ENERGY MANAGEMENT 1. Introduction...system costs $465, solar collector $910, frost protection $141 and installation a further $520. Discount rate is r = 14.5% Escalation rate is a

ELEC9713 Industrial and Commercial Power Systems

ENERGY MANAGEMENT

1. Introduction Energy management ensures that energy is being used effectively in a building or business. An energy management program is a program of activities which aims to reduce energy usage and cost. Energy management involves:

Adopting a strategic corporate approach by gaining commitment within the company for a continuing effort to control energy use in the building. Clear accountability for energy management needs to be established. Provide appropriate financial and staffing resources

Appointing an energy manager who will be responsible for overall coordination of the program.

Setting up an energy monitoring and reporting system, collecting and analyzing energy usage data.

Undertaking energy audit to determine where and how efficiently energy is used.

Preparing an energy management policy which specifies targets relating to: energy consumption reduction, energy cost reduction, timetables, budgetary limits, energy cost centres, and organization of management resources.

Implementing energy saving measures.

ELEC9713: Energy management page 1/23

Implementing a staff awareness and training program. Regularly reporting the savings achieved. Feedback reinforces staff commitment and leads to successful energy management practices.

The two central energy management strategies are:

Energy conservation: avoid wasteful energy use, i.e. if don’t need it then turn it off.

Energy efficiency: reduce energy consumption of current operations, i.e. if need it then do it more efficiently.

Energy management is a continuing process which should be reviewed annually and revised if necessary. Energy management checklist: Step 1: Gain commitment

Step 2: Conduct energy audit Obtain past energy bills Take inventory of energy-using equipment Monitor energy usage Plan immediate, short-term, and long-term EM measures and implementation strategies

Analyzing financing options

Step 3: Implement energy management measures

Step 4: Staff education and training

Step 5: Monitor program

Step 6: Evaluate and review program


2. Building energy management system (BEMS) This includes a variety of systems, over a wide range of complexity, designed for the control, monitoring and optimization of various functions and services provided in a commercial building, including:

1) Lighting. 2) HVAC (heating, ventilating, air-conditioning) systems. 3) Motors and drives. 4) Electrical distribution equipment and appliances. 5) Building’s environmental shell.

Typically, a BEMS consists of one or more self-contained computer based ‘outstations’ which use software to control energy consuming plant and equipment, and which can monitor and report on the plant's performance. These outstations have the ability to be linked together in a modular fashion by a network, and can communicate with each other and with an optional central operator's terminal, which is often a standard personal computer (PC). BEMS provide control by using software logic and are re-programmable, whereas older controllers of the electrical or electro-mechanical type relied on purpose built hardware which required hardware changes to change their characteristics or abilities. In general, there are two main mechanisms by which services within buildings can be controlled:

Time when a service (e.g. heating, lighting) is provided. A parameter of the service such as temperature for room heating or illuminance for lighting.


For example, lighting control can be implemented as follows:

Zoning: lights are switched on in zones corresponding to the use and layout of the illuminated area, thus avoiding lighting a large area if only a small part requires light.

Timer control: automatic switching in each zone based on a predetermined schedule for light use.

Occupancy sensing: using detection systems (ultrasonic movement or infrared sensing) to switch light on if a person is present.

Light level control: using dimmer to maintain a light level measured by a photo-cell, thus make the best use of daylight available

3. Energy audits Energy audits survey energy use and cost within a building. The rationale behind conducting energy audits is to provide the information needed to establish or improve energy management program as well as provide a baseline against which to compare the results of any management initiatives. The direct benefits of conducting energy audits include financial, operational and environmental benefits. There are 3 levels of audit: 1) Level 1 audit (overview): gather data to evaluate overall

energy consumption of the site on annual basis. Derive


performance indicators to determine whether energy use is acceptable or excessive. Provide broad conclusions and recommendations with rough orders of savings and costs (figures accurate to within 40%± ).

