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Do you know what you pay per kW/hr, do you know how to read your electric bill?  When evaluating a system for potential upgrade/optimization a key component of the evaluation is energy cost.  In my travels doing energy assessments and system evaluations I was surprised to find that many companies are not aware of what they are paying per kW/hr, a key component in the project justification process.

Higher rates will become a fact of life and will make a direct impact on your companies’ bottom line.  In these uncertain times it is more important then ever that the consumer understand what they are truly paying for electricity. 

Virtually every power company in the United States will use the same basic billing format.  A typical industrial electric bill will include, billing address, electric usage history, rate schedule, power factor adjustment (if applicable), additional facilities charges, account summary, usage information, demand information, metered service charges and amount due.

For the purpose of this “blog” we will focus on the segments of the electric bill that directly impact your bottom line, specifically:

 Electric Usage History

• Rate Schedule
• Power Factor Adjustment
• Additional Facilities Charges
• Usage Information
• Demand Information
• Metered Service charges

Electric Usage History – Compare your electric usage over the past 13 months.  This is important to understand any trending in power usage. 

Rate Schedule – Indicates the electric rate (negotiated rate) for the metered point of delivery

Power Factor Adjustment – This billing adjustment applies if the power factor for the metered services falls below a specified % during the billing period.  The percentage generally ranges from 85% to 90%.  Power factor adjustment may be negotiated with the utility company and may not be applicable in some areas.  However, power factor adjustment can have a huge impact on your energy cost. 

NOTE – Power factor is a calculation indicating how efficiently power is being used.  It represents the relationship of “real” power (kw) which performs useful work in turning a motor, to “apparent” power (kvar) which magnetizes motor and transformer coils.  Motor loads frequently adversely affect the power factor of a circuit, usually from oversized or lightly loaded motors.  Certain other types of loads can reduce power factor.  A low power factor also reduces the capacity of circuit conductors to deliver “real” power and can increase wiring costs as well as electric demand on the utility system.  Most power utilities reserve the right to adjust meter reading kw for billing where power factor is less than 85%.  Capacitors are sometimes connected on the load side of a motor controller to improve the power factor of the circuit.  When this is done, the total kvar connected should not exceed the value required to raise the power factor of the motor to unity when it is running unloaded.  Kw is defined as True (real) Power which is derived from volts times Amps times square root of 3 (or 1.730 times power factor (normally 0.8).  Some folks think kW is measured by Amps times voltage.  Actually the product of this calculation is apparent power or KVA. 

Usage Information - Includes the meter number for the point of delivery (POD), meter readings, days in billing period and total KWh usage.  This is valuable information and must be factored when determining “actual” energy cost.

Demand Information – Includes actual peak kW demand, on peak and off peak demand and peak reactive power (kVAR).  This information allows the customer to calculate actual peak usage (higher cost per kW) and determine when this demand period occurs, allowing “consumer” to perhaps plan operations around this demand period.  Again, this is critical information when calculating true energy cost.   

Additional Facilities Charge - Indicates charges for additional facilities or non-metered services.  This charge may involve dawn to dusk lighting or other types of lighting service.  This cost will generally remain constant however total amount should be verified monthly.

Sample Calculation

 On Peak Kwh + Off Peak kWh + Demand + Facilities Charge = Cost per kWh

                                         Total kWh usage

Don’t be too hasty in answering the question, let’s take a few minutes and look at a few facts, then we can review all of the unsubstantiated facts that seem to be clogging the media and energy industry.

Just the facts:

• We have an aging labor force the lack of skilled experience labor is impacting the mining industry.  Several companies (James River Coal, Massey Energy Co. and Alpha Natural Resources are doling out gas money in hopes of avoiding labor shortages. 

• Demand for coal is growing worldwide, china recently shifted from mostly exporting coal to mostly importing it.  Soaring coal prices and international demand push the coal companies to produce as much product as possible (coal prices and demand have more then doubled since 2007).  Rising wages and expensive new safety regulations have boosted the cost of mining coal.

• Emissions control systems, the average price cost for scrubber systems has gone up 83%, from 250M to 457M in the last couple of years, primarily due to material and labor.  This additional cost will be past on to the consumer.  It should also be noted that the scrubber system provide zero return on investment and reduces the output (net megawatts) of the power plant, in simplistic terms the scrubber is a liability.

• Currently, coal is the most reliable and affordable energy source in the United States.  However, coal –fired power plants produce a significant amount of emissions.

