Devki Energy Consultancy Pvt. Ltd. Vadodara, Gujarat, India TRAINING MANUAL FOR CHEMICAL CLUSTER

Transcription

1 TRAINING MANUAL FOR CHEMICAL CLUSTER Guidelines for Energy Professionals for preparing bankable DPRs Devki Energy Consultancy Pvt. Ltd. Vadodara, Gujarat, India

2 CONTENTS 1. INTRODUCTION PROJECT BACKGROUND PROJECT ACTIVITIES OVERVIEW OF ANKLESHWAR CLUSTER ANKLESHWAR INDUSTRY PROFILE MSME PROFILE ANKLESHWAR BARRIERS TO FINANCING ENERGY EFFICIENCY PERSPECTIVES OF STAKEHOLDERS POLICY & REGULATORY PERSPECTIVE EQUIPMENT/SERVICE PROVIDERS PERSPECTIVE END USER PERSPECTIVE FINANCIERS/LENDER PERSPECTIVE UNDERSTANDING FINANCIALS OF MSME UNITS CLASSIFICATION OWNERSHIP OF UNITS BALANCE SHEET ASSETS INTANGIBLE ASSETS CURRENT ASSETS LIABILITIES- CAPITAL ACCOUNT PROFIT & LOSS ACCOUNT LOANS CURRENT LIABILITIES FINANCIAL RATIOS CREDIT MONITORING ANALYSIS (CMA) PREPARATION OF BANKABLE DPRS INTRODUCTION WORKING CAPITAL FUND BASED FACILITIES NON FUND BASED FACILITIES PREPARATION OF DPRS BANKER S PERSPECTIVE PREPARATION OF IGDPR FUNDING SCHEMES FROM GOVERNMENT & FINANCIAL INSTITUTIONS INTRODUCTION

3 6.2 CREDIT GUARANTEE FUND TRUST FOR MICRO AND SMALL ENTERPRISES (CGTMSE) CREDIT LINKED CAPITAL SUBSIDY SCHEME (CLCSS) SIDBI SCHEME FOR FUNDING PROJECTS THROUGH INDO JAPAN COLLABORATION ON ENERGY SAVING IN MSME SECTORS KFW-SIDBI SCHEME FOR FINANCING ENERGY EFFICIENCY PROJECTS IN THE MSME SECTOR ENERGY AUDIT ENERGY MANAGEMENT ENERGY AUDIT ENERGY AUDIT INSTRUMENTS ANALYTICAL TECHNIQUES HEAT TRANSFER CALCULATIONS ESTIMATING COST OF IMPLEMENTATION THE PLANT ENERGY STUDY REPORT BARRIERS TO SUCCESSFUL IMPLEMENTATION IDENTIFYING ENERGY SAVING PROJECTS INTRODUCTION BOILERS THERMIC FLUID HEATERS DRYERS DISTILLATION PROCESS HOT/COLD RECOVERY ELECTRIC MOTORS BELTS & GEARS PUMPS & FANS COOLING TOWERS COMPRESSED AIR REFRIGERATION & AIR CONDITIONING SYSTEM ANNEXURE BANKS IN ANKLESHWAR ANNEXURE-2: SME FINANCE SCHEMES List of Figures FIGURE 1-1: PROGRAM OVERVIEW... 7 FIGURE 2-1: ANKLESHWAR MAP... 8 FIGURE 2-2: MSME CHEMICAL CLUSTER... 9 FIGURE 3-1: BARRIERS TO FINANCING- SUMMARY FIGURE 6-1: MSME ADVANCES- BREAK UP

4 FIGURE 8-1: FLASH STEAM FIGURE 8-2: FLOW CONTROL OPTIONS FIGURE 8-3: ECONOMISER FIGURE 8-4: DRYING CURVE FIGURE 8-5: SPIN FLASH DRYER FIGURE 8-6: SPRAY DRYER FIGURE 8-7: FLUIDISED BED DRYER FIGURE 8-8: TRAY DRYER FIGURE 8-9: RECIRCULATION OF EXHAUST IN DRYING FIGURE 8-10: HEAT PUMP DRYING FIGURE 8-11: DISTILLATION COLUMN FIGURE 8-12: MOTOR EFFICIENCY FIGURE 8-13: MOTOR LOADING, EFFICIENCY & PF FIGURE 8-14: MOTOR LOSSES FIGURE 8-15: PUMP CURVES... 1 FIGURE 8-16: PUMP CURVES... 2 FIGURE 8-17: SAVING BY VFDS... 5 FIGURE 8-18: PART LOAD OPERATION OF SCREW COMPRESSOR List of Tables: TABLE 4-1: MSME UNITS - CLASSIFICATION TABLE 4-2: CAPITAL ACCOUNT- SOLE PROPRIETORSHIP TABLE 4-3: CAPITAL - PARTNERSHIP FIRMS TABLE 4-4: PRIVATE LIMITED COMPANY-EXTRACT OF BALANCE SHEET TABLE 4-5: NET PROFIT MARGIN TABLE 5-1: WORKING CAPITAL LIMITS TABLE 6-1: MSME ADVANCES GROWTH IN GUJARAT TABLE 6-2: LIST OF BANKS TABLE 6-3: EQUIPMENTS/TECHNOLOGIES ELIGIBLE TABLE 6-4: FINANCIAL PARAMETERS TABLE 8-1: FUELS AND CALORIFIC VALUES TABLE 8-2: EXCESS AIR TABLE 8-3: BOILER CONVERSION TABLE 8-4: HEAT LOSSES FROM PIPE SURFACES TABLE 8-5: SUMMARY OF LOSSES TABLE 8-6: SELECTION OF TRAPS TABLE 9-3: DRYER EFFICIENCY TABLE 9-4: ADVANTAGES OF HEAT PUMP DRYING TABLE 8-9: EXISTING CONDITION TABLE 8-10: AFTER MODIFICATION

5 TABLE 8-11: SAVING POTENTIAL TABLE 9-8: HEAT PUMP ASSISTED CHLORINE EVAPORATION TABLE 8-13: MOTOR SIZING TABLE 8-14: COMPARISON OF REWINDING & REPLACEMENT TABLE 8-15: HIGH EFFICIENCY MOTORS TABLE 8-16: MOTOR REPLACEMENT... 0 TABLE 8-17: EFFICIENCY OF GEAR & BELT DRIVES... 1 TABLE 8-18: SAVING BY IMPELLER TRIMMING... 6 TABLE 9-15: PNEUMATIC VS ELECTRICAL PUMPS TABLE 9-16: COMPRESSED AIR LEAKAGE TABLE 9-17: EFFECT OF HIGHER TEMPERATURE ON EFFICIENCY TABLE 9-18: INCREASE IN COP TABLE 9-19: REPLACEMENT OF EVAPORATORS

6 1.1 Project Background 1. Introduction The Micro, Small and Medium Enterprises Sector (MSME) is a critical segment of the Indian economy. It has a large share in employment generation and contributes significantly to manufacturing output as well as exports of the country The potential for growth and stability of this sector is however being hampered by factors like obsolete technology, information deficiencies, lack of financing avenues for technological up gradation and conservative management practices. These factors are also likely to create energy inefficiencies The Bureau of Energy Efficiency (BEE), a statutory body under the Ministry of Power, and Small Industries Development Bank of India (SIDBI) are jointly executing a Project Financing Energy Efficiency at MSMEs. This project forms a part of the Global Environment Facility (GEF) Programmatic Framework ( ) for promoting Energy Efficiency in India with an objective to increase demand for energy efficiency investments in targeted MSME clusters and to build their capacity to access commercial finance The GEF implementation agency for this project is World Bank. The project aspires to address the current gap in the understanding between energy auditors and bank loan officers and demonstrate a viable mechanism of synergic tie-up between MSMEs, energy auditors, financial consultants/chartered accountants, local industrial or MSME associations and local bankers The project has been launched at the following five MSME clusters from different industrial sectors, namely, Ankleshwar (Chemical), Faridabad (Mixed), Kolhapur (Foundry), Pune (Forging) and Tirunelveli (Lime kiln) Devki Energy Consultancy Pvt. Ltd. is providing technical assistance to energy professionals at the Ankleshwar Cluster, which involves capacity building of energy professionals in technoeconomic feasibility studies and development of bankable Detailed Project Reports The primary objective of the assignment is to develop a constituency of trained energy auditors and energy professionals for the MSME Chemical clusters with specific knowledge in: Production processes in various types of industries in the cluster, viz., Chemicals, Pesticides, Dye & Dyestuffs, Petroleum Products, Rubber, Bulk Drugs, Pharmaceuticals, Packaging, etc. 6

7 Identifying potential for energy savings in equipments and processes in these industries Developing implementable energy saving schemes in these industries Preparing bankable DPRs Schemes available with banks/fis for financing energy saving schemes 1.2 Project Activities A brief activity chart followed by us for implementing this project is given below. Review of cluster information Identify chemical MSME units in Ankleshwar by discussions with BEE, Industry Associations & End Users Review & compile information on EE in the Ankleshwar cluster such as energy norms, current technologies, penetration of EE technologies, barriers, etc. Walk through audits to validate review findings Identify plants for conducting walkthough audits considering scale of production, production process and technology. About 25 audits to be done in the Ankleshwar chemical cluster. Develop a Cluster specific template for data collection, monitoring & measurements, energy saving calculations. The Walk Through Audit Report will include process flow charts, energy & material balance, energy use information and practices, energy production norms, information gaps, case studies, etc. Developing training modules Discussions with FIs to understand existing schemes and documentation requirements to prepare guidelines for training energy professionals to prepare bankable DPRs Modules will be developed by discussions with Associations, FIs & BEE to highlight govt /FI initiatives, technological interventions to save energy cost, M&V techniques, financial evaluation methods, etc. Imparting Training to Energy Professionals Three training programs will be conducted with number of participants in each program. Candidates for training will be selected in consultation with BEE regarding qualifications and experience A half-day industry visit will be organised after each program to familiarise participants with the processes, practices and barriers in MSME in the cluster. Design, collect & disseminate feed back from programs to BEE Figure 1-1: Program overview 7

8 2.1 Ankleshwar Industry profile 2. Overview of Ankleshwar Cluster Ankleshwar is one of the historical cities of Gujarat in Bharuch district. The city is also well connected with the metro cities of Mumbai and Delhi by road (NH 8), rail and air (approximately 90 kms from Vadodara and Surat airports). One of the notable attractions of Ankleshwar is the 132 year old Golden Bridge over the river Narmada, that connects it with Bharuch city The city is also primarily identified with the presence of Ankleshwar Industrial Estate, one of the largest industrial townships of Asia. This estate was set up by GIDC in the mid 70s and today there are more than 1200 Micro, Small and Medium industrial units engaged in manufacturing, trading and providing various services. Most of the industries being from the chemical sector, Ankleshwar is also recognised as a major chemical zone of the State Ankleshwar also provides industrial and social infrastructure to other nearby estates like Panoli and Jhagadia as indicated in the map below. Figure 2-1: Ankleshwar map % of the total exports of the State are from this area. Ankleshwar is contributing significantly to the growth of Gujarat State as well as the nation. 8

9 2.1.5 Many MNC companies and large corporates also have manufacturing facilities at GIDC Ankleshwar; some of the well known names are Aventis Pharma, Asian Paints, Bayer Cropscience, Cadila Healthcare, Lupin, UPL etc. 2.2 MSME profile Ankleshwar Of the 1200 units in Ankleshwar GIDC, around 450 units can be classified as chemical units in MSME. These units can be further classified under the following industrial sector Chemicals Dyes, Pigments & Colours Pesticides & Fertilisers Packaging Petroleum Products Pharma & Bulk Drugs Plastics & Rubber The following figure illustrates the number of units coming under various categories. Chemicals 84 Dyes, Pigments, Paints & Colour 179 Pesticides & Fertilizers 4 Plastics & Rubber MSME Chemical Units Packaging 22 Pharma & Bulk Drugs 79 Petroleum products 10 Figure 2-2: MSME Chemical Cluster The majority of industries fall into Dyes & Pigments sector. General chemicals & pharmabulk drugs also contribute significantly in terms of numbers in this cluster. 9

10 3. Perspectives on Financing Energy Efficiency 3.1 Perspectives of Stakeholders Big ticket Energy Efficiency projects in the MSME sector have often suffered due to nonavailability of finance. Financing Barriers are broadly segregated to understand the perspectives of the stakeholders: Policy & Regulatory Perspective Equipment/Service providers Perspective End Users Perspective Financiers /Lenders Perspective 3.2 Policy & Regulatory Perspective Energy pricing structures often do not send the right signals to end users to improve their energy efficiency One of the important financial barriers being faced by MSMEs today is the difficulty in providing technical and financial information to banks and companies to routinely negotiate loans for implementing energy efficiency interventions Reserve Bank of India has issued guidelines & directives to banks regarding priority sector lending, including MSMEs. Bank lending to the Micro and Small Enterprises is reckoned as priority sector advances; lending to Medium enterprises is not eligible to be included for the purpose of computation of priority sector lending. The domestic commercial banks are expected to enlarge credit to the priority sector and ensure that priority sector advances (which include the micro and small enterprises sector) constitute 40% of Adjusted Net Bank Credit (ANBC) or credit equivalent amount of Off-Balance Sheet Exposure, whichever is higher. However, the priority sector also includes agriculture, housing etc. and hence there are no separate targets for loans to MSEs alone Banks have been advised to achieve a 20 per cent year-on-year growth in credit to Micro and Small enterprises and a 10 per cent annual growth in the number of Micro enterprise accounts. 10

11 3.2.5 Serious market failures exist in most jurisdictions. The perception is that governments are not providing a clear and compelling set of targeted policies and incentives to pursue energy efficiency interventions across the economy at a meaningful scale. Most of the government subsidies/incentives are generally targeting renewable energy investments like wind energy, solar thermal and solar photovoltaic, micro hydro etc. The rapid, policy-led growth in renewable energy investment in many countries is highlighted as a positive example that should be emulated Market driven mechanisms such as Clean Development Mechanism (CDM) have not penetrated the MSME sector because of high transaction costs as compared to the benefits. The Perform, Achieve, Trade mechanism, initiated by BEE, which is targeting only designated consumers under the Energy Conservation Act, is not available as an incentive for MSMEs Most financial institutions lack awareness about the impact of energy efficient equipment/processes on the bottom line and resultant environmental benefits; for example, a loan may be granted more easily for pollution control equipment than energy efficient equipment. 3.3 Equipment/Service Providers Perspective Absence of sufficient information from the customers and lack of customer awareness are often major impediments in implementation of energy efficiency projects. Company purchase policies often encourage purchases at the lowest cost, disregarding the issue of energy efficiency and potential energy cost savings Techno-economic feasibility analyses of any energy saving projects are typically done by energy auditor or the vendor of the energy efficient equipment; often insufficient knowledge of financial analyses results in a report that does not provide all information required by a banker or financier. For example, a typical feasibility study makes assumptions for various factors for estimating energy savings, such as energy cost, operating hours, production levels, discount rates, inflation in costs and other factors beyond the control of unit owner. Sensitivity analysis is required to understand the base case, best case and worst case scenarios and build the confidence level of the industry owner and the financier; often this is not done. For large investments, the bankers may be interested in understand the impact on CMA data, which may require the skills of a chartered accountant; lack of access to qualified professionals to do this type of analyses often limits further development of energy saving interventions. The scope of such analyses is often limited by the professional charges that the unit owner is willing to spend on such activity. 11

12 3.3.3 The process for loan approval for project financing also often tends to be a tedious process; the efforts are often disproportionately high and not worth especially if the loan amount is small. High risk projects, that can be implemented on an ESCO basis, also do not take off at times as establishing water-tight Monitoring & Verification protocols is also difficult in some cases. It may also be difficult to secure the rights over the Energy Efficient equipment and/or collect payment installments in the event of dispute over performance Poor documentation and inability of the industry owner to communicate issues to the banker may also result in non-availability of funding for potentially lucrative energy saving projects. 3.4 End Users Perspective Very high perceived risks of some energy efficiency projects, mistrust in unduly optimistic projections in project reports of auditors/vendors etc. can often derail the implementation of energy efficiency projects Lack of money, lack of time, absence of experts for designing & project planning or lack of internal expertise for implementation are genuine problems faced by MSMEs. Many unit owners may have good conceptual knowledge but are unable to take these forward due to the mentioned reasons Cash flows from saving energy are not conventional revenues, so it discourages commercial financial institutions (CFI)s' entry into this market. Energy cost savings are often not considered as positive cash flows into the plant boundary like money from sales of products Even in cases wherein the payback periods are short and huge savings are expected, energy efficiency projects are often not implemented because of high startup cost, especially due to production shutdown requirements for implementation. Often high investment projects are filtered based on simple payback periods, which considers only the savings in the first year; use of IRR or other methods, which provide a more holistic understanding of economics over the life time of the equipment, are often not used Additional project costs for engineering analyses & design, additional utility requirements, disruptions to production during implementation, additional staffing & training and other overheads are often ignored in calculation resulting overly optimistic scenarios and misleading economics. Due to small size of projects, due diligence requirements from a project financing perspective create relatively high transaction costs, resulting in managements giving low priority to such projects. 12

13 3.5 Financiers /Lenders Perspective The contributions of energy savings to cash flow often cannot be differentiated from main cash flow which may increase or decrease due to a variety of factors. Often the contributions of energy saving projects get masked due to variations in cash flow due to other reasons, which lead to finance persons doubting the real contribution of energy saving projects Low collateral asset value of energy efficient equipment results in difficulties in creating creditworthy financing structures. Collateral value is low because for most energy efficiency projects equipment represents a small share of total project cost but may have high engineering development and installation costs Energy efficiency projects often represent a relatively small position of business for major banks and may be perceived as high credit risk. Unfavorable financial position indicated in balance sheet may also demand more collateral to fund the project Energy professionals should make an attempt to transgress their limitations in understanding of finance to ensure the Investment Grade Detailed Project Reports (IGDPR) prepared by them The following diagram shows the broad category of barriers to implementing energy efficiency schemes. 13

