ENERGY ECONOMICS

In the process of energy management, at some stage, investment would be required for reducing
the energy consumption of a process or utility, investment would be required for modifications /
retrofitting and for incorporating new technology. It is essential to identify the benefits of the
proposed measure with reference to not only energy savings but also other associated benefits
such as increased productivity, improved product quality etc.
The cost involved in the proposed measure should be captured in totality viz.
1. Direct project cost
2. Additional operations and maintenance cost
3. Training of personnel on new technology etc.
To persuade your organization to commit itself to a program of investment in energy efficiency,
you need to demonstrate:
The size of the energy problem it currently faces
The technical and good housekeeping measure available to reduce waste
The predicted return on any investment
The real returns achieved on particular measures over time. The need for investments in
energy conservation can arise under following circumstances
For new equipment, process improvements etc.
To provide staff training
To implement or upgrade the energy information system
And other priorities
Energy manager has to identify how cost savings arising from energy management could be
redeployed within his organization to the maximum effect. To do this, he has to work out how
benefits of increased energy efficiency can be best sold as,
Reducing operating /production costs
Increasing employee comfort and well-being
Improving cost-effectiveness and/or profits
Protecting under-funded core activities
Enhancing the quality of service or customer care delivered
Protecting the environment

FINANCIAL ANALYSIS
In most respects, investment in energy efficiency is no different from any other area of financial
management. So when your organization first decides to invest in increasing its energy efficiency
it should apply exactly the same criteria to reducing its energy consumption as it applies to all its
other investments. It should not require a faster or slower rate of return on investment in energy
efficiency than it demands elsewhere.
The basic criteria for financial investment appraisal include:
Simple Payback a measure of how long it will be before the investment makes money, and
how long the financing term needs to be
Return on Investment (ROI) and Internal Rate of Return (IRR) measure that allow
comparison with other investment options
Net Present Value (NPV) and Cash Flow measures that allow financial planning of the project
and provide the company with all the information needed to incorporate energy efficiency
projects into the corporate financial system.
Simple Pay Back Period:

Advantages
A widely used investment criterion, the payback period seems to offer the following advantages:
It is simple, both in concept and application. Obviously a shorter payback generally indicates a
more attractive investment. It does not use tedious calculations.
It favours projects, which generate substantial cash inflows in earlier years, and discriminates
against projects, which bring substantial cash inflows in later years but not in earlier years.
Limitations
It fails to consider the time value of money. Cash inflows, in the payback calculation, are
simply added without suitable discounting. This violates the most basic principle of financial
analysis, which stipulates that cash flows occurring at different points of time can be added or
subtracted only after suitable compounding/discounting.

 It ignores cash flows beyond the payback period. This leads to discrimination against projects
that generate substantial cash inflows in later years.
It is a measure of a projects capital recovery, not profitability.

Time Value of Money

A project usually entails an investment for the initial cost of installation, called the capital cost,
and a series of annual costs and/or cost savings (i.e. operating, energy, maintenance etc.)
throughout the life of the project. To assess project feasibility, all these present and future cash
flows must be equated to a common basis. The problem with equating cash flows which occur at
different times is that the value of money changes with time. The method by which these
various cash flows are related is called the present value concept
If money can be deposited in the bank at 10% interest, then a Rs.100 deposit will be worth
Rs.110 in one year's time. Thus the Rs.110 in one year is a future value equivalent to the Rs.100
present value. In the same manner, Rs.100 received one year from now is only worth Rs.90.91 in
today's money (i.e. Rs.90.91 plus 10% interest equals Rs.100).
The relationship between present and future value is determined as follows:
Future Value (FV) = NPV (1 + i)n or NPV = FV / (1+i)n
Where
FV = Future value of the cash flow
NPV= Net Present Value of the cash flow
i = Interest or discount rate
n = Number of years in the future
Net Present Value (NPV)

The decision rule associated with the net present value criterion is: Accept the project if the net
present value is positive, and reject the project if the net present value is negative.
The net present value criterion has considerable merits.
It takes into account the time value of money.
It considers the cash flow stream in its project life
Internal Rate of Return (IRR):
The internal rate of return (IRR) method expresses each investment alternative in terms of a rate
of return (a compound interest rate). The expected rate of return is the interest rate for which

total discounted benefits become just equal to total discounted costs (NPV=0). The criterion for
selection among alternatives is to choose the investment with the highest rate of return.

