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ENERGY OPTIMIZATION: A KEY TO COMPETITIVENESS THROUGH THE ENERGY TRANSITION
TECH FLASH
Energy Optimization: A Key to Competitiveness Through the Energy Transition
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BY DAVID ANDERS
The need to adapt to a changing energy and regulatory landscape while maintaining competitiveness is a key challenge for the oil and gas industry. New technologies are providing increasingly cost-effective solutions to mitigate the impact of carbon, and optimizing energy use to improve efficiency has the potential to generate a positive return on investment in the near term while simultaneously working towards a low-carbon future.
Energy optimization can include both improvements to equipment and facilities but also operational optimizations, productivity, fuel switching, and self-generation. The scope of energy optimization encompasses a holistic review of energy consuming systems to optimize performance, improve resilience, and enhance environmental sustainability. Moreover, minimizing energy cost and future cost risks has a direct impact on competitiveness in a commodity industry.
The scope and objectives of an energy optimization engagement can vary widely depending on a company’s business objectives, external policy, and economic drivers, as well as a company’s starting point in terms of understanding energy use within its operations.
Understanding energy use and costs
The initial step in any energy optimization study is an analysis of the types, quantities, and costs of energy inputs. This may include fuel, electricity, water, purchased steam, and hot or chilled water. Energy use and cost intensities can be calculated to benchmark facilities against similar operations.
The structure of energy rates and tariffs needs to be well understood; this may include volume or capacity-based pricing, and firm or variable supply options. A project may improve energy costs through shifting usage patterns or switching to a more cost-effective rate option.
Cost variability, as well as increases over time, should also be considered. GHG-related costs (e.g., carbon tax or credits) are becoming increasingly relevant to the consideration of fuel switching or electrification. A thorough understanding of energy use patterns and costs is an essential prerequisite to assessing energy optimization opportunities.
Funding and incentives
Many utilities and governments provide incentive programs that fund energy studies or capital investment. Engaging utilities early in the process can facilitate understanding funding options and utilities may collaborate on projects that can improve power quality. Currently in Alberta, Greenhouse Gas (GHG)regulations are providing an incentive for regulated emitters to reduce emissions, including from energy use. In addition, programs funded through Alberta’s Technology Innovation and Emissions Reduction (TIER) fund are providing support to businesses to implement solutions to improve efficiency and reduce emissions, such as the Industrial Energy Efficiency and Carbon Capture Utilization and Storage Grant program.
Various financing models are possible to support energy optimization projects, including as a traditional capital investment, with or without incentive funding, or partnering with an energy services company that can fully fund project capital costs and guarantee a minimum level of savings as part of a longer-term operating contract. The availability of capital and/or appetite for taking on capital or operating risk needs to be balanced against the value of expected savings or returns. In considering either approach, the experience, financial strength and capabilities of solutions providers and financingcounterparties should be evaluated, and the technical solution design developed sufficiently to mitigate project risks.
Facility audits
The initial step to understanding energy use is to perform an energy audit. The level of detail and effort of the audit can vary depending on a company’s needs. An audit typically begins with a desktop review of energy use and cost data, equipment lists, drawings, and operational records. A basic screening audit is the initial step in understanding the scope and nature of the operations and identifying key areas for energy optimization, based on a desktop review of information, discussions with staff, and a walk-through of the facility.
Measures are defined at a high level including approximate costs, energy savings estimates, and payback periods. This level is a good first step to evaluate the level of the potential savings opportunity, and to justify investment and resources for further studies. A detailed audit typically incorporates a more detailed site survey of energy consuming equipment and a more detailed breakdown of energy use by area, potential energy savings measures, and costs, enabling a higher degree of certainty in the business case. Further engineering analysis may be required for capital-intensive measures to further reduce uncertainty and understand implementation and life cycle costs, project benefits, and project risks in greater detail.
Project implementation
Depending on the nature of the proposed measures, the additional work required to advance the design to implementation stage will be scoped. This may include developing a detailed feasibility study as an immediate next step or proceeding to preliminary and detailed engineering design. In this stage, it’s often beneficial to collaborate with consultants to develop specifications, select vendors and equipment, and assist with a request for proposal process to finalize cost estimates and schedules.
Change management requirements should also be considered in the implementation scope of work in order to minimize any operational impacts and ensure that the benefits associated with the project are maximized. Third party expertise brings value to project implementation in a variety of ways, including independent engineering, procurement, project and construction management, and monitoring services.
Measurement and verification
A critical component of any energy optimization project is measurement and verification (M&V) of performance. M&V ensures that energy savings are quantified post-implementation by comparing actual energy use against an appropriate baseline and considering operational and external variables, as well as any major operational changes. This way, the project business case can be validated, and any problems or issues are identified and addressed as early as possible. An M&V plan should be created prior to implementation, establishing the performance baseline, proposed approach, metering and monitoring requirements, and the roles and responsibilities.
Figure 1: Energy Optimization and Management begins with the definition of clear objectives, and follows a process of evaluating energy use, studying alternative options, implementing solutions and verifying results. A continuous process ensures that lessons and experience are integrated into future planning.
Best practices
Some of the best practices to consider when planning an energy optimization study include:
• Clearly articulate the organization’s objectives for energy optimization to ensure alignment with the scope of energy optimization studies. Depending on whether the drivers are cost reduction, operational improvements, or reducing GHG emissions, the focus and approach should be customized to ensure the right results.
• The quality of analysis and recommendations from an energy audit depend on strong communication and access to information. Ensure that information and personnel are available to facilitate an accurate assessment of energy use and operations.
• When assessing potential energy savings, energy use data for a minimum of one-year is typically required to establish a reliable baseline. It’s critical to understand the nature of operations during this baselineperiod, as well as the expectations for future operations. Any operational trends or changes that can impact energy use should be noted.
• Energy optimization is a cross-functional domain that can have impacts on operations, management, administration, as well as tenants and service providers. At the outset of an energy audit or energy optimization study, the relevant stakeholders and parties should be identified within and outside the organization to ensure their input is incorporated.
• Many opportunities exist for external funding, incentives and financing, and programs are continuously updated. Many of these are delivered through the local utility, which may also provide some initial analysis at no cost or be able to suggest alternate rate plans. Companies should ensure that they contact their utility account managers to ensure funding opportunities or utility-side issues are identified at the outset.
Considering the current economic, environmental, and social challenges and opportunities facing businesses, in particular the shift towards low carbon energy infrastructure and the increasing cost of conventional energy supply, energy optimization is not only imperative, but a key opportunity that can effect positive change.
Prioritizing efficiency improvements can result in immediate savings, while minimizing future costs associated with carbon mitigation. For these reasons, understanding energy use and identifying efficiency opportunities is foundational to sustainable business leadership in the 21st century.
David Anders, Consultant, Energy Management
David is an energy management consultant at Hatch with over fourteen years’ experience. He has worked with large energy consumers in the commercial, industrial, and government sectors to identify opportunities for energy optimization and decarbonization, develop transformational and continuous improvement strategies for managing energy and sustainability, and implement alternative energy, distributed generation, and energy storage projects.
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