Manufacturing operations are faced with many challenges in today’s marketplace. Plants must stay competitive to keep the doors open; sell what is manufactured at a cost higher than what it costs to produce. Global competition says they must be lean and efficient. Production costs can include such items as raw materials, labor, plant and equipment, maintenance, utilities, warehouse and shipping to name a few. Reducing the cost of any of these items can add to the companies’ profitability and increase shareholder value. Managerial performance is recognized when production costs are reduced and profits increase.
Operating an efficient plant can improve a company’s competitive position. Well maintained and efficient equipment improves reliability, reduces scrap rate and increases productivity. Revenue increases through greater productivity. An area often overlooked is utility costs. Depending upon the process, electricity, natural gas or propane, and municipal water costs can be a significant part of the manufacturing cost. Read on to learn more about:
- Understanding energy costs
- How to form an energy management team
- The areas of greatest energy saving potential
- The barriers to energy efficiency
- How to get started
Understanding Energy Costs
Depending upon the size and energy usage of the plant, understanding the utility tariff for electricity or natural gas can be a challenge. There are variables that directly affect the bill. For the electric bill, factors such as kilowatt demand (kW – the amount of energy required instantaneously) and kilowatt hours (kWh – the amount of energy used throughout the billing cycle) drive the final cost. Generally lowering the kW demand while using kWh’s for efficient manufacturing helps lower the cost. Many utilities have summer and winter rates, with summer rates being higher because of the demands on the system. Can a specific energy-intensive operation be shifted to non-summer rate times? Time-of-use or time-of-day energy tariffs are generally available with less expensive electricity at night. Can an energy-intensive operation be shifted to the night shift? Some utility tariffs bill for kilovolt amperes reactive power or kVAR’s. Improving a plant’s power factor can reduce or eliminate these kVAR charges. A plant either buys kVAR’s from the utility or produces its own kVAR’s to meet the demands of the plant. Is your plant on the least cost rate based on your operation? When was this last reviewed?
For natural gas, much of the bill is for the gas itself and the delivery cost to get it to the plant. Many smaller manufacturing operations buy their natural gas directly from the utility under tariffs based upon usage. However, depending upon the size of the plant and usage, purchasing natural gas on the open market may be an option. There are still charges from the utility for delivering your purchased natural gas to the plant. Many contract options are available from natural gas brokers and are often times beneficial to large users. If a manufacturing operation can be shut down for a period of time during high gas demand, an interruptible tariff may offer cost savings. Has someone in the plant ever examined all of the gas purchasing options? When was the last time this was done?
Sub-metering a manufacturing line or building can be a way to track usage. Sometimes this data can be used to assign costs to various departments. It can be said you have to measure usage before you can manage it. Establishing a key performance indicator or KPI for energy cost per manufactured unit can be a way to keep track of utility costs trending up or down, and what is the reason for this?
Form an Energy Management Team
A way to address energy efficiency in the plant is to form an energy management team. The team should include representatives from senior management, engineering, production, physical plant, purchasing and accounting. A person should be assigned the duty of the “Energy Champion” to coordinate staff and conduct meetings. Energy efficiency should be given the same priority in the plant as safety, environmental requirements, production, and human resources.
The energy management team may already have some energy efficiency projects in mind. However, a fresh set of eyes in the plant to perform an investment-grade energy assessment can produce additional projects for consideration. The plant walkthrough can take place by trained energy engineers followed by a written report. The report can then go back to the energy management team for discussion. Projects can be prioritized with the most advantageous ones brought to senior management for budget authorization.
Areas of Greatest Energy Saving Potential
Energy savings don’t necessarily mean huge capital improvements within the plant; out with the old and in with the new. Often times control strategies or adjustments can be implemented to manage existing systems. For instance, lighting controls such as motion sensors can be installed to control lighting in areas of the plant seldom used (warehousing). Thousands of dollars can be saved annually just by lowering the operating pressure of the compressed air system. Areas of savings often include:
- Advanced lighting design, technology, and controls – LED fixtures replacing less efficient high-intensity discharge (HID such as metal halide and high-pressure sodium) can be quite cost-effective. Often times a lighting redesign allows a reduction in the number of new LED fixtures and not just a one-for-one replacement. Areas of the plant can be upgraded in phases as the budget allows. Lighting controls can be set up to coincide with production schedules. Do the lights need to be on when the plant is shut down during the third shift?
