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Introduction to Energy Efficiency Industry for Malaysians
The document outlines the need for dedicated policies on energy efficiency (EE) in Malaysia, detailing the current energy landscape, potential barriers, and strategies for growth in the EE industry. It emphasizes the role of energy service companies (ESCOs) in promoting energy efficiency projects and highlights the economic benefits of adopting efficient energy practices. The document calls for a comprehensive regulatory framework and management commitment to ensure sustainable energy practices effectively contribute to economic development.
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Introduction to Energy Efficiency Industry for Malaysians
- 1. By ZAINI ABDUL WAHAB MAESCO AwarenessProgram For Engineers 17th December 2014 WISMA IEM
- 2. Overview ofEnergy in Malaysia and Outlooks on EE industry potentials ESCOs in EE industry Sustainable implementation of EE initiatives at organizations through management and engineering solutions Barriers and counter measures for holistic EE implementation at the national level to grow EE industry The way forward
- 3. CONSULTANT/ PRACTITIONER REGULATOR/ POLICY MAKERIN GOVERNMENT SERVICES CONSULTANT/ INDUSTRY PLAYER 1997-2004 2004-2012 2012-present
- 4. Certified CompetentEnMS Expert, UNIDO Registered Electrical Energy Manager, Energy Commission Certified Trainer, HRDF Registered ISO50001 Technical Auditor with Certification Bodies Registered Consultant, Asian Development Bank Member of Board of Judges, Asean Energy Awards 2011 Expert Facilitator for EE Policy Workshop, IEA 2012 EE Policy Studies & strategic implementation plan for national & state levels Expert trainer & speaker for energy management training, seminars and conferences at local & international programs EE Capacity Development Program Designs EnMS development & implementation , energy audit & business case proposal preparation & presentation REEM Coaching for qualified professionals/EE practitioners
- 5. AS A PROPFESSIONALSPEAKER AT LOCAL & INTERNATIONAL EVENTS
- 6. AS A TRAINERFOR CAPACITY BUILDING PROGRAMS
- 7. AS A PANELISTFOR LIVE SHOWS AT TV & RADIO STATIONS
- 8. IN PRINTED &ONLINE MEDIA
- 11. There isa need to have a dedicated policy on EE at the national level &recommended by the study by government Source: SEDA Malaysia
- 12. CRUDE OIL :5.46 billion barrels, NATURAL GAS : 88.00 trillion standard cubic feet RESERVE LIFE : Oil – 19 years, Gas - 36 years (source: PETRONAS (as at 1st January 2008)
- 13. more onthe decreasing trends from the early 90s Source: PEMANDU
- 14. Total resources additionhas been shrinking despite increased in exploration activities. Oil explorations activities today require bigger investments Source: PEMANDU
- 15. moved fromoil dependent to gas &coal dependent for electricity generation. The dependency on coal from Indonesia reduced from 84% in 2008 to 65% in 2011. Source: Energy Commission
- 16. GDP growthis strongly related to the increase of final energy supply &demand. Need to get the GDP to grow as are moving towards a developed country To change the trend of the energy demand to increase exactly according to the GDP growth to show that we are not utilizing our energy resources effectively. Source: National Energy Balance 2012
- 17. Malaysia isexpected to become net oil importer by 2020 or earlier if the demand increase in the same period. Coal is biggest imported energy source for Malaysia until 2030 -80% -60% -40% -20% 0% 20% 40% 60% 80% 100% 2002 2010 2020 2030 Percentage Coal Oil Gas Hydro Nuclear NRE Electricity Heat Source: APERC 2006
- 18. Energy demandprojected to increase from 2,000 PJ(2009) to 4,013 PJ(2030), average rate of 3.6% /year Short term &long term measures that can be taken is through EE initiatives while working on looking for new energy sources (RE& alternative energy) To balance and reduce the supply and demand gap Source: EPU
- 20. Using the same/less amountof energy to produce the better Output Using less energy to accomplish the same task/to enjoy the same comfort level Process ( Equipment/Operations) INPUT OUTPUT • Comfort level • Production volume • Quality • Safety • Electricity • Fuel
- 21. ….but how Malaysia has beendoing it?