14 Barriers to investment in energy efficiency Policy / Regulatory Equipment vendors / Service providers End Users Banks /FIs Energy pricing Procurement policies favor lowest cost Import duties on EE equipment Unclear or underdeveloped institutional framework for EE Lack of testing facilities, poor enforcement of standards High Project development costs Limited demand for EE goods Diffuse/diverse markets New contractual mechanisms(escos) Limited technical, business, risk management skills, Limited financing/equity Lack of awareness of EE Higher project development and upfront costs Ability/willingness to pay incremental cost Low EE benefits relative to other costs Perceived risk of new tech/systems, mixed incentives, lack of credible data Figure 3-1: Barriers to financing- summary New technologies and contractual mechanisms Small sizes widely high transaction costs High perceived risk as these are traditional asset based Other higher return, low risk projects are more attractive Behavioral biases 14

15 4.1 Classification 4. Understanding Financials of MSME Units A unit is classified as MSME (Micro, Small or Medium Enterprise) based on the investment in Plant and Machinery. Table 4-1: MSME Units - Classification Manufacturing Sector Micro Enterprises Small Enterprises Medium Enterprises Service Sector Micro Enterprises Small Enterprises Medium Enterprises Investment in plant & machinery Does not exceed twenty five lakh rupees More than twenty five lakh rupees but does not exceed five crore rupees More than five crore rupees but does not exceed ten crore rupees Investment in plant & machinery Does not exceed ten lakh rupees: More than ten lakh rupees but does not exceed two crore rupees More than two crore rupees but does not exceed five core rupees 4.2 Ownership of Units Sole Proprietorship Firms Sole proprietorship is the oldest and most common form of business in India. It is a business enterprise exclusively owned, managed and controlled by a single person with all authority, responsibility and risk A distinct disadvantage, however, is that the owner of a sole proprietorship remains personally liable for all the business's debts. So, if a sole proprietor business runs into financial trouble, creditors can bring lawsuits against the business owner. If such suits are successful, the owner will have to pay the business debts with his or her own money The amount in the Proprietor s capital account is reflected in the liabilities section of the balance sheet under sources of funds. 15

16 Particular Table 4-2: Capital account- Sole proprietorship Current Year (Amount in Rs) Capital Account Opening Balance xxx xxx Add Addition to Capital xxx xxx Interest on Capital xxx xxx Net Profit earned during the year xxx xxx Less - Withdrawals xxx xxx Closing Balance of Capital Account xxxx xxxx Partnership Firms Previous Year (Amount in Rs) Partnership concerns are formed when more than one person owns the business and they have jointly signed a Partnership Deed At least two members are required to start a partnership business. But the number of members should not exceed 10 in case of banking business and 20 in case of other business. If the number of members exceeds this maximum limit, then that business is not called as a partnership business legally The Partnership Firm s capital account is reflected in the liabilities section of the balance sheet under sources of funds as shown in table 4.3. This is the net worth of the Partnership Firm Particular Table 4-3: Capital - Partnership firms Current Year (Amount in Rs) Previous Year (Amount in Rs) Partner Capital Account ( Mr. A) Opening Balance xxx xxx Add Addition to Capital xxx xxx Interest on Capital xxx xxx Net Profit ( as per Profit Sharing Ratio) xxx xxx Remuneration Less - Withdrawals xxx xxx Closing Balance of Capital Account xxxx xxxx Partner Capital Account ( Mr. B) Opening Balance xxx xxx Add Addition to Capital xxx xxx Interest on Capital xxx xxx Net Profit ( as per Profit Sharing Ratio) xxx Xxx Remuneration Less - Withdrawals xxx Xxx Closing Balance of Capital Account xxxx Xxxx 16

17 Private Limited Company A private limited company is a voluntary association that offers limited liability or legal protection for its shareholders but that places certain restrictions on its ownership. These restrictions are defined in the company's bye laws or regulations and are meant to prevent any hostile takeover attempt The major ownership restrictions are: Shareholders cannot sell or transfer their shares without offering them first to other shareholders for purchase, Shareholders cannot offer their shares to the general public over a stock exchange, The number of shareholders should not be less than two and not more than fifty Private Limited company is a fully owned by a group of promoters. All shares of the company are held with promoters and their relatives. Details of shareholder s funds are found in the liabilities section of the balance sheet of the private limited company as detailed in table 4.4 below. Particular Table 4-4: Private Limited company-extract of balance sheet Current Year (Amount in Rs) Previous Year (Amount in Rs) Shareholder s Funds A) Share Capital Account ( Note No -1) xxxx xxxx B) Reserve & Surplus Account ( Note No -2) xxxx xxxx Particular Share Capital Account Authorized Equity shares of Rs 10 each with voting rights (No Share xxx ) Issued,Subscribed & fully paid up Equity shares of Rs 10 each with voting rights (No. Share xxx) Current Year (Amount in Rs) xxx xxx Previous Year (Amount in Rs) xxx xxx Particular Reserve & Surplus Account Surplus /Deficit in the statement of Profit and Loss Account Current Year (Amount in Rs) xxx Previous Year (Amount in Rs) xxx 17

18 4.3 Balance Sheet A financial statement summarizes a company's assets, liabilities and Shareholders' Fund at a specific point in time. These three balance sheet segments give investors an idea as to what the company owns and owes, as well as the amount invested by the shareholders An audited balance sheet generally comprises of the following: Directors Report. Auditor s Report Balance Sheet Profit and Loss Account The first page of the balance sheet contains a summary of all the balances in the various asset and liability accounts of the company. The total of all the assets must equal the total of all the liabilities. 4.4 Assets The Assets part of the balance sheet generally comprise of the following This section of the balance sheet contains the book value of all the fixed assets of the firm/company i.e. summary of the cost of asset less depreciation for the year Fixed Assets are assets used within the business and not acquired for the purposes of resale Examples include: Land and buildings Plant and machinery (Eg. boilers, chillers, Reactors etc.) Fixtures and fittings, such as light fittings and shelves Motor vehicles like vans and cars Fixed assets are shown at original cost (purchase price) or valuation (including all expenses that are incurred before it is ready for use. Depreciation* is charged on the asset at a rate prescribed under the Income Tax Act 1961 and Companies Act *Depreciation is the measure of wearing out of a fixed asset. Fixed assets are expected to wear out and become less efficient. Depreciation is calculated as the estimate of this measure of wearing out and is a charge in the Profit and loss Account. 18

19 No Depreciation should be charged on land while depreciation is to be charged on all other assets. 4.5 Intangible Assets An intangible asset is an identifiable non-monetary asset, without physical substance, held for use in the production or supply of goods or services, for rental to others, or for administrative purposes. Eg. Copyright, Patents etc 4.6 Current Assets Current assets are assets which can be easily liquidated within a period of 12 months or as per operating cycle of business concern. The following can be classified under current assets: Cash and Bank Balances Government and other deposits Fixed Deposits with banks Sundry Debtors or Receivables (domestic & export, outstanding for less than six months) Inventory (Stock of Raw materials) Stocks in process Finished goods Other consumable spares and packing Advances and prepaid expenses Advance Tax Others Deposits etc 19

20 4.7 Liabilities- Capital Account Proprietor s capital account or Partnership Firm s capital account or Share Capital account in the case of Private Limited companies wherein the Paid up Capital will actually give an idea regarding the amount of money the promoters of the company have brought into the business The credit/ (Debit) balance in the profit and loss account is called a surplus/(deficit) and, at the end of an accounting period, the company may decide to transfer part of the profits to Reserve head in the balance sheet; the reserve created out of profits transferred from Profit and Loss account is called General Reserve The company can use the general reserve for various purposes including issue of bonus shares to shareholders and payment of dividend when profits are insufficient. 4.8 Profit & Loss Account Profit & loss Account is a Financial Statement summarizes the revenues, costs and expenses incurred during a specific period of time, usually a fiscal quarter or year. These records provide information that shows the ability of a company to generate profit by increasing revenue and reducing costs. The P&L statement is also known as a "statement of profit and loss", an "income statement" or an "income and expense statement". 4.9 Loans Working Capital Loan- Current outstanding of working capital loans are mention.example Cash Credit Unsecured Loans- Outstanding loans from promoters, their friends and relatives, which are not secured by any collateral Current Liabilities A. From Banks Short term borrowings from banks (including bills purchased & discounted and the excess borrowings placed on repayment basis) B. Other Current Liabilities Short term borrowings (others) Sundry Creditors (trade) Advance Payments from customers/deposits from dealers, agents etc. Provision for taxation 20

21 Dividend payable Other statutory liabilities Installments of term loans/ deferred payment credits / etc. due within one year Other current liabilities and provisions due within one year 4.11 Financial Ratios Current Ratio This is the most fundamental ratio in Financial Analysis. It is also known as Liquidity Ratio and is calculated as under: =( )/( ) Having a current ratio of 1.33 is ideal The current ratio is a liquidity ratio which estimates the ability of a company to pay back short-term obligations. This ratio is also known as cash asset ratio, cash ratio, and liquidity ratio. A higher current ratio indicates the higher capability of a company to pay back its debts. Quick Ratio The quick ratio also referred as the acid test ratio or the quick assets ratio, this ratio is a gauge of the short term liquidity of a firm. The quick ratio is helpful in measuring a company s short term debts with its most liquid assets. The formula used for computing quick ratio is: ( )/( ) A higher quick ratio indicates the better position of a company. Debt Equity Ratio This ratio gives an idea regarding the total debt or borrowings of the entity against the capital or the tangible net worth of the entity. TOL stands for Total outside Liabilities. = / 21

22 TNW stands for Tangible Net Worth. Debt Service Coverage Ratio (DSCR) = h The Debt Service Coverage ratio (DSCR), also known as "debt coverage ratio" (DCR), is the ratio of cash available for debt servicing to interest, principal and lease payments. It is a popular benchmark used in the measurement of an entity's (person or corporation) ability to produce enough cash to cover its debt (including lease) payments. The higher this ratio, the easier it is to obtain a loan. This terminology is also used in commercial banking and may be expressed as a minimum ratio that is acceptable to a lender; it may be a loan condition or covenant. =( + + )/( ) Net Profit Margin The Net Profit margin is a number which indicates the efficiency of a company in cost control. A higher net profit margin shows more efficiency of the company at converting its revenue into actual profit. This ratio is a good way of making comparisons between companies in the same industry, for such companies are often subject to similar business conditions. The formula for computing the Net Profit Margin is: (Net Profit)/(Net Sales) Table 4-5: Net Profit Margin Acceptable Values A ) Ratios Current Ratio 1.33 Debt: Equity 1.5 to 2:1(preferred) TOL/TNW Not More than 3:1 Gross Average DSCR PBDIT/Interest More than 2.5 B) Promoters Contribution as % age to Total 25% to 30% Cost of Project 22

23 4.12 Credit Monitoring Analysis (CMA) The financials of a company are classified in a spreadsheet in a particular format. This forms the CMA data of the entity CMA Data means credit monitoring arrangement data. This data is provided by a company to a bank for getting a loan from the bank. Banks analyse this data and decide whether the loan should be sanctioned as well as set the drawing power/limits The CMA generally consists of 5 years data including 2 years Audited balance sheets and 1 year s estimated/provisional (i.e. current year) balance sheet and the future projected balance sheets for the remaining years. In the case of a Term Loan, CMA includes data till the repayment of a loan and, in case of a WC, current year s and following year s projections The Fund flow statement, changes in working capital report, ratio analysis and maximum permissible bank finance (MPBF) report Banks want to decrease risk of default of loan. Over a period of time, if any company is not in position to repay the loan, it becomes bad debt. The reason for the default may be due to the fact that the bank did not analyze the financial and solvency position of company. By getting CMA data, bankers will be in the position to understand the financial position of the company. So, every bank should demand CMA Data and analyze it in depth. CAs generally provide the service of preparing and analyzing the CMA data on the behalf of the company and bank With studying the balance sheet, the bank will know as to whether the financial position of the entity is sound or not, and whether the assets are debt free or mortgaged With the fund flow statement, banks get an idea regarding the inflows and outflows of funds. It also gives the exact picture as to whether the company is wasting their funds or using the funds for growing the business The profit and loss account gives details of the appropriation of profits etc. to the banker. It also helps in understanding the earning cycle which gives a further understanding of how expenses are being met With changes in working capital report, the banker will know the changes in current assets and current liabilities. It also gives a picture of short term solvency of the entity i.e. if the entity has enough money to pay the current liabilities, it will be difficult to misuse its long term resources. 23

24 With ratio analysis, banks can understand the financial position of the entity quickly Maximum permissible bank finance (MPBF) generally should not be more than 75% of the working capital of the entity, which helps set loan limits RBI has introduced clause for inclusion of the CMA data with the aim of protecting the customers deposits in bank. 24

25 5.1 Introduction 5. Preparation of Bankable DPRs A company can be endowed with assets and profitability but requires liquidity or cash for Expansion / Diversification / Technology up-gradation / Face competition and also meet with its day to day operating requirements like procurement of raw materials, routine expenses like local conveyance, salaries, rent etc. The firm/company is said to be short of liquidity if its assets cannot readily be converted into cash. 5.2 Working Capital Working capital, also known as net working capital or NWC, is a financial metric which represents operating liquidity available to a business. Along with fixed assets such as plant and equipment, working capital is considered a part of operating capital. If current assets are less than current liabilities, an entity has a working capital deficiency or working capital deficit. =( ) ( ) Positive working capital is required to ensure that a firm is able to continue its operations and that it has sufficient funds to satisfy both maturing short term debt and upcoming operational expenses. The management of working capital involves managing inventories, accounts receivable & payable and cash There are two types of limits which are generally set by banks: Table 5-1: Working capital limits Type Fund Based Non-fund Based Meaning With Fund Based Limit, the Company actually gets money (Cash) company Examples of fund based limits are: 1. Cash Credit 2. Term Loans 3. Demand Loan 4. Bank Overdraft etc. With Non-fund based limit, the bank makes payment on behalf of Examples of Non fund based limits are: 1. Bank Guarantee 2. Letter of Credit etc. 25

26 5.2.4 Working capital loans are provided by banks or financial institutions and are tailored to suit the precise requirements of the client through any of the various instruments available or are structured as a combination of cash credit, demand loan, bill financing and non-funded facilities. 5.3 Fund Based Facilities Cash Credit Cash Credit (CC) is a facility that has the features of a loan as well as bank account. When a person opens a CC account with the bank, he is being provided specified CC limit for the purpose of carrying on his business. For this purpose he is required to submit Stock Statements each month to the bank. The bank charges interest each month for operating the CC account. Once the CC account is opened, the person can start issuing cheques. The bank will then debit the account holder s account & the account holder will credit the bank account in his books. This is exactly the opposite of the normal current account. They need not maintain any balance, but have to pay cheques subject to the CC limit granted by the bank. Term Loan Term loans are given to purchase fixed assets like plant and machinery, which are long term assets. It is a loan from a bank of a specific amount with a specified repayment schedule and a floating interest rate. Term loans usually mature between one to ten years. Demand Loan Is a loan (such as an overdraft) with or without a fixed maturity date, but which can be recalled anytime (often on a 24-hour notice) by the lender and must be paid in full on the date of demand. Also, the borrower can pay off a demand loan at any time without incurring early-payment penalties. Demand loans often require collateral and are also called call loans. Overdraft Facilities A loan arrangement under which a bank extends credit up to a maximum amount (called overdraft limit) against which a current account customer can write cheques or make withdrawals. It is one of the most common forms of business borrowing. Overdraft facility is against a security like Bank Deposits / NSC / mortgage etc. pledged to the Bank. 26

27 5.4 Non Fund Based Facilities Bank Guarantee A guarantee from a lending institution ensuring that the liabilities of a debtor will be met i.e. if the debtor fails to settle a debt, the bank will cover it. A bank guarantee enables the customer (debtor) to acquire goods, buy equipment, or draw down loans, and thereby expand business activity. Letter of Credit A letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. In the event that the buyer is unable to make payment on the purchase, the bank will be required to cover the full or remaining amount of the purchase Letters of credit are often used in international transactions to ensure that payment is received. Due to the nature of international dealings including factors such as distance, differing laws in each country and difficulty in knowing each party personally, the use of letters of credit has become a very important aspect of international trade. The bank also acts on behalf of the buyer (holder of letter of credit) by ensuring that the supplier will not be paid until the bank receives a confirmation that the goods have been shipped. 5.5 Preparation of DPRs In the normal course of an Energy Audit, the Energy Auditor submits his findings and recommends retrofits or replacement of existing equipment with more energy efficient equipment. The investment figure is given in the form of cost of equipment plus additional costs for infrastructure adjustments. To justify the investment, usually Payback Period is calculated, which is quite simplistic and is generally suitable only for small investments with very fast payback periods of only few months (less than a year). Simple Payback Period calculation does not consider the time value of money. When the investments are large, usually Detailed Project Reports (DPRs) are made, wherein Internal Rate of Return (IRR) is calculated, Which considers all cash inflows and out flows, including interest, depreciation etc. while IRR is a good parameters to evaluate the project with large investment, as far as the clients are concerned, bankers need more information than Payback Period and/or IRR to fund the project; they insist on evaluating the financials of the company, both historical and future projections, to satisfy themselves about the company s ability to repay the loan through positive cash flows. 27

28 5.5.6 After a brief mention of Payback Period and IRR, the bankers perspective is elaborated in this section. If the DPR provides unambiguous information on the impact of the project on the financials of the company, the chances of getting bank funds for the project improves. Payback Period The payback period i.e. the length of time required to recover the cost of an investment, is computed based on the monetary value of expected savings divided by cost of investment. Please note that this calculation does not consider the interest cost, annual maintenance cost etc. Internal Rate of Return = / Since payback period ignores the time value of money, we also compute the Internal Rate of Return (IRR) and/or Net Present Value (NPV) of the proposed investment; these are the two most-used measures for evaluating an investment NPV is the difference between the present value of cash inflows and the present value of cash outflows. NPV is used in capital budgeting to analyze the profitability of an investment or project. NPV analysis is sensitive to the reliability of future cash inflows that an investment or project will yield IRR is the rate of return on investment at which the cash inflows equal the cash out flows i.e. NPV = 0. NPV = 0; or PV of future cash flows Initial Investment = 0; or CF 1 CF 2 CF ( 1 + r ) 1 ( 1 + r ) 2 ( 1 + r ) Initial Investment = 0 Where, r is the internal rate of return; CF 1 is the period one net cash inflow; CF 2 is the period two net cash inflow, CF 3 is the period three net cash inflow, and so on... 28

