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4. Managing an energy conservation programme

4.1 Introduction
4.2 Role of management
4.3 Staff development, training and motivation
4.4 Investment appraisal
4.5 Strategic approach to planning

4.1 Introduction

4.1.1 Fuel price increases
4.1.2 Benefits of energy conservation
4.1.3 Some examples of reasons held for caution

The need to conserve energy in the mechanical forest industries is now widely accepted. Although energy may account for less than ten percent of the product sales value, it is an area that can be greatly improved upon, helping mills contain escalating costs, maintain financial viability and gain a marketing edge on their competitors.

Yet compared to other resources, energy is possibly the most widely neglected, although one of the easiest to control. To manage energy and bring about worthwhile savings, the same degree of management skill and expertise is required to energy management as that which is needed to operate a well-run production enterprise.

4.1.1 Fuel price increases

In spite of the present glut of oil on the international market, fuel prices are continually rising, as indicated in Figure 10. As the recession eases demand for manufactured products will undoubtedly increase and with it the demand for energy, resulting in yet further price rises. Additionally, one must take into consideration the fact that fossil fuel supplies are limited, which in turn will create further pressures as time passes.

Hence, those that have already taken steps to reduce their energy demand will be better placed in the event of future fuel shortages and sharp price rises, and not be forced to cut-back on production nor face closure due to a dramatic erosion of profit margins and competitiveness.

4.1.2 Benefits of energy conservation

As stated previously, no two mills are alike and for that reason the extent of rewards of energy management and conservation efforts will vary from mill to mill. Yet, in spite of the site-specific nature of the potential for conservation, it has been found that energy savings in the order of ten percent may be expected in the low investment phase, 10 - 25 percent for the medium phase and between 15 - 20 percent in the higher investment level. (21) However, in all cases the more efficient use of energy will be directly related to a reduction in energy consumption per unit of finished product.

Not only will management effort and financial investment in energy conservation lead to an eventual increase in profits and competitiveness on the national and international markets, but will continue to provide benefits long after the capital investment has been recouped. When the inevitable price rises in fuel occurs the energy conscious mill will be better placed to handle the impact, added to which its reduction in dependence on energy will tend to make it less vulnerable during periods of fuel shortages.

Figure 10. Industrial fuel price rises during the period 1974-84. Source (21)

4.1.3 Some examples of reasons held for caution

Although the benefits of energy conservation may be well appreciated by mill managers, the reluctance of some to embark upon a major energy saving programme could well stem from any of the following reasons, the most common being:

- the lack of knowledge as to what is involved and the full benefits to be gained;

- the lack of knowledge of available materials, equipment and processes which could bring about effective energy savings;

- concern as to adopting new technology which may prove a risk and cause production losses;

- lack of the necessary inhouse expertise which may be needed to identify energy saving opportunities;

- lack of trained personnel sufficiently competent to undertake the tasks involved;

- insufficient funds to modernize or replace old and obsolete plant;

- anticipation of long pay-back periods, particularly in the present economic climate.

In addition to the above, a view-point which is erroneously held by some management is, that as energy costs are generally less than ten percent of production costs, energy savings are low in priority compared to the improvements needed in other areas of production. Concerns such as these are understandable in the smaller isolated manufacturing unit, yet confidence can be developed by way of providing the appropriate information and professional guidance, which should help to dispel many ill-conceived fears and encourage a more positive attitude towards taking the first steps towards energy conservation.

4.2 Role of management

4.2.1 Energy manager

Management's role in energy conservation commences at the very start of a manufacturing plant's conception, in the choice of plant layout, building design and in the selection of energy efficient equipment and processes. Also, a greater degree of support and participation in energy schemes and conservation efforts would be given by all levels of mill personnel, if an energy savings ethic be established at the very beginning of operations.