- 22.
- 23. It’s beyondenergy cost saving! Source: IEA,2012
- 24. What the energy consumption& socioeconomic situation would have been without improved EE - baseline The government must to prioritise the needs of the country-benefits in economic growth, job creation/industri al productivity are given equal weight, or even favoured over energy savings. Reconsidering the outcomes from EE improvements - welfare gains rather than energy savings alone could transform the rebound effect from negative impacts to a quantification of the wider socioeconomic impacts
- 25. Economically viableefficiency measures can halve energy demand growth to 2035 Source: IEA
- 26. EE potentialused by sector in the New Policies Scenario 2/3 of the economic potential to improve EE remains untapped in the period to 2035 Source: IEA
- 27. Reducing demandof energy with lesser investments & faster results Source: McKinsey Global Institute Analysis 2010
- 28. Source: McKinsey Global InstituteAnalysis 2010
- 29. Source:Global Insight, IEAMcKinsey Global Institute Analysis Malaysia don’t have EE policy yet & urgently need one!
- 30. 1,327 1,273 1,192 1,101 1,101 1,059 1,059 1,000 978 951 1,036 1,013 1,013 985 1,049 1,091 1,051 1,0701,077 1,037 1,044 1,021 1,059 1,036 1,038 1,050 1,131 1,142 1,345 1,405 1,467 1,566 1,573 1,438 900 1,000 1,100 1,200 1,300 1,400 1,500 1,600 1,700 '73 '75 '77 '79 '81 '83 '85 '87 '89 '91 '93 '95 '97 '99 '01 '03 '05 FiscalYear Primaryenergyconsumption/GDP Ton oil eq. / Billion yen 2nd Oil Crisis 1st Oil Crisis Source: METI/General Energy Statistics 10 years Improvement by 30% 10% improved for 20 years Main Improvements: 1. Energy Management 2. Energy Efficient Equipment 3. Efficient Processes Technologies 4. R&D
- 31. Through strong regulatoryimplementation framework, sustainable funding & holistic approach for focused sectors
- 32. Source: American Councilfor an Energy Efficient Economy(ACEEE)
- 34. An EnergyService Company(ESCO) Develop and implement turnkey, comprehensive EE projects ESCOs offer performance-based contracts (i.e., contracts that tie the compensation of the ESCO to the energy savings generated by the project) as a significant part of their business To ensure credentials, ESCOs must demonstrate the technical & managerial competencies to design & implement projects involving multiple technologies : Lighting Motors & Drives Heating & steam systems HVAC Systems Control Systems Maximum Demand Controls Building Envelope Improvements …at building/industrial facilities
- 35. Registered in September2000 n conjunction with the launching of the Malaysian Industrial EE Improvement Project (MIEEIP) by the Government-UNDP OBJECTIVES To develop recognized ESCO businesses in collaboration with Government & private sectors. To actively promote the activity of cost reduction and efficiency standards of the industrial and commercial sector To oversee the well being of it’s members To facilitate and do all things necessary towards developing successful energy related projects. To introduce related products and services for the industry To foster healthy co-existence amongst members through ethical professional practices Ensure quality of services by members
- 36. Energy Management TrainingCourses for Energy Managers Producing guidelines & provide advisory in services delivery Awareness & promotional programs Provide inputs on EE industry to the Government with other Stakeholders Rental of Equipment for energy audit and M&V
