Successfully reported this slideshow.
Your SlideShare is downloading. ×

Energy management for Belgian Businesses

Energy management for Belgian Businesses

Download to read offline

For companies, the energy demands are becoming more and more complex every day. This white papers aims business owners & decision makers to identify all the important factors in transforming energy into a broad and strategic business driver.

For companies, the energy demands are becoming more and more complex every day. This white papers aims business owners & decision makers to identify all the important factors in transforming energy into a broad and strategic business driver.

More Related Content

Energy management for Belgian Businesses

  1. 1. White Paper ENERGY MANAGEMENT FOR BELGIAN BUSINESSES Filip Modderie
  2. 2. ENERGY MANAGEMENT FOR BELGIAN BUSINESSES Goal This whitepaper aims to help Belgian Businesses manage their total energy demands in order to lower their overall energy costs or Total Cost of Energy (TCE).
  3. 3. ENERGY MANAGEMENT FOR BELGIAN BUSINESSES Challenges on the Belgian Market The Belgian electricity market is in constant evolution. As both society and government move towards more renewables in the energy mix, new challenges are bound to arise. The physical nature of the majority of renewable energy sources (wind, solar, hydro,…) implies they are not as controllable as other sources of energy. When there is no wind, there is no power to be harnessed from wind. This uncontrollability is largely due to the simple fact that there are no realistic ways – yet – to store energy in large amounts. As long as we are unable to store energy in an economically viable way, the combined demand of all companies and households in Belgium at any given time during the day cannot exceed supply (the total sum of all electricity originating from windmills, gas-fired plants, nuclear installations, solar panels, imported energy, etc.). As governments are constantly modifying the applicable rules and regulations, it is becoming increasingly difficult for companies to predict their energy-related costs. On the other hand, however, new technical evolutions (in terms of measurement, smart grids and load balancing for example) are opening up new opportunities for companies to optimise their energy needs. In the face of these challenges and opportunities, we have developed the Total Cost of Energy indicator (TCE): a powerful tool designed to help you tackle your company’s energy challenges. The TCE Whether your organisation relies on energy simply for heating and lighting your offices or for more heavy-duty industrial processes, energy management is an essential part of your operational and even strategic management. It is therefore important to integrate every aspect with a potential impact on your total P&L within a comprehensive energy strategy. And that is where the Total Cost of Energy (TCE) model comes in. To help you map all these elements into an effective strategy to minimise costs and maximise your competitive edge. The TCE is not just a cost-related construct. In addition to tracking total costs, the individual building blocks of the TCE can represent both savings and gains. tbc ...
  4. 4. ENERGY MANAGEMENT FOR BELGIAN BUSINESSES The TCE takes the following elements into account: • Total Raw energy cost Defined as the total cost of the raw energy (the total amount of money you spend on every MWh consumed via all your energy sources combined). This is the price for your electricity and/or gas, including all taxes, transport and distribution costs charged on the basis of your consumption. It is important to always keep in mind that this is not the unit price (e.g. in €/MWh) but the total cost (unit price x consumption). o Unit price - Energy component - Tax component - Grid component - Price risk component (Fix vs. Flex). As energy cannot be stored, there is always a direct link between the moment you consume and the moment energy is generated somewhere on the grid. The real cost of delivering any given amount of energy is therefore different at different times. Of course, most energy providers offer (semi-) fixed price plans which eliminate this price risk or, more accurately, transfer this risk onto themselves. Naturally this, too, comes at a price. Companies that prefer to adopt this price risk themselves should include it in their TCE. o Volume component - The energy needs of your process, installation or building. - Requirement for energy acquisition: the amount of energy you need to buy in the market (in excess of your own production). When you have no local production, this equals the total energy needs of your business. o Consumption timeframe. Any flexibility you may have regarding the time of consumption (see below: Demand response). • Non-consumption related energy cost. The cost (in EUR) you pay for your use and/or impact on the grid without necessarily consuming energy from it. The reactive fine (caused by the impact your installation has on the grid) is an example of this. It is possible that in the near future, grid operators will be forced to impose more of these costs. tbc ...