• The U.S Geological Survey has lowered its estimates of the amount of “recoverable” coal in the nation’s largest coal fields

• The nation’s rail freight network (primary source of transportation for coal) is in shambles.  By the year 2035, traffic jams could be so severe trains would grind to a halt for days with nowhere to go.  The nation’s 140,000 mile network of rails devoted to carrying freight (coal) is already groaning under the strain of congestion.  And it’s probably going to get worse over the next two decades.

• The average coal plant consumes 100 to 250 rail cars (100 tons per car)) of coal per day.  Some of this coal is imported and blended with U.S coal

• Coal accounts for 48% of power generation in the U.S. today.  Over the past several years, multiple power producers have announced plans to move forward with construction of a plethora of coal-fired generating units. At the peak of activity, well over 200 new coal-fired generating units were announced. Coal-fired power plants continue to generate a great deal of the energy consumed in North America, especially in the United States, and according to long-range projections, this is not expected to change in the near future. In fact, coal supplies approximately 48% of the electricity generated in the United States. The Department of Energy estimates that by 2030, our dependency on coal will increase to a point that 54% of our electricity will be supplied by this fuel source.

Now for the speculation and unsubstantiated comments:

•  North American coal supply, I have heard estimates ranging from 600 years to 200 years.  Are these number based on current usage or future usage, did they take into account exporting to India and China?

• Despite recent price increases, coal is still cheap compared to other fuels?  For how long?  What other fuels?   Did they take into account renewable energy was Life Cycle Costing factored in?   The price of coal has doubled since last year, largely due to surging energy use in China and India why wouldn’t we assume the cost will continue to rise, making coal cost prohibitive?

• Alternative / renewable energy is expensive (compared to coal).  Wind, solar, bio-mass doesn’t depend on fossil fuels.  Did they consider LCC and projected fuel cost over the life of the plant? 

Our dependency on fossil fuels and resistance to change will eventually bring our economy to a stand still.  It never ceases to amaze me that U.S consumer will rush out to buy the latest and greatest electronic device but fight every inch of the way when our perceived entitlements (utility services) are challenged.  Wake up America the age of fossil fuel is a mere blip on the geological scale, its time to move on.

Is coal or for that matter fossil fuel really King?  You be the judge.

Some very influential people seem to think so.  Wind is a key energy source critical to our power shortage and will play a vital role in reducing our dependency on fossil fuels, but is it really the answer?  Let’s take a look at the big picture, fuel and energy used to generate electricity is only part of the equation, we must take into account transmission, distribution, sustainability as well as public sentiment.

It seems everyone has a “Pet” energy source that is going to solve our energy crisis be it nuclear, wind, coal, natural gas, solar or bio-mass.  If we step back and take an objective look at what is going on in the world today perhaps we can make sense of the world (not just North America) energy crisis and come to a rational solution to this global issue. 

I’m going to go out on a limb here and make a broad statement, most Americans react only when a situation is in crisis mode or when it directly impacts their life style.  We go into panic mode and look for a quick fix, hence the single energy source solution.  In order to resolve this world wide problem (think global) we need to look beyond current technology.  Existing technology does not fit our future energy needs.  Does it make sense to continue building massive coal fired power plants when we do not have the rail capacity to deliver the coal or the capability to control emissions?  Not to mention public sentiment, there are quite a few environmental groups that will respond with a resounding no.  The same can be said for nuclear, while nuclear is emission free we still have special interest groups that feel nuclear power is dangerous.  Other special interest groups appose wind because of the noise, danger to birds and general appearance.  I can go on and on with other energy sources, no matter what some special interest group will have reason to object (that is their right).

Reality check, we are in a crisis situation and we still can’t seem to agree on a primary energy source.  A few people have offered up “conventional / singular” solutions all of which have come under fire.  The longer we wait the greater the impact on our economy.  Other countries are moving forward with solutions right or wrong, they are committed to meeting their countries need for additional power generation.  In my humble opinion we have “too many cooks in the kitchen” and we are not thinking beyond current conventional power generation technology.   

Is the answer blowing in the wind?  Only part of the solution lies in wind, the remainder will/should be a mix of other energy sources, some renewable, fossil, biomass and nuclear.  It makes little sense to gobble up our natural resources simple because it’s there, plentiful and perceived to be inexpensive.  This is short sighted thinking, smaller localized plants using renewable and bio fuels can make up a bulk of the power needs.  Main line generators can be used for the load cell regions of the country.  Wind is a key player but not the ultimate solution to our energy crisis.  Until we as a nation agree on the recipe we will be hard pressed to stabilize our economy.   