- 37. Elected Committee Members(2014/2016) President Ar. Zulkifli b. Zahari Vice President, Policies & Int. Liaison Ir. Ong Ching Loon Honorary Secretary & Historian VTR Dharamarajah Honorary Advisor / Internal Auditor Ir. Dr. KS Kannan Business Development Ir. Phang Chen Faut Training Mohd Iskandar b. Majidi Green Technology Kevin Yap Publicity & Promotions Ir. Kumarason S Kandiah Government Liaison Ahmad Zaky b. Mohd Amin Internal Auditor Khairol Nizam b. Abd Muen Treasurer & Finance/Strategic Initiatives Zaini b. Abdul Wahab Asst. Honorary Secretary & Membership and Practice Koay Keong Tay Program Coordinator Anuar b. Mat Saad Admin / Secretariat Afiza bt. Mohd Sa’ad Accountant Mohd Izzuddin b. Salahudin
- 38. Source: Lawrence BerkeleyNational Laboratory , National Association of Energy Service Companies, USA September 2013
- 39. Source: Lawrence BerkeleyNational Laboratory , National Association of Energy Service Companies, USA September 2013
- 40. The total marketsize = US$6.7 billion; Industrial = US$2.9 billion(44%) Commercial = US$3.7 billion(56%) source: www.reexasia.com Biggest potentials in the industrial sector
- 41. “Energy Performance Contractingis when an ESCO is engaged to improve the energy efficiency of a facility, with the guaranteed energy savings paying for the capital investment required to implement improvements”
- 42. EPC Project Funding &Financing Options Engineering & Economic Feasibility Studies Project Design, Engineering & Permitting Project Construction Project Commissioning Operation, spare parts & Maintenance Performance measurements & monitoring Energy performance reporting Consultancy & Advisory Regulatory Compliance Standards & Ratings
- 43. Energy Cost savingsbased on ACTUAL & MEASURED data-before & after CAPABLE ESCO UNDERSTANDING of the how EPC works & it long term benefits by facilities owners COMPREHENSIVE EPC Contract Document TRUST & TRANPARENCY in strategic partnership to reduce business costs Commitment to get FASTER results!
- 44. The owner confirmed EPC needs PrepareEPC basic info, Objectives & Targets Prequalification Of ESCOs Issue RFP to qualified ESCOs Evaluate Proposals from ESCOsAppoint ESCO ESCO conduct technical audit & present detailed EPC investment proposal EPC Contractual Terms Negotiation Sign EPC Contract Implement EPC Project Measurement & Verification of Saving Achieved Monthly reporting & payment to ESCO
- 45. Experiences in EPC Projects/Track Records in energy services Financial Strengths Management capacity in energy services Technical Competency & Expertise ESCO To secure financing & ensure sustainable operations
- 46. EPC implementationprocess must match the ESCOs business model. EPC is a proven EFFECTIVE model for faster EE implementation! Interested parties must have the same understanding & goals on how to make EPC works – WIN-WIN & LONG TERM ENERGY COST SAVINGS! ESCOs must have/develop competency & capability to ensure successful EPC projects implementation. More successful EPC projects are required to attract more attention of building owners & banks/investors
- 48. •Energy supply &utilization •The most costly period Source: Institute of Asset Management, UK
- 49. EE programshelp manage energy risks - reducing exposure to the high costs of sourcing, transport & energy-intensive upstream products
- 50. EEPs viewedas “Infrastructure Investments” – LOW PRIORITY VS. CORE BUSINESS – don’t fix if not broken EEPs funding through loans/debts WILL IMPAIR “CREDIT CAPACITY” from core business – NO WAY for SMEs/SMIs BENEFITS ARE TOO SMALL TO APPEAR ON CEO’S RADAR SCREEN & to justify “perceived’ operating complexities/risks NOT CONVINCED ON ACTUAL COST SAVINGS ACHIEVED nor aware of proven Measurement & Verification(M&V) methods to ensure sustainability of savings.