In the internal rate of return calculation, we set the net present value equal to zero and determine
the discount rate (internal rate of return), which satisfies this condition
Advantages
A popular discounted cash flow method, the internal rate of return criterion has several
advantages:
It takes into account the time value of money.
It considers the cash flow stream in its entirety.
It makes sense to businessmen who prefer to think in terms of rate of return and find an
absolute quantity, like net present value, somewhat difficult to work with.
Cash Flows
Generally there are two kinds of cash flow;
Cash Inflow: the initial investment as one or more installments, and
Cash outflow: the savings arising from the investment.
There are usually other cash flows related to a project. These include the following:Capital costs are the costs associated with the design, planning, installation and commissioning
of the project; these are usually one-time costs.
Annual cash flows, such as annual savings accruing from a project, occur each year over the life
of the project; these include taxes, insurance, equipment leases, energy costs, servicing,
maintenance, operating labour, and so on. Increases in any of these costs represent negative cash
flows, whereas decreases in the cost represent positive cash flows.

Sensitivity or Risk Analysis

Cash flows are based on assumptions that have an element of uncertainty. The present day cash
flows, such as capital cost, energy cost savings, maintenance costs, etc can usually be estimated
fairly accurately. Cash flows in future years normally contain inflation components which are
often

"guess-etimates" at best. The project life itself is an estimate that can vary

significantly.
Sensitivity analysis is an assessment of risk. Because of the uncertainty in assigning values to the
analysis, it is recommended that a sensitivity analysis be carried out - particularly on projects
where the feasibility is marginal.

Factors that need to be considered in calculating annual cash flows are: Taxes, using the marginal tax rate applied to positive (i.e. increasing taxes) or negative (i.e.
decreasing taxes) cash flows.
Asset depreciation, the depreciation of plant assets over their life; depreciation is a paper
expense allocation rather than a real cash flow, and therefore is not included directly in the life
cycle cost. However, depreciation is real expense in terms of tax calculations, and therefore
does have an impact on the tax calculation noted above. For example, if a Rs.10,00,000 asset is
depreciated at 20% and the marginal tax rate is 40%, the depreciation would be Rs.200,000 and
the tax cash flow would be Rs.80,000 and it is this latter amount that would show up in the
costing calculation.
Intermittent cash flows occur sporadically rather than annually during the life of the project,
relining a boiler once every five years would be an example.

Energy Conservation and its Importance

Coal and other fossil fuels, which have taken three million years to form, are likely to deplete
soon.
Today, 85% of primary energy comes from non-renewable, and fossil sources(coal, oil, etc.).
These reserves are continually diminishing with increasing consumption and will not exist for
future generations.

The word energy conservation means, reduction in growth of energy consumption as a result
of several processes or developments, such as productivity increase or technological progress.
Energy efficiency is achieved when energy intensity in a specific product, process or area of
production or consumption is reduced without affecting output, consumption or comfort levels.
Promotion of energy efficiency will contribute to energy conservation and is therefore an integral
part of energy conservation promotional policies.
Energy conservation and energy efficiency are both ways to reduce consumption of energy,
bringing the cost of electric bills down, and making less impact on the environment since lower
energy use means fewer greenhouse gas emissions and conservation of non-renewable resources.
Energy conservation is a behavior change that results in not using energy at a time when
one might normally. For example, riding a bike instead of driving a car, unplugging computers
and other electronics at night or when not in use, or turning of the lights when you leave a room.
Energy efficiency is an improvement in technology that makes an existing use of energy
more efficient, i.e. allows us to do more with less. Examples of energy efficiency include
replacing incandescent light bulbs with compact florescent (CFLs) or LEDs, adding extra
insulating to a house, or using Energy Star appliances that have power-saving measures
installed.