Sustainability is the biggest opportunity and challenge that industry faces.  Developing a strategy to take on sustainability is vital for the long term survival of industry. The motivation for industry is clear however the change in thinking required and the associated challenge for industry is significant. How can industry get past first cost and the paralyzing fear of change?  One thing we can’t get past is rising energy cost.  Since 1999 average energy rates have increased 50% for industrial and 30% for commercial businesses in the Northwest, other regions of the U.S. have experienced similar cost increases. 

The U.S. power industry must build at least 150 gigawatts of new generating capacity to meet electricity demand by 2030, at a cost of about $457 billion, according to preliminary findings of a new study being prepared by the Brattle Group on behalf of the Edison Foundation.  An additional $900 billion will need to be invested by 2030 in transmission and distribution facilities to modernize the national grid.  The additional capacity and transmission will come at a significant cost to the customer.  We have established this fact in my earlier blogs.

Three-fourths of U.S. electricity–69% of which is used in buildings, nearly all the rest in industry can be saved for less than the price of just running a coal or nuclear plant. This energy potential is not just in smarter motors, lights, appliances, etc., but even more in their larger systems. For example, three-fifths of the world’s electricity runs motors, and half their shaft power runs pumps and fans. Designing friction out of pipes and ducts can save 10 times as much fuel at the power plant and sizing equipment properly can save even more.

While it is important to negotiate the best price per kW/hr for electricity investment in energy efficiency is not only about obtaining the cheapest source of new power for business.  Cost savings through energy efficient systems, waste reduction, reduced risk, and increased workforce productivity will allow industry to achieve sustainability. Unfortunately many companies still focus on reducing staff, eliminating or reducing planned maintenance and in some cases run equipment to failure, all for the sake of increasing stockholder value.  This is a huge misconception that must change in order for U S industry to prosper.  Eventually equipment must be maintained, catastrophic failures typically cost more than a standard repair any perceived savings is eliminated when the equipment fails.  So who wins?  Maybe the pump repair shop but certainly not your company.

For the skeptics there is a very compelling business case exists for investment in energy efficiency.  According to the NPCC’s 5^th Power and Conservation Plan, costs associated with energy efficiency average about 2.4 cents per kW/hr.  I challenge anyone to come up with a better return on investment.

The U S Department of Energy Superior Energy performance Program is asking for 25% reduction in energy intensity (a measure of energy consumption per dollar of real gross domestic product) by the year 2017.  By working smarter, using the latest technology, thinking beyond 1^st cost and controlling your systems we can achieve the desired energy reduction. 

Don’t forget to think beyond energy savings, in many cases by optimizing the design of a new pumping system it is possible to lower construction cost and achieve better performance, the best of both worlds.

Sustainability through energy conservation is the best solution for our country.

Reference:  The Case for Efficiency by Amory B. Lovins

                    Energy Efficiency is Pro Business by Kevin Wilhelm

We are living in dangerous times, no I’m not talking about hostilities with other countries I’m referring to making the wrong decisions when specifying new equipment or system upgrades.  Failure to consider all options could be a fatal mistake, for example, sticking with the old tried and true specifications your company has been using for the last 50 years.  You know what I’m talking about, the typical fixed speed oversized pump coupled to an oversized motor with a 1.15 service factor bolted to oversized piping (future capacity).  Yes I sound like a broken record I’ve already mentioned this in previous blogs.   It’s worth repeating we need to dispense with the status quo.

Now let me throw out a new catch phrase “OPSOP” other wise know as “Optimum Pumping System Operating Point”.  This term was developed and coined by a well respected member of the Hydraulic Institute.  What is “OPSOP”?  Simply stated it is the pump operating point, which when combined with the optimized pumping system yields the absolute lowest cost.  Did I get your attention?  Lowest cost!!!

On a new pumping system you have three variables that affect the system initial and recurring cost:

Pump

•         Operating points have costs by choosing different pumps the pump curve can be adjusted.  The pump efficiency and BEP also adjust.  The pump curve can also be changed by changing the impeller size or (fixed) speed.

Control and Operations

•         The pump curve can be adjusted using variable speed control.  The system curve can be adjusted (to a limited degree0 by decreasing pressure drop across high pressure drop components

System

•         The system curve can be adjusted by using different pipe sizes, layout,  pipe material, and components

For existing system cost reduction, opportunities are typically focused on the first two.  Changes to the system are typically not cost effective.  Opportunities typically reside in changing the pump curve i.e. repair pump, impeller size change, controls (VFD) or a new pump.

Doesn’t this make more sense then following the same inefficient methodology that has been in place for the last century?  It’s time to step out of the “box” there are better ways to design new and upgrade existing pumping systems.  Your companies’ bottom line depends on cost effective, energy efficient systems the status quo is not the solution.