29 The following graph explains that IRR is the discount rate when NPV is zero. Example Find the IRR of an investment having initial cash outflow (investment) of Rs 213,000. The cash inflows (cost reduction) during the first, second, third and fourth years are expected to be Rs 65,200, Rs 96,000, Rs 73,100 and Rs 55,400 respectively. Solution Assume that r is 10%. NPV at 10% discount rate = Rs18,372 Since NPV is greater than zero we have to increase discount rate, thus NPV at 13% discount rate = Rs 4,521 But it is still greater than zero we have to further increase the discount rate, thus NPV at 14% discount rate = Rs 204 NPV at 15% discount rate = (Rs 3,975) Since NPV is fairly close to zero at 14% value of r, therefore IRR 14% 5.6 Banker s Perspective A bank generally sanctions a Term Loan for such an investment; the banker conducts a holistic evaluation of the investment which involves evaluation the existing financial position of the company/firm for the last three years, estimating and projecting the financials for the coming years, after factoring in the proposed loan etc The projected balance sheet can be prepared by taking into account the need of the business to expand its activities in the future. In such cases, it has to project the required assets it intends to purchase, the corresponding cash resources it would be able to generate and the external sources of finance it would require after considering its internal cash resources. 29

30 5.6.7 Documents required by a bank/financial institution for appraising a Term Loan Proposal: Sr. No. A Annexure Company Verification 1 MOA & AOA Basic Document for Company Formation 2 PAN KYC 3 Address Proof of a Regd. Office KYC 4 Last 3 years ITRs and Audited BS Financial position 5 Bank Statements of last 6 months To see the flow of funds B Licenses / Approvals To ensure that the proper 1 Excise Registration permission and approvals. 2 GST/CST/VAT Registration 3 Service Tax Registration 4 Industrial License SSI Registration C Factory Land & Building Documents 1 Ownership documents if owned and Lease Deed if To ensure the ownership leased 2 Title Clearance Report To ensure the encumbrance of property 3 Valuation Report To ascertain the market value of the property. D Promoters/Guarantors 1 PAN KYC 2 Address Proof KYC 3 Last 3 years Income Tax Returns Financial Position 4 Net Worth Details along with Proofs Credit facilities 5 Names & Activities of all Associate Concerns, Last 3 To know the business years Audited BS activities 6 Saving Account Bank Statements of last 6 months To see the flow of funds. 7 If existing accounts and loans are with another bank/fi Copy of sanction letter of borrowings with other banks including working capital loans Repayment schedules and repayment track records of above loans Bank statements of CC/CA/OD accounts with other banks To know other liabilities of Business 8 Detailed project report including SWOT analysis, market trends, growth prospects. 30 To know industrial scenario of Business

31 Copy of CA certified Audited Financials of the Firm/Company for last three financial years or CA certified balance sheet and P&L account (if the financials of the firm are not audited) CMA data with last three audited financial data, estimates for current/following financial years and projections for next three financial years (or more, this varies from bank to bank). CA certified Net Worth statements of the promoters Specifications of the equipment being financed including cost and other overheads Detailed profile of the client Detailed Project Report (DPR) including SWOT analysis, market trends, growth prospects, prevailing industry scenario. 5.7 Preparation of IGDPR The Investment Grade Detailed Project Report (IGDPR) should include the following: 1. Introduction of the company Mention company founding year and briefly describe company history, including qualifications and experience of promoters and key persons. Describe briefly the product types and growth in production volumes over the years. 2. Products Mention all products and byproducts produced by the company presently, along with annual production volumes. 3. Brief Overview of the Industry Describe the product and product sub-categories Mention typical users of the product Briefly describe market scenario in India & world and potential for growth in the foreseeable future Regulatory scenario for product quality and export & import 4. Strengths, Weakness, Opportunities & Threats (SWOT) Analysis Present results of SWOT analysis of the Company; Typical issues to be considered are: Ability to exploit market potential and increase market share Advantages in terms of product range, quality & volumes to capture higher market share 31

32 Likely obsolescence of products or processes, especially if processes are causing environmental pollution. Marketing network, both national and global reach. Financial strength for technology upgrades and expansion of production Profit margins & ability to beat the competition in the market Regulatory issues enforced by governments and/or local bodies; for example, in Ankleshwar, strictures of the Gujarat Pollution Control Board often results in increased lead time for project implementation. 5. Manufacturing process in brief Mention and briefly describe the important steps in the manufacturing process. Mention the energy source and/or utilities consumed in each process step. 6. Review of Energy Consumption Provide quantitative information on all energy sources used on a monthly basis for at least one year. Provide information on monthly energy costs for all energy sources independently. Correlate energy consumption with production and calculate Specific Energy Consumption, if possible 7. Energy Cost Saving Measures with Analyses Technical basis for recommendation Quantifications of savings Specifications of new equipment, retrofits and additional infrastructure required i.e. additional utilities, civil work etc. Investments required for the project, including equipment, instrumentation and other associated infrastructure Additional maintenance requirements Additional manpower man power requirements 8. Detailed Financial Calculations Quantification of investment required Assumed lifetime of the project (usually 10 or 15 years) Quantification of annual maintenance costs over the assumed life time of the recommended equipment Assumption of energy costs during the life time of the project Calculation of IRR and DSCR Sensitivity analysis considering changes in assumptions related to energy and other costs Impact on CMA data (required only when the project investment and/or impact are large) 32

33 9. Plan for Capacity Building Training requirements to ensure correct operation of recommended equipment to maximize energy cost savings 10. Plan for Project Management Special expertise for project design, installation and commissioning Production shutdown required for implementing the project Time line for the project 11. Sources for Project Funding Contacts on prospective lending agencies Information of specific funding schemes for MSMEs 12. Monitoring and Verification Protocol Instrumentation required for monitoring energy savings. Unambiguous calculation methodology for measuring the energy consumption and specific energy consumption before and after implementation of the project Methodology for calculating net cost savings on a monthly basis. 33

34 6. Funding Schemes from Government & Financial Institutions 6.1 Introduction The following break up of loans to MSMEs in Gujarat gives a clear picture of the major lenders in Gujarat. The major players are State Bank of India, Bank of Baroda & Bank of India together contributing to about 50% of the advances. A private sector bank also has significant presence in Gujarat MSME financing. The Growth rate in lending to MSMEs in Gujarat has exceeded the targets set by RBI & Ministry of Finance. Figure 6-1: MSME advances- break up Table 6-1: MSME advances growth in Gujarat 34

35 6.1.2 Most of the public sector banks and private sector banks have a presence in Ankleshwar city with either with branches/extension counters in the GIDC. Some co-operative banks and credit societies are also operating in Ankleshwar A detailed list of banks in the public sector, private sector & cooperative sector is given in Annexure-1. Typical lending rates of these public sector banks vary from 12.5% to 16% depending on the amount sanctioned, credit rating etc. Lending rates of private banks are generally 2%-5% higher than PSU banks. Cooperative banks have higher interest rates than PSU & Private sector banks. 6.2 Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) Objective Government of India launched Credit Guarantee Scheme (CGS) so as to strengthen credit delivery system and facilitate flow of credit to the MSE sector. Ministry of Micro, Small & Medium Enterprises (MSME, Government of India) and SIDBI have set up CGTMSE to ensure availability of bank credit without the hassles of collaterals / third party guarantees for setting up a Micro and Small Enterprises (MSE) The lender gives importance to project viability and secure the credit facility purely on the primary security of the assets financed. The lender, availing guarantee facility, endeavors to give composite credit to the borrowers so that the borrowers obtain both term loan and working capital facilities from a single agency. The CGS seeks to reassure the lender that, in the event of a MSE unit, which availed collateral free credit facilities, fails to discharge its liabilities to the lender, the Guarantee Trust would make good the loss incurred by the lender up to 75 / 80/ 85 per cent of the credit facility. Credit Guarantee Any collateral / third party guarantee free credit facility (both fund as well as non- fund based) extended by eligible institutions, to new as well as existing Micro and Small Enterprise, including Service Enterprises, with a maximum credit cap of Rs. 100 lakh are eligible to be covered The guarantee cover available under the scheme is to the extent of 75% / 80% of the sanctioned amount of the credit facility, with a maximum guarantee cap of Rs lakh / Rs. 65 lakh. The extent of guarantee cover is 85% for micro enterprises for credit up to Rs.5 lakh. 35

36 6.2.5 The extent of guarantee cover is 80% (i) Micro and Small Enterprises operated and/or owned by women; and (ii) all credits/loans in the North East Region (NER). In case of default, the Trust settles the claim up to 75% (or 80%) of the amount in default of the credit facility extended by the lending institution The lender should cover the eligible credit facilities as soon as they are sanctioned. In any case, the lender should apply for guarantee cover in respect of eligible credits, sanctioned in one calendar quarter, latest by end of subsequent calendar quarter. Guarantee will commence from the date of payment of guarantee fee and shall run through the agreed tenure of the term credit in case of term loans / composite loans and for a period of 5 years where working capital facilities alone are extended to borrowers, or for such period as may be specified by the Guarantee Trust in this behalf. Eligible Lending Institutions All scheduled commercial banks and specified Regional Rural Banks, NSIC, NEDFI, SIDBI, which have entered into an agreement with the Trust for the purpose, are Member Lending Institutions (MLIs) of CGTMSE. Eligible Borrowers New as well as existing Micro and Small Enterprises. Maximum Risk Cover Of the credit facilities extended by MLIs, the Trust guarantees, in case of default by the borrower, up to 75 per cent (85% for select category of borrowers), of the defaulted the principal amount in respect of term credit, including interest on principal for one quarter and / or outstanding working capital advances (inclusive of interest), as on the date of account becoming NPA, or as on the date of filing the suit. Other charges such as penal interest, commitment charge, service charge, or any other levies/ expenses shall not qualify for the guarantee cover. Rehabilitation Assistance Units, covered under CGTMSE, becoming sick due to factors beyond the control of management, assistance for rehabilitation extended by the lender could also be covered under the scheme provided the overall assistance is within the credit cap of Rs.100 lakh. Non-Eligibility Any facility given on the basis of collateral security or third party guarantee shall be disqualified for coverage under the scheme. The Trust also reserves the right to reject any application for the guarantee cover, if it deems necessary. 36

37 Guarantee Fee For credit facility up to Rs.5 lakh, an upfront Guarantee Fee (GF) of 1% of the amount sanctioned will have to be paid to the Trust by the MLI. For amounts sanctioned beyond Rs.5 lakh and up to Rs.100 lakh, the GF is 1.5%; while for credit facility up to Rs. 50 lakh for units in the North Eastern Region including Sikkim, the GF is 0.75%. The GF will have to be paid within 30 days from the date of first disbursement of credit facility by the MLI to a borrower. Annual Service Fee Guarantee cover extended by CGTMSE in respect of any specific borrower shall be valid, provided the MLI concerned pays an Annual Service Fee (ASF) of 0.50% on the amount guaranteed for credit facilities up to Rs. 5 lakh and 0.75% on the amount guaranteed for credit facilities beyond Rs. 5 lakh and up to Rs. 100 lakh. Such ASF is to be paid by the MLI on or before 31st May of that year. The Trust reserves the right to revise the guarantee fee / annual service fee from time to time. Cost To the Borrower The Credit Guarantee Scheme leaves it to the discretion of the MLIs to decide about passing on the incidence of Guarantee Fee and Annual Service Fee to the borrower or alternatively they may decide to bear it themselves. Interest Rate Payable by Borrower The MLI shall follow the guidelines issued by RBI. However, interest rate shall not exceed 3 per cent over and above the Prime Lending Rate of the MLI, excluding the annual service fee Details of some the schemes offered by public sector banks are given in Annexure-2 similar such loans are being offered by private sector banks like Axis Bank, ICICI Bank etc. 37

38 6.3 Credit Linked Capital Subsidy Scheme (CLCSS) For Technology up-gradation of the Small Scale Industries, the Ministry of Small Scale Industries is operating a scheme for Small Scale Industries (SSI) called the Credit Linked Capital Subsidy Scheme (CLCSS). The Scheme aims at facilitating technology up-gradation by providing upfront capital subsidy to SSI units, including tiny, khadi, village and coir industrial units, on institutional finance (credit) availed of by them for modernization of their production equipment (plant and machinery) and techniques The Scheme (pre-revised) provided for 12 per cent capital subsidy to SSI units, including tiny units, on institutional finance availed of by them for induction of well established and improved technology in selected sub-sectors/products approved under the Scheme. The eligible amount of subsidy calculated under the pre-revised scheme was based on the actual loan amount not exceeding Rs. 40 lakh. The ceiling on loans under the Scheme has been raised from Rs. 40 lakh to Rs. 1 crore The admissible capital subsidy is to be calculated with reference to the purchase price of plant and machinery, instead of the term loan disbursed to the beneficiary unit The practice of categorization of SSI units in different slabs on the basis of their present investment for determining the eligible subsidy is followed The Small Industries Development Bank of India (SIDBI) and the National Bank for Agriculture and Rural Development (NABARD) will continue to act as the Nodal Agencies for the implementation of this scheme The following nine Public Sector Banks/ Government Agencies have also been inducted as nodal banks/agencies for implementation and release of capital subsidy under the CLCSS: Table 6-2: List of Banks S. No. Name of Bank/Agencies 1. State Bank of India 2. Canara Bank 3. Bank of Baroda 4. Punjab National Bank 5. Bank of India 6. Andhra Bank 7. State Bank of Bikaner & Jaipur 8. Tamil Nadu Industrial Investment Corporation 9. The National Small Industries Corporation Ltd. 38

39 6.3.5 The inclusion of above-mentioned nodal banks/agencies will be in addition to the existing nodal agencies, namely, the Small Industries Development Bank of India (SIDBI) and the National Bank for Agriculture and Rural Development (NABARD) under the CLCSS. These nodal banks/ agencies would consider proposals only in respect of credit approved by their respective branches, whereas, for other Primary Lending Institutions (PLI), SIDBI and NABARD would continue to be the nodal agencies for release of subsidy under this scheme. Eligible Primary Lending Institutions (PLI) All Scheduled Commercial Banks, Scheduled Cooperative Banks [including the urban cooperative banks co-opted by the SIDBI under the Technological Up gradation Fund Scheme(TUFS) of the Ministry of Textiles, Regional Rural Banks (RRBs), State Financial Corporation s (SFCs) and North Eastern Development Financial Institution (NEDFi) are eligible as PLI under this scheme after they execute a General Agreement (GA) with any of the nodal agencies, i.e., the Small Industries Development Bank of India (SIDBI) and National Bank for Agriculture and Rural Development (NABARD). Eligible Beneficiaries The eligible beneficiaries include sole Proprietorships, Partnerships, Co-operative societies, and Private and Public limited companies in the SSI sector. Priority shall be given to Women entrepreneurs. Types of units to be covered under the Scheme Existing SSI units registered with the State Directorate of Industries, which upgrade their existing plant and machinery with the state- of -the -art technology, with or without expansion New SSI units which are registered with the State Directorate of Industries and which have set up their facilities only with the appropriate eligible and proven technology duly approved by the GTAB/TSC. Eligibility Criteria Capital subsidy at the revised rate of 15 per cent of the eligible investment in plant and machinery under the Scheme shall be available only for such projects, where terms loans have been sanctioned by the eligible PLI on or after September 29, Machinery purchased under Hire Purchase Scheme of the NSIC is also eligible for subsidy under this Scheme. 39

40 Industry graduating from small scale to medium scale on account of sanction of additional loan under CLCSS shall be eligible for assistance Eligibility for capital subsidy under the Scheme is not linked to any refinance Scheme of the Nodal Agencies. Hence, it is not necessary that the PLI will have to seek refinance in respect of the term loans sanctioned by them from any of the refinancing Nodal Agencies. Definition of Technology Up gradation Technology Up gradation would ordinarily mean induction of state-of-the-art or near stateof-the-art technology. In the varying mosaic of technology obtaining in more than 7500 products in the Indian small scale sector, technology up gradation would mean a significant step up from the present technology level to a substantially higher one involving improved productivity, and/or improvement in the quality of products and/or improved environmental conditions including work environment for the unit. It would also include installation of improved packaging techniques as well as anti-pollution measures and energy conservation machinery. Further, the units in need of introducing facilities for in-house testing and on-line quality control would qualify for assistance, as the same is a case of technology up gradation Replacement of existing equipment/technology with the same equipment/technology will not qualify for subsidy under this scheme, nor would the scheme be applicable to units upgrading with second hand machinery The scheme would cover the following technology needs / products/sub - sectors: Table 6-3: Equipments/technologies eligible Common Effluent Treatment Plant Drugs and Pharmaceuticals Dyes and Intermediates Industry based on Medicinal and Aromatic plants Plastic Moulded / Extruded Products and Parts/ Components Rubber Processing including Cycle/ Rickshaw Tyres Food Processing (including Ice Cream manufacturing) Paints, Varnishes, Alkyds and Alkyd products Zinc Sulphate 40

41 6.4 SIDBI Scheme for Funding Projects through Indo Japan Collaboration on Energy Saving In MSME Sectors The Japan International Cooperation Agency (JICA) has extended a Line of Credit to Small Industries Development Bank of India (SIDBI) for financing Energy Saving projects in Micro, Small and Medium Enterprises (MSMEs) Sector. The project is expected to encourage MSME units to undertake energy saving investments in plant and machinery to reduce energy consumption, enhance energy efficiency, reduce CO 2 emissions, and improve the profitability of the units in the long run The financial assistance to MSMEs is through SIDBI, as well as through refinance to banks / State Finance Corporations (SFCs) and Non-Banking Financial Companies (NBFCs). The project also seeks to provide technical assistance to these financial institutions and MSME units for successful implementation of this Scheme resulting in Energy Saving in MSME Sector and thereby contributing to environmental improvement and socio-economic development in the country and address the climate change concerns The escalating cost of energy is a cause for major concern. There are some highly energy intensive sub-sectors where the cost of energy forms a sizeable proportion of the total production cost and offers tremendous scope for energy efficiency improvement vis-a-vis reduction in energy cost through technology up gradation Project Objectives Motivate MSMEs to undertake energy saving investments in plant and machinery geared at reduced energy consumption. Support the creation of a list of energy saving equipment that qualifies for the financial assistance. Reinforce the capability of financial institutions so as to evaluate the loan applications (likely to be received) for the energy-saving projects. Utilize the expertise of the financial programs that cushion the energy-saving initiatives. Support the financed projects to apply for the Clean Development Mechanism (CDM) specific carbon credits. Make the units profitable in an ultimate analysis Energy Saving Sub-Projects under This Initiative Acquisition (including lease and rental) of energy saving equipments/ facilities, including newly installing, remodeling and upgrading of those existing, Replacement of obsolete industrial furnaces and/or boilers or burners etc. or introduction of additional equipment which improve performance comparable to those of replacement, 41