Conservation certainly reduces energy use, but it's not always the best solution because it
may impact comfort or safety as well. Efficiency, on the other hand, maintains the same level of
output (e.g. light level, temperature) but uses less energy to achieve it. A combination of both
energy conservation and energy efficiency measures yields an ideal solution.
.
Energy efficiency had even more importance because of being the most cost-effective and
reliable means of mitigating the global climatic change. Recognition of that potential has led to
high expectations for the control of future CO2 emissions through even more energy efficiency
improvements than have occurred in the past.
DG System
Diesel engine is the prime mover, which drives an alternator to produce electrical energy. In the
diesel engine, air is drawn into the cylinder and is compressed to a high ratio (14:1 to 25:1).
During this compression, the air is heated to a temperature of 700 9000C. A metered quantity of
diesel fuel is then injected into the cylinder, which ignites spontaneously because of the high
temperature. Hence, the diesel engine is also known as compression ignition (CI) engine.

Selection Considerations
The two most important factors to make a decision on the type of engine, which is most suitable
for a specific application, are: power and speed of the engine.
The power requirement is determined by the maximum load. The engine power rating should be
10-20 % more than the power demand by the end use. This prevents overloading the machine by

absorbing extra load during starting of motors or switching of some types of lighting systems or
when wear and tear on the equipment pushes up its power consumption.
Diesel engines typically running at lower speeds (1300 - 3000 RPM). There will be an optimum
speed at which fuel efficiency will be greatest. Engines should be run as closely as possible to
their rated speed to avoid poor efficiency and to prevent buildup of engine deposits due to
incomplete combustion - which will lead to higher maintenance and running costs.
For a generator, it is important to get a good speed match with diesel engine. If a good match can
be obtained, direct coupling of engine and generator is possible; if not, then some form of
gearing will be necessary - a gearbox or belt system, which will add to the cost and reduce the
efficiency.
Most frequently used diesel engine sizes are between the range 4 to 15 MW. For continuous
operation, low speed diesel engine is more cost-effective than high speed diesel engine.
The various other factors that have to be considered, are cooling system, abnormal
environmental conditions (dust, dirt, etc.), fuel quality, speed governing (fixed or variable speed),
poor maintenance, control system, starting equipment, drive type, ambient temperature, altitude,
humidity, etc.
Advantages of adopting Diesel Power Plants are:
Low installation cost
Short delivery periods and installation period
Higher efficiency (as high as 43 -45 %)
More efficient plant performance under part loads
Suitable for different type of fuels such as low sulphur heavy stock and heavy fuel oil in case of
large capacities.
Minimum cooling water requirements,
Adopted with air cooled heat exchanger in areas where water is not available
Short start up time
Energy Saving Measures for DG Sets
a) Ensure steady load conditions on the DG set, and provide cold, dust free air at intake (use of
air washers for large sets, in case of dry, hot weather, can be considered).
b) Improve air filtration.

c) Ensure fuel oil storage, handling and preparation as per manufacturers guidelines/oil company
data.
d) Consider fuel oil additives in case they benefit fuel oil properties for DG set usage.
e) Calibrate fuel injection pumps frequently.
f) Ensure compliance with maintenance checklist.
g) Ensure steady load conditions, avoiding fluctuations, imbalance in phases, harmonic loads.
h) In case of a base load operation, consider waste heat recovery system adoption for steam
generation or refrigeration chiller unit incorporation. Even the Jacket Cooling Water is amenable
for heat recovery, vapour absorption system adoption.
i) In terms of fuel cost economy, consider partial use of biomass gas for generation. Ensure tar
removal from the gas for improving availability of the engine in the long run.
j) Consider parallel operation among the DG sets for improved loading and fuel economy
thereof.
k) Carryout regular field trials to monitor DG set performance, and maintenance planning as per
requirements.
FANS & BLOWERS
Fans and blowers provide air for ventilation and industrial process requirements. Fans generate a
pressure to move air (or gases) against a resistance caused by ducts, dampers, or other
components in a fan system. The fan rotor receives energy from a rotating shaft and transmits it
to the air.
Difference between Fans, Blowers and Compressors
Fans, blowers and compressors are differentiated by the method used to move the air, and by the
system pressure they must operate against.