- 51. EE IMPROVEMENT PROGRAM Sustainable Energy Management AwarenessProgram Capacity Building – Training & Development HRDF refundable programs Measurement & Verification (M&V) Internal/3rd Parties Adoption of Energy Management System (ISO50001) Internal/Consultant Energy Saving Project Energy Auditing Internal Budget EPC Model Full/matching grant – with commitment to implement Energy Saving Projects Implementation EPC model Standard Procurement SUPPORT MEASURES NEEDED Options To Save Energy Costs in Organizations
- 52. • Management Directives • Implementationof EnMS - to ensure sustainability of energy cost reduction initiatives MEASURES With LOW/NO COST Minimal Cost Savings •Priorities of budget - core business/operations •Investment risks •Limited human resources & expertise MEASURES WITH HIGH COST Significant Cost Savings May require expert assistance & external financing such as EPC model In-house initiatives
- 53. TOP MANAGEMENT •Smooth operation •BudgetCompliance •Profit & loss account PRODUCTION MANAGER •Product quality and delivery dates •Optimization of production costs •Reliability of production facilitiesPROCUREMENT MANAGER •Improvement of purchasing conditions/procedures •Best/optimal prices ENGINEERING MANAGER •Reliability of supplying facilities •Optimization of energy cost FACILITIES OPERATORS •Reliability of operation and maintenance •Low defect/damage potentials EXTERNAL SERVICE PROVIDER/CONSULTANT •Maintain the contract •Identification of potential improvements •Client’s satisfaction
- 54. Profitability Sustainability Competiveness Competency Working environment quality Corporate Image OperatingCosts - Energy Risks – price fluctuation & supply shortages Pollution Carbon emission Depletion of fossil fuel INCREASE USERS’ COMFORT SALES/LEASE & ENERGY COST SAVINGS BOOST IMAGE & VALUES
- 56. Typical manufacturingcompanies* can improve their profit margins by 2% within 3 years
- 57. Require holistic& inclusive approach for sustainable results
- 58. Management commitmentis needed!
- 59. Organizational culturalchanges needed!
- 60. •CEO shows strong& ongoing enthusiasm for EE •To achieve significant results ENSURE TOP MANAGEMENT SUPPORT •Giving the program its own budget responsibility ALIGN RESPONSIBILITIES& BUDGETS •set up new metrics & tools to measure energy consumption •quantify the success & benefits CREATE DATA TRANSPARENCY & INSTALL TARGET TRACKING
- 61. MANAGEMENT COMMITMENT ENERGY POLICY PLANNING IMPLEMENTATION & OPERATION SYSTEM & PERFORMANCE CHECKING MANAGEMENT REVIEW Energysaving measures – to bring results in improving energy performance & cost reduction! No management commitment = less impacts = forget it!
- 62. ENERGYSAVING MEASURES/PROJECTS TECHNICAL VIABILITY FINANCIAL VIABILITY SUSTAINABILITY PLAN Expertise/ Competency EnMS (ISO50001) Performance M&V Financial criteria & sources
- 63. Source: Energy ConservationCentre of Japan, 2011
- 64. Pumps (25% -35%) Chiller (20% - 25%) AHU/FCU (25% - 35%) Cooling Tower(15% - 20%
- 65. Savings at40-60% from lighting systems Energy Saving Micro Ballast and HP Fluorescent T8-28 watts LED Fluorescent Tubes LED Down Light LED Ceiling Light High Performance LED Street Light LED Spot/Flood Light
- 67. Stage 2: Retrofittingfor Improving Chiller Performance Stage 3 : Maximum Demand Monitoring & Control Stage 1: Electricity Incoming Supply Optimization
- 69. Building owners cansee reduced operating costs, increased building values, greater return on investment, and higher occupancy from new and retrofitted green buildings UNEP - GEO-5 for Business Impacts of a Changing Environment on the Corporate Sector Companies may receive reputational benefits from achieving green building certifications . A 2011 survey of U.S. adults- 64% would prefer to patronize a business whose facility is certified as green, while 48% indicated that green certification of a facility improves their image of a company. University of Missouri researchers - consumers would be more willing to pay between 15 & 20% more for retail products from companies that support sustainable practices UN Global Compact of 766 CEOs worldwide-93 % of CEOs said sustainability issues will be a critical factor to the future success of their business 2012 Ernst & Young Survey – 66% of executives saw an increased amount of sustainability-related inquiries from investors in the past year. 70% inquiries focused on energy management and greenhouse gas emissions & more than ½ questions about sustainability reporting Survey on 250 CFOs in 14 countries by Deloitte - CFOs are increasingly aware the benefits sustainability can bring to the business. 2/3 respondents said they are involved in driving sustainability strategies .More than 50 % said their involvement in pushing sustainable practices has increased in the past year. TOWARDS GREENER BUSINESS PRACTICES & MARKET DEMANDS