Any energy saving effort, however large or small, involves a multitude of disciplines from finance, planning, engineering, purchasing, operation and maintenance. In the larger manufacturing operations, where a lateral organizational structure can lead to a more dispersed chain of command, it is essential that effective lines of communication be established in order that a free two-way flow of information may develop. To maintain such a communication system and to secure the assistance and co-operation of all involved, necessitates the appointment of an energy manager.

4.2.1 Energy manager

If a mill's energy programme is to have any measure of success it is essential that an energy manager be appointed. This post, depending on the size of the mill's operation, may be a full-time job or undertaken in addition to other duties.

The qualification for such a post should include:

- a knowledge of the mill's manufacturing process and interrelated departments;

- the ability to communicate with all levels of mill personnel, from top management to plant operators and maintenance crews. To be able to collect relevant data and ideas, provide information and instructions and to put forward his recommendations with confidence to the decision-makers;

- he must be able to motivate people and possess the energy and enthusiasm to get things done.

In order that the energy manager's role proves of value, top management should provide him with the authority and the means with which to carry out his task.

Apart from initiating and actively participating in the development of action plans, the energy manager would be expected to keep check on energy supplies and usage, monitor the day to day results of energy saving efforts, establish new targets, be constantly in search for new opportunities for improvement. He would also be expected to be the focal point for the collection and dissemination of all information relating to energy conservation.

However, to be effective in his task the energy manager should be encouraged by top management to keep abreast of the latest developments in equipment, production processes and energy saving methods. This may be achieved by reference to technical publications, attendance at conferences, exhibitions and specialist training programmes as well as being given the facility of visiting and maintaining contact with energy suppliers, equipment manufacturers and other mills involved in energy conservation. In the majority of cases a good energy manager will more than pay for himself in the savings made for the firm.

4.3 Staff development, training and motivation

It is true to say that the enthusiastic and meaningful participation of employees is the key to virtually all successful action programmes, without whose full support all attempts to conserve energy would be rendered futile. For which reason management should examine how best to motivate their employees into becoming willing and active participants in the drive towards a reduction in energy consumption.

Motivation may be engendered by way of offering incentives to attain, and surpass, set goals; taking heed of suggestions from operators, maintenance personnel and the like and to give appropriate rewards when the implementation of their ideas yield results; taking steps to involve all personnel in the programme and for management to be seen putting it into effect and actively following the progress of all energy saving efforts.

The reasons, objectives and overall effects of energy conservation should be understood by all those working in the plant. This may be achieved by formal and informal discussion, the prominent display of information notices and posters, and the circulation of data relating to the real cost of such services as steam, power and compressed air. It is equally important that all should be aware of the targets to aim for and the resultant benefits that energy savings would bring to both the mill and its workforce.

A series of in-house courses of education and training, in the efficient operation of plant and energy conservation techniques, would bring its own rewards. Such courses could be planned in conjunction with fuel supplies and equipment manufacturers as well as interested government bodies. It is at the pre-installation and commissioning stage of plan that such instruction has been found to have the greatest effect and should be followed by regular refresher courses. It is strongly recommended that sufficient numbers of operating and maintenance manuals be obtained from the equipment suppliers at the time of plant purchase and that they be made freely available during all training sessions and for reference purposes.

4.4 Investment appraisal

Whenever energy conservation measures involve investment capital, the rate of return must be determined to analyse whether there will be a return on the investment, and if the net return exceeds the cost of obtaining the funds, whatever the source.

Yet, although energy conservation is a cost-effective investment option with potentially high real rates of return, many firms fail to consider the merits of greater energy efficiency. This may partly be due to the reasons mentioned previously, or stem from the capital budgeting procedures and investment appraisal techniques adopted, which could well indicate energy conservation as being an unprofitable investment.

In some mill's energy may be regarded as yet another overhead, where management has neither the means nor inclination to accurately apportion usage to sectors of the manufacturing process. Other mills, although realising the importance of energy as a separate cost item, may view investment in energy-savings as a low priority area in their capital investment programme, which is only funded when profits are high, and cut when business is bad.

