1. Introduction to energy Management

2. Energy Management
The phrase energy management can be defined as: The thoughtful and effective use of energy to maximize profits (minimize costs) and enhance competitiveness.
This rather broad definition covers many operations from product and equipment design through product shipment.
Energy management can take the form of implementing new energy efficiency technologies, new materials, new processes and methodologies.

3. The Value Of Energy Management
Business, industry and government organizations have all been under tremendous economic and environmental pressures in the last few years.
Being economically competitive in the global marketplace and meeting increasing environmental standards to reduce air and water pollution have been the major driving factors in most of the recent operational cost and capital cost investment decisions for all organizations.
Energy management has been an important tool to help organizations meet these critical objectives for their short term survival and long-term success.

4. The Value Of Energy Management
Energy management helps improve environmental quality.
For example, the primary culprit in global warming is carbon dioxide, CO2.
The Equation below, a balanced chemistry equation involving the combustion of methane (natural gas is mostly methane), shows that 2.75 kgs of carbon dioxide is produced for every kg of methane combusted.

5. The Value Of Energy Management
Thus, energy management, by reducing the combustion of methane can dramatically reduce the amount of carbon dioxide in the atmosphere and help reduce global warming.
Energy management reduces the load on power plants as fewer kilowatt hours of electricity are needed.
If a plant burns coal or fuel oil, then a significant amount of acid rain is produced from the sulphur dioxide emitted by the power plant. Acid rain problems then are reduced through energy management, as are NOx problems.

6. The Value Of Energy Management
Less energy consumption means less petroleum field development and subsequent on-site pollution.
Less energy consumption means less thermal pollution at power plants and less cooling water discharge.
Reduced cooling requirements or more efficient satisfaction of those needs means less CFC usage and reduced ozone depletion in the stratosphere.
The list could go on almost indefinitely, but the bottom line is that energy management helps improve environmental quality.

7. Energy Units & calculations

8. Energy Efficiency Energy Input Useful Energy Output Energy Dissipated
to the Surroundings

9. Example
An electric motor consumes 100 watts (a joule per second (J/s)) of power to obtain 90 watts of mechanical power. Determine its efficiency ?
= 90 W x = 90 %
100 W

10. Efficiency of Some Common Devices
Electric Motor 90
Home Oil Furnace 65
Home Coal Furnace 55
Steam Boiler (power plant) 89
Power Plant (thermal) 36
Automobile Engine 25
Light Bulb-Fluorescent 20
Light Bulb -Incandescent 5

11. Vehicle Efficiency – Gasoline Engine
25% Of the gasoline is used to propel a car, the rest is “lost” as heat

12. Efficiency in Power Generation

13. Units
The energy field involves the measurement of a variety of quantities.
These measurements should be accurate and reproducible.
The first step in ensuring accuracy and reproducibility is defining the units in which the measurements are made.
SI Units:
meter (m): unit of length
kilogram (kg): unit of mass
second (s): unit of time

14. Units
The units for length, mass, and time (as well as a few others), are regarded as base SI units.
These units are used in combination to define additional units for other important physical quantities such as force and energy.

15. Units

16. Units of Energy
Joule [J]: equivalent of 1 N of force exerted over a distance of 1 m.
1 J = cal
1 J = 1 N.m = ft.lbf
1 J/s = 1 W
1 kWh = 3.6 ×106 J = 3412 Btu
Horsepower [hp]: power of a typical horse able to raise 33,000 lbm by 1 ft in 1 minute.
1 hp = 746 W
1 hp.hr = 2.68 ×106 J = 0.74 kWh

17. Energy Conversion Unit Table
1 kWh
3.6 MJ
1 m3 natural gas
37 MJ
1 kg #2 fuel oil
42 MJ
1 litre gasoline
35 MJ
1 m3 #2 fuel oil
39 GJ
1 m3 propane (LPG)
25.5 MJ
1 kg propane (LPG)
45.65 MJ
1 MJ
1000 kJ
1 GJ
106 kJ
1 MW
106 Watts

18. Example
A steam boiler for a facility can operate on LPG or diesel. LPG costs $1.25 per kg, and results in efficiency of 75%, while diesel costs $1.0 per liter and results in efficiency of 78%.
Which fuel should be used from an economic point of view?