Fan Laws

Energy Savings Opportunities

1. Minimise excess air level in combustion system.
2. Minimise air leakages in flue gas path as well as air-conditioning paths.
Energy can be saved by,
1. Change of impeller by a high efficiency impeller along with cone.

2. Change of fan assembly as a whole, by a higher efficiency fan

3. Impeller derating (by a smaller dia impeller)
4. Change of metallic / Glass reinforced Plastic (GRP) impeller by the more energy efficient
hollow FRP impeller with aerofoil design, in case of axial flow fans, where significant savings
have been reported
5. Fan speed reduction by pulley diameter modifications for derating
6. Option of two speed motors or variable speed drives for variable duty conditions
7. Option of energy efficient flat belts, or, cogged raw edged V belts, in place of conventional V
belt systems, for reducing transmission losses.
8. Adopting inlet guide vanes in place of discharge damper control
9. Minimizing system resistance and pressure drops by improvements in duct system
Factors that Could Affect Performance
Leakage, re-circulation or other defects in the system;
Inaccurate estimation of flow resistance;
Erroneous application of the standardized test data;
Excessive loss in a system component located too close to the fan outlet;
Disturbance of the fan performance due to a bend or other system component
located too close to the fan inlet;
Error in site measurement
AIR CONDITONING SYSTEM
The Heating, Ventilation and Air Conditioning (HVAC) and refrigeration system transfers the heat energy
from or to the products, or building environment. Energy in form of electricity or heat is used to power
mechanical equipment designed to transfer heat from a colder, low-energy level to a warmer, high-energy
level.
Refrigeration deals with the transfer of heat from a low temperature level at the heat source to a high
temperature level at the heat sink by using a low boiling refrigerant.
Two principle types of refrigeration plants found in industrial use are: Vapour Compression Refrigeration
(VCR) and Vapour Absorption Refrigeration (VAR). VCR uses mechanical energy as the driving force for
refrigeration, while VAR uses thermal energy as the driving force for refrigeration.

Vapour Compression Refrigeration

Low pressure liquid refrigerant in the evaporator absorbs heat from its surroundings, usually air, water or
some other process liquid. During this process it changes its state from a liquid to a gas, and at the
evaporator exit is slightly superheated
The superheated vapour enters the compressor where its pressure is raised. There will also be a big
increase in temperature, because a proportion of the energy put into the compression process is transferred
to the refrigerant.
The high pressure superheated gas passes from the compressor into the condenser which de-superheats
the gas before it is then turned back into liquid. The cooling is usually achieved by using air or water. A
further reduction in temperature happens in the pipe work and liquid receiver so that the refrigerant liquid
is sub-cooled as it enters the expansion device.

Energy Saving Opportunities

Cold Insulation
Insulate all cold lines / vessels using economic insulation thickness to minimize heat gains; and choose
appropriate (correct) insulation.
Building Envelop
Optimise air conditioning volumes by measures such as use of false ceiling and segregation of critical
areas for air conditioning by air curtains.
Building Heat Loads Minimisation
Minimise the air conditioning loads by measures such as roof cooling, roof painting, efficient lighting,
pre-cooling of fresh air by air- to-air heat exchangers, variable volume air system, optimal thermo-static
setting of temperature of air conditioned spaces, sun film applications, etc.
Process Heat Loads Minimisation
Minimize process heat loads in terms of TR capacity as well as refrigeration level, i.e., temperature
required, by way of: i) Flow optimization ii) Heat transfer area increase to accept higher temperature
coolant iii) Avoiding wastages like heat gains, loss of chilled water, idle flows. iv) Frequent cleaning / descaling of all heat exchangers
At the Refrigeration A/C Plant Area
i) Ensure regular maintenance of all A/C plant components as per manufacturer guidelines.
ii) Ensure adequate quantity of chilled water and cooling water flows, avoid bypass flows by closing
valves of idle equipment.
iii) Minimize part load operations by matching loads and plant capacity on line; adopt variable speed
drives for varying process load

iv) Make efforts to continuously optimize condenser and evaporator parameters for minimizing specific
energy consumption and maximizing capacity.
v) Adopt VAR system where economics permit as a non-CFC solution.

