Utility Audit Incentive for Continuous Improvement

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1 Utility Audit Incentive for Continuous Improvement Jerry Zolkowski, PE CEM Senior Engineer at Consumers Energy Business Solutions Robert Joba, PE CEM Director at Consumers Energy ABSTRACT The Energy Optimization program for Consumers Energy operates a pilot program to encourage industrial sites to adopt a continuous improvement program for energy either ISO or ENERGY STAR Challenge for Industry. The program includes training, coaching, gap assessments, incentives, and an energy audit. The participating sites reported on the implementation rate of the audit recommendations which was about 40%. The overall program is described plus an analysis of audit recommendations is presented. The Industrial Continuous Improvement Program (ICIP) Consumers Energy is a large electric & gas utility serving 6.8 million of Michigan s 10 million population 1. The Energy Optimization program started in 2009 under a state law mandating 1% annual savings. Consumers Energy Business Solutions, with support from implementation contractors DNV-GL and Franklin Energy, run the Commercial and Industrial Energy Optimization program. Most of the program is prescriptive and custom; however Pilots were created to test and develop new measures. ICIP started in 2012 as a pilot program and continued in 2013 and About 25% of the energy consumed in this country is by industry 2. An efficiency program needs a way to tap into the potential offered through industrial savings, especially in an industrialized Midwest state like Michigan. Many industrial opportunities are typically not part of prescriptive measures, so increasing adoption of an energy management system was conceived as a way to tap into the gains available from industry in order to contribute to the program s savings goal. The aim of ICIP is to get industrial sites to adopt continuous energy improvement programs either ISO or ENERGY STAR Challenge for Industry. The reasons to pursue this path are the following: History suggests that many sites follow a pattern of improvement in response to some crisis, and then backslide until the next crisis arises. Audits are great, but many get shelved. Consumers Energy did not want to offer an audit-only program. The solution is to have a system of continuous improvement so that improvements are maintained, and there is a system for identifying, implementing, and verifying gains. ICIP is split into two phases. During the first phase the site establishes an energy team and designates an energy leader. The program provides a three hour energy training to the energy team to familiarize 1

2 them with the concepts of energy management and what elements are critical to a successful system. There is also discussion regarding where energy savings may be found at the facility. The second phase requires the site to commit to pursuing ISO or register for EPA s ENERGY STAR Challenge for Industry. ISO is an audited management system, but the quantity of savings set as a goal can be trivial and still comply with requirements. ENERGY STAR sets a goal of a 10% reduction in five years, but it does not require management systems to be in place to get there. Sites are encouraged to choose the path that best fits with their organization. During the second phase a gap analysis is performed for those in the ISO track and a site energy audit is completed. A second gap analysis is offered later when the site is preparing for their certification audit. Throughout the process ICIP engineers are available to assist the site with project development, creating key performance indicators, incentive applications, and addressing any other energy topics. There is no charge to the site for program services. There is a small monetary incentive of a 25% bonus on efficiency incentives (up to paying $10,000) received by the site for projects performed en-route to ENERGY STAR achievement. There is also an incentive of $7,500 upon reaching ISO certification. An energy audit is performed at the site during the second phase of the program. This service provides an incentive to the site, and it also serves to provide a list of energy opportunities. While a process should be in place to continually identify and evaluate project prospects, an audit gets the process started and demonstrates some energy evaluations. The Energy Audit A typical audit uses a team of four engineers at the site for one day. It is modeled after the audits performed by the Department of Energy s Industrial Assessment Center program. Typically, the audit begins with an interview period where the manufacturing process is discussed along with compressed air, lighting, ventilation, space heating & cooling, and central plant equipment such as chillers, cooling towers, and pumping systems. That meeting is followed with a plant tour, a lunch meeting where the team chooses which prospects to investigate further, and then additional data collection in the afternoon such as light counts, machine specifications, air leak detection, and power monitoring for specific machines. After the site visit, specific recommendations are evaluated and researched to provide a completed report within two months of the site visit. From the first audit in November 2012 through July of 2014 ten audits had been completed providing 75 individual recommendations. The summary list of recommendations is shown in Table 1, and subsequent tables will evaluate this information by how much each site contributed to the savings, how much of each site s utilities were identified as potential savings, what system (compressed air, HVAC, process, etc.) was identified for improvement, and the payback period. 2