2) Level 2 audit (energy use audit): detailed site energy input

and energy use. Reconciliation of energy accounts with loads. Variation on a month-by-month basis. Energy performance indicators. Detailed recommendations including costs and savings and accuracy of estimates to within 20%± .

3) Level 3 audit (analysis audit): Detailed metering down to

half-hourly time interval. Derive target energy use. Detailed recommendations including costs, savings and accuracy of estimates to within 10%± . Detailed financing options and investment analysis. Detailed implementation plan. Suggest refinements to energy policy and energy program.

Level 1 audit should be undertaken annually as part of the review of an energy management program. A higher-level audit should be undertaken every 3 to 5 years or whenever there is significant change in building use, refurbishment, substantial changes in energy prices, significant increase in energy performance indicator, introduction of new technology, etc. A listing of building operations, equipment, and energy conservation opportunities (ECOs) will provide both a usage


history and a basis for evaluating future improvement. There are four categories of ECOs: 1) House-keeping measures: easily performed actions, e.g.

turn lights off when not required; clean air filters; keep doors shut.

2) Equipment modifications: usually more difficult and expensive, e.g. remove light fixtures, reduce motor sizes, modify cooling system. New energy-efficient technology offers many energy-saving retrofit possibilities for much of the equipment being used in commercial buildings. Significant energy saving options are available for lighting, ventilation, heating and cooling, office equipment, motors, and building automation and control systems.

3) Better equipment utilization: use natural lighting as much as possible, stagger working times to reduce energy demand, redirect warmer air to cooler parts of building.

4) Changes to building shell: improve insulation to reduce energy loss to outside or heat gain in inside environment.

4. Cost benefit analysis Energy manager has to demonstrate that the costs of saving energy are met by cost savings in the consumption of energy, thus the need for cost accounting. 1) Simple payback:


This method is acceptable if inflation and interest rates are low and the period of payback is short. The simple payback period is defined as: SPB = cost of energy saving proposal / (annual saving – annual cost of saving) Short payback periods of up to 5 years are usually more desirable. Clearly payback period must be less than life of energy saving measure and less than life of the building as a whole.

2) Discount cash flow and present value:

Consider an investment with a present value of PV dollars at an annual interest rate r percent. After n years, the terminal value would be:

( )1 nTV PV r= × + Alternatively, we can say that an amount of TV dollars at the end of year n is worth only PV dollars today (because of discount rate r):

( )1 nPV TV r −= × + Define: Terminal value factor ( )1 nTVF r= +

Present value factor ( )1 nPVF r −= +


Thus: PV TV PVF= × TV PV TVF= ×

Case study: $3000 is spent on an energy saving measure which has no further cost and the annual savings in fuel are $1000. Thus the simple payback period will be 3000/1000= 3 years. Undertake a discounted cash flow and present value analysis and compare the results. Assume the discount rate is fixed at 5%. If money spent on energy saving measure had been invested for 3 years, the terminal value would be: ( )33000 1 0.05 $3473TV = + =and the return R on the investment would be:

3473 3000 $473R = − = The return on investment in energy saving measure at the end of 4th year will be $1000 net and $1000 net annually thereafter. Some observations:

No return on investment in energy saving measure during first 3 years.

Charge for servicing $3000 loan must be accounted for. If life of energy saving provision is 20 years, net savings

will accrue for remaining 17 years and amount to $17000 at present value.

If energy saving measure had not been undertaken and $3000 invested, after 20 years at 5% it would be worth $7960, providing a return of $4960.