Performance Terms and Definitions

Tons of refrigeration (TR): One ton of refrigeration is the amount of cooling obtained by
one ton of ice melting in one day: 3024 kCal/h, 12,000 Btu/h or 3.516 thermal kW.
Net Refrigerating Capacity.
A quantity defined as the mass flow rate of the evaporator water multiplied by the difference in enthalpy
of water entering and leaving the cooler, expressed in kCal/h, tons of Refrigeration.
kW/ton rating: Commonly referred to as efficiency, but actually power input to compressor motor
divided by tons of cooling produced, or kilowatts per ton (kW/ton). Lower kW/ton indicates higher
efficiency.
Coefficient of Performance (COP): Chiller efficiency measured in Btu output (cooling)
divided by Btu input (electric power).
Energy Efficiency Ratio (EER): Performance of smaller chillers and rooftop units is frequently
measured in EER rather than kW/ton. EER is calculated by dividing a chiller'scooling capacity (in Btu/h)
by its power input (in watts) at full-load conditions. The higher the EER, the more efficient the unit.

Example

=12/1.29 = 9.3

LIGHTING

Lamp Types and their Features

Some Good Practices in Lighting

Installation of energy efficient fluorescent lamps in place of Conventional fluorescent lamps.
Energy efficient lamps are based on the highly sophisticated tri-phosphor fluorescent powder technology.
They offer excellent colour rendering properties in addition to the very high luminous efficacy.
Installation of Compact Fluorescent Lamps (CFL's) in place of incandescent lamps.
Compact fluorescent lamps are generally considered best for replacement of lower wattage incandescent
lamps. These lamps have efficacy ranging from 55 to 65 lumens/Watt. The average rated lamp life is
10,000 hours, which is 10 times longer than that of a normal incandescent lamps. CFL's are highly

suitable for places such as Living rooms, Hotel lounges, Bars, Restaurants, Pathways, Building entrances,
Corridors, etc.
Installation of metal halide lamps in place of mercury / sodium vapour lamps.
Metal halide lamps provide high color rendering index when compared with mercury & sodium vapour
lamps. These lamps offer efficient white light. Hence, metal halide is the choice for colour critical
applications where, higher illumination levels are required. These lamps are highly suitable for
applications such as assembly line, inspection areas, painting shops, etc. It is recommended to install
metal halide lamps where colour rendering is more critical.
Installation of High Pressure Sodium Vapour (HPSV) lamps for applications where colour
rendering is not critical.
High pressure sodium vapour (HPSV) lamps offer more efficacy. But the colour rendering property of
HPSV is very low. Hence, it is recommended to install HPSV lamps for applications such street lighting,
yard lighting, etc.

Optimum usage of daylighting

Whenever the orientation of a building permits, day lighting can be used in combination with electric
lighting. This should not introduce glare or a severe imbalance of brightness in visual environment.

Installation of "exclusive" transformer for lighting

To prevent voltage fluctuation the lighting equipment has to be isolated from the power feeders. This will
reduce the voltage related problems, which in turn increases the efficiency of the lighting system.
Installation of high frequency (HF) electronic ballasts in place of conventional ballasts
New high frequency (28-32 kHz) electronic ballasts have the following advantages over the traditional
magnetic ballasts:
Energy savings up to 35%
Less heat dissipation, which reduces the air conditioning load
Lights instantly
Improved power factor
Operates in low voltage load
Less in weight
Increases the life of lamp