- 70. EE Energy Management Energy Management System Consultancy/Advisory Standard &Certification Performance Measurement &Verification EnMS Tools Hardware (meters , sensors & etc) Software (Computerized EnMS) Energy Engineering Energy Efficient technologies Testing, Rating & Labeling R&D, TQM Manufacturing Energy Auditing Capacity Building Education & Awareness Training & Development Policy Policy research & development Regulatory Fiscal & Financial Investments & Funding Analysis & Evaluation
- 71. Energy Auditors Energy Efficient Technology Application Experts Measurement &Verification Specialists EnergyEfficient Equipment Inventors Energy Efficient Facilities Designers Energy Economists & Data Analysts Policy & Regulatory Experts Demand Side Management Specialists Energy Managers Energy Management Consultants Documentation & Certification Specialists ISO50001 EnMS(System/ Technical Auditors) Expert Trainers …and many more with the growth of EE industry
- 73. The foregone benefits representthe ‘opportunity cost’ of failing to adequately evaluate & prioritize EE investments Larger opportunities & increasing global demand, stress on resources & climate concerns-costs that we cannot afford to bear The failure to properly evaluate the benefits of EE likely results in under investment in EE
- 74. •Clear policy &targets •Comprehensive regulatory & implementation framework •Competencies in institutional set up Strong governance in policies implementation •Competency programs •Career opportunities Technical competencies & human resource capacity •Sources of funds •Understanding risks & mitigating factors in EE investments Sustainable financing & business friendly mechanisms •On green practices •Business opportunities •Impacts to climate change mitigation Information ,education &awareness •Funding •Academic vs. Commercial valuesR&D & commercialization
- 75. SMEs &SMIs - energy audit and guidance Measurement & verification of performance Technical assessment from other ministries/agencies on EE projects for financing /further approval Registration & deployment of experts Fiscal incentives Low interest loans with government guarantee Grant based on annual government budget for specified initiatives and awareness programs Technical Assistance & Advisory Incentives & Financial Assistance
- 76. Look andact on EE urgently! Clear policy goals & targets Strong governance & comprehensive framework Consistency, accountability & competency Inclusiveness in policies development & reviews
- 77. Strong Governance Financing & business friendly mechanisms Accountable & competent implementing agency Information, Education &Awareness R&D & Commercialization EE Industry Growth Policy Targets Policy Introduction Focused Sectors +Industry Players + Consumers Industry players just need the basic & right “infrastructure” & supports . We can take it from there!
- 78.
- 79. Project/solution/ technology based approaches? or Project based or sustainable implementation plans & strategies at national level?
- 80. INTRODUCTION & AWARENESS IMPLEMENTATION & SUPPORT MEASURES PERFORMANCE MONITORING& MEASUREMENT IMPROVED •Energy Performance •Competitiveness/ •profits •Environmental quality REDUCED •Energy consumption & costs •Pollution •CO2emissions CREATED •Business & job opportunities •More experts/workers from EE industry •New source of economic growth •More Direct Domestic Investments
- 82.
Editor's Notes
- #2 http://www.bain.com/publications/articles/hidden-treasure-why-energy-efficiency-deserves-a-second-look.aspx
- #24 Direct rebound When a consumer or producer reduces their energy costs by investing in an energy‐efficient piece of equipment and then chooses to increase production or consumption using proceeds of the energy saved. Indirect rebound When consumers and businesses invest the savings due to EE improvements in other goods More difficult to study than the direct rebound and so and there are fewer comparable studies. Macroeconomic or economy‐wide rebound when improved EE leads to increased energy productivity and economic growth- can “backfire’
- #25 what the energy consumption and socioeconomic situation would have been without improved EE - counterfactual or baseline. In many cases there would have been even higher energy consumption leading to higher costs in the long run. important in developing countries on a high path of economic growth where improvements in EE are likely to improve the productivity of the country and lead to further economic development. It is for governments to prioritise the needs of their country and this may mean that benefits such as economic growth, job creation or industrial productivity are given equal weight, or even favoured over energy savings. Reconsidering the outcomes from EE improvements in terms of welfare gains rather than energy savings alone could transform the rebound effect discussion from one of negative impacts to a quantification of the wider socioeconomic impacts of EE improvements.