Net savings accruing from energy conservation measure are $17000-$4960=$12040

A more accurate approach accounts for the initial loss of earnings during the payback period:

PV = energy saving × PVF = energy saving / TVF

Start of year

Cost of measure

Energy saving

PV factor

PV CumulativePVs

0 1 2 3 4

$3000 - - - -

- $1000 $1000 $1000 $1000

- 0.952 0.907 0.864 0.823

-$3000 $952 $907 $864 $823

-$3000 -$2048 -$1141 -$277 +$546

To determine accurately the payback period, need to use the cumulative present value (CPV) factor:

CPVF ( )1 1 nrr

−− +=

CPVF = simple payback period CPVF is also known as the present worth factor (PWF) or present value of an annuity (PVA). In the above case study:

( )1 1 0.053

0.05

n−− += ⇒ 3.331n = years


In summary:

Simple payback takes 3 years for original cost of energy saving provision to be paid.

Discounted payback takes 3.33 years. This accounts for loss of revenue which would otherwise accrue by investing $3000.

Note that in the above case study, the money raised for the energy saving measure ($3000) was taken from the building owner which were invested at 5%. If the money had instead been borrowed (usually at a higher interest rate) at 10% interest rate, the payback period would be extended from 3.33 years to 3.74 years. Now consider the case where government wants to encourage energy conservation by instituting a progressive increase in tax on fuels. Working on assumption of zero general inflation but an annual inflation on fuels of 6%: Start year

Cost of plan

Energy saving

Energy inflation

Cash flow

PV factor

PV Cumu- lative PV

0 1 2 3

-3000 - - -

- 1000 1000 1000

- 1.06 1.062 1.063

-3000 +1060 +1124 +1191

1.0 0.9520.9070.864

-3000 +1009 +1019 +1029

-3000 -1991 -972 +57

From the Table, the measure will pay for itself in about 2.9 years. Thus, progressive inflation of fuel prices gives a better return on the capital investment in energy saving measure by reducing the payback period.


Case study 2: domestic hot water system Assess two options: a fully electric system and a solar system with electric boost. Determine which system is cheaper over a 20 year period. Interest rate is assumed to be 14.5%. Recurring fuel costs: electricity costs are $357 for the electric system and $119 for the solar-assisted system in year 1. Nominal rise in electricity charges is 10%. Recurring non-fuel costs: none Non-recurring costs: tank for fully electric system costs $465 and its installation a further $290. The tank for solar-assisted system costs $465, solar collector $910, frost protection $141 and installation a further $520.

Discount rate is 14.5%r =Escalation rate is (inflation rate of fuel cost) 10%a =

Escalation ratio is defined as: 11

adr

+=

+

Net present cost of fuel is:

( )111 1

ndNPC Cd−

=−

for r a ≠

1NPC n C= × for r a = where C1 is fuel cost in first unit of time (period 1)

Here: 1 0.1 0.96071 0.145

d += =

+


Option 1: fully electric system

(a) Non-recurring costs 465 290 $755= + =

(b) Recurring fuel cost ( )

201 0.9607357 $48131 0.9607 1−

= × =−

(c) Total cost of option 1 755 4813 $5568= + = Option 2: solar-assisted system

(a) Non-recurring costs 465 910 141 520 $2036= + + + =

(b) Recurring fuel cost ( )

201 0.9607119 $16041 0.9607 1−

= × =−

(c) Total cost of option 2 2036 1604 $3640= + = Hence, solar-assisted system is more financially attractive. Case study 3: hospital cogeneration system Assess two options: installing a cogeneration system versus keeping existing system (base case). Determine which system is cheaper over a 15 year period, over which discount rate is assumed at 15%. Recurring fuel costs: present annual fuel cost in the base case is $515,000 (gas) and $658,000 (electricity). The cogeneration option would cost $600,000 (gas) and $344,000 (electricity). Both gas and electricity are assumed to escalate at nominal rate of 8%.


Recurring non-fuel costs: cogeneration would require extra operational and maintenance expenditure of $5,000 annually, assumed to escalate at zero. Non-recurring costs: base case has no non-recurring costs while cogeneration requires an initial outlay of $750,000, and maintenance of $320,000 in year 6.