  5. 5. ENERGY MANAGEMENT FOR BELGIAN BUSINESSES The TCE takes the following elements into account (continuation): • The cost of security of supply. Most businesses today are highly dependent on energy consuming devices (whether it be your workforce PC farm, cooling installation for your production facility or heat used in industrial processes. If for some reason the energy supply to your facility is interrupted, the opportunity cost of not being able to produce can be very high. Elements of this part of the TCE may include the possible loss of industrial output or the cost of mitigating/eliminating this risk such as the cost of a backup generator or maintenance costs of your high-voltage cabinet. • Cost of compliance. Government authorities and/or grid operators require you to meet certain technical or other criteria. One example would be the requirement to install a high-voltage cabinet (which includes the legal obligation to carry out annual check-ups and modifications according to safety regulations). • Cost of energy consumption devices. This is the cost of your installation. This might already be part of and therefore managed together with your industrial cost. However, if it is not (or not entirely), it is important to allocate this cost here. For example: a producer of steel plates might consider the raw steel as part of his production cost. But if you do not consider the cost of the installation that generates the compressed air used in his installation, you are basing your management on incomplete information. • Cost of the maintenance of energy consumption devices. Cost related to the devices in the previous point. E.g. the repairs or even replacement of your high-voltage cabinet. • Cost of comfort security. Having a secure and comfortable workplace to motivate your workforce is not only relevant in office buildings. In fact, it might be even more critical in industrial environments (think of sufficient lighting that allows your workers to perform tasks beneath your production line).
  6. 6. ENERGY MANAGEMENT FOR BELGIAN BUSINESSES What to do with TCE ? The TCE enables you to map all your energy-related costs. As such, it gives you a real and actionable view of the real impact of energy on your business and value chain. This clear view enables you to take the best decisions and clearly identify possible risks. TCE element Content Opportunities Energy cost - Price of energy (€/MWh) - Cost of price changing risk - Price of taxes (€/MWh) - Grid costs (transport distribution) (€/ MWh) - Volume needs of your business. - Potential volume savings for your business - Volume needs to buy energy (excl. local production) - Flexibility of your consumption profile (time of consumption) - Price of commodity contract - Type of commodity contract (fixed vs. flex) - Consumption saving investments (relighting, VSD, liquid air, HVAC) - Load balancing - Local production (PV, Wind, Combined Heat Power (CHP) unit) Non- consumption related energy costs - Reactive fine - Grid use net cost - capacitor bank installation - optimise local use of energy production Security of supply - cost of non-production in the event of interruption - local production - installation of backup capacity Cost of compliance - personal liability in the event of non- compliance - audit HV - adaptation HV Energy consumption devices - cost efficiency of equipment - Improve efficiency - Use more robust equipment Cost of energy consumption device maintenance - cost of keeping your current equipment in good condition. This also includes small replacement investments (e.g. bulbs for your existing lighting installation) - all-in maintenance contract Cost of comfort security - cost of ensuring your people can work in a safe and comfortable environment (e.g. sufficient lighting for all areas of the work floor). - Relighting Cost of energy saving investments - Investments in new energy-saving equipment - Third party financing
  7. 7. ENERGY MANAGEMENT FOR BELGIAN BUSINESSES Zoom in: Price elements Fixed vs. flexible tariffs. Choosing the pricing structure that best fits your needs is an important and balanced exercise. The following elements should be taken into account: - The % of energy costs in your total expenditure. This % defines the impact of your choice. - Your belief in the future. Nobody has a crystal ball. But all of us have an idea of how the future will look. This idea can shape your pricing structure decisions: If you are confident that markets are at a low level, it makes sense to lock in this price by opting for long-term fixed price contracts (e.g. 5 years fixed). - Your risk profile vis-à-vis price fluctuations. With fixed prices, you are hedging the future. This means you are certain about not having to pay double for your energy in the near future. The trade-off being that you are unable to profit from price drops on the market in the future. - The place of energy in your value chain. If (part of) your energy is used to directly create your industrial output, you should consider the impact of the price structure on your daily competitiveness. Take for example a brick manufacture who uses gas to power an oven to bake bricks. A fixed price may place him at a competitive disadvantage overnight if market prices go down. tbc ...