3 Table 1: Measure List Common Measures Electricity (kwh) Nat Gas (MMBtu) Energy Cost ($/yr) Incremental Measure Cost ($) Consumers Energy Incentive* ($) Simple Payback (yrs) Install VFD's, EMS Control Optimization, Economizer Repair, Radiant Heaters, Compressed Air Survey & Leak Repair, Lighting Upgrades, HE RTU Replacement 1,334,533 2,222 $148,719 $211,842 $33, Small Auto Compressed Air Survey & Leak Repair, Reduce Compressed Air Pressure/Change Valve, Install Cycling Compressed Air Dryer, Install Compressed Air Float Drains, Alternative Bath Mixing Solution, Interior & Exterior Lighting Upgrade, Install HE Forklift Battery Chargers 431,376 0 $33,949 $67,367 $25, Nuts Lighting Upgrades, Recuperator for Heat Treat Hearth Furnances, Oxy-fuel Burners for Ladle Heaters, Program PLC's to Turn Off Conveyor Motors, VSD Fans for Heat Treat Furnaces, Improve Steam Demand Control, Air Compressor Staging, HVAC Upgrades 6,088, ,316 $732,860 $2,337,758 $827, Big Steel Grinder Replacement, Cooling Tower Replacement, Air Compressor Staging, OA Intake for Air Compressors 575,809 0 $56,141 $68,000 $ Plastics 1 Lighting Upgrades, Optimized Air Compressor Controls, Compressed Air Survey & Leak Repair, Boiler Modifications, HVAC Upgrades 2,067,331 14,002 $261,722 $267,469 $121, Med Auto Repair Compressed Air Leaks, Right sizing pumps, Dust collection system, Lighting upgrades, VSD's on pumps 632,799 5,076 $81,476 $239,608 $42, Steel Parts Lighting upgrades, Boiler controls, Boiler economizers, Preheat with Boiler Blowdown, Compressed Air Survey & Leak Repair 248,596 11,701 $70,891 $269,012 $121, Cardboard Upgrade lighting & lighting controls, Motors, Repair Compressed Air Leaks, VFD's, Replace Grinders, Desiccant Compressed Air Dryer 860,784 10,664 $150,513 $425,613 $163, Steel Fab Optimize Compressed Air Dryer, Install Compressed Air Float Drains, LED exit signs 66, $10,119 $15,650 $3, Small Brass Grinders, Stage Startup, Lighting upgrades, Barrel wraps, Compressed Air Storage Tanks, Repair Compressed Air Leaks, VFD's on Cooling Towers, Programmable Thermostats 1,046, $107,766 $111,520 $30, Plastics 2 Totals 13,352, ,591 $1,654,155 $4,013,839 $1,369, Site Code 3

4 by Facility This information is considered two ways the first is how much each of the ten facilities contributed to the annual energy cost savings identified which is shown below: The largest facility provided the largest contribution which can be expected, and there is a tendency for the larger sites to contribute more to the total savings identified. Another way to look at the facilities information is to consider how much of each site s energy cost was identified for savings as a percentage of its total energy cost. An average of the percentages shown below is 10.9%. While big steel provided some large quantities of savings, the facility was so large that the audit team resources were exhausted before identifying and evaluating all opportunities. 4

5 Audit Findings by Type Recommendations were classified as compressed air (e.g. leaks or new dryer), steam (e.g. boiler controls), facility (e.g. high speed door), HVAC (e.g. EMS), lighting, and process. Process covers changes to production practices or equipment even if the savings comes from one of the other systems like steam or compressed air. One example is changing a pneumatic valve on a production machine so the plant air pressure could be reduced. The production machine would be modified so it counts as Process rather than compressed air. The distribution of the recommendations (by dollar savings) is shown in the chart below: Usually industrial processes use most of the energy at a site, so the Process category should dominate the findings. Conversely lighting is typically a small portion of the industrial load but provides a large part of the savings identified. The distribution of savings recommendations does not align with the distribution of energy uses. Lighting, compressed air, HVAC, steam, and facility measures typically improve those system efficiencies a few percentage points. While those can be great (and low risk) findings, process changes remove or reduce the demand entirely so process changes should dominate the findings. Auditor bias and best fit influence which recommendations are selected. Auditors will audit what they know. Auditors visiting the site will understand systems that are common to all facilities which include lighting, compressed air, HVAC, steam, and facility upgrades. Auditors will be unfamiliar with unique processes at each facility, and the processes may have been running for decades. It is hard to get up to speed and understand all the production details in a couple 5

6 hours and improve upon the hard work already done by the experts at the site. The site has expertise in production areas, but often has little expertise in support systems. An auditor brings expertise in areas where theirs is lacking. Audit Findings by Payback The audit recommendations were sorted by payback period. Looking at the dollar savings for each group as a percentage of the total savings identified is shown in the graph below: Noteworthy is the strong bias toward projects with the fastest paybacks. This is due entirely to customer (the utility and the site) needs. Audit resources were directed toward researching and evaluating those projects rather than on projects with longer paybacks to increase the probability of implementation earlier during the continuous improvement process. Implementation The program supports regular contact between most sites (some do drop out ) and the program engineers. This allows the program to get progress updates. To date, 31 of the 75 recommendations have been acted upon. That does not necessarily mean that the recommendation is fully implemented as recommended. It does mean the site recognized the recommendation as having enough value (satisfactory risk and return) to expend resources for planning, proposal, and/or implementation. The implementation table is shown in Table 2. 6