19. Energy Accounting

20. Energy Use Index (EUI)
Basic measure of a facility’s energy performance.
A statement of the number of MJ of energy used annually per square meters of conditioned space.
To compute the EUI:
Identify all the forms of energy used in the facility.
Tabulate the total energy in MJ used in the facility.
Determine the total number of square meters of conditioned space.

21. Energy Use Index (EUI)
The Energy Use Index is the ratio of the total MJ used per year to the total number of square meters of conditioned space.
A typical office building in the US has an EUI of around 900 MJ/square meters/year.
Food sales and food service facilities in the US have the highest average EUI’s of over 2000 MJ/square meters/year. Health care facilities are next at about MJ/square meters/year.

22. Energy Use Index (EUI) Example:
An office building has 10,000 square meters of conditioned floor space and uses 2.0 million kWh and GJ of natural gas in one year.
Convert the electric and gas use into MJ by finding the appropriate conversion factor.

23. Energy Use Index (EUI) One kWh electric energy is equal to 3.6 MJ,
thus 2.0 million kWh is equal to ………….
One GJ of natural gas is 1000 MJ,
so 6800 GJ of natural gas is equal to …………
The EUI is then MJ divided by square meters,
and is equal to MJ/square meter/year ………….

24. Energy Cost Index (ECI)
The Energy Use Index (EUI) has some fairly obvious limitations:
Problem with mix of fuel and electricity.
Looks only at site energy- not source energy.
With site energy, 1 kWh is valued at 3.6 MJ, but back at the thermal power plant, it took around MJ of primary energy to produce the 3.6 MJ value of that 1 kWh.

25. Energy Cost Index (ECI)
The Energy Cost Index is sometimes used as a simpler and more meaningful measure of energy efficiency.
The Energy Use Index is somewhat misleading since all MJ are not really equal.
Electric energy is much higher quality energy than oil or gas, and it costs about three times as much per end use MJ.
The Energy Cost Index adds up all costs of energy and divides result by total square meters of conditioned space.

26. Energy Cost Index (ECI):Example
For the 10,000 square meters office building looked at earlier, the cost of electricity is $ 153,200 per year, and the cost of gas is $ 52,500 per year.
The ECI is then $ divided by 10,000 square meters, for an ECI of ……………………/square meter/year.
The ECI is easy to calculate, and is very useful.
It is another simple benchmark that can be used.

27. Engineering Economic Analysis

28. Engineering Economic Analysis
It is the Use of a combination of quantitative and qualitative techniques to analyze economic differences among engineering design alternatives in selecting the preferred design.

29. Capital Investment Characteristics
When companies spend money, the outlay of cash can be broadly categorized into one of two classifications; expenses or capital investments.
Expenses are generally those cash expenditures that are routine, ongoing, and necessary for the ordinary operation of the business.
Capital investments, on the other hand, are generally more strategic and have long term effects.

30. Capital Investment Characteristics
Three characteristics of capital investments are of concern when performing life cycle cost analysis.
First, capital investments usually require a relatively large initial cost.
“Relatively large” may mean several hundred dollars to a small company or many millions of dollars to a large company.

31. Capital Investment Characteristics
The second important characteristic of a capital investment is that the benefits (revenues or savings) resulting from the initial cost occur in the future, normally over a period of years.
The period between the initial cost and the last future cash flow is the life cycle or life of the investment.

32. Capital Investment Characteristics
The last important characteristic of capital investments is that they are relatively irreversible.
Frequently, after the initial investment has been made, terminating or significantly altering the nature of a capital investment has substantial (usually negative) cost consequences.
This is one of the reasons that capital investment decisions are usually evaluated at higher levels of the organizational hierarchy than operating expense decisions.