- Compressed air optimization – Many manufacturing operations use compressed air in their operation. Slight adjustments can have significant savings. For instance, slowly lowering the base system operating pressure can have a big impact. Compressor load-unload strategies can offer savings as well. Air piping sizing, receiver/dryer operation is another area to examine for energy savings. Inefficient use of compressed air can be an area of concern as well. For instance, can an air nozzle be timed to blow off metal chips from a part rather than blowing continuously?
- Efficient motor systems – Upon motor failure, installing a new motor with NEMA Premium efficiencies can offer significant savings. Often times rewinding a failed motor can lead to lessor efficiencies than nameplate unless done with best practices techniques. Variable speed or variable frequency drives (VSD or VFD) to control motors can be ideal for variable torque applications such as fans and pumps. Is a pump pushing against a throttling valve to control flow or are there inlet guide vanes on a large fan to control airflow instead of a VFD? Often times a VFD can provide 60% savings in electricity costs.
- Process heating or cooling – Often times energy used for processed heating or cooling can be captured for use elsewhere in the plant. Simple things like insulation blankets on plastic injection molding machines or refrigerant line insulation can provide significant savings. Boiler optimization through advanced controls can have gas savings. Automatic dampers on boiler ventilation can offer energy savings as well.
HVAC Improvements – Simple things like taking advantage of chiller free cooling or control optimization can be low-cost energy savings. Low velocity, large diameter ceiling fans of up to 20-feet move large volumes of air reducing the demand on rooftop air conditioners or central plant cooling systems. Duct-less mini-split air conditioners can provide area-specific spot cooling without putting additional cooling demand on central systems.
Barriers to Energy Efficiency Improvements
It can be a challenge to give energy efficiency the time, resources, and budget needed. Some maintain if it’s not broken, we’re not going to fix it. Others say the manufacturing process is working fine so why worry about energy efficiency? Other barriers include:
- Not understanding the business opportunity to reduce expenses
- Lack of staff and management awareness
- Restrictive budget for capital improvements
- Relatively low gas and electricity costs
- Lack of staff resources
How to Get Started
How do I make energy efficient improvements that make good business sense and are cost-effective? A good place to start is an energy assessment from The Energy Group in Des Moines, IA. The Energy Group can provide an investment-grade energy assessment with a detailed report. The report can be presented to the Energy Management Team. Metrics such as payback, net present value, and life cycle cost analysis can be applied to potential projects to enhance their possibility of budget funding. The Energy Group has helped Midwest customers for over 30 years by providing professional energy assessments. In addition to assessments, The Energy Group provides these services to the manufacturing sector:
- Energy bill/rate analysis
- Energy modeling
- Design assistance / Project management
- Engineering review
- Diagnostics (combustion testing, light level documentation, etc.)
- Energy planning
- Supply-side studies for solar, combined heat and power(co-generation) and wind
- Utility rebate assistance
- ENERGY STAR certifications
- Water-saving strategies
- Sales tax exemptions
Sales Tax Exemptions
The Energy Group has provided hundreds of sales tax exemptions to Midwest customers. Energy used for certain equipment for resale, processing energy used in manufacturing, qualifying farm machinery, qualifying manufacturing equipment, pollution controls used in manufacturing, qualifying computers, and qualifying computer software may be exempt from state sales taxes. An assessment and report are required with the proper form filed with the State to qualify for an exemption. An example of a customer we worked with is a processing plant with an 85% exemption on sales taxes associated with their electric usage and 95% exemption on sales taxes associated with their gas usage, resulted in saving of more than $117,000 over three years. You can see significant energy savings can be attained. Don’t leave money on the table.
Contact The Energy Group
The Energy Group staff has engineers, certified energy managers, and energy professionals with over 133 years of service in the energy efficiency field. Contact us today to schedule your assessment and start saving money! You’ll be glad you did.