Energy Management and Economics Energy Management and Economics Tay Cher Seng April 2016 1 Energy Management and Economics © 2016 The Institution of Engineers, Singapore and National Environment Agency. All rights reserved. No part of this manual may be reproduced, distributed, transcribed, stored in a retrieval system, translated into any language or computer language or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of the copyright owner. The copyright owners give no warranties and make no representations about the contents of this manual and specifically disclaim any implied warranties or merchantability or fitness for any purpose. The copyright owners reserve the right to revise this manual and to make changes from time to time in its contents without notifying any person of such revisions or changes. 2 Energy Management and Economics Foreword Singapore has joined the world community in pledging at the UN climate change talks in Paris (the 21st Conference of the Parties, or COP 21) to reduce greenhouse gas emissions and limit global warming. In the December 2015 conference, Singapore has made a commitment to reduce our Emissions Intensity by 36% from 2005 levels by 2030, and stabilise our greenhouse gas emissions with the aim of peaking around 2030. Given Singapore’s limited access to renewable energy, this pledge is an ambitious one. It will require the concerted effort by all stakeholders, including the government, businesses, households and individuals to achieve this target. The Singapore Certified Energy Manager (SCEM) programme is targeted at engineers and managers who manage manufacturing facilities and buildings and provide energy services or engineering consulting services. The role and responsibilities of the SCEM, as the appointed energy manager, to lead and execute the energy management system cannot be over emphasized. I hope that this book on “Energy Management and Economics” will go some way in the training of the SCEM and contribute to our meeting the emissions reduction target. S.K. Chou Professor Department of Mechanical Engineering and Executive Director Energy Studies Institute (ESI) National University of Singapore 1 Energy Management and Economics Preface This book is organised in three parts:- I. Energy Management System II. Overview of the Energy Market in Singapore III. Economic Analysis in Energy Efficiency Investments In Part I, we deal with the energy management system (EnMS) which allows an organisation to plan, manage, measure, and continually improve the energy performance of its facilities. The following key components of the energy management system are discussed: a. Roles and responsibilities of energy management team members b. Energy policy c. Energy objectives and energy targets d. Energy efficiency improvement plan e. Monitoring, measurement and analysis These topics will be covered in Chapter 1 to Chapter 9. At the end of this first part, the reader should be able to successfully perform the following: 1. Develop an energy management system; 2. Define roles and responsibilities of energy management team members; 3. Conduct energy planning process, develop an energy policy, set objectives and targets, and develop action plans; and 4. Integrate energy management system into business practice. Part II provides an overview of the energy market in Singapore. This is a subject that is dynamic. New policies and guidelines are announced by the authorities just as new players enter the energy market. With each development, the energy manager has to strategise how the procurement of energy supply might be optimised for the organisation. The materials are covered in Chapter 10 and Chapter 11. In this context, the energy manager’s roles include the following functions – a. taking advantage of fuel-switching and load management opportunities; b. negotiating or advising on major utility contracts; c. developing contingency plans for supply interruptions or shortages; and 2 Energy Management and Economics d. forecasting and budgeting for short and long-term energy requirements and costs. At the end of Part II of the book, the learning outcome is: 5. Understand Singapore’s energy market tariff structure to enable better evaluation of supply contracts for reducing energy costs As most energy management activities are dictated by economics, the energy manager must have good financial literacy. Besides making a technical appraisal of the energy efficiency project, the energy manager has to assess that the project is economically viable. The viability of a project hinges on the return on investment that the project can yield. The energy manager has to determine how much funds are needed to invest in the project and how much it will cost to raise this amount of money. He has to make an assessment of the financial risk of the project and weigh this against the reward. The last two of seven learning outcomes are covered in Chapter 12 and Chapter 13 of the book. At the end of Part III, the reader should be able to: 6. Evaluate the financial attractiveness of energy retrofit projects; and 7. Understand the various energy performance contracting models. At the end of each Part, the reader should reinforce the learning by attempting to work out the exercises. The solutions to some of the problems are provided at the end of the book for the reader’s reference. Acknowledgements I like to record my appreciation to Ms Thazin Soe, a Green Mark Professional at Natflow Pte Ltd and Ms Zhang Xiuting, a senior manager at the Building and Construction Authority for their contributions in this book. I also like to thank Mr. Andy Ong and Ms Angie Ng of the Institution of Engineers, Singapore for their efforts in the preparation of the book. Tay Cher Seng April 2016 3 Energy Management and Economics Table of Contents Part 1 Energy Management System .................................................................................. 7 1. Introduction to Energy Economy .............................................................................. 8 1.1 Introduction and Learning Outcomes................................................................................. 8 1.2 The Energy Economy ........................................................................................................... 9 2. Energy Management System .................................................................................. 15 2.1. Organising for Energy Management ................................................................................ 16 2.2. Energy Manager and the Energy Management Team .................................................. 18 3. Energy Policy ........................................................................................................... 21 4. Energy Objectives and Energy Targets .................................................................. 23 4.1. Energy Accounting Process .............................................................................................. 23 4.2. Analysing Energy Data ...................................................................................................... 25 4.3. Benchmarking and Establishing Energy Baseline ........................................................ 26 4.4. Energy Audits ...................................................................................................................... 29 5. Energy Efficiency Improvement Plan ..................................................................... 32 5.1. Energy Efficiency Measures .............................................................................................. 32 5.2. Identifying Energy-Efficiency Measures .......................................................................... 35 5.3. Evaluating Energy-Efficiency Measures .......................................................................... 37 5.4. Implementing Energy-Efficiency Measures .................................................................... 41 6. Monitoring, Measurement and Analysis ................................................................. 42 6.1. Key Performance Indicators .............................................................................................. 42 6.2. Tracking Performance ........................................................................................................ 43 6.3. Developing New Goals ...................................................................................................... 44 6.4. Reporting .............................................................................................................................. 45 7. Continual Improvements ......................................................................................... 46 7.1. Communications ................................................................................................................. 46 4 Energy Management and Economics 7.2. Documentation .................................................................................................................... 47 7.3. Management Review .......................................................................................................... 48 8. Other Energy Management Systems ...................................................................... 49 8.1. ISO 50001 ............................................................................................................................ 49 8.2. ASEAN Energy Management Scheme