42 Installation or improvement or adoption of such manufacturing machinery and equipment that meet the specific requirements for energy performance standard provided by the related energy conservation act/code in India (e.g. Top Runner Equipment, Energy Labels etc.), Installation of building envelopes, equipment, heating systems, lighting and electrical power/motors in compliance with energy performance standard provided in the Energy Conservation Building Code (ECBC), Introduction of the equipment that utilize alternative energy sources which can reduce GHG emissions such as natural gas, renewable energy, biogas etc. instead of fossil fuel such as oil and coal etc., Clean Development Mechanism (CDM) projects involving clusters level intervention by a change in the process and technologies for the cluster as a whole duly supported by technical consultancy will be eligible for coverage. The equipment list eligible for financing under this initiative is available in SIDBI offices. The equipment list would be continuously revised and updated by the Consultants Inspire Development Services appointed by JICA. The List shall be used for screening the sub-projects for deciding their eligibility for coverage under the JICA Line of Credit and the List would be the primary criteria for the sub-projects Eligibility Criteria for Units New / existing MSME units, as per the definition of the Micro, Small & Medium Enterprises Development (MSMED) Act, 2006; however, units graduating out of medium scale will not be eligible for assistance. Existing units should have satisfactory track record of past performance and sound financial position. Energy saving projects will be screened as per the Energy Saving List, which is available on SIDBI website. Units should have minimum investment grade rating of SIDBI. Sectors such as the arms industry, narcotics industry or any unlawful businesses are not eligible. Similarly, such projects which may result in larger negative social and environmental impact are also not eligible under this scheme. Equipment/machinery with energy saving potential less than 10% is not eligible 42

43 Table 6-4: Financial parameters Parameter Norms Minimum Assistance Rs.10 lakh Minimum 25% for existing units 33% for new units promoters contribution Debt Equity Ratio Maximum 2.5 :1 Interest Rate Upfront fee Security Asset coverage As per credit rating and 1% below the normal lending rate Non-refundable upfront fee of 1% of sanctioned loan plus applicable service tax First charge over assets acquired under the scheme; first/second charge over existing assets and collateral security as may be deemed necessary Minimum Asset Coverage should be 1.4 : 1 for new units and 1.3 : 1 for existing units Repayment period Need based. Normally, the repayment period does not extend beyond 7 years. However, longer repayment period of more than 7 years can be considered under the Line if considered necessary Application for Loan Assistance The prospective borrower is required to submit the duly filled in application form along with the supporting documents as per the prescribed format, to the nearest SIDBI branch office. In addition to the information requested for in the application form, it may be ensured that the prospective borrower explicitly provides details of the energy saving potential of the project. This will be an important parameter for deciding the eligibility of the project financing under the Line of Credit. Disbursement Disbursement would be carried out after compliance of the terms of sanction. 6.5 Kfw-SIDBI Scheme for Financing Energy Efficiency Projects in the MSME Sector Micro, Small & Medium Sized Enterprises (MSMEs) can reduce their energy consumption by investing in equipment, technologies or process improvements, which increase the energy efficiency of their facilities. SIDBI offers financial assistance for investments in energy efficiency projects to existing MSMEs under a Line of Credit from KfW Development Bank in the framework of the Indo-German Development Cooperation Energy efficiency investments may include: Improving insulation of e.g. heat pipes, 43

44 Energy efficient lighting, Installing variable speed drives, Upgrading or modernizing of industrial boilers, Heat recovery systems, Optimization of air pressure systems, Fuel switching (e.g. from electricity to Liquefied Petroleum Gas (LPG), Replacing existing equipment / machinery with energy efficient equipment / machinery Financial Parameters include: Minimum Assistance: Generally not less than Rs.10 lakh Minimum Promoter s Contribution: 25% of project cost Overall Debt/Equity Ratio: 2:1 Interest Rate As per credit rating and 0.75% below the normal lending rate Asset Coverage: 1.3 for manufacturing unit and 1.75 for service sector unit Repayment Period: Need based normally not more than 7 years Eligibility Criteria- In order to qualify for a loan an enterprise should be an existing MSME unit (as per the definition of the MSMED Act 2006 ); Have a satisfactory track record of past performance and sound financial position; and Score above the minimum investment grade rating as per SIDBI s extant Loan Policy Proposed investments for the Energy Efficiency Financing Scheme Will result in significant energy savings and reductions of greenhouse gas emissions; Will up grade existing installations; May include purchase of machinery and equipment, process modifications and related civil construction ; and Taxes, import duties and other public charges shall be borne by the enterprise. Contact for SIDBI: eec_credit@sidbi.in A long list of equipment is provided on SIDB s website ( some of the equipment that are relevant to the Chemical cluster are: Thermal Insulation materials Amorphous core transformers Energy efficient motors Variable frequency Drives Energy efficient blowers 44

45 Energy efficient pumps Energy efficient air compressors Heat of compression dryers for compressed air Synthetic flat belts BEE Star rated appliances High Efficacy lamps & gear (Electronic ballasts, Metal halide lamps, Sodium Vapour lamps, LED lamps etc.) Transformers for lighting feeders Infra-red heaters Energy efficient boiler (including Fluidized Bed Boilers) Water tube boilers Condensate recovery systems High efficiency furnace Improved burners (including regenerative burners) Combustion controls & instrumentation Heat recovery equipment (including recuperators) Steam recompression pump Interfuel substitution projects (including Biomass gasifiers) Automatic temperature controllers Energy efficient mixers (eg. Nauta mixer, Planetary mixer etc.) High concentration filter press Flash dryers Rotary vacuum dryers Dehumidification dryer Falling film evaporator Wiped film evaporator Mechanical conveyors Energy efficient refrigeration system HVAC heat reclaim systems Air separation plant (including Molecular sieve for nitrogen) Renewable energy systems (solar, biomass etc.) 6.6 Gujarat Government s Scheme for Assistance to MSMEs In 2009, Gujarat Government announced a "Scheme for Assistance to Micro, Small and Medium Enterprises" for the period for Expansion or Diversification for existing MSME units taking up expansion or diversification with investment more than 50% in its existing gross fixed capital investment. Modernization/Technology Up gradation: Existing MSME unit investing more than 25% in the cost of its existing plant and machinery to upgrade technology by way of adopting new technology / production process and/or improving quality of products. 45

46 6.6.1 Salient features of this scheme are as follows: Subsidy graded interest subsidy for micro, small and medium enterprises. Interest 7% for micro enterprises 5% for small and medium enterprises. Maximum amount of interest subsidy will be Rs. 25 lakhs per annum, for a period of five years. Unit availing term loan from any bank/fl approved by RBI will be eligible. The amount of interest subsidy will be paid to the Bank/FI with intimation to the unit. Quality Certification: Assistance will be granted to the eligible MSMEs for maximum 3 quality certifications, at the rate of 50% of cost of quality certification within overall ceiling of Rs. 6 lakhs in 5 years. The cost for certificate will include: Fees charged by certification agency Cost of testing equipments as suggested by BIS. Calibration charges of equipment. Consulting fees and training charges Energy and Water Conservation: 50% cost of energy/water audit conducted in a unit by a recognized institution/ consultant subject to a limit of Rs. 25,000/- will be reimbursed to the MSME. Group of units/cluster will be given priority. In addition, assistance of 20% of cost of equipment subject to maximum Rs. 10 lakhs per project will be considered in a period of five years. 46

47 7.1 Energy Management 7. ENERGY AUDIT Energy Management can be defined in different ways. In the present context, Energy Management can be defined as the judicious and efficient use of available energy resources to increase profitability of an enterprise with minimal impact on the environment Energy Management is an integral part of cost reduction strategy to improve competitiveness. Energy management addresses issues related to energy costs, energy efficiency, secure energy supplies, alternative energy sources and abatement of environmental pollution Greenhouse gases are polluting gaseous emissions that are leading to rise in the atmospheric temperature or leading to ozone depletion in the atmosphere. The Kyoto Protocol has been ratified most major member nations (excluding the USA) of the United Nations. It specifies a mandatory 5.2 % reduction in Carbon emissions by the developed nations with 1990 as the baseline year. The Clean Development Mechanism (CDM) is part of the global strategy proposed by the Kyoto Protocol (1997) to combat atmospheric build-up of greenhouse gases. CDM is a mechanism for trading of Carbon credits to help the developed nations buy Carbon credits from developing nations, to achieve their carbon emission reduction targets. Another mechanism called Emission Trading is the trading of carbon credits between developed nations. Energy efficiency improvement and fuel switching to less polluting fuels are acceptable methods to reduce carbon emissions. Participation in this global endeavor is now part of the corporate policy of some organizations. In India, some organizations are undertaking CDM projects with the objective of participating in the global trading of carbon credits. 7.2 Energy Audit Energy Audit is an important tool for energy management. Energy Audit can be defined as a systematic exercise for collection of information on energy consumption and energy costs at macro and micro levels, followed by its analyses in relation to production, provided utility service and equipment operating efficiencies with the objective of improving energy efficiency, identifying energy efficient alternatives, reducing the energy consumption per unit of production or provided service, identifying alternative energy sources and ultimately reducing energy costs. 47

48 7.2.2 Often energy audit is compared with financial audits, which is glaringly misleading. Financial audits check for compliance with declared accounting rules and regulations. An energy audit is not merely a check for compliance with energy norms, its main objective is to identify measures for improving energy efficiency and reduce energy costs Energy audit goes beyond study of available information in the record books, it involves measurements to establish operating energy efficiencies and recommendations to improve efficiency and reduce energy costs. The information generated by an energy audit can be used for benchmarking, target setting and developing a road map to achieve the energy conservation targets There are three styles of conducting energy audits: Walk-thru, Preliminary and Detailed Energy Audits Walk thru energy audit involves physical observation of operation of equipments and processes to visually identify glaring deficiencies, identify areas worthy of further study and check compliance with previously recommended measures. No measurements are taken during this type of energy audit. This type of energy audit is usually conducted by consultants before preparation of a techno-commercial proposal for a preliminary or detailed energy audit. It is also done by plant personnel (like members of energy conservation cell) to identify obvious energy wastages and maintain surveillance on previously implemented measures Preliminary energy audit is a precursor to a detailed energy audit wherein the consultant conducts a quick energy audit with a few spot measurements to identify obvious energy saving opportunities and identify areas worthy of a detailed energy audit. Such energy audits are usually done by consultants, on the client s insistence, if the client wants detailed study of only those areas with significant scope for energy savings Detailed energy audit is a study involving collection of past records of energy consumption, production data, co-relation of energy consumption with production data, spot measurements or prolonged data logging of energy consumption and process parameters to establish the efficiencies of various equipments and processes, followed by practical recommendations to improve energy efficiency and reduce energy costs An extension of the detailed energy audit is the so called Investment Grade energy audit, wherein the detailed energy audit results in a project report that can be a basis for receiving complete commercial proposals from implementing agencies like vendors and contractors. 48

49 7.3 Energy Audit Instruments The effectiveness of an energy audit depends on the identification of energy saving projects that can be practically implemented. Realistic techno-economics of proposed projects can only be estimated only if the existing energy consumption and process parameters are measured with reasonable accuracy. Both installed plant instrumentation and portable instruments have to be used to measure various parameters In the Indian industry, the plant instrumentation is usually restricted to that minimum level that is required to maintain production, quality and safety; installed instrumentation is generally not sufficient to estimate the energy efficiency and energy losses in the existing system. Portable instruments are generally used by energy auditors to measure various operating parameters like electrical power, pressure, flow, temperature, flue gas composition etc Some of the commonly used portable instruments are: Electrical power analyzer: To measure electrical parameters like voltage, current, power factor, power, frequency, harmonics etc Flue gas analyzer: To measure flue gas composition i.e. CO 2, O 2, CO etc Temperature measuring devices: To measure temperature by direct contact or noncontact method. Direct contact temperature measuring instruments use thermocouples or RTDs with electronic indicating instruments or mercury in glass thermometers. Noncontact temperature measuring instruments indicate the temperature by sensing the infra-red radiation from the hot surface, which requires emissivity correction depending on the condition and colour of the radiating surface Pressure gauges: Analog and digital pressure gauges are used to measure pressures of liquids and compressed gases Manometers: U-tube and inclined manometers are used for measure low air pressures. Electronic manometers are also used.

50 7.3.9 Ultrasonic flow meter: Doppler type flow meters are used to measure of velocity of liquids in pipelines, wherein the liquid has particulate matter or air bubbles of more than 30 microns size. Transit time ultrasonic flow meters are used to measure the velocity of clear liquids in pipelines. Flow measurement using ultrasonic flow meters is prone to errors and is not accepted as a standard flow measurement method. However, it is used in energy audits in the absence of installed in-line flow measuring instruments. Similar instruments for air flow measurement are also available in the international market; however, these are not commonly used presently due to the prohibitively high cost of the instrument Anemometer: Turbine type and thermal anemometers are used to measure the velocity of low pressure air Psychrometer: Measurement of relative humidity is measured by measuring the dry bulb and wet bulb temperature of air and correlating it on a psychrometric chart. Direct relative humidity indicating capacitance electronic instruments are also available Steam Trap Tester: This instrument is used to identify malfunctioning steam traps Ultrasonic leak detector: Ultrasonic leak detectors are electronic instruments with analog indication used to detect minor leaks in compressed air systems and refrigerant gas leaks, which are normally not audible. This instrument only detects leaks, it cannot quantify the leakage Energy audits also use data from installed plant instruments wherever there constraints in using portable instruments; typical examples are measurement of flow of gaseous fluids, flow of liquids at high temperature etc. Calibrated installed instrumentation is generally more accurate than portable instruments. 7.4 Analytical techniques A number of analytical techniques are used in energy management context to help the energy auditing team to arrive at realistic results. The following discussions will familiarise you with some techniques Incremental cost concept: How much energy cost is saved by saving 1 unit of energy? In a plant that is supplied from Electricity Board Grid, this is more or less straight forward or, is it really so? When energy auditors probe the plant managers, the usual answer is Rs 4 to 5 per kwh. This figure is generally arrived at by dividing the total bill amount by energy consumed. How accurate is this calculation? 50

51 7.4.4 We have seen that electricity billing is generally appearing in two parts. One for the demand of electricity (kva or kw) and the other for energy consumed (kwh). In addition to this, lot more other cost components like time of use charges, power factor penalty/rebate etc also are applicable. If an energy saving measure results in only energy saving (and no demand saving), one need to consider energy cost alone, excluding demand charges In the case of a plant having a cogeneration system and drawing power from grid also, this calculation becomes slightly involved. For example, in a Paper Mill, energy audit has shown that there is a potential of saving 200 kw by modifications in the pumping systems. The plant has a power plant with a coal fired boiler and a back pressure turbine. The average cost of electricity generation is Rs 1.0/kWh. The following calculations can be made. Annual operating time = 8000 hours. Annual energy saving = 200 X 8000 = 16,00,000 kwh per year Now, it would be correct to state that the energy cost saving is Rs 1.0 X 16,00,000 = Rs 16.0 lakhs per year. Looking more closely at the given system operation, you may also find that in some plants, due to the process requirement of steam remaining the same, when you reduce generated power by 200 kw, some amount of steam need to be vented out. If this is so, your saving may reduce to the extent of loss of steam and its cost On the other side of it, consider a grid connected system, where you have identified 200 kw saving by replacement of Chilling plant with a new efficient plant. While evaluating potential energy saving opportunities, you should note that chillers run most often when the weather is hottest and/or when your plant is running at its highest capacity. Chillers contribute greatly to the monthly demand charge on your electric bill. As a result, using an average Rs/kWh figure to estimate operating costs yields inaccurate results. Estimating the savings available through chiller conservation measures requires that you evaluate the effects on energy charges and peak demand charges separately Hence, make sure that your energy cost calculations include all the possible variables. The cost saving should be the difference in overall energy cost baseline and the total energy cost after the implementation of measures. This is the basis of incremental cost concept. 7.5 Heat transfer calculations In Chemical processes, there are mainly three types of energy involved. Sensible heat ( eg. heating water) Latent heat ( eg. condensing vapours) Heat of reaction ( eg. combustion) 51

52 The relationships for estimating heat involved in these systems is given below. Sensible heat Q = m c p ( T1 T2) (2) Where: Q = Heat transferred per unit time (W) m = Mass or Mass Flow rate of fluid (hot stream or Cold stream), kg or kg/s c p = Specific heat capacity, kj/kg- C T 1 = Fluid outlet temperature, C T 2 = Fluid inlet temperature, C Latent Heat For condensing vapours/boiling liquids, the heat transfer equation would be Q = m L Where L = latent heat of vapourisation, kj/kg Heat of reaction 52