- #26 EE/energy saving is the first fuel-a source of energy instead of the an option in O&M activities. Think about it after we consumed the energy or only when we need it
- #27 Which is better for utility companies? Managing current assets with maximized and efficient utilization by the demand(users) or Having to add new assets just to me the increasing demands and facing uncertainties on the business outcomes in the regulated market. Example: In Malaysia, tariff increase purely subject to the government’s decision and directly linked to political climate
- #44 The cost savings measurement with significant changes of operations at the facilities. The responsibilities of building owners and the ESCO throughout the contract period. Maintenance, use and modification/ removal of the equipment that was installed by the ESCO by the facilities owner. If the equipment installed by the ESCO is lost or damaged Guarantee of losses and liabilities by ESCO to the facilities owner.
- #50 Securing the base of economic activity BP’s Energy Outlook 2030 predicts that global energy consumption will grow nearly 40% by 2030. Dwindling resources and the rising share of renewable sources will push energy prices up, increasing costs for production, logistics and energy-intensive commodities. Thus, a company’s exposure to energy costs is often much higher than its utility bill, increasing the relevance of efficiency as a key element of strategy. Energy-efficiency programs help manage energy risks by reducing exposure to the high costs of sourcing, transport and energy-intensive upstream products. They help balance demand across different energy sources and providers. On-site cogeneration and long-term supply agreements can reduce demand per output and keep energy costs predictable (see Figure 4). Gaining a better overview of energy market opportunities and upcoming regulatory schemes will help companies remain competitive. For example, they may be able to cut costs by managing demand more intelligently, reducing consumption during peak load times and increasing production when supply is ample.
- #55 So much clear benefits-why are we still holding our actions? Easier to measure and verified? Yes!
- #56 1. A wide range of benefits, and a “must” Most manufacturing executives think of EE only in terms of cost savings. They scrap old, energy-guzzling equipment and think they did a good job. In truth, they did only half the job, because EE offers much more. It can reduce non-energy costs, for example, create new business opportunities, significantly improve the company’s image for all stakeholders and help companies stay competitive and attractive to customers (see Figure 1). In order to reach its full potential, an energy-efficiency program must cover the whole value chain, from sourcing to selling. A complete energy-efficiency program combines several aspects. It is a preemptive move to meet impending regulations. It answers concerns from the board of directors on improving the resilience of the company. It addresses future needs of customers. And, it strengthens company culture by enhancing energy sustainability. Of course, EE cannot be achieved through a onetime improvement. Instead, it needs a holistic and ongoing initiative that gets institutionalized within the company—much like quality management, with which it shares many goals. BUSINESS INSIGHTS Global Private Equity Report 2014 Founder's Mentality℠ Management Tools Digital Strategy Macro Trends Decision Effectiveness More INDUSTRY INSIGHTS Consumer Products Financial Services Healthcare Media Oil & Gas Private Equity Retail Technology Telecommunications Utilities & Alternative Energy CAPABILITY INSIGHTS Strategy Performance Improvement Customer Strategy & Marketing Organization Mergers & Acquisitions Information Technology BAIN BOOKS SUBSCRIBE VIDEOS & MULTIMEDIA Hidden treasure: Why EE deserves a second look September 19, 2013 Bain Brief By Oliver Straehle, Kim Petrick, Fabian Stierli and Adrien BronDownload PDF Print E-mail Share Executive Summary CEOs often ask us what they can do about EE. Most feel that they need to act on the topic—80% of respondents to a 2010 Economist Intelligence Unit survey agreed that EE is becoming more important—but only half said their companies were doing enough to integrate efficiency into their business strategy. RELATED ARTICLES Making biomass part of your energy mixThe big green talent machineBuilding productivity and accountability in T&D organizationsINDUSTRY EXPERTISE Utilities and Alternative Energy At Bain, we believe that energy-efficiency programs significantly improve the sustainability, economic stability and image of an industrial or consumer goods manufacturing company. Some corporations in energy-intensive industries have been tackling the subject for a while. Dow Chemical Company, an early adherent, says it has saved $24 billion since launching its energy-efficiency program in the 1990s. BASF, GE and Toyota claim similar