Hence, in such instances it is understandable how such accounting procedures can well lead to management's lack of interest in energy conservation. Investment in energy conservation, by virtue of its potential returns, should be afforded as much importance as product development and plant renewal.

The manner in which an investment project is evaluated, in terms of expected returns, is important if the true worth of the project is to be fully appreciated by management. The common approach, to use the pay-back method with periods of two to three years being regarded as the acceptable norm, does not portray the true worth of the investment, which in fact will provide real returns for the lifetime of the investment.

For this reason it is recommended that the Internal Rate of Return (IRR) method be adopted as a means to provide a more realistic financial evaluation, in that it measures the net value of the project to the mill, taking into account the project's expected life and forecasts for inflation, and in particular energy price rises during that period. Therefore, in order to assess the overall financial benefits of an energy conservation investment project the correct evaluation techniques should be used.

In all instances individual projects should be evaluated on their own merits and ranked in order of decreasing returns - those that rank high, and are within the limits of the available capital, should proceed. Naturally it is the ultimate goal in any energy conservation programme for the investment to be recouped in the shortest possible time.

By adopting a well conceived strategy the programme could be self-financing, in that financial benefits gained from one phase of the programme be used to help finance the next, and so on until such a point is reached where sufficient funds are generated through energy savings to help finance large-scale investment plans. Of course Government incentive schemes, and the attractive financial packages offered by some of the larger equipement suppliers, should also be given serious consideration and taken into account when making a financial evaluation.

4.5 Strategic approach to planning

4.5.1 Seeking advice
4.5.2 Energy audit

Prior to embarking upon a full-scale energy saving programme, it is recommended that a strategic approach be taken and the programme planned in progressive stages. Each stage should be objectively analysed before and after being put into action and fine tuned accordingly, before further plans and financial resources are committed to the next stage.

Experience has shown that those companies which adopt a well conceived and planned strategy tend to gain greater and longer lasting rewards with minimal inconvenience, compared to those who approach energy conservation in a feckless manner.

Basically the strategy involves a logical, yet fundamental approach to planning, of which the key components are:

(a) the overall committment of top management to the energy conservation programme;

(b) the appointment of an energy manager in whom is vested the responsibility, authority and means to bring about effective energy savings;

(c) the undertaking of an energy audit to identify the sources and usage of energy and to highlight potential areas for energy savings;

(d) an education and training programme to develop energy conscious employees a provide them with the knowledge as to how to bring about energy savings;

(e) a programme of planned preventative maintenance 1/ to ensure efficient plan operation and to safeguard against costly breakdowns and plant running idle;

(f) good housekeeping 1/, being the first and singularly major contributor to energy savings;

1/ To be covered in detail in a subsequent document

(g) an established system to monitor and set targets on energy flows and usage, so as to provide management with the means to progressively lower departmental energy consumption;

(h) a phased approach to energy investment in which four different levels may be adopted i.e.:

(i) no-cost, involving good-housekeeping such as immediate attention to steam and compressed-air leaks, judicious use of lighting, switching off of idling plant, together with adopting alternative operating procedures;

(ii) low level, in which minimal costs are involved, such as lagging of pipework, attention to the maintenance needs of equipment, improvements in the manner of plant operation and training;

(iii) medium level, involving the systematic replacement of worn and obsolete equipment, reconditioning production plant and ancillary equipment so as to render them more energy efficient, attention to dryers, combustion units and materials handling plant and the investment in instruments for measurement and control;

(iv) high level of investment in such items as more efficient combustion and heat raising plant, heat recovery units, the switch from traditional fossil fuels to alternatives including mill residues and the installation of energy efficient production plant;

(i) the frequent display of promotional material in the form of pesters, energy targets and instructional notices as considered essential to foster continued interest and participation in the energy saving programme.