53 7.5.2 The Heat of Reaction or Enthalpy of Formation of a substance is the energy required to form it from its elements at 298K and 1 atmosphere. These values are negative when heat is given out when the substance is formed and positive when heat is to be supplied to form substance. The following relationship can be used (Sum of heats of formation of reactants) + (Heat of reaction) = (Sum of heats of formation of products) The above relationships can be used estimate heat flow in processes. 7.6 Estimating cost of implementation The cost of implementation should take into account the total cost, not only the basic equipment cost. For example, while estimating cost of installing of capacitors for power factor improvement, one should consider the cost of capacitors, controls, electrical panels, cables etc. The error in investment calculation can be as high as 50% if we take only the cost of capacitors In another case, for calculating investment for installation of heat recovery equipment, the basic equipment cost + cost of fittings + transportation cost etc. need to be considered. If additional auxiliary equipments are likely to be added, the energy consumption of those auxiliaries also needs to be considered When considering new equipments, like a motor, the incremental cost concept can be used. Here, one can estimate the payback period or rate of return on the basis of additional cost, because a motor has to be bought anyway. 7.7 The plant energy study report Energy audits don't save money and energy for companies unless the recommendations are implemented. The goal in writing an audit report should not be the report itself; rather, it should be to achieve implementation of the report recommendations and thus achieve increased energy efficiency and energy cost savings for the facility Effective organization: The first thing to keep in mind when you start to write anything is to know who your audience is and tailor your writing to that audience. When writing an industrial audit report, your readers can range from the company president to the head of maintenance. If recommendations affect a number of groups in the company, each group leader may be given a copy of the report. Thus, you may have persons of varying backgrounds and degrees of education referring the report. Not all of them may necessarily have a technical background. The final decision maker may not be an engineer and the person who implements the recommendations may not have a college degree. 53

54 7.7.3 The report may start with an executive summary which briefly describes the recommendations and tabulates the results such as the energy and money savings and the simple payback periods Present Information Visually: Often the concepts conveyed in an audit report are not easy to explain in a limited number of words. Therefore, use drawings to show what you mean. Present energy use data visually with graphs showing the annual energy and demand usage by month. These graphs give a picture of use patterns. Any discrepancies in use show up clearly Use Commonly Understood Units: In the report, be sure to use units that your client will understand. Discussing energy savings in terms of BTUs is not meaningful to the average reader. Kilowatt-hours for electricity or m 3 for natural gas are better units because most energy bills use these units Make Your Recommendations Clear: Some writers assume that their readers will understand their recommendation even if it is not explicitly stated. Although the implied recommendation may often be clear, the better practice is to clearly state your recommendation so that your reader knows exactly what to do Explain Your Assumptions: A major problem with many reports is a failure to explain the assumptions underlying the calculations. When you show your basic assumptions and calculations, the reader can make adjustments if there is any change in parameters later Contents of Energy Audit Report: Executive Summary: The audit report should start with an executive summary which basically lists the recommended energy conservation measures and shows the implementation cost and savings amount. This section is intended for the readers who only want to see the bottom line Introduction: Give a brief introduction of the facility, scope of study, the personnel involved in the study and energy auditors team. The duration of the study, instruments used etc also should come in this section Manufacturing Process /service: You can describe about the process in this section. The process flow diagram should be presented here Analysis of Energy Consumption & Production: Energy Bill analysis, energy vs. production analysis etc can be described in this section. 54

55 Energy Audit recommendations: Here, you can describe the measurements and analysis of each energy consuming system followed by recommendations, financial analysis. Equipments/systems can be grouped together based on their functions (cooling water system, refrigeration system etc.) or they can be grouped as per individual production areas (grinding section, core making section, melting section etc.) In the calculation section, explain the methodology that you have used to arrive at your savings estimates. Provide equations and show how the calculations are performed so that clients can appreciate the calculations. If they want to change your assumptions subsequently, they can, if they understand the calculations. If some of the data that has been used is incorrect, they can replace it with the correct data and recalculate the results Energy Financing Options.: Include a short discussion of the ways that a company can finance the implementation of the recommendations. Cover the traditional use of company capital, loans for businesses, utility or government incentive programs and the shared savings approach of the energy service companies Maintenance Recommendations: Do not usually make formal maintenance recommendations in the technical supplement because the savings are not often easy to quantify. Provide energy-savings maintenance checklists for desired equipments such as lighting, heating/ventilation/air-conditioning, and boilers Appendix: Use an appendix for lengthy data tables, wherever required. For example, power measurements-voltage, current, p.f., power input, frequency etc. Instead of repeating it in each chapter, put it in the appendix. The appendix allows us to provide backup information with out cluttering up the main body of the report. 7.8 Barriers to Successful implementation While formulating ideas for energy saving, it is important to understand that many recommendations are not implemented in plants due to various reasons Cost of energy is too small when compared to production cost: The sectors where the energy cost is low as a percentage of production cost include pharmaceuticals, engineering (heavy and light), value added products, assembly units, automobile units, machine shops, fabrication units, electronic units, appliances, garments, etc. In these units the energy cost is normally lesser than 5% of the total production cost. Though there is potential about 20% savings in total energy cost the cost of production can be reduced by maximum 1%. This makes the management not to venture for the energy audit 55

56 7.8.3 Non involvement or poor co-ordination among the inter-departments: Normally most of the energy audits services will be coordinated by the maintenance or utility department rather than the energy consumers (production or process personnel). Making the energy consumers (process or production departments) are equally responsible for the energy conservation by making the balanced team from the both sides is very important Lack of minimum instrumentation, metering and monitoring: In addition to portable instrumentation employed by the external auditor, some amount of metering and monitoring is required on plant side to have effective field study to analyze the energy consumption minutely. Also, metering & monitoring by the plant makes a historical trend assessment possible which may account for factors like seasonal variations etc Plant sees only the first cost rather than life cycle cost while making the fresh purchase: High importance should be given to life cycle cost of the equipment by considering energy, maintenance, depreciation and other costs Failure or Poor performance of the energy saving retrofits or equipment supplied by the vendors due to inferior quality or improper application: In many cases actual practice the plant identifies the vendors locally who can supply the similar type equipment at low cost. After the implementation in many cases these retrofits were failed due to many reasons such as improper sizing, poor quality, technology adopted, location, poor attention given, lack of expertise, etc. Hence plant will revert back to original situation New technology application: There are plenty of the new equipment or new technologies available in the market and many of them resort to marketing gimmicks to penetrate the market. The function of the auditor or energy manager is to evaluate these equipment thoroughly before recommending their use Lack of Communication to downstream manpower (Operator Level) for EC Measures: In all Industrial units, successful implementation of energy saving activities only depends upon proper communication with internal customers (Execution area). Effect of EC measures should be properly communicated to the operators who will actually perform his duty after any EC measures in that area. 56

57 7.8.9 Absence of alternative implementation strategies: Reports resulting from an industrial audit regularly include a number of recommendations for energy savings. The recommendations normally calculate expected savings and evaluate the costs of implementation. Usually, one of two forms of implementation of a new practice or technology is recommended; either immediate implementation or incremental implementation where the items are changed out as they fail. These two methods often fail to consider such concerns as risk (real or perceived), comfort, the appropriate sizing and loading of equipment, availability of product, rebuilt products, time constraints, disposal costs, and economies of scale Presentation too theoretical not able to convince the plant personnel during the presentation: During the presentations of the report to the plant, the convincing skills of the auditor will be depend up on his practical approach rather than theoretical since in actual practice the practical skills are more important. The practical approach of the auditor is most important and the plant personnel will get convinced if the auditor suggests the measures, which are realistic, more practical and implementable At the same time the auditor should know about the concept behind the principle. But if you see the most of the auditor lack the practical approach since they may have not on the job experience to implement the measures. More over the auditor in their measures they will not consider the human involvement in implementing the measure. We can see some of the examples: Switching of the idle transformers during idle operation (plant personnel feel that moisture will ingress in to the transformers and also frequent on and off of the transformer requires human attention) Switching of the Air condition units during non-occupancy times of the guests in the rooms. But the management feels that when the guest enters the rooms there should be required conditions of the temperature with in the rooms There are so many measures where the practical aspects should be considered very carefully before suggesting the measures. The above measures can be implemented; but you need to convince the operating people and gain their confidence Lack of expertise and resources during the energy audit field study: Many of the audit firms prefer methods which just focus on the cause and not the effect during the plant studies of the energy conservation measures. This is most often due to lack of theoretical background and measurement resources. 57

58 8. Identifying Energy Saving Projects 8.1 Introduction Some of the typical energy saving opportunities in common energy consuming systems are discussed below. This will help in focusing on energy conservation opportunities during the energy audit. 8.2 Boilers Q1. What are the typical fuels used for fired equipments and their calorific values? Various fuels & their calorific values of fuels are summarized below. Table 8-1: Fuels and Calorific values Sr Fuel Approx heating value Kcal/Kg Dry state A BIOMASS 1 Wood Cattle dung Bagasse Wheat and rice straw Cane trash, rice husk, leaves and vegetable 3000 wastes 6 Coconut husks, dry grass and crop 3500 residues 7 Groundnut shells Coffee and oil palm husks Cotton husks Peat 6500 B FOSSIL FUELS 1 Coal Coke Charcoal Carbon Fuel oil Kerosene and diesel Petrol Paraffin Natural gas, kcal/sm Coal gas, kcal/sm Electrical (Kcal(KW) Bio gas(kcal/cu mtr) (12 kg of dung produces 1 cu. Mtr gas)

59 Q2. What is excess air? The quantity of air in excess of the theoretical minimum air required for complete combustion of the solid and liquid fuels is excess air. Free oxygen in the products of combustion is an indication of the excess air. Usually the CO 2 recorder provides the indicating of excess air. For a fuel containing only carbon, the theoretically correct combustion will yield in products of combustion only CO 2 and N2. % Excess air is estimated by the equation % Usually CO 2 % varies from 10 12% by volume in boilers with natural draught and % by volume in boiler with artificial draught. The boiler efficiency is maximum within small excess air. For higher excess air, higher is the heat loss in the exhaust For natural gas boilers, 10% excess air corresponds to 2.2% oxygen in the flue gas. For coal-fired boilers, 20% excess air corresponds to 4% oxygen. The recommended excess air for various fuels is shown below: Table 8-2: Excess air FUEL Excess Air Recommended OIL 15% COAL 25% NATURAL GAS 10% DRY BAGASSE 30% WET BAGASSE 45% Q3. Can steam be generated from renewable fuels in place of Natural gas or oil? Biomass fired boilers are an excellent choice for replacing petroleum fuels on two counts. It uses a much cheaper fuel such as brequettes made from locally available agricultural residues. Cost saving potential of 40-60% can be achieved by either purchasing a new biomass boiler or converting existing Oil/Gas fired boilers to briquette firing The conversion of boiler essentially means installation of a briquette fired furnace in place of the existing oil fired burner. The furnace will have features of fuel feeding system, draft system etc. The existing shell and tubes will be intact. The rated capacity of the boiler would be 70% of the existing rated capacity i.e kg/h. However, since maximum load is expected to be about 1.5 TPH, there will not be any issues related to availability of steam. 59

60 8.2.7 The economics of fuel cost saving is worked out below. Table 8-3: Boiler conversion Average NG consumption Average NCV of NG Average boiler eff. Enthalpy gain by steam Total steam generation 82.0% Cost of NG Cost of steam Average GCV of Briquette Avg efficiency of converted boiler Amount of briquette required Cost pf Briquette % Cost of steam generation 1.2 Annual steam generation cost saving 7,522,834 M3 per day kcal/sm3 % kcal/kg kg per day Rs/M3 Rs/kg of steam kcal/kg % kg per day Rs/kg Rs/kg of steam Rs Note that the existing steam generation cost (only fuel cost considered) is Rs 2.44/kg steam. This can be reduced to Rs 1.2/kg steam if the boiler is converted to briquette firing. The annual cost reduction is Rs 75.0 lakhs per year. Additional power consumption on 6 kw in an ID fan will have to be considered, which amounts to Rs 2.8 lakhs. Hence the net saving potential is Rs 72.2 lakhs per year. Q4. How to estimate heat losses from hot pipe surfaces? The following table can be used to estimate heat losses from surfaces. Table 8-4: Heat losses from pipe surfaces 60

61 Q5. What are the typical losses in boiler & methods to reduce the same? The following table summarises boiler losses and methods to minimize the same. Table 8-5: Summary of losses LOSSES INDICATOR REASON LIMITING FACTOR RANGE HOW TO MINIMIZE LOSS Dry Gas Loss Wet Gas Loss Moisture Loss High Exhaust Gas Temperature Low CO2 in Exhaust Gas High Temperature High excess air Dew Point (% Sulphur in Fuel) 2. Avoiding Incomplete Combustion %H in Fuel %H in Fuel %H in Hydrocarbon Fuel %Water in Fuel High Relative Humidity %Water in Fuel %Water in Air Hygroscopic Nature of Fuel Uncontrollable % Cleaning Boiler Tubes, carry out feasibility for Waste Heat Recovery Opting Low Sulphur Fuel Minimize Excess Air 5 7 % Proper Choice of Fuel % Coal-> Storage under Shed before charging; Oil->Regular Separation of Water At Storage Tank Uncontrollable Blow down Loss Higher number of Blow down Higher Quantity of Blow down High TDS in Boiler Feed Water Available Water Source with High TDS. Inadequate Treatment Capacity &/or operation 1 2 % Possibility of Source Changeover Proper Selection, Design and operation of Water Treatment Plant Loss due to CO in Flue Gas %CO in Flue Gas Incomplete Combustion High Dry Gas Loss % Adequate Amount of Excess Air and cleaning of Blocked Air path due to Clinkers Un-burnt Carbon Loss Ash Loss ((Sensible Heat) Radiation Loss Losses due to Improper Sizing of Boiler Losses due to Improper Fuel Selection %Un-burnt Carbon in Ash High Ash Temperature and Quantity High Body Temperature High Duration of Boiler Trips Higher Steam Cost inspite of Higher Boiler Efficiency Higher Coal Particle size High Ash content in Coal2. High Ash Temperature Improper Insulation Over Sizing of Boiler Fluctuation in Fuel prices and their Quality and Availability Non availability of proper sized Coal &/or Coal Sizing Facility Non availability of Low Ash Coal 2 10 % Use of Proper Sized Coal % Proper Choice of Coal Insulation Thickness2. Material of Construction % Proper and timely Repair of damaged Insulation Changing Steam Load 2 15 % Derating of Boiler Capital Investment2. Changing Steam Load. Availability of Fuel 2 10 % Conversion of Existing Boiler to Cheaper Fuel options (Along with possible Downsizing) is Possible by Retrofitting Investments 61

62 Q6. Does the plant have a significant number of steam traps that are malfunctioning? The following table summarises application of various types of steam traps. Table 8-6: Selection of traps TYPE OF LINE Distribution Line Moisture Separator Constant Load equipments beyond heat transfer area of 5 m2 like tray drier, kettle, etc. Drum Drier Evaporator beyond 20 m2 heat transfer area Operations near 100 deg C. Dead end of Pipeline Main Line Headers STEAM TRAP SUITABLE Thermodynamic Trap Thermodynamic Trap for Package Boiler Inverted Bucket Trap for Coil type Non-IBR Boiler Ball Float Trap Inverted Bucket Trap Inverted Bucket Trap Inverted Bucket Trap Ball Float Trap Metallic Expansion Thermostatic Air vent Thermodynamic Trap Steam traps are usually designed based upon a maximum back pressure rating. This rating is determined by dividing the outlet pressure by the inlet pressure, absolute. If the back pressure of the present system is greater than the original design pressure, the trap is not able to fully close, and can fail in the open position. When these traps fail open, they blow steam into the return system, which increases the back pressure on other traps in the system, causing them to fail. When the steam is induced into the return piping, the vapour flows over the condensate, eventually causing enough turbulence to create a mass or slug of condensate that fills the pipe The most reliable method to identify traps that are malfunctioning is to use ultrasonic tools Initiate a program to identify and repair traps that are malfunctioning. Consider installing continuously discharging thermostatic steam traps. Q7. How to calculate flash steam generation potential? Use of flash steam depends on Its availability i.e. continuous or Intermittent and Its pressure.by the use of flash vessel the high-pressure condensate can be used to satisfy the need. It lowers the demand on boiler and saves the energy. Use of flash steam are: To heat fuel oil Pre-heat air To pre-heat feed water Can be used with thermo compressor. 62

63 The condensate enters the steam trap as saturated water, at a gauge pressure of 7 bar g and a temperature of 170 C. The specific amount of heat in the condensate at this pressure is 721 kj/kg. After passing through the steam trap, the pressure in the condensate return line is 0 bar g. At this pressure, the maximum amount of heat each kilogram of condensate can hold is 419 kj and the maximum temperature is 100 C. There is an excess of 302 kj of heat which evaporates some of the condensate into steam. The quantity of steam is calculated in the following text. Figure 8-1: Flash steam The heat needed to produce 1 kg of saturated steam from water at the same temperature, at 0 bar gauge, is 2257 kj. An amount of 302 kj can therefore evaporate: From each kilogram of condensate in this example, the proportion of flash steam generated therefore equals 13.4% of the initial mass of condensate.. If the equipment using steam at 7 bar g were condensing 250 kg/h, then the amount of flash steam released by the condensate at 0 bar g would be = x 250 kg/h of condensate = 33.5 kg/h of flash steam Hot condensate will travel in the direction of high pressure to low pressure. When the feed tank is vented to atmosphere, as the condensate enters the feed tank, it will flash to steam due to the sudden drop in pressure and the steam escapes through the vent to atmosphere. The steam and associated energy is lost Install properly designed steam traps to reduce the amount of steam lost through the open system Install pressurized condensate return system to reduce flash steam losses Insulate Condensate Storage Tanks. 63

64 Q8. Does the boiler cycle frequently? Boiler efficiency is reduced at partial load. Frequent cycling reduces the overall operation efficiency and the life of a boiler. Continual cycling can be an indicator of an oversized boiler. Install multiple smaller boilers (modular). Match steam load to the boiler output. Q9. Is the flow rate of the induced draft and forced draft fans being controlled by throttling methods? Install VSD control on boiler induced draft and forced draft fans. From the following chart, note that operating at lower flows with VFDs consume much less power than damper controls. Figure 8-2: Flow control options Q10. Are there any opportunities for heat recovery? Install economiser on the boiler to preheat feed water The existing feed water temperature is only about 40 C. This should be heated to about 80 C by using an economiser. The economiser can use Boiler feed water from the feed water pump, which should pump through the economiser and then to the drum. This can improve the boiler efficiency to 87% Average feed water consumption is about 20 Tons per day. Economiser can be designed for heating 1000 kg/h water from 40 C to 80 C. the heat recovery potential is 40,000 kcal/h, equivalent to 4.4 m3 per hour of NG. This is roughly 100 m3/day saving in NG cost. i.e. Rs 90,000 per year The following is a schematic of an economiser system. 64