33. Capital Investment Cost Categories
In almost every case, the costs which occur over the life of a capital investment can be classified into one of the following categories:
Initial Cost,
Annual Expenses and Revenues,
Periodic Replacement and Maintenance, or
Salvage Value.

34. Capital Investment Cost Categories
As a simplifying assumption, the cash flows which occur during a year are generally summed and regarded as a single end-of-year cash flow.
Initial costs include all costs associated with preparing the investment for service. This includes purchase cost as well as installation and preparation costs.
Initial costs are usually nonrecurring during the life of an investment.

35. Capital Investment Cost Categories
Annual expenses and revenues are the recurring costs and benefits generated throughout the life of the investment.
Periodic replacement and maintenance costs are similar to annual expenses and revenues except that they do not (or are not expected to) occur annually.
The salvage (or residual) value of an investment is the revenue (or expense) attributed to disposing of the investment at the end of its useful life.

36. Payback Period
The payback period of an investment is generally taken to mean the number of years required to recover the initial investment through net project returns.
The payback period is a popular measure of investment worth and appears in many forms in economic analysis literature.
Unfortunately, all too frequently, payback period is used inappropriately and leads to decisions which focus exclusively on short term results and ignore time value of money concepts.

37. Payback Period
The fact that this approach ignores time value of money concepts is apparent by the fact that no time value of money factors are included in the determination of m.
This implicitly assumes that the applicable interest rate to convert future amounts to present amounts is zero.
This implies that people are indifferent between $100 today and $100 one year from today, which is an implication that is highly inconsistent with observable behavior.

38. Example
A 10 kW electric motor with 84% efficiency is replaced with 96% high efficiency motor which costs SR Assuming that the motor is operating for 4000 hours per year at full load, calculate the payback period if the electricity cost is SR 0.3/kWh.

39. Cash Flow Diagrams
A convenient way to display the revenues (savings) and costs associated with an investment is a cash flow diagram.
By using a cash flow diagram, the timing of the cash flows are more apparent and the chances of properly applying time value of money concepts are increased.
It is usually advantageous to determine the time frame over which the cash flows occur first.

40. Cash Flow Diagrams
The cash flows depicted represent an economic evaluation of whether to choose a window air conditioning system or a heat pump.

41. Cash Flow Diagrams
The differential costs associated with the decision are:
The heat pump costs (cash outflow) $1500 more than the window air conditioning system,
The heat pump saves (cash inflow) $380 annually in electricity costs,
The heat pump has a $50 higher annual maintenance costs (cash outflow),
The heat pump has a $150 higher salvage value (cash inflow) at the end of 15 years,
The heat pump requires $200 more in replacement maintenance (cash outflow) at the end of year 8.

42. Time Value of Money
Most people have an intuitive sense of the time value of money.
Given a choice between $100 today and $100 one year from today, almost everyone would prefer the $100 today. Why is this the case?
Two primary factors lead to this time preference associated with money:
Interest and;
Inflation.

43. Interest Tables
Time value of money problems involving compound interest are common.
Because of this frequent need, tables of compound interest time value of money factors can be found in most books and reference manuals that deal with economic analysis.
The factor (F|P,i,n) is read “to find F given P at i% for n years.”
The factor (P|F,i,n) and is read “to find P given F at i% for n years.”

44. Interest Tables
The factor (P|A,i,n) is known as the uniform series, present worth factor and is read “to find P given A at i% for n years.
The reciprocal relationship between P and A is symbolized by the factor (A|P,i,n) and is called the uniform series, capital recovery factor.
The factor (F|A,i,n) is known as the uniform series future worth factor and is read “to find F given A at i% for n years.
The reciprocal factor, (A|F,i,n), is known as the uniform series sinking fund factor and is read “to find A given F at i% for n years.”

47. Examples
Determine the balance which will accumulate at the end of year 4 in an account which pays 10%/yr using compound interest (using future worth value) if a deposit of $500 is made today.
To accumulate $1000 five years from today in an account earning 5%/yr compound interest, how much must be deposited today?