  8. 8. ENERGY MANAGEMENT FOR BELGIAN BUSINESSES Zoom in: Price elements (continuation) - The time element. Even when you opt for a fixed-price contract, the element of time plays an important role. In this case, it is not the time of consumption but the time of buying that defines your total cost. Fixed-price contracts use forwards in the market to set a price. The situation of such forward markets, however, is in constant evolution. Which enables you to optimise the relative risks and gains by choosing your moment of buying. Take, for example, the evolution of the Endex CAL 2015 (yearly forward curve) for the year 2013: If we eliminate the ‘outliers’ in this curve, we can see that if you had the flexibility of buying energy when you wanted (no deadlines) and you had a crystal ball to look into the future, an average B2B electricity consumer with an annual consumption of 2.5 GWh could save 12000 EUR. Assuming, of course, you could find the right moment every time. Image 1 - Evolution of ENDEX CAL 2015 during the year 2013
  9. 9. ENERGY MANAGEMENT FOR BELGIAN BUSINESSES Zoom in: The old economical reality Cost = p (price per unit) x q (quantity) However straightforward this equitation may be, it is significantly underestimated when it comes to energy management decisions. This also explains why it is important to look at the total cost in EUR and not merely the unit €/MWh cost. Why quantity beats price in the short long run tbc ... P (€/MWh) 0,25€/MWh price decrease Q (MWh) 10% saving
  10. 10. ENERGY MANAGEMENT FOR BELGIAN BUSINESSES Zoom in: The old economical reality (continuation) Market Deregulation After the deregulation of the energy market in Belgium (for B2B already more then 10 years), the energy market was suddenly flooded with competition, driving prices to an all-time low. The bottom line here is that it has become almost impossible to drive unit prices down any further without sacrificing minimum service levels and stability of supply. Actionable When looking at energy prices, a large chunk (up to 2/3!) is ‘non negotiable’ as they are set by the government in the form of taxes (either as regular VAT or in the form of support schemes for green energy, denuclearisation, etc.) or grid costs (transport distribution). Recurrence With average industry contract durations of 2 years or floating price products, the impact of the unit price can only capitalised on for a relatively short time. An energy saving investment typically results in recurrent savings for 5-20 years. Impact p x q means we are talking rectangles here, where in the case of large businesses, q is the long side. The impact of q therefore typically trumps that of the p element. By way of demonstration, simply compare the probability (1/365) of a 10% price difference in the ENDEX example above to an almost 100% certain realisation of a 40% reduction in consumption after replacing your old lighting. Sustainability Finally, saving on energy consumption is the best green investment there is: the cheapest and most green KWh is the KWh that has not been used.
  11. 11. About the author. Filip Modderie is Marketing Innovation Transformation Manager for EDF Luminus and crazy about effective innovation. www.luminusbusiness.be The opinions reflected in this whitepaper are the ones of Filip M. and do not necessarily reflect those of EDF Luminus nv/sa. @xtension Load balancing When we look at the complete energy production and consumption value chain, one of the most critical elements of the equation is defined by our inability to effectively store energy. That is why we often see windmills not in use during summer or on weekends, even when there is a lot of wind. This is simply because nobody is consuming energy at that specific moment in time. As you can imagine, striking the right balance requires that energy producers continually shut down and start up their production units. However, the balancing act is also one that can be performed on the side of demand as well as supply. If we could postpone our consumption of energy to times of low demand, we would avoid the need to switch on a new production unit. As this adds value to the entire network, it creates opportunities for companies with a flexible consumption profile to profit from compensation, bonuses, etc. in return for switching their load. WRAP-UP When it comes to effective energy management, there is no one magic ingredient. What can make a difference, however, is your ability to adopt a clear and comprehensive view of all elements in the TCE. At present, the only way to realise immediate and sustainable savings on your energy bill is to actively manage your consumption. ENERGY MANAGEMENT FOR BELGIAN BUSINESSES

×