For more information on System Optimization and “OPSOP” go to www.pumps.org and purchase “Optimizing Pumping Systems a Guide for Improved Energy Efficiency, Reliability and Profitability”.

Superior Energy Performance Program

This month the federal government will launch the Superior Energy Performance Program.  SEP is a partnership between industry and government to accelerate US industry’s energy efficiency by:  

• Delivering tools, training, technologies & standards to all types of manufacturing plants
• Facilitating recognition and incentives for effective industrial energy management and energy efficient technology adoption

Partners 

• U.S. Industry
• U.S. Department of Energy Industrial Technologies Program
• U.S. Environmental Protection Agency ENERGY STAR Program
• U.S Department of Commerce Manufacturing Extension Partnership
• American National Standards Institute

Objective 

U.S. industry improves energy intensity by 25% over a 10 year period:  from 2007 to 2016

The big question, how do we achieve this lofty goal and an even bigger question, what are the ramifications if we don’t?  The government has a viable reason for pushing this initiative; if we continue down our current path we can expect rolling blackouts and perhaps extended periods without electricity.  Why?  Because the power industry infrastructure is antiquated, we have an aging fleet of power plants (the average coal plant is over 40 years old).  Even if we had the generation capacity we lack adequate transmission lines to distribute electricity efficiently. 

Our government is making every effort to motivate the consumer (residential, industrial and commercial) to reduce energy consumption however unless we all take an active role we will never achieve the desired results. 

Needless to say we will make the greatest impact within the industrial sector.  The challenge, as I have stated repeatedly, is to audit/review your existing pumping systems, most pumping systems are inefficient. Studies have shown that a majority of pumping systems operate at less then 40% efficiency.  If a pump system is inefficient it is most likely unreliable and significant maintenance.  Such systems should not be difficult to identify, track your maintenance look for the “bad actors” systems requiring frequent motor repair, pump repair.   When walking through the plant listen for noise at the pumps and valves, severe cavitation is quite easy to identify. 

For new construction and improving existing systems, think “Life Cycle Cost”, review your current specifications require energy efficient pumping systems. 

Consult Hydraulic Institute and Pump Systems Matter, HI and PSM have excellent web sites containing the necessary tools and resources to guide you through the system assessment process as well as developing specification for new and energy efficient systems. 

Pump Systems Matter TM (PSM) is a market transformation initiative created to assist North American pump system users gain a more competitive business advantage through strategic, broad-based energy management and pump system performance optimization. A primary objective of the initiative is to change the decision-making process for the purchase of pumping systems (motors, couplings, base drives etc).  Pump Systems Matter will promote educated decision-making based on life cycle costs (TCO), thereby accounting for energy, maintenance and other significant costs factors of operating a pumping system. PSM seeks to transform the market by changing owner and operator decision-making (END USER) on pumping systems from a focus on first cost to a focus on life cycle costs, while helping pump users capture significant energy-savings and performance improvements.  

No single organization can achieve the objective of the Superior Energy Performance Program we need the combined efforts of PSM, HI, and most important OEM’s, end users and engineering firms.

The government is asking for help in reducing energy intensity the SEP program provides the incentives for implementation.  Don’t wait until your energy bills put you out of business. 

REFERENCE 

Hydraulic Institute - www.pumps.org

Pump Systems Matter – www.pumpsystemsmatter.org

   One thing we can count on in this world is change, nothing stays the same.  Change can occur out of necessity, i.e. technology or to maintain an economic edge over the competition.  No matter what the reason it is not a good business practice to maintain the status quo.  Having said that, why do we (industry) continue to design / specify inefficient pumping systems?  It is still common practice to design a pumping system for “future capacity” oversize the motor then add a 1.15 service factor.  All for the sake of future demand.  Does this make sense in today’s business environment where energy costs are sky rocketing at double digits rates?  Energy costs will continue to rise there is no end in sight.  The only way to off set the rising cost is to raise the price of your product creating an endless cycle cost increases.  We can slow this process by being a bit more energy conscious when specifying and or designing pumping systems.  Is it cost effective to oversize a pumping system for future demand?  It all depends on how long you intend to operate at the lower rate. 

   Let’s take a look at motor life cycle cost.  The purchase price of a motor is roughly 2.7% of the total life cycle cost while electricity cost comprises 97.3%.  Now we will associate some dollars to the equation: 

Purchase Price                                                                      60 hp Motor  

Annual Use                                                                               8,760hrs

Efficiency                                                                                   93.6%

Fuel/Energy Cost                                                                      $0.10 kW/hr

Annual Operating Cost                                                             $41,890.00 per/yr

Operating cost as % of Purchase Price                                  1600%

Pump life cycle cost is energy intensive as well.  The LCC of a 75hp pump over a 20 year period is approximately $750.000 ($0.07 kW/hr)

Environmental      7%

Downtime            9%

Operating            9%

Installation          9%

Pump                 14%  

Energy                32%

Maintenance        20%

  Does it still make sense to oversize a system for future demand?  Run the numbers, factor in projected energy costs, you might be surprised.  Planning for expansion is important but not at the expense of your companies bottom line. 