4.5.1 Seeking advice

Nowadays a wide variety of sources are available to those companies about to embark upon an energy conservation programme and who may wish to seek advice. During the past decade a large number of publications and government funded studies have been devoted to the subject and generally made available to industry, some of which have been referred to in the preparation of this document.

Government departments, established primarily for the purposes of encouraging industry and commerce to reduce their overall energy consumption, are to be regarded as worthwhile sources of information on technical matters, as well as being able to indicate the financial incentives available. It is likely that they can also recommend consultants who possess the expertise needed to assist management in their energy conservation efforts.

It is also recommended that advice be sought from manufacturers and trade associations, as well as research centres who, in the majority of cases, are able to readily refer to their own libraries and member companies as well as to individuals with valuable experience. As previously mentioned, suppliers of fuel and equipment are generally most helpful in providing both advice and assistance to those mills wishing to maximize the energy efficiency of their plant and fuels.

4.5.2 Energy audit

All mills benefit from a well conceived action plan, but before one can be drawn-up and implemented with any real measure of success, an energy audit should be undertaken. Whereas the larger organizations may well have in-house expertise to carry out the task, the small and medium-sized mills will need to engage the assistance of an outside consultant. However, in all cases it is strongly recommended that the audit be reviewed by specialists.
The purpose of the energy audit is primarily to identify the sources of energy, the location and manner of use and the costs involved; additionally the amount and pattern of consumption of each major and user station will become evident and those areas that require further identification shall be highlighted. In order to facilitate the collection of accurate data, both for the purposes of the audit and subsequent monitoring, basic measurement and control instruments are needed.

The sequential approach to undertaking such an audit and developing an action plan based on the information obtained, is deliberate and progressive and to be in such a manner as to allow for the systematic examination of all energy using plant and processes. Areas with energy saving potential are to be identified and corrective measures and major improvement plans embarked upon within the means of the plant. The general approach would normally take the following form:

(a) a brief preliminary survey to identify energy saving opportunities, which may be readily attended to at minimal cost;

(b) an examination of the potential savings and costs involved for each specific opportunity identified;

(c) an energy audit of all incoming and site-generated sources of heat and power, together with details of consumption;

(d) a study of the existing manufacturing process and production patterns, individual items of plant, work activities and buildings with regard to their effect on the mill's energy consumption;

(e) an analysis of energy generation and distribution, particularly heat-raising plant;

(f) comparisons to be made with other more energy efficient plant and processes currently on the market;

(g) an analysis of the mill's overall efficient use of energy relative to its production;

(h) an examination of the mill's choice of fuels, taking into account the true costs of handling, storage, and heat generating efficiency etc. when compared to alternative fuels (including mill residues);

(i) management policy and methodology, with respect to energy related procedures, to be reviewed;

(j) opportunities for improved energy savings to be recommended, together with the manner of implementation, costs involved and estimated returns on investment;

(k) a phased plan of action to be drawn up to suit the firm's and other available financial resources.

Those improvements that may be attended to immediately, with minimal cost, would obviously constitute the first phase of the improvement programme. The results would be analysed and the next phase of activities planned, involving medium cost modifications to plant and production processes in which outside assistance may be needed for detailed engineering and implementation. (Refer to Figure 11.) As each phase of the energy efficiency programme proceeds, it is critically reviewed for results, and vetted as to its worth and cost-effectiveness, before a subsequent, more capital intensive phase is embarked upon.

It must be appreciated that the energy audit is not a once-off operation, but is to be undertaken on a continual basis if a mill is to maintain optimum efficiency in its energy use. In fact the energy conservation programme as a whole must be maintained and continually developed, regardless of whether initial objectives or targets have been reached. Fuel and power savings are to be regularly monitored and a constant review is to be made of new and improved operating techniques, plant and production processes, which may benefit the mill's energy saving efforts.

Figure 11. A systematic approach to policy implementation, monitoring and targeting

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