benefits. Talking with these and other companies reveals a wide range of benefits beyond direct energy savings. Bain’s research and project experience show that a typical manufacturing company in Europe or North America can save between 10% and 30% of direct energy costs in three years. Indirect savings, like reduced maintenance, materials and waste, as well as lower risks, typically add another 50% on top of the direct energy cost reductions. Beyond these savings, EE delivers benefits around corporate social responsibility, employee motivation, improved sustainability and a secure base of economic activity. Depending on the respective products and value chain position, energy-efficiency products and energy-efficiency services can also make for improved offers and even new business models. EE is an option today, but it’s likely to be a necessity very soon. Few manufacturers can pass up the opportunity to improve profitability by 2%, mobilize their employees or ignore new business opportunities. We believe energy-efficiency programs will play an important part in keeping European and US manufacturing competitive over the next decade. While the regulatory environment is still in the making, the pure business logic is already convincing today. 1. A wide range of benefits, and a “must” Most manufacturing executives think of EE only in terms of cost savings. They scrap old, energy-guzzling equipment and think they did a good job. In truth, they did only half the job, because EE offers much more. It can reduce non-energy costs, for example, create new business opportunities, significantly improve the company’s image for all stakeholders and help companies stay competitive and attractive to customers (see Figure 1). In order to reach its full potential, an energy-efficiency program must cover the whole value chain, from sourcing to selling. A complete energy-efficiency program combines several aspects. It is a preemptive move to meet impending regulations. It answers concerns from the board of directors on improving the resilience of the company. It addresses future needs of customers. And, it strengthens company culture by enhancing energy sustainability. Of course, EE cannot be achieved through a onetime improvement. Instead, it needs a holistic and ongoing initiative that gets institutionalized within the company—much like quality management, with which it shares many goals. Substantial direct and indirect savings Energy is one of the few remaining opportunities to reduce costs in manufacturing. Energy accounts for about 5% of costs for an average manufacturing company, more in energy-intensive industries. An energy-efficiency program can save between 10% and 30% of those energy costs within three years. Indirect savings from reduced maintenance, materials, waste and risk increase the benefits, combining to effectively cut direct energy costs by about half. Tax reductions and government incentives boost the savings further in many countries. Most savings come from adapting equipment and processes. In production, typical efficiency measures include more effective motors, drives, boilers, furnaces, pumps, compressors, and ventilation and heating systems. Energy recovery systems can help reduce demand. On-site generation can also reduce costs, and, in some places, manufacturers can sell power back to the grid when they produce more energy than they use. A plan to use energy flexibly, reducing usage during peak times, saves even more. Bain’s calculations show that the average manufacturing company can improve its profit margin by 2% within three years, helping to strengthen industrial players and maintain Europe and the US as strong manufacturing centers (see Figure 2). Compliance with tightening regulatory requirements EU directives aim to reduce energy consumption by 1.5% annually between 2014 and 2020, so most organizations will need to implement energy-efficiency programs to ensure compliance. Energy management at large companies will be audited every four years, and several current ministerial draft bills indicate that simplified procedures are planned for small and medium-sized enterprises. National rules concretely implementing the EU’s plans are to be applied by June 2014. Germany introduced an energy tax (the “eco-tax”) in 1999 to encourage energy savings in the private, public and commercial sectors. To lessen the impact on manufacturing companies, which were hit hardest by the new tax, German lawmakers also introduced a tax relief—as high as 90% for energy-intensive production processes like steel or cement production. Over the years, some 100,000 German companies had benefited from these tax incentives in varying degrees. However, starting in 2013, only companies that implement energy-efficiency management systems in line with ISO 50001/EN 16001 certification and meet annual energy-savings targets are eligible for them. As of today, less than 20% of German and Swiss industrial firms with more than 250 employees have