Change is good, optimizing your pumping system is even better.

When I was approached to write an energy blog my first thought was, “What can I say that isn’t already being discussed on numerous other websites.”  Then after some reflection, reality set in. There is much to be said about energy!  We need to get the energy message out to the industry.  It seems as though the message isn’t getting to the right people, that is, the decision makers, upper management  . . . to be more specific, the money people.  Without upper management involvement and active participation, we will never achieve the level of energy efficiency necessary to meet the new government standards as outlined in the Superior Energy Performance Program (SEP).

  In this blog, we will review current pumping system design practices, various industry standards installation practices and the most important topic, why we continue specifying, designing and building energy inefficient systems. 

  Let’s do a reality check.  I believe we all agree there is an energy crisis. You are faced with this reality every time you pull into a gas station.  Now for the wakeup call  . . .  the power industry is in a similar crisis and surprisingly has only recently made front page news.  Yes, we have seen bits and pieces about nuclear power, wind and coal plants here and there.  In the last 6 months a number of one-hour segments on the state of the power industry have been televised.  Why did it take so long to make public what the power industry knew was coming for years?  News flash, the power utilities have been sending out signals for years.  Power generators have made every effort to meet future power demands. Unfortunately they have been stonewalled by special interest groups throwing up road blocks for everything from power transmission lines to nuclear power. 

  At our current rate, power demands are expected to exceed capacity by approximately 30 percent within 5 years.  In addition, a majority of the plants in the US have reached the end of useful life.  From 2002 to 2025, 62 gigawatts of capacity will most likely be retired, accounting for nearly all old fossil-fired plants that are not competitive with newer types of fossil-fired plants.  

The electric power industry faces a situation in which significant investments are needed, and significant rate increases will be necessary to finance them.  Fuel costs will also play into the equation. The price of coal—which provides fuel to 48 percent of power plants in the U.S. – has doubled since last year.  Natural gas prices have increased 50 percent in the last year alone.  Now add in the raw material cost to build new plants.  Remember, the utilities have been trying to add capacity for years. With the construction activity in China and India, the cost to build a power plant has also increased.  What’s the old expression, “He who hesitates is lost?”  In this case we are all losers, everyone in the U.S. will suffer financially for the mess created by a few. 

I would imagine you have already heard this tale of woe, so let’s cut to the chase and talk about solutions, or better yet, survival.  What can we do to prosper in today’s changing business environment?  The first thing we need to do is accept change. We can no longer conduct business as usual, which brings us to the primary purpose of this energy blog. 

Change must be a four letter word in the industrial sector.  I can’t tell you how many times I have heard the expression “We’ve always done it that way, why should we change?”     Unfortunately I cannot put into words the individuals’ facial expression that go along with this statement.

  I believe we have made a good case for change, specifically more energy efficient solutions.  Yes, energy efficiency, the number one fuel source.  This is not the “silver bullet,” but it will minimize the impact of rising energy costs.  Companies that fail to implement energy saving measures will most likely not survive the next decade.  One thing you can count on is higher energy cost, some power utilities will have to raise rates as much as 115 percent in order to pay higher fuel cost, build new plants and recover environmental fees.  Industry experts anticipate the power generation industry will be in a state of flux for at least the next 15 to 20 years.   

  What can we do to minimize the impact on our companies’ bottom line?  I’ll throw out a few bones that you can chew on until next week’s blog.

                       Pumping Systems Are Energy Intensive

 Industry Type         Pump Energy (% Total Motor Energy usage)

Petroleum                                     60%

Forest Products                          30%

Chemicals                                     25%

Food Processing                         20%

Primary Metals                            10 %

A 200hp Pump $70,000 / Yr Electrical Energy

Energy Savings Help Justify Reliability Projects 

   As with any blog, we fully expect some lively comments – the more the better.  Feedback is a good indicator we are making an impact.  Whether you agree with our assessment of the energy crisis is not the issue. The issue is energy conservation. 

William C Livoti

Baldor Electric

Reference:  MECS 1994, Bureau of Economic Analysis 1997 Census of Manufacturers, 1993

Hydraulic Institute, Pump System Optimization, Opportunities to Improve Life Cycle Performance