65 Figure 8-3: Economiser Investment for a coil type economiser is expected to be about Rs 80,000 with a payback period of 1 year. 8.2 Thermic fluid heaters In recent times, thermic fluid heaters have found wide application for indirect process heating. Employing petroleum - based fluids as the heat transfer medium, these heaters provide constantly maintainable temperatures for the user equipment. The combustion system comprises of a fixed grate with mechanical draft arrangements The modern oil fired thermic fluid heater consists of a double coil, three pass construction and fitted a with modulated pressure jet system. The thermic fluid, which acts as a heat carrier, is heated up in the heater and circulated through the user equipment. There it transfers heat for the process through a heat exchanger and the fluid is then returned to the heater. The flow of thermic fluid at the user end is controlled by a pneumatically operated control valve, based on the operating temperature. The heater operates on low or high fire depending on the return oil temperature, which varies with the system load The overall economics of the thermic fluid heater will depend upon the specific application and reference basis. Coal fired thermic fluid heaters with a thermal efficiency range of percent may compare favorably with most boilers. Incorporation of heat recovery devices in the flue gas path enhances the thermal efficiency levels further. 65

66 The efficiency assessment is done similar to a boiler, and is very simple in Indirect method. Direct method is not followed because of lack of measurement on the hot oil flow through the heater The following case study illustrates the economics of replacing a 5.0 lakh kcal/hr oil fired thermic fluid heater with wood chip fired heater. Inter-fuel Substitution: Agro Briquette Fired Heater The prevailing price of natural gas is Rs 40 per scm, which implies that we are essentially purchasing it at the rate of 207 kcal/re. Assuming 80% efficiency for the natural gas fired thermic fluid heater, the net energy delivered to the plant is 160 kcal/re The prevailing price for agro briquettes is Rs 5.80 per kg, which implies that we are essentially purchasing 620 kcal/re. Assuming 60% efficiency for the agro briquette fired thermic fluid heater, the net energy delivered to the plant is 372 kcal/re The natural gas consumption is around 1400 scm/day, costing Rs. 56,000 per day. By switching to agro briquette fired thermic fluid heaters, the energy cost is likely to be Rs. 24,000 per day i.e. a saving of Rs. 32,000 per day The investment for the new agro briquette fired thermic fluid heaters is expected to be around Rs 75 lacs, with a payback period of 250 days 8.3 Dryers Q1. What is drying curve? Each and every product, there is a representative curve that describes the drying characteristics for that product at specific temperature, velocity and pressure conditions. This curve is referred to as the drying curve for a specific product. Fig 2.1 shows a typical drying curve. Variations in the curve will occur principally in rate relative to carrier velocity and temperature. Figure 8-4: Drying curve 66

67 Drying occurs in three different periods, or phases, which can be clearly defined The first phase, or initial period, is where sensible heat is transferred to the product and the contained moisture. This is the heating up of the product from the inlet condition to the process condition, which enables the subsequent processes to take place. The rate of evaporation increases dramatically during this period with mostly free moisture being removed In some instances, pre-processing can reduce or eliminate this phase. For example, if the feed material is coming from a reactor or if the feed is preheated by a source of waste energy, the inlet condition of the material will already be at a raised temperature The second phase, or constant rate period, is when the free moisture persists on the surfaces and the rate of evaporation alters very little as the moisture content reduces. During this period, drying rates are high and higher inlet air temperatures than in subsequent drying stages can be used without detrimental effect to the product. There is a gradual and relatively small increase in the product temperature during this period. Interestingly, a common occurrence is that the time scale of the constant rate period may determine and affect the rate of drying in the next phase The third phase, or falling rate period, is the phase during which migration of moisture from the inner interstices of each particle to the outer surface becomes the limiting factor that reduces the drying rate. Q2. How to calculate dryer efficiency? Dryer efficiency is estimated as below. ( H ) lh + Hlv + He sup Dryer efficiency = H in In contact dryers, there is no superheating of vapour and heat required for evaporation is only H lh + Hlv Where Hlh = W m in Cpl ( Ts out Ts in) W m in Hlv = ( ) e mout L In hot air dryers, the vapor evaporated in dryer are further superheated to exhaust temperature. In that case, Hlh = W m in Cpl ( Tout wb Tsin) W m in mout L W m in mout C Hlv = ( ) e He sup = ( ) pv ( Toutdb Tout wb) 67

68 For batch dryers, the material and energy flow rate has to be replaced with total material quantity dried and energy consumed in the period. Q3. What are the typical efficiencies of various types of dryers? The following table summarises dryer efficiencies and source of losses Dryer group and type Table 8-7: Dryer efficiency Typical Heat loss sources Typical specific energy consumption, MJ/kgof water Typical efficiency Rotary Indirect Rotary Surface 3.0 to % Cascading Rotary Exhausts, leaks 3.5 to % Band, Tray & Tunnel Cross circulated tray/oven/band Exhaust, surface 8.0 to % Cross circulated shelf / Exhaust, surface 6.0 to % tunnel Through circulated tray / Exhaust 5.0 to % band Vacuum tray / band / plate Surface 3.5 to % Drum Surface 3.0 to % Fluidised / Sprouted bed Exhaust 3.5 to % Spray Pneumatic conveying/spray Exhaust 3.5 to % Two stage Exhaust, 3.3 to % surface Cylinder Surface 3.5 to % Stenter Exhaust 5.0 to % Q4. What are the major types of dryers in chemical industry? Spin Flash Dryer The pneumatic or flash dryer is used with products that dry rapidly owing to the easy removal of free moisture or where any required diffusion to the surface occurs readily. Drying takes place in a matter of seconds. Wet material is mixed with a stream of heated air (or other gas), which conveys it through a drying duct where high heat and mass transfer rates rapidly dry the product. Applications include the drying of filter cakes, crystals, granules, pastes, sludges and slurries; in fact almost any material where a powdered product is required. Salient features are as follows. 68

69 Particulate matter can be dispersed, entrained and pneumatically conveyed in air. If this air is hot, material is dried. Pre-forming or mixing with dried material may be needed feed the moist material The dried product is separated in a cyclone. This is followed by separation in further cyclones, fabric sleeve filters or wet scrubbers. This is suitable for rapidly drying heat sensitive materials. Sticky, greasy material or that which may cause attrition (dust generation) is not suitable. Figure 8-5: Spin Flash Dryer Spray dryers Salient features of Spray dryers are as follows. Solutions, suspensions, slurries and pastes, which can be pumped, can be dried on spray dryers. The advantage of spray dryer is rapid and non-contact drying. Much higher initial temperature of drying medium can be used. High evaporation rates and thermal efficiencies are achieved. It can be quickly started and shut down. It is capable of handling volatile or inflammable solvents in a closed cycle. 69

70 Figure 8-6: Spray dryer Fluidised bed dryers Fluid bed dryers are found throughout all industries, from heavy mining through food, fine chemicals and pharmaceuticals. They provide an effective method of drying relatively free-flowing particles with a reasonably narrow particle size distribution. In general, fluid bed dryers operate on a through-the-bed flow pattern with the gas passing through the product perpendicular to the direction of travel. The dry product is discharged from the same section. Refer figure With a certain velocity of gas at the base of a bed of particles, the bed expands and particles move within the bed. High rate of heat transfer is achieved with almost instant evaporation. Batch/continuous flow of materials is possible. The hot gas stream is introduced at the base of the bed through a dispersion/distribution plate. Figure 8-7: Fluidised bed dryer 70

71 Tray Dryers By far the most common dryer for small tonnage products, a batch tray dryer (Figure 1) consists of a stack of trays or several stacks of trays placed in a large insulated chamber in which hot air is circulated with appropriately designed fans and guide vanes. Often, a part of the exhausted air is recirculated with a fan located within or outside the drying chamber. These dryers require large amount of labor to load and unload the product. Typically, the drying times are long (10-60 hours). The key to successful operation is the uniform air flow distribution over the trays as the slowest drying tray decides the residence time required and hence dryer capacity. Figure 8-8: Tray Dryer Q3. How to calculate moisture removed in drying process? If the throughput of the dryer is 60 kg of wet product per hour, drying it from 55% moisture to 10% moisture, the heat requirement is estimated below: 60 kg of wet product contains 60 x 0.55 kg water = 33 kg moisture and 60 x (1-0.55) = 27 kg bone-dry product. As the final product contains 10% moisture, the total weight of final product is = 27/(1-0.1) = 30 kg. Moisture content in final product is = 3.0 kg Total moisture removed by drying = 33-3 = 30 kg Latent heat of evaporation = 2257 kj kg -1(at 100 C so heat necessary to supply = 30 x 2257 = 6.8 x l0 4 kj 71

72 Q5. How energy can be optimised in dryers? While drying is an extremely energy intensive operation, there are techniques that can be used to minimize the energy costs per unit output of product, including: Minimizing the water content of the feed prior to feeding to the dryer: The most important of the above is to minimize the water content of the feed by pretreatment with other techniques. Mechanical separation processes such as settling, centrifuging, filtration, reverse osmosis, etc., are far more energy efficient than thermal processes. When mechanical separation is not possible, evaporation should be considered. Although evaporation is a thermal process, the thermal efficiency of water removal is many times that of a dryer. In a large system, say 7 effect evaporator, it is possible to evaporate 7 or 8 mass units of water for 1 mass unit of steam supply. Mechanical recompression evaporation can be even more energy efficient. A typical dryer does not even evaporate 1 mass unit per 1 mass unit of steam At 35% moisture content as shown at point A, a spray dryer could be used to dry the material to 0.1%. However, if a rotary vacuum filter can be used to reduce the water content to 14%, the energy requirements are reduced to less than 1/3. The final drying can then be performed by a spin flash or pneumatic dryer 72

73 Maximizing the temperature drop of the drying gas: This implies maximum inlet and minimum outlet temperature. Unlike evaporators where the latent heat of the evaporated water can usually be reused in effects operating at lower pressure, the steam from a dryer is not easily reused apart from some preheating applications. The steam is usually carried in a gas stream, which reduces the thermal potential. Hence, the dryers are usually a once-through system. Therefore, it is important to minimize the volume of inlet gas used to input the heat and carry over the steam that is generated. If large quantities of gas exit the dryer, an equally large quantity of heat is lost. The higher the inlet gas temperature, the lower the quantity of gas required, and the higher the efficiency of the dryer. Unfortunately, there are usually temperature limitations associated with the product which limit both the inlet and outlet gas temperature. For example, with dairy products, the inlet gas temperature limit is approximately 480 F (250 C). For ceramics, the gas inlet temperature can exceed 1200 F (650 C). The outlet temperature is controlled by the type of product and the dryness required Employing the maximum possible recirculation of the drying gas: Any gas that leaves the system carries heat and reduces the thermal efficiency of the dryer. It appears logical to recirculate as much gas as possible. However, this system is limited by the relationship between the required dryness of the product and the humidity of the outlet gas. A condenser can be used in the recirculation loop to condense some water vapor, but the heat can only be recovered at low temperatures Example of a flash dryer system with recirculation is given below. Figure 8-9: Recirculation of exhaust in drying Utilizing the heat in the discharge air to preheat incoming air. Heat can be saved by using the discharge gas (air)/steam mixture to preheat the incoming air. This technique is most beneficial when product properties restrict the gas (air) inlet temperatures, requiring large volumes of gas (air). 73

74 Reducing radiation and convection heat loss by means of efficient thermal insulation. Drying equipment tends to be large. Also the equipment operates at quite high temperatures. As a result, there is a large potential for high heat loss from both convection and radiation. Insulation of the equipment is vital to ensure energy efficiency Heat Pump assisted Drying: This is relatively a new concept, and one of the most efficient forms of drying. Table 8-8: Advantages of heat pump drying Schematic of heat pump assisted drying is given below. Figure 8-10: Heat pump drying 74

75 Q6: Caste Study on energy saving in dryers Retrofit of Heat Pump based Fresh Air Dehumidifier: The energy savings by retrofit of Low Energy Heat Pump Fresh Air Dryer on existing dryers is expected for the following reasons: Reducing sensible heat load due fresh air now entering the dryer at 60 C instead of at ambient temperature. Since dehumidified fresh air will have absolute humidity (grams moisture per kg of dry air), it has more capacity to pick up and hold water or solvent vapour, scope will exist for the following measures: Reducing the air flow for the same production throughput in fluidized bed dryers, spray dryers and tray dryers Reducing the air supply temperature for the same air flow and production throughput in tray dryers, fluidized bed dryers, spin flash dryers and spray dryers Reducing batch cycle time for the same production throughput in tray dryers Increasing production throughput for the same air flow and air supply temperatures A combination of all the above measures The dynamics of drying will vary depending on the properties of the material being dried and type of dryer; hence, after retrofitting the Low Energy Heat Pump Air Dryer, energy savings should be maximized by optimizing air flow, air supply temperature and production throughput for maintaining the same quality of output and residual moisture in the product The following case study is from a chemical industry belt dryer. Optimising airflow to the requirement helped in reducing the useful heat carried away by the excess airflow. Drying processes where falling rate of evaporation time is significant, reduction of airflow can be a good energy saving option. During the falling rate period of drying, the moisture diffusion from inside the material to the surface is predominant and this is a function of more of the material properties than external conditions like airflow The energy inputs to the system are: Steam for air heating Electrical energy for FD Electrical energy for ID : 300 kg/hr : 8.5 kw : 8.4 kw 75

76 Initial performance parameters were established by field measurements and the performance was monitored for few batches. Following is summary of performance parameters at present conditions: Table 8-9: Existing condition 1. Air flow rate : 17,000 kg/hr 2. Moisture evaporation load : 27 kg/hr 3. Effectiveness of dryer : 10.9% 4. Effectiveness of steam consumption : 9.5% 5. Efficiency of FD fan : 29.2% 6. Efficiency of ID fan : 26.2% Recommendation: Start the circulating fans in each section and cut down the blower flow rate. Replace the blower with smaller size blower. Following is summary of performance parameters at after modifications conditions: Table 8-10: After modification 1. Air flow rate : 5,000 kg/hr 2. Moisture evaporation load : 27 kg/hr 3. Effectiveness of dryer : 40% 4. Effectiveness of steam consumption : 38% 5. Efficiency of FD fan : 60% 6. Efficiency of ID fan : 26.2% The energy consumption of new system Steam for air heating : 90kg/hr Electrical energy for FD : 2 kw Electrical energy for FD Table 8-11: Saving potential Steam Saving = 215 kg/hr (i.e. 72 %) Yearly fuel Saving = Rs. 3,87,000/- Electrical saving = 9 kw (i.e. 75%) Yearly electrical Saving = Rs. 3,24,000/ This is a typical example where reduction in demand by modification in the end application leads to a mammoth saving of 75%. However, note that for a spin flash dryer, reduction in airflow should be done carefully, as the heat and mass transfer rates in SFDs are closely linked with the airflow. 76

77 8.4 Distillation Process Q1. What is distillation process? Distillation, sometimes referred to as fractionation or rectification, is a process for the separating of two or more liquids. The process utilizes the difference of the vapor pressures to produce the separation When a mixture of two or more liquids is heated and boiled, the vapor has a different composition than the liquid. For example, if a10% mixture of ethanol in water is boiled, the vapor will contain over 50% ethanol. The vapor can be condensed and boiled again, which will result in an even higher concentration of ethanol. Distillation operates on this principle The two classes of distillation are batch distillation and continuous distillation. In batch distillation, the feed to the column is introduced batch-wise. The column is first charged with a batch and then the distillation process is carried out. When the desired task is achieved, the next batch of feed is introduced. Batch distillation is usually preferred in the pharmaceutical industries and for the production of seasonal products On the other hand, continuous distillation handles a continuous feed stream. No interruption occurs during the operation of a continuous distillation column unless there is a problem with the column or surrounding unit operations. Continuous columns are capable of handling high throughputs. Besides, additional variations can be utilized in a continuous distillation column, such as multiple feed points and multiple product drawing points. Figure 8-11: Distillation column 77

78 Q2. What are the typical causes of inefficiencies in distillation processes? Operating at the wrong pressure Higher column pressure costs the system the ability to separate and thus energy. Higher pressure reduces vaporization so a column must operate at higher temperature. Therefore, more energy is added to the reboiler at higher pressure than at lower pressure to get the same separation. To save energy, run column pressure at the lower end of the operating range, just high enough to cool the overhead and hydraulically move products. One way to do this is to reduce the pressure drop across the column by installing distillation trays or packing that has little differential pressure (more efficient trays also can reduce energy requirements). This allows to run the same overhead pressure with less reboiler work. Or reduce pressure in the entire tower. For those in areas of the country that experience wide variation in outside temperature (and thus have the ability to cool better in the winter), look at seasonable adjustments in tower pressure Putting the feed in the wrong location Tower separation is typically determined by the reboiler, condenser, and feed system. Designers sometimes concentrate on getting the two ends, condenser and reboiler, to do the right thing but forget about the feed system itself. In some cases, where multiple feed entrances are possible, always look at the proper tray to introduce your feed. The feed location depends heavily on the composition and your final product spec. Introducing a feed at the wrong location means the trays around the feed entrance will operate inefficiently and thus require the tower to work harder, use more energy, to perform the required separation. If your feed composition changes or if it has changed since the tower was designed, run tower simulations to see if you can introduce your feed on a different tray to reduce energy cost Over-purifying your products In a distillation column, the primary control protects the most valuable product. For example, if you have a specification of less than 5% unwanted material in the overhead liquid, you typically will set a target to achieve that. However, it s very common for a plant to produce 2% to 3% unwanted material in shipped product even when allowed 5%. This commonly happens because operators are taught to respond immediately to results close to the limit but are less likely to make changes when the results are far below the target. Although you never want to produce off-spec material, running a distillation column far below target takes a lot more energy then running a column to produce very near the target. With the advanced control schemes and equipment available today, look at your column to determine if you can run a tighter specification range for a lot less energy Using too much reflux It seems to make sense that a higher reflux ratio would create better separation, but more traffic in the tower requires energy. Many towers operate at the same reflux rate no matter how much feed is running to the tower. Typically, a distillation tower can operate at many different reflux rates and produce acceptable products. The key is to find the most stable low energy rate you can. Modifying reflux rates isn t a simple task as a tower running reduced reflux needs more operator attention. 78