Option 1: base case

(a) Non-recurring costs $0=

(b) Recurring fuel cost:

Escalation ratio is: 1 1 0.08 0.93911 1 0.15

adr

+ += = =

+ +

Net present cost factor ( )

151 0.9391 9.4121 0.9391 1−

= =−

Gas NPC 515000 9.412 $4,847,180= × =

Electricity NPC 658000 9.412 $6,193,096= × =

Total recurring fuel costs = $11,040,276

(c) Recurring non-fuel costs = $0

(d) Total 0 11040276 0 $11,040,276= + + = Option 2: cogeneration system

(a) Non-recurring costs:

Capital investment =$750,000.

For maintenance investment in year 6:


Present value factor ( )1 nr −= +

( ) 61 0.15 0.4323−= + = Present value 320000 0.4323 $138,336= × =

Total non-recurring cost=750000+138336=$888336

(b) Recurring fuel cost:

Net present cost factor 9.412= (same as above)

Gas NPC 600000 9.412 $5,647,200= × =

Electricity NPC 344000 9.412 $3,237,728= × =

Total recurring fuel costs = $8,884,928

(c) Recurring non-fuel costs:

Escalation ratio is: 1 1 0.0 0.86961 1 0.15

adr

+ += = =

+ +

Net present cost factor ( )

151 0.8696 5.84871 0.8696 1−

= =−

Net present cost 5000 5.8487 $29,244= × =

(d) Total cost 888336 8884928 29244 $9,802,508= + + = Conclusion: cogeneration is significantly less expensive. Case study 4: life cycle cost calculation The cost of owning a system over its life plus the cost in use establishes the life cycle cost. The life of electrical plant is usually between 15 and 30 years. Life cycle costs include the


cost of the capital outlay, taking into account of the interest it could have earned had it been invested, or the interest that must be paid on had it been borrowed. As an example, the capital cost for a building services installation is $145/m2. It is estimated to have a useful life of 20 years. The annual cost in use which includes heating, electricity and maintenance are estimated to be $20/m2. Determine the net present value of the installation and the annual cost of owning and operating it. If the project is financed directly by the building owner, a discount rate of 4% is to be used. If, alternatively, the capital has to be borrowed from the bank, the interest rate charged is 7%. Ignore effect of inflation. For discount rate of 4%, CPVF=13.59 Present value of capital cost is $145. Present value of cost in use is $20 x 13.59 = $272 Therefore total net present value = $417/m2 For discount rate of 7%, CPVF=10.594 Present value of capital cost is $145. Present value of cost in use is $20 x 10.594 = $212 Therefore total net present value = $357/m2 To repay a loan of $145/m2 over 20 years at borrowing rate of 7% using the annual cost method:

Loan on capital payable each year = 145/10.594 = $13.69 Annual cost in use is estimated at $20


Total annual owning and operating cost = $33.69/m2 If building owner used his own fund to pay for installation, the loss in interest on this capital would be 4%:

Loan on capital payable each year = 145/13.59 = $10.67 Annual cost in use is estimated at $20 Total annual owning and operating cost = $30.67/m2 5. Load management Need to exert control over energy usage in building and the rate of its usage. Obviously, no energy is used when equipment is shut off. Thus, first task is to make sure unused or idling equipment is turned off. To avoid the high cost associated with the demand tariffs, it is worthwhile to keep the demand at a steady level. If the kW demand goes too high in any half-hour during a one-month billing period, then the user has to pay for this worst half-hour in the month. A popular feature of BEMS is to use a demand controller to monitor the electricity demand and switch off plant on a priority and size basis, i.e. load shedding. The two commonly used techniques of load shedding are the predictive method and the offset method. Predictive method: The utility demand meter calculates the maximum demand by averaging the kWh over a set interval (a 30 minute demand


interval would indicate the kWh for 30 minutes multiplied by 2 since there are two 30 minute periods in an hour). Consider the energy consumption as shown in the figure below where a BEMS monitors every 5 minutes. The aim is to keep demand to less than 80kW, or a consumption of 40 kWh in half an hour. Already the consumption is at 30kWh after 15 minutes. If a BEMS monitors the consumption at regular intervals of δT minutes, then the kW demand Ki at the ith interval is:

( )160 i ii

C CK

Tδ−−

=

where Ci is the cumulative consumption (kWh) at interval i from the start of the sampling period. The kW demand at the end of the half-hour period is:

60 nn

CKn Tδ

=×

where n is the number of intervals in one half-hour.



