will have to
spend at least 2% of the average net profit of the
past three financial years on specified CSR
activities”.
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16. General CSR guideline
As per general convention there are four different
kind of CSR activities-
• Environmental CSR: Focuses on ecological &
climate change issues.
• Community based CSR: Focuses on business
model that improves the quality of life of the
people living in local community.
• HR based CSR: Projects that improves the well -
being of company staff.
• Philanthropy: Donate a money to a good cause
usually thru a charity partner.
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18. Energy analysis of OEM
OEM having only press, body, paint, engine & assembly shop
Type of Vehicle SEC (kWh/ unit)
Passenger Car, SUVs 500 – 700
Commercial Vehicles 1100 – 1500
Tractors 500 – 650
Two Wheelers 30 – 35
20% Energy savings in 2,00,000 cars manufacturing unit will generate
INR 100 million at the present electricity rate of Rs 5/- per unit.
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19. Typical Energy Share of Automobile
Plant
In utility, compressed air alone consumes more
than 50% power while second most important is
HVAC
Paint Shop (35%)
Engine & Transaxle
(25%)
Utilities (28%)
Others (12%)
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20. Major areas to be audited
Compressed Air System,
Ventilation,
Ovens,
Hot water generating system,
Heat Treatment (Sealed Quenched
Furnace & tempering),
Test Bed cooling water system,
Press machines &
Pumping system.
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21. Renault-Nissan Sustainable Operation
New Renault-Nissan JV plant was
inaugurated in Morocco in February, 2012.
With an annual capacity of 4,00,000
vehicles it is world’s first zero carbon and
zero effluent automotive plant.
The facility is the fruit of unique
partnership among Kingdom of Morocco,
Renault and Veolia Environment.
Compared to an equivalent factory, CO2
emission has been slashed by 98% - a
feat to save 1,35,000 tones of CO2
emission annuallyUL-DQS India 21
22. Renault-Nissan Case Study
The plant doesn’t discharge any waste
water to the environment while the total
water requirement has been reduced by
70%
Substantial energy savings has been
made by combining innovative technology
& best practices.
Paint shop which consumes 70% of
thermal energy was put under innovative
measures. By this, total thermal energy
requirement of the plant was cut by 35%.
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23. Renault-Nissan Case
Fuel for hot water boiler and oven were
replaced with biomass. Locally sourced
olive stones & eucalyptus wood used as
biomass fuel.
Electricity requirement of the plant is also
met from renewable source like wind-
power & hydro-electricity.
These efforts were recognized by EU with
“Sustainable Energy Europe” award to
Renault.
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24. Conclusions
Energy will become a crucial part of
production for auto industry in the coming
days.
To have meaningful savings in the overall
process, all vendors/ suppliers need to be
trained and brought under energy saving
plan.
Energy and Environment are co-related
and they need to be treated with equal
importance. Energy action plan should
cover the environmental aspect as well.
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25. Conclusions-2
There are various statutory & legal
requirements of the country and industry
should comply them thru energy efficiency
measures.
Energy management is nothing but
judicious and effective use of energy to
maximize profit (minimize cost) and
enhance competitive position.
The fundamental goal of energy
management is to produce goods or
provide services with the least cost and
least environmental effect.UL-DQS India 25