79 Q3. Example of Re-sizing of Methanol Distillation column The diameter of the existing distillation column is 600 mm which is most probably resulting in very high reflux quantity which in turn results in increase in heating loads and results in higher natural gas consumption. Presently the gas consumption is 2250 scm/batch of 36 hours; two options are available for reducing the heating demand: For mole fraction of 65% methanol, 57.8 mole fraction of water will be about = 11% Thus, minimum reflux will be 600 = 92 kg/h of methanol Estimation of Vapor Load Excessive reflux of 5 times i.e. 450 kg/h will have vapor load of ( ) = 1050 Kg/hr. Volumetric flow of vapor will = m3 /h. 739 Cross section area for 6 m/s vapor velocity will be = 0.03 m Accounting for packing void space by 0.6, cross-sectional area = 0.05 m 2 should be 0.6 sufficient, this would be equivalent to 250 mm. Thus, 300 mm dia column should be more than sufficient even for 5 times of the minimum reflux. The heat load accordingly will come down to 1050 x 260 x 1.1 = 300,000 Kcal/hr or 1100 m 3 of gas consumption per day We therefore recommend blanking of existing distillation column and erecting parallel 250/300 mm dia distillation column and connecting both ends. The weight of the column will be 800 kg and packing will weigh about 400 kg. The potential savings will be around 100,000 kcal/h; the natural gas savings are expected to be about 350 scm/day. i.e. Rs per day. 8.4 Hot/Cold Recovery Heating or cooling from processes can reduce the requirements of steam or cooling/chilled water if properly integrated. The following examples of process heat recovery explains the concept Recover heat from hot water circulation system of RK2 & RK3 to preheat fresh water. The solvent recovery and reflux system of RK2 & RK3 are based on hot water circulation. Since these reactors operate at elevated pressures, condensing solvent vapours and recovering back to the reactor require hot water circulation. 79

80 8.4.3 The temperature requirement of hot water in tank is about 85 deg.c. There is one pump each for each reactor for circulating hot water through the condenser and accumulating heat in a storage tank. Fresh water supply at 25 deg.c (flow of about 10.5 m3/h) is continuously fed into the storage tank and the same amount of hot water is drained to maintain the temperature in the tank A schematic of the existing system is given below The total amount of heat available for recovery is 10.5 x 1000x (85-25) = kcal/h for two reactors. The above heat availability was verified by measurements on the hot water circulation side. The hot water circulation rate is 80 m3/h for each pump and temperature rise by 4 deg.c in the condenser. Hence total heat recovered from condenser is 2 x x 4 = 640,000 kcal/h Assuming 75% of this heat can be recovered for generating hot water by installing a heat exchanger, energy can be saved by reduced steam demand for hot water generation. Presently hot water is generated in a hot water tank of 15 m3 capacity located near the cooling tower in CPC plant. This is at 60 deg.c and is used for filter press washing and preparation for slurry for transferring RVD product to acid purification vessel The total heat requirement for hot water generation in CPC & Alpha plants is thus 675 kg/h. This matches with the heat recovery from RK2 & RK3 condenser.with an average steam cost of Rs 0.75/kg, annual fuel cost saving achieved is Rs 35.4 Lakhs/year. This can save about 780 Tons/year of coal consumption. 80

81 8.4.8 Concept of a proposed system is given below. Heat Recovery from Thermic fluid heater exhaust The existing flue gas exhaust temperature in the thermic fluid heater is at a temperature of 250 C which is very high for natural gas fired heater; ideally, this temperature should be in the vicinity of 130 C to 140 C, which is usually achieved by using combustion air preheater or other heat exchanger for recovery of the waste heat for any process heat application The possibility of installing a waste heat hot water generator may be explored; this can heat up the water to 90 C which can be used in the reboiler of the methanol distillation column The energy saving expected from this is approximately 400,000 kcal/h which implies natural gas saving of 120 scm/day i.e. Rs. 4,800 per day. The hot water generator can be a heat exchanger with hot water tank with thermosyphon; the investment is likely to be approximately Rs 6.1 lacs for the hot water tank, heat exchanger and piping with a payback period of around 128 days. Cold recovery from Chlorine vaporizer using heat pump The plant manufactures monochloro acetic acid. The process involved chlorination of acetic acid. For a production of 9600 Tons/year, the chlorine consumption is about 2000 kg/h. The schematic of production process is given below. 81

82 The process of generating vapour chlorine from liquid chlorine involves heating by steam. The energy balance of chlorination process is given below. The steam consumption is 218 kg/h A more energy efficient option is by use of a heat pump system. A heat pump is basically a chilling plant with generates chilled water and hot water simultaneously. 82

83 From the above schematic, note that hot water at 60 C generated by the heat pump and fed to a chlorine vapouriser. Chilling is generated at the heat pump can offset partially the chilling requirements which is presently met with a centralized chilling plant. Detailed calculations are given below. Table 8-12: Heat pump assisted Chlorine evaporation Production of monochloro acetic acid Chlorine consumption Liquid chlorine temperature Liquid chlorine pressure Liquid chlorine enthalpy Vapour chlorine temperature Vapour chlorine pressure Vapour chlorine enthalpy Enthalpy rise of chlorine Energy required for clhorine vapourisation, kcal/h Enthalpy of steam Equivalent steam consumption Steam cost Cost of steam consumption Heat pump based chlorine vapourisation system TR 25 Tons/day 2 Tons/h 25 C 6 kg/cm kcal/kg 50 C 2 kg/cm kcal/kg 61.0 kcal/kg kcal/h 40.3 TR kcal/kg kg/h 2.6 Rs/kg 4,079,581 Rs/year Heating required by heat pump to vapourise chlorine kcal/h Hot water inlet temperature to condenser 60.0 Hot water out let temperature of condenser 55.0 Hot water flow required 24.4 m3/h Expected Power consumption of condenser (hot water) pump 3.9 kw Additional cooling available from heat pump Chilled water inlet temperature to heat pump Chilled water outlet temperature of heat pump Chilled water flow required Expected Power consumption of chilled water pump Power consumption of heat pump Total power consumption of heat pump system Power saving in chilling capacity at KC6 chiller Net power consumption of heat pump Electricity price Cost of power consumption of heat pump 32.2 TR 12 C 7 C 19.5 m3/h 3.7 kw 32.2 kw 39.8 kw 25.8 kw 14.0 kw 6.5 Rs/kWh 656,436 Rs/year Overall cost saving potential 3,423,145 Rs/year Investment for a 50 TR heat pump is expected to be about Rs 30.0 lakhs, with a payback period of 10 months. 83

84 8.5 Electric Motors Q1. Motor efficiency & Power factor How does it vary with load/rating? Electric motors are intrinsically very efficient. Their efficiencies vary from 85% to 95% for motors of sizes ranging from 10 HP to 500 HP. Due to a large installed base of motors using electricity, even a small improvement in efficiency can result in significant savings from a broader national perspective. The following chart shows efficiency of electric motors of various sizes at different loads. Higher the motor rating higher will be the efficiency at full load. Figure 8-12: Motor efficiency Typical variations of motor efficiency and power factor with load are shown in figure below. Figure 8-13: Motor loading, efficiency & pf 84

85 8.5.3 The motor efficiency remains almost constant up to 40% load, below which the efficiency drops significantly and becomes zero at 0% load.for a particular operating voltage and shaft load, the motor efficiency is determined by design, it cannot be changed externally The power factor reduces with load. At no load the p.f. is in the range of 0.05 to 0.2 depending on size of the motors Note that at 50% load, the efficiency has dropped by 3%, whereas the power factor has dropped from 0.84 to 0.7 for the same load change. At no load, the power consumption is only about 1 to 5%; just sufficient to supply the iron, friction and windage losses Break up of losses of a 50 HP motor is given below. Some losses are fixed; some vary with load as can be seen from the figure. Figure 8-14: Motor losses Q2. How much saving can be achieved by motor replacement or proper sizing? The following table explains the effect of oversizing a motor. For a duty requirement of 15 kw, if we install a 30 kw or a 55 kw motor, the additional energy consumption is given below. Table 8-13: Motor sizing Description Unit Motor Rating Motor Load Requirement KW Motor Rating KW Motor Efficiency % Input Power KW Input Energy (for 6000 KWH hrs/annum) Input Energy Rs.5/- Rs Motor Power Factor Input KVA Energy Difference KWH Investment Rs Increase in Investment RS Increased in Running Cost Rs

86 8.5.7 It is clear that even if we oversize by double, energy penalty is quite low. Q3. Motor rewinding or replacement How to decide? The following table compares the efficiency, economics of rewinding vs. high efficiency motors. Efficiency of a rewound motor can be same as original or less depending on the rewinding practices. It does not mean that all rewound motors have poor efficiency. Table 8-14: Comparison of rewinding & replacement Rewound motor Standard Motor High efficiency Motor Motor rating, kw Efficiency 85% 88% 91% Energy consumed per hour, kw Annual electricity consumption, kwh Additional energy consumption Additional energy cost, Rs/year A new high efficiency motor will payback within one year, as compared to rewinding. Q4. High efficiency motors Compare with standard efficiency motors Table 8-15: High efficiency motors Rated kw Speed at rated output rpm Input current at rated output Amps Motor Efficiency, % Standard Premium

87 Q5. Case study- motor replacement A case study of replacing existing motor with a high efficiency motor is discussed below. Table 8-16: Motor replacement Principle Background Replacement of standard efficiency motors with high efficiency motors can give savings of about 2 to 5% depending on the ratings. The savings can be still higher if the efficiency of existing motor is poor. In this case a motor which is frequently rewound and very high no load current is replaced with a high efficiency motor. A 15 kw motor was being used to drive an air-conditioning compressor. This motor had been rewound a few times. The normal load current was 32.5 A. Since this was higher than the rated current. The no load current (after removing the belts) was observed to be 24 A (85% of the full load current) and the no load power loss was kw, which is very high. The operating efficiency of the motor was estimated to be about 76%. This motor was replaced by a new High Efficiency Motor. Existing Motor: Make: Bharat Bijlee, Rating: 15 kw/20hp, Voltage: 415V, Current: 28A, Speed: 1445 rpm New Motor: Make: Bharat Bijlee, Rating: 15 kw/20hp, Voltage: 415V, Current: 26.1A, Speed: 1450 rpm, Efficiency: 90.8%, Power Factor: 0.88 The measured no load current was 6.6 A and the no load power was kw. The saving in no load power itself was kw (from to 0.873kW). Ignoring the reduction in copper losses, the minimum saving for about 6000 hours operation is 8766 kwh/annum i.e. Rs. 35,000/- per annum. The investment in the new motor was Rs. 35,000/-. The pay back period was one year. 8.6 Belts & Gears Q1. What are the typical efficiencies of various types of mechanical power transmission systems? Different types of belts & gears have different efficiencies. Energy savings can be achieved in some applications by replacing inefficient worms gears by helical bevel gears Worm gear efficiency varies from 75 to 95%. For agitators, this is a common application. Use of a planetary gear or helical bevel gears can save about 5 to 10% depending on the efficiency of worm gear. For new applications, consider planetary gears.

88 Table 8-17: Efficiency of gear & belt drives Type Efficiency % Spur Gear Cast teeth 93 Cut teeth 96 Bevel gear Cast teeth 92 Cut teeth 95 Worm gear Thread angle Thread angle Planetary Gear V Belts Flat belts Examples of replacing inefficient belts/gears with high efficiency models are given below. Flat Belt in Place of V Belt in Refrigeration Compressor Power consumed with 4 nos. of V belts -37 KW Power Consumed with 1 flat belt KW Power Saving with flat belt KW % Power Saving % High Efficiency Gear in Place of Low Efficiency Gear : For a Reactor with Worm Gear Motor Rating KW (10 HP) Actual Motor Input KW With High Efficiency planetary gear Motor Rating = 5 HP Actual Motor Input = 3 KW Savings achieved = 0.75 KW 8.7 Pumps & Fans Pumps and fans account for more than 60% of the industrial motive power consumption. We will discuss the basic principles, operational aspects and energy saving potential in water pumping systems. The approach in fans is also similar.

89 Q1. What is a pump characteristic curve and how it can be used to understand performance? Figures below give the typical basic characteristics for pump and fan. The important characteristics of Head v/s Flow, Power v/s Flow and Efficiency V/S Flow are shown. Figure 8-16: Pump Curves The pump head pressure decreases with increase in flow. Blowers also have a similar characteristic, except that the pressure increases slightly from zero flow and then decreases with increasing flow The pump/blower efficiency increases with flow, reaches a maximum and then decreases with further increase in flow. Please note that the efficiency drops significantly on both sides of the best efficiency point. Electric motors at 50% shaft load have almost the same efficiency as that at full load. But in the case of pumps/blowers, at 50% flow, the efficiency can be even 20 percentage points below the best efficiency The input power v/s flow curve is approximately a rising near linear characteristics, At shut off, the output flow end hence output is zero, but the pump input is sizeable (40% to 45% of full load) due to internal churning losses. This is in sharp contrast with electric motors which take very small input at no load Efficiency v/s flow is a curve rising from zero at shut off to a very narrow (unique) region for maximum efficiency at a certain design flow and fells by 10% to 20% on either side. Thus operation at a flow, higher or lower than Best Efficiency Point (BEP) gives a sizeable drop in efficiency. 10% drop in efficiency may be quite common due to OFF DUTY POINT OPERATION.

90 8.7.7 The following figure shows a typical performance curve for a model. Impeller diameter varies from 270 mm to 370 mm, as can be seen in the figure.

91 Q2. How to calculate pump/fan efficiency? Efficiency of pump is calculated as below. Q ρ g H Efficiency (Pump) = in per unit Pshaft 1000 Q = Flow, cu.m/s ρ = Density, kg/cu.m g = 9.8 m/s H = Head in metres of water column Efficiency of fan/blower is calculated below Q(CFM) x H (inches of Water Column) Efficiency (blower) = in per unit Pshaft (HP) x 6356 Q3. What are the causes of inefficiency in Fluid handling systems? Ideally, pumps and fans should operate at their best efficiency points, when their valves or dampers are in fully open position; however, such cases are rare. During energy audits, some of the causes of poor efficiency observed are as follows: The valves and dampers are fully open and the pump/fan is operating at either higher flow or lower flow; the actual operating point being not at the best efficiency point. This results in energy wastage as the pump or fan is not operating near its best efficiency point The actual operating point of the pump or fan is near its best efficiency point. However this operation has been achieved by closing of valves or dampers. In such cases, the pumps/fans are operating efficiently, only to supply large valve/damper throttling losses. Hence the overall system efficiency is still likely to be very poor The pump/fan has a certain rated head/flow specification on its nameplate. The pump is operating at the specified head and flow condition, but study of the pump/fan performance characteristic reveals that the best efficiency point of that pump/fan is not at at the specified condition. This is again very wasteful from the energy view point The pump or fan is itself of very poor efficiency. This can happen it the equipment is old or if the equipment has been purchased from manufacturers whose models are of poorer efficiency than their competitors.

92 Q4. Can water flow be optimised? Optimal use of water for various applications can significantly reduce the raw water pumping energy consumption Review of water circulation rates to optimize flow rates for process cooling can also have a significant effect on energy consumption Q5. Are pumps or fans installed that are not sized correctly for the task? Pump or fan efficiency is very dependent upon flow and pressure, and the pump or fan s operating characteristics. For a given rpm there is one optimal operating point of flow and pressure. As the pressure changes, flow changes and operating efficiency is also affected. If system conditions have changed since the initial selection of the pump or fan, they may be operating at a higher rpm than is required, therefore wasting energy. An oversized pump or fan often works continuously against a throttle or damper causing even greater inefficiencies Use of Variable Speed Drives. Use of mechanical, electrical or electronic variable speed drives can help in improving the pumping system efficiency in cases that require variable flow or in cases where the pumps are oversized and the flow is controlled by throttling of valves. Figure 8-17: Saving by VFDs

93 Trim or replace pump impellers. A pump s operating characteristics can be adjusted by re-sizing the impeller. On a given system, it may be possible to achieve greater efficiency with a different pump impeller. An example of trimming impeller in a large chemical plant is given below: The utility equipment comprising 3 nos. centrifugal chillers, 3 to 4 nos. air compressors, and 2 nos. refrigeration dryers were cooled by 3 nos. cooling tower pumps. The cooling water piping was very liberally designed and pipe friction losses were very low During the energy audit, it was observed that the valves on the return line of each cooling tower cell were kept about 70% closed and that the pumps were operating at about 35 m head. Detailed pressure measurements indicated that about 70% of the pressure drop in the entire system was in throttled valves. This implied that there was a large mismatch between the pump and the piping system for the required operating flows. After a detailed study, it was decided to replace the existing 342 mm dia. impellers with 307 mm dia. impellers and only slightly throttled to balance the flow. The savings are estimated to be kwh/annum i.e. Rs.15 lakhs per annum. The pay back period on an investment of Rs. 75,000/- (for 3 nos. new impellers) was 18 days. Pump Specifications: Head: 30m, Flow: 550 m3/hr, Speed: 1450 rpm, (3 nos. pumps in operation) Table 8-18: Saving by impeller trimming Impeller diameter, mm Head,m Flow, m3/hr (per pump) Motor input, kw (per pump) Power savings for 3 pumps, kw Energy savings, kwh Money saved, Rs Investment, Rs Payback, days Replace fan or pump with a more energy efficient model. It may not always be possible to achieve an acceptable efficiency in a system with a given pump or fan. New equipment may be required and a better option.