The limiting slope is determined by the target kW demand, Kt. If the consumption goes above this line then the consumption has to be reduced. The minimum load that can be left switched on is given by the predicted slope. In this example:

Predicted slope ( )( )

( )( )

60 0.5 60 0.5 80 3040

6 3 5t iK C

kWn i Tδ

− × −= =

− × − ×=

The consumption slope during the previous 5 minutes is: ( ) ( )3 2

3

6012 30 10 240

5C C

K k−

= = − = W

Thus if this rate of consumption is to continue, 200kW of equipment would have to be switched off. Conversely, if the rate dropped below 40kW, equipment could be switched on to the level of 40kW.

Offset method: The limiting slope is raised at the start of the demand interval by an offset. Loads are only shed when the offset limiting slope is exceeded. This allows for larger demands earlier in the interval.

Shedding priority: Load shedding primarily saves maximum demand charges, although it may also save some electrical energy. But the decision has to be made as to which items of plant should be switched off, and in which order. This requires careful consideration in advance. Thus before installing controllers, an equipment audit should be carried out.


Possible loss of equipment life or mechanical problems associated with switching each load must also be considered. Air-conditioning refrigerant compressors are not tolerant of too frequent switching and can easily be severely damaged. The same applies to induction motors, due to high inductive currents, although soft starters greatly reduce these currents. The switching off of lights must not cause a safety hazard. The equipment can be prioritised into four categories:

1) Critical equipment: required at all times for occupancy and safety reasons. In commercial buildings where public safety is involved, integrity of the power and control systems is much more important than energy-saving considerations.

2) Necessary equipment: required for occupancy but can be shut down at some measurable financial loss during extreme conditions.

3) Deferrable equipment: important but can be turned off for varying periods of time. Some load may even be switched, virtually at will, provided that some minimum on time is allowed.

4) Unnecessary equipment: used only occasionally. Once the loads are recorded and analyzed, a proper control method can be established with the help of a load profile. The load profile is developed by continuous monitoring for at least a week or perhaps several times over the year to account for seasonal weather or operation patterns. The profile is then analyzed along with the equipment audit to determine the target demand.


Demand controllers may be incorporated into the facility master control system. In this case, signals have to be sent or telemetered to the control system. Various software packages are available to perform energy control functions, data logging, and visual alarm and display. 7. Relevant Standards AS3595-1990: Energy management programs – Guidelines for financial evaluation of a project. AS/NZS 3598:2000: Energy audits AS 3596-1992: Energy management programs – Guidelines for definition and analysis of energy and cost savings IEEE Std 241-1990: IEEE recommended practice for electric power systems in commercial buildings




6. Energy-efficient technology Variable speed drives (VSDs): These can be used for a variety of purposes, including pumps, fans and blowers. Variable speed drives can be applied to ac motors regardless of motor horsepower, and can be used to drive almost all types of motorised equipment. The use of VSDs can reduce electricity costs by between 20 and 50% on suitable pump and fan applications. The more time equipment operates at less than full load, the more energy will be saved with a VSD. They have lower maintenance costs than other speed control methods, can provide the opportunity to operate pumps and fans over a wide speed range and can reduce the number of different equipment sizes required on a given site.

Documents

ENERGY MANAGEMENT 1. Introduction...system costs $465, solar collector $910, frost protection $141 and installation a further $520. Discount rate is r = 14.5% Escalation rate is a