that certification, and many do not yet meet the requirements (see Figure 3). Switzerland’s Energy Strategy 2050 framework proposes similar measures with compulsory efficiency targets and sanctions for companies that miss them. Meeting energy-efficiency standards will become a prerequisite for participating in public tenders. Energy inspections will help reduce consumption. Corporate social responsibility Reducing energy consumption and using renewable energy sources demonstrate good corporate citizenship, both strengthening the corporate image and contributing to sales. A long-term sustainability strategy can make the company more attractive to investors and suppliers. Efficiency programs also boost employee morale and help make companies more attractive employers. GE’s energy “treasure hunts” bring together energy experts and employees at job sites to identify and recommend efficiency initiatives. GE’s programs often include a weekend day, when production is off and plants and offices are idling. Employees willingly join even on their day off, expressing that participating increases their pride and personal commitment in the company, as well as their sense of inclusion. In addition to these benefits, GE has saved $150 million and has started selling this concept externally. New business opportunities EE is more than just a way to optimize operations; it is also a growth market. As energy regulations for commercial and industrial companies increase, so too will demand for commercial and consumer products that use energy efficiently. For example, both the EU and Switzerland plan to introduce new efficiency regulations for electric and electronic devices. Efficiency is a key selling point for these devices as well as for other B2B products, including elevators, electric drives, electric transmission equipment and pumps. Consumers, too, say they are ready to pay a premium for energy-efficient products, such as refrigerators, washing machines, light bulbs and cars. Companies with an energy-efficient culture are bound to take the lead—not only in how they use energy but also in the products and services they develop. Energy-efficiency champions often report an increased potential for innovation in their organizations. Some will discover new business models helping other companies and consumers become more energy efficient.
- #57 Substantial direct and indirect savings Energy is one of the few remaining opportunities to reduce costs in manufacturing. Energy accounts for about 5% of costs for an average manufacturing company, more in energy-intensive industries. An energy-efficiency program can save between 10% and 30% of those energy costs within three years. Indirect savings from reduced maintenance, materials, waste and risk increase the benefits, combining to effectively cut direct energy costs by about half. Tax reductions and government incentives boost the savings further in many countries. Most savings come from adapting equipment and processes. In production, typical efficiency measures include more effective motors, drives, boilers, furnaces, pumps, compressors, and ventilation and heating systems. Energy recovery systems can help reduce demand. On-site generation can also reduce costs, and, in some places, manufacturers can sell power back to the grid when they produce more energy than they use. A plan to use energy flexibly, reducing usage during peak times, saves even more.
- #61 Ensure top management support Unless the CEO shows strong and ongoing enthusiasm for EE, middle managers will show lacklusture support for an effort that delivers only marginal savings. Align responsibilities and budgets Often, one unit must invest in efficiency while another unit reaps the savings—a problem if the program’s budget is distributed throughout the company. Giving the program its own budget responsibility can help organizations avoid this fragmentation. Create data transparency and install target tracking Companies often have to set up new metrics and tools to measure energy consumption and to quantify the success and benefits of efficiency programs.
- #62 basic components in energy management system
- #65 To highlight the potentials to improve asset’s operational & energy performance to increase profitability for service providers and/or facilities owners
- #70 We embrace changes or we will be struggling or out of the business
- #74 The failure to properly evaluate the benefits of EE likely results in under investment in EE. The foregone benefits represent the ‘opportunity cost’ of failing to adequately evaluate and prioritize EE investments. This opportunity cost may be very large, and in particular in a context of increasing global demand, stress on resources, and climate concerns, they may represent a cost that we cannot afford to bear.
- #81 Look energy management as another business opportunities and for future source growth EE as an industry – the future and integral element synchronized in asset management