94 Q6. Are pumps or fans being throttled in order to control the flow rate? One of the most common and inefficient methods to control a fan or pump is to restrict its flow by throttling. As the pressure is increases, the flow reduces. The following recommendations apply best to systems with variable flow (such as a boiler feed-water pump or an induced draft fan.) Replace throttle control on pump or fan with solid state VSD control. VSDs can provide significant energy savings. Quick savings estimates vary greatly with conditions; however VSDs frequently pay off in a year or two if they replace a throttle control that operates at percent of full flow or less most of the time. The impact on the fan or pumping system due to variations in speed should be evaluated when considering this measure Example: Use of variable frequency drive on boiler FD fan to avoid damper control. The boiler FD fan was rated 20 HP and the airflow was controlled by discharge damper. Use of a VFD on fan was implemented so that electrical energy at the fan could be saved. In addition to this, there was expectation of improving the boiler efficiency since the VFD can be used for better control of excess air The energy consumption in the blower per Ton of Furnace oil as estimated was 44 kwh before the retrofit. The damper postion was varied between 50% to 80%. After installing the VFD, the frequency was kept between 31 to 45 Hz with damper fully open. The energy consumption per Ton of furnace oild was reduced to 12 kwh/ton of F.O. With an average 110 KL furnace oil consumption, the energy saving was 42,000 kwh/annum. i.e Rs 170,000 per annum. Payback period was 7 months Trim or replace pump impellers and open the discharge valve. On a given system, it may be possible to achieve greater efficiency with a different pump impeller Example: Blower Speed Reduction at a Chemical Plant by Change of Pulley Ratio. For the SFD (Spin Flash Dryer) blower, inlet damper was 40% closed in order to control dust collection performance. It was felt during the audit that this blower is probably oversized for the existing requirement. Blower speed was 2350 rpm with 14 pulley diameter and power consumption was about 51.3 kw. After conducting trials to ensure optimised production and quality, a 12 pulley has been put on the motor and 8.75 pulley on the blower so that blower now operates at 2000 rpm. This is an effective speed reduction of 15% from the initial blower speed of 2350 rpm. Now the dampers are also kept fully open. Power input to the motor is now 45.3 kw. This is a reduction of 6 kw. For 7000 hours/annum operation, annual energy saving of 42,000 kwh is being achieved. I.e. Rs 2.1 lakhs/annum. Investment is about Rs 5000/- with payback period of 10 days..

95 Replace throttle control on fan discharge with inlet vane control. Inlet vanes are a good option for applications like dust collection systems where the air volume (cubic feet per minute (CFM) of air flow) required changes, while the air velocity and associated pressure drop must remain relatively constant. By pre-spinning inlet air, inert guide vanes can reduce air flow without affecting the pressure the fan must overcome. They are not as efficient as VSDs in applications where system pressure can be allowed to drop with reductions in airflow. At extreme reductions in airflow (less than 30 percent) an inlet vane acts like a throttle and its efficiency drops off significantly. Q7. Is bypass control being utilized to vary the flow out of the Pump? Although less common, bypass control can be an extremely inefficient method for controlling flow. In the best case, pump energy use is constant regardless of delivery to an end use. In the worst case, energy use increases with reduced delivery to the end use. As less flow is required at the end use, the excess is diverted to the bypass circuit and re-circulated. The diverted fluid does not add any value to the finished product. 8.8 Cooling Towers Q1. What are the saving opportunities in cooling towers Install solid state VSD control on the cooling tower fans. The cooling tower fans typically operated with single speed (50 Hz) or a two speed motors. Depending upon the ambient weather conditions (Wet Bulb Temperature) at the tower location and the cooling loads placed on the tower, the installation of VSDs on the cooling tower fan motors can produce significant energy savings. During periods when the cooling demands are at a minimum, the tower fans run at minimum speed and consume less energy The tower fans can be turned off during periods when the ambient air conditions will sufficiently cool the water without the aide of the fans. The energy consumption is significantly reduced to just the cost of circulating the water through the tower Replace the tower fill material with cellular film fill to improve the heat transfer efficiency Install non-clogging, non-corroding spray nozzles to improve water distribution through the tower Install energy efficient airfoil fans. 8.9 Compressed Air Q1. What are the saving opportunities in compressed air system?

96 8.9.2 Reducing Compressed Air Use: Many uses of compressed air like cleaning, material conveying, scouring, agitation and aeration of liquids etc. are not justified at the present energy prices. For applications like cleaning & conveying, blowers can be used. For material conveying, use of efficient alternatives like belts, bucket elevators, screw conveyors etc. can be used. For agitation or aeration of liquids, low-pressure Roots compressors or submersible (pump type) agitators can be used. More efficient, portable electrical tools can replace pneumatic portable tools. In many plants, pneumatically operated controls are being replaced by electronic and electrical controls, thus reducing the requirement for instrumentation air. In all these cases, the potential for energy saving is about 80% to 90% Pressure Reduction: A thorough study of the end-use pressure requirements and the compressor discharge pressure should be done. An opportunity to reduce the discharge pressure should not be missed as it can give significant energy savings due reduced compression power as well as reduced air leakage. An approximate thumb rule is that 10% reduction in compressor discharge pressure reduces energy consumption by about 5%; the savings due to leakage reduction are additional. In cases where higher pressures are set to overcome the problem of pressure fluctuations, increase in receiver capacity and use of newly developed pressure & flow controllers can help reduce pressure settings Air Leakage Reduction: Compressed air leakage can vary from 5% to 70% or higher depending on the house keeping efforts on the compressed air distribution system. At the present energy cost, all plants should attempt to operate at compressed air leakage levels below 5%. Even a small leakage of 50 cfm is equivalent to a loss of Rs.3.0 lakhs per annum (@ Rs per kwh). Air leakage generally take place from threaded pipe joints, hose connections, valve stems, buried underground lines etc Distribution System: Decentralized installation of compressors can lead to smaller distribution systems and hence reduced pressure and leakage losses. However, whether a system should be decentralized or centralized depends on the air utilisation patterns for various end uses in the plant. If uses are highly variable and the equipments (with significant air consumption) are spread out over a large area, a decentralized system may be preferred, with interconnections with isolation valves for emergencies. A decentralized system facilitates switching off compressors when air is not required in a particular area. Pipe sizing should be done to minimize pressure drops, say less than 0.3 bars from the receiver at the compressor end. Isolation valves should be provided at convenient, accessible locations to shut off air when not required in certain areas for known time periods.

97 Q2. Compare performance of compressor types Compressors should be selected with a good understanding of the air utilisation pattern. Reciprocating, Screw or Centrifugal or Roots compressors can be used depending on the pressure, quantum of air required and the air demand variations All compressors have the facility for capacity control; part load efficiencies depend on the type of compressor and the method of capacity control; prolonged operation at part loads results in higher energy consumption. Compressors consume 10% to 50% of their rated power (depending on the type of compressor and capacity control method) even at no load. Power vs. capacity curves of screw compressor is given below. Figure 8-18: Part load operation of screw compressor The attempt should be to ensure that the operating compressors run close to their rated load. Automatic controls are available to detect and switch off compressors operating in unloaded condition for prolonged period. Q3. Compare Pneumatic diaphragm pumps and electrical options Air operated diaphragm pumps are not used because they are efficient. They are generally used because they tolerate aggressive conditions relatively well and run without catastrophic damage even if the pump is dry. There several areas to pursue to perhaps generate significant air savings. Is the air operated diaphragm pump the right answer? An electric pump is significantly more power efficient. Electric motor driven diaphragm pumps are available.

98 Consider the installation of electronic or ultrasonic controls to shut the pumps off automatically when they are not needed. Remember the pump uses the most air when it is pumping nothing. Are you running most of the time at the lowest possible pressure? The higher the pressure the more air used. Table 8-19: Pneumatic vs electrical pumps 1/2" diaphragm pump 1" diaphragm pump 1-1/2" diaphragm pump 1-1/2" diaphragm pump 2" diaphragm pump 2" diaphragm pump Basic Pump Requirement Discharge Pressure Hea d Estim ated flow Pneumaticall y driven Diaphr agm pump Air cons Air Pressu re Equiva lent power Likely motor input of elect. Pump Savings kw kw kw % Q3. How much does compressed air leakage cost? The following table explains the quantity of air leakage thru various sizes of openings. Orifice Diameter Table 8-20: Compressed air leakage Air leakage Scfm Power wasted KW At 3 bar (45 psig) pressure 1/ / / ¼ At 4 bar (60 psig) pressure 1/ / Cost of Wastage (for 8000 hrs/year) (@ Rs. 4.50/kWh

99 1/ ¼ At 5.5 bar (80 psig) pressure 1/ / / ¼ At 7 bar (100 psig) pressure 1/ / / ¼ Q4. Is the pressure drop across auxiliary equipment such as dryers, oil separators, or filters excessive? Some compressors display pressure drop across these devices. Pressure drop should not exceed 8 to 10 psig; for oil separators, 5 psig for a dryer, 0.5 to 1 psig for a filter Replace filters, overhaul equipment to reduce pressure drop. Clogged filters and fouled lines increase air velocity and pressure drop Size equipment to accommodate air flow with acceptable pressure drop. Equipment such as a refrigerated dryer causes excessive pressure drop when air flow exceeds design. Q5. Does the facility utilize any air nozzles? Have the air nozzles been designed for maximum efficiency? Install engineered nozzles. These nozzles are typically used for blowing off parts of equipment, cutting or cooling. Commercially available engineered nozzles use less air For applications like blowing of components, use of compressed air amplifiers, blowers or gravity-based systems may be possible. Brushes can sweep away debris from work in progress as effectively as high-pressure air. Blowers also can be used for this purpose. When moving air really is required for an application, often sources other than compressed air can do the job. Many applications do not require clean, dry, high-pressure, and expensive 90- or 100-psi compressed air-rather, only moving air is needed to blow away debris, provide cooling, or other functions. In these cases, local air fans or blowers may satisfy the need for moving air much economically Mechanical stirrers, conveyers, and low-pressure air many mix materials far more economically than high-pressure compressed air.

100 8.10 Refrigeration & Air conditioning System Q1. Description of terms The cooling effect of refrigeration systems is generally quantified in tons of refrigeration. 1 Ton of Refrigeration (TR) = 3023 kcal/hr = 3.51 kw thermal = Btu/hr The commonly used figures of merit for comparison of refrigeration systems are Coefficient of Performance (COP), Energy Efficiency Ratio (EER), Specific Power Consumption (kw/tr) These are defined as follows: If both refrigeration effect and the work done by the compressor (or the input power) are taken in the same units (TR or kcal/hr or kw or Btu/hr), the ratio is COP = Refrigeration Effect Work done If the refrigeration effect is quantified in Btu/hr and the work done is in Watts, the ratio is EER = Refrigeration Effect (Btu/hr) Work done (Watts) Higher COP or EER indicates better efficiency. The other commonly used and easily understood figure of merit is Specific Power Consumption = Power Consumption (kw) Refrigeration effect (TR) A lower value of Specific Power Consumption implies that the system has better efficiency. Q2. Can we reduce the Need for Refrigeration For process cooling applications, many foreign machinery suppliers specify chilled water at 10 C to 15 C as these are the normal cooling tower water temperatures in cold countries for most time of the year The possibility of replacing chilled water with cooling water with higher flows can be considered. Air-conditioning should be restricted to small spaces, as guided by process requirements. Comfort air-conditioning should be provided only if necessary in small areas.

101 Use Evaporative Cooling for Comfort Cooling in Dry Areas In dry areas, reasonable comfort temperatures can be achieved in summer by use of evaporative cooling i.e. by humidification of air by small desert coolers or centralised humidification plants. The energy consumption is likely to be about only about 10% to 20% of an air conditioning system Table below shows the variation of refrigeration capacity, power consumption and specific power consumption for a particular vapour compression system with evaporator refrigerant gas temperature. Table 8-21: Effect of higher temperature on efficiency Evaporator Temperature C Condenser Temperatures C Capacity (TR) Power cons. (kw) Sp. Power (kw/tr) Capacity (TR) Power cons. (kw) Sp. Power (kw/tr) Capacity (TR) Power cons. (kw) Sp. Power (kw/tr) It may be observed that higher the temperature, higher the system capacity, higher the power input and lower the specific power consumption (kw/tr). This clearly indicates that the cooling effect increases in greater proportion than the power consumption, thus the system will cool faster and shut off The approximate thumb rule is that for every 1 C higher temperature in the evaporator, the specific power consumption will decrease by about 2 to 3%. Details of saving for each type of systems are given in table below Compressor Type Table 8-22: Increase in COP Percent Increase in the COP for each 1 F Reset for: Condenser Temperature Evaporation Temperature Reciprocating 1.30% 1.13% Centrifugal 0.50% 1.54% Screw 2.30% 2.08% Absorption 0.80% 0.59%

102 Q3. Reduction of air conditioning volume /shifting of unnecessary loads Keep Unnecessary Heat Loads Out: Unnecessary heat loads may be kept outside air-conditioned spaces. Often, laboratory ovens/furnaces are kept in air-conditioned spaces. Such practices may be avoided. Use air-to-air heat exchangers to reduce energy requirements for heating and cooling of outside air. Provide dedicated outside air supply to kitchens, cleaning rooms, combustion equipment etc. to avoid excessive exhausting of conditioned air Use False Ceilings: Air-conditioning of unnecessary space wastes energy. In rooms with very high ceiling, provision of false ceiling with return air ducts can reduce the air-conditioning load. Relocate air diffusers to optimum heights in areas with high ceilings Use Small Power Panel Coolers :In some engineering industries, CNC machine shops are airconditioned. Use of small power panel coolers and hydraulic oil coolers (0.1 to 0.33 TR are available) can make the whole centralised air-conditioning redundant and save energy Use Pre-Fabricated, Modular Cold Storage Units: Under-utilised large cold storage units can be replaced by pre-fabricated, modular, small cold storage units. The idea is to match product volumes and avoid unnecessary cooling of space and reduce losses Improve Air Distribution and Circulation: In some air-conditioning systems, lower temperatures are set to overcome problems of poor air distribution; making changes in ducting may be a more economical solution than permanently paying higher energy bills. In air-conditioned spaces, use of circulation fans can provide apparent comfort and help raise the room temperature settings to about 26 C instead of 24 C. the reduction in energy consumption in the refrigeration machine will be significantly more than that consumed by the circulation fans Improve air Distribution in Cold Storages: In cold storage units, replacement of centralised coilfan-diffuser units by ducts (for better air distribution) or frigid coil units (small expansion coils with fans) can lead to lower temperature settings (at the compressor end) and large energy savings Reduce Heat Ingress: Vessels, pipelines and pipe fittings (like valves, flanges, bends etc.) handling refrigerant, chilled water or brine should be well insulated. For air-conditioned spaces and cold stores, appropriate methods like double doors, fast closing doors, air curtains and low emissivity films (sun control) for glass windows should be incorporated. Building insulation is strongly recommended for air-conditioned buildings, this aspect is usually neglected in India.

103 Q4: How does better maintenance or improved design of chillers save energy? Better Heat Exchanger Design and Maintenance: Use of larger and better heat exchangers (evaporators & condensers) can help in increasing the refrigerant temperature in the evaporator and decreasing the temperature in the condenser for the same end use temperatures and cooling loads. The potential for savings can be 10% to 30%. This can be ideally addressed at the time of purchase of new equipment. The quality of circulating chilled and cooling water should be maintained within tolerable limits to prevent scaling and ensure efficient heat transfer. Proper water treatment is necessary for maintaining the efficiency of a refrigeration plant Case Study: Replacement of Existing Evaporator with a New Evaporator with Better Heat Transfer Efficacy: Replacing the existing Ammonia Evaporator Coil in Tank with Shell & Tube Heat Exchanger was implemented in a chemical plant. The comparative measurements are given in table as follows. Description Table 8-23: Replacement of evaporators Qty Unit Power consumption of the chiller before replacing evaporator = 32.3 kw Average operating hours before replacing evaporator = 10 hours/day Daily energy consumption = 323 kwh/day Power consumption of the chiller after replacement = 39.9 kw Average operating hours after replacing evaporator = 6.7 hours/day Daily energy consumption = 267 kwh/day Daily energy savings = 56 kwh/day No. of days of operation/annum = 330 days/annum Annual energy savings = kwh/annum Annual savings(@rs 4.5/kWh) = Rs/annum Daily energy saving is 56 kwh/day i.e. 18,370 kwh/annum. This is a saving of Rs. 82,670/- per annum. The investment in the new evaporator and primary pumping system is about Rs. 1.2 lakhs. The pay back period is about 1.5 years. Q5. How does Thermal Energy Storage help? Some electricity boards have adopted Time of Use energy pricing, which implies higher energy prices during certain hours. By operation of compressors in off-peak hours (when energy price is low), Cooling Effect can be stored in ice banks, some special salts etc. In addition to the advantage of lower energy cost, this method can also help reduce the peak kw and kva demand of the plant, resulting in lower Maximum Demand charges. Thermal Storage implies storing the cooling effect in the latent heat of ice banks (fig. 8) or eutectic salts (which undergo a phase change) and using it when required. Ice banks are being used in dairies for the past many years to overcome their peak cooling loads. The same concept can be used to reduce energy cost by operating the refrigeration

104 machines during off-peak hours and storing cold for use during peak hours. This reduces the number of refrigeration machines that may have to run to satisfy the peak cooling load. The energy cost savings accrue due to reduction in the registered Maximum kva Demand and Peak-time energy charges (if applicable); the quantum would depend on the load profile of the plant Ice banks are a proven technology. One company in India has now introduced a variety of salt hydrates which can change from solid to liquid phase at temperatures ranging from 33 to +27 C. The salt hydrates are enclosed in HDPE nodules; a number of such nodules are enclosed in a tank through which chilled water or brine can be allowed to flow. Some hotels and industries are already using this technology. Q6. System configuration in Chilled Water Pumping System The chilled water system had primary (chiller side) and secondary (process side) pumps with a hot well and cold well arrangement. Since the chilled water requirement for the plant was reasonably steady, it was decided to eliminate the primary pump and connect the warm chilled water from the secondary side directly to the chiller, bypassing the hot well. In view of the increased pressure requirement, a new, efficient pump of appropriate head requirement was recommended. The power consumption scenario before and after this change is as follows. Before Change Operating hours of primary pump = 10 hours Daily energy consumption of primary pump = 8.5 x 10 kwh/day = 85 kwh/day Operating hours of secondary pump = 24 hours Daily energy consumption of secondary pump = 11.3 x 24 kwh/day = kwh/day