48. Examples
Determine the future worth (accumulated total) at the end of seven years in an account that earns 5%/yr if a $600 deposit is made today and a $1000 deposit is made at the end of year two?
Determine the equal annual withdrawals that can be made for 8 years from an initial deposit of $9000 in an account that pays 10%/yr. The first withdrawal is to be made one year after the initial deposit.

49. Who wants to be a millionaire?
If you want to be a millionaire on your 65th birthday, what equal annual deposits must be made in an account starting on your 24th birthday? The account pays 10%/yr.

50. Electricity Rate Structures

51. Electricity Rate Structures
The rate tariff structure generally consist of:
customer charge
energy charge
demand charge
Each type of charge may consist of several individual charges and may be varied by the time or season of use.

52. Customer Charge This is generally a flat fee per customer.
It is used to cover the costs incurred in the connection between customer and utility.
Customer costs vary with the number of customers, not with the amount of use by the customer.
These costs include the operating and capital costs associated with metering (original cost and on-going meter-reading costs), billing, and maintenance of service connections.

53. Energy Charge
This is a charge for the use of energy, and is measured in dollars per kilowatt-hour for.
The energy charge often includes a fuel adjustment factor that allows the utility to change the price allocated for fuel cost recovery on a monthly, quarterly, or annual basis.
This passes the burden of variable fuel costs (either increases or decreases) directly to the consumer.
Energy charges are direct charges for the actual use of energy.
Energy costs are not affected by the number of customers or overall system demand.

54. Demand Charge
Electric utilities must be able to meet the peak demand—the period when the greatest number of customers are simultaneously using service.
The utility needs to generate enough power to cover its customers’ needs at all times.
Customers using service at off-peak hours are less expensive to serve than on-peak users.
Since electricity cannot be stored, and since a utility must provide instantaneous and continuous service, the size of a generation plant is determined by the aggregate amount of service taken by all its customers at any particular time.

55. Demand Charge
Therefore, demand-related costs are dependent upon overall system requirements.
The demand charge is usually not applied to residential or small commercial customers, though it is not always limited to large users.
The customer’s demand is generally measured with a demand meter that registers the maximum demand or maximum average demand in any 15-, 30-, or 60-minute period in the billing month.

56. Power Factor Charge
Another type of demand charge that may be included is a reactive power factor charge; a charge for kilovoltamp reactive demand (kVAR).
This is a method used to charge for the power lost due to a mismatch between the line and load impedance.
Where the power-factor charge is significant, corrective action can be taken, for example by adding capacitance to electric motors.

57. Innovative Rate Structures
Utilities have designed a variety of rate types to influence the customer to use more or less energy or use energy at times that are helpful to the utility.
One of these rate structures is the time-of-use rate (TOU).
The primary purpose of this rate structure is to send the proper pricing signals to the consumer regarding the cost of energy during specific times of the day.
Generally, a utility’s daytime load is higher than its nighttime load, resulting in higher daytime production costs.
Proper TOU price signals will encourage customers to defer energy use until costs are lower.

58. Example 1
An office building is billed for electricity according to the following structure:
Customer cost = $50 per month
Energy cost = $0.06 per kWh
Demand cost = $6.5 per kW per month
Fuel adjustment = $0.025 per kWh
This month, the building used 150,000 kWh, and the metered demand was 525 kW, calculate its electricity bill for this month.

59. Example 2
A company is billed for electricity according to the following structure:
Customer charge = $151/bill/month
Demand charge = $13.27/kW (June-October)
Demand charge = $4.82/kW (November-May)
Energy charge = $0.0468/kWh
Power factor: If less than 80%, the charge is equal to the metered demand multiplied by 80 and divided by the average power factor.
If the electric use during September for this company was as follows: 54,000 kWh, 250 kW measured demand, 75% power factor, calculate the electricity bill for this month.