7 Table 2: Implementation Matrix Customer Type E NG Cost Project Cost Incentive Payback Small Auto 864, $91,158 $147,451 $18, Cardboard 170,906 9,991 $41,241 $162,000 $102, Big Steel 5,987,027 0 $478,965 $793,409 $213, Nuts 173,493 0 $13,653 $48,982 $22, Small Brass 64,194 0 $6,920 $1,200 $0 0.2 Steel Fab 609,920 8,825 $119,143 $417,613 $163, Plastics 2 707,521 0 $72,493 $90,775 $31, Steel Parts 146,029 0 $11,492 $1,400 $0 0.1 TOTAL 8,723,145 19,619 $835,065 $1,662,830 $552, Of the 13.4 million kwh identified in recommendations there is 8.7 million kwh in completed or planned projects. This was due in large part to the giant site tackling a couple of the big projects. For natural gas 19,600 MMBtu are being implemented out of 144,600 MMbtu recommended. The influence of the giant site is again evident as they are taking on few of the natural gas projects. That is likely due to low natural gas prices resulting in projects with longer paybacks. In quantity terms 31 out of 75 are in motion or complete. The implementation results compared to the recommendations is summarized in Table 3 below. Table 2: Implementation Summary Measure Electricity (kwh) Natural Gas (MMBtu) Energy Cost ($/yr) Incremental Measure Cost ($) Consumers Energy Incentive ($) Simple Payback Period (yrs) Quantity Total Recommendations 13,352, ,591 $1,654,155 $4,013,839 $1,369, Total Implementation 8,723,145 19,619 $835,065 $1,662,830 $552, Implementation Percentage 65.3% 13.6% 50.5% 41.4% 40.3% 41.3% This is 65% of electric savings, 13% of gas savings, and 41% of projects. A normal or expected rate has not been defined. However in general terms the electric uptake seems high, gas seems low, and project rate seems to be good. The DOE Industrial Assessment Center program database 3 reports 57,832 implementations for 124,614 recommendations for 46.4% - so it appears this is a similar result to ICIP for now. There is a huge difference in the amount of personal contact with the site, and ICIP sites have some time invested in establishing a team, metrics, and training before the audit. They are more likely to be focused on energy than a site that signs up for a free audit. The increased attention has not produced a higher uptake percentage yet, but might over a longer period of time. However that greater amount of assistance is reflected in higher program costs. 7

8 Results and Conclusion Implementation is one goal, but that is not the final measure. The audit is really just one piece of continuous improvement. The whole idea is to identify, evaluate, implement, monitor & verify, and repeat. The audit is something to help identify some measures to jump-start the continuous improvement process - and it is an incentive to help the sites make progress. Consumers Energy sponsors a pilot program for industrial continuous improvement for ENERGY STAR or ISO Training, gap analyses, bonuses, and an audit are offered as incentives to help move sites closer to implementing a continuous improvement system for energy. The audit offering is a valuable piece of the program, and it brings expertise needed by the manufacturing plant. Customer sites are implementing audit recommendations; however the resources do not exist to do everything in the near term (18 months). Audits are valid for several years, and can be updated or consulted for ideas when seeking efficiency projects. An industrial program continues for ICIP sites are expected to continue to produce great projects, and the ICIP offering will continue. A broader industrial program is expected to reach more sites, but with additional goals such as delivering training and increased applications for the larger Commercial and Industrial program. REFERENCES BIOGRAPHICAL SKETCH Jerry Zolkowski, PE CEM has been a Senior Engineer at DNV-GL since He works on the Consumers Energy Business Solutions incentive program in Michigan with a focus on making industrial plants more efficient. He can be contacted at: Gerard.Zolkowski@dnvgl.com Prior employment includes: 2.5 years at Dow Corning, the world leader in silicones, supporting global manufacturing energy efficiency efforts; and 6 years finding and evaluating energy conservation opportunities for Shaw Industries manufacturing operations. Shaw has over 50 manufacturing plants and is the country s largest carpet producer. Also 10 years at the state s industrial extension service at Georgia Tech. That work included energy conservation, environmental compliance, and plant & design engineering. Education includes a BS in Mechanical Engineering from the University of Rochester and an MBA from Columbus State College. 8

9 Robert Joba, PE CEM is the Director of Custom programs and has worked for Consumer Energy for 36 years. He works on the Consumers Energy Business Solutions incentive program providing management of large business programs. He can be contacted at: Education includes a BS in Mechanical Engineering from Michigan State University. 9