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some “pilot” industrial plants under real working conditions, that will allow goods to be produced with much lower GHG emissions. Targeted industries include inter alia iron and steel, non-ferrous metals such as aluminium and copper, cement, glass, pulp and paper, chemicals and ceramics.
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While this number is increasing (i.e., only 1,420 sites were certified in January 2013), the total still represents a very small percentage of sites in the EU, since the standards on their own are driving widespread adoption of EnMS.
6.2.1.3 Context of the proposed measure
The key objective of the proposed measure is to ensure that obligated enterprises are committed to continually improve energy performance by implementing an appropriate approach in achieving this objective. Table 6.1 summarises the estimated technical potential of energy savings for this measure.
Table 6.1 Technical potential of energy savings attributable to increased uptake of EnMS
Sector
Technical energy saving potential (kTOE)
2030 2050
Pulp, paper and print 360 298
Iron and Steel 611 597
Non-Metallic Mineral 219 192
Chemical and Pharmaceutical 481 539
Non-ferrous Metal 87 74
Petroleum refineries 329 260
Food and beverage 188 151
Machinery 204 183
Section 5.2 discusses numerous barriers deterring uptake of ESOs due to organisational behavioural issues. EnMS is an effective tool for enterprises to systematically address some of these issues.
Low status of EE: One of the key strengths of the ISO 50001 standard is that it requires top management commitment on an energy policy which has to be constantly assessed and reviewed. This is an effective way of bringing the discussion of energy performance into the decision making level. Another crucial strength of the standard is the mandatory appointment of a management representative, who is responsible for establishing, implementing, maintaining and continually improving the EnMS. Irrespective of where the priorities are for the organisation, EnMS ensures that energy performance is visible at decision making level.
Awareness: EnMS ensures that the enterprise communicates its energy policy, energy objectives and energy performance to within the organisation, especially to significant energy users. It also enables any individual within the enterprise to suggest improvements to the EnMS. These are crucial steps in communicating the importance of energy objectives and creating awareness among employees on identifying opportunities.
Risks: Implementation of EnMS itself is extremely low risk. The main cost elements of implementing and maintaining an EnMS is largely a commitment of resources to establish, implement and maintain the EnMS. This may require additional hiring or training depending on the availability and skill sets of the existing resources. An effective EnMS is designed and implemented to the enterprise’s needs. Therefore it can be designed appropriately, so it does not intrude on the main business activity.
Policy: Article 8 of the EED mandates large enterprises to conduct energy audits once every 4 years; however, enterprises that are implementing an EnMS might be exempted from this requirement. Although an energy audit aims to measure energy use and identify ESOs, if it is conducted as a regulatory requirement rather than part of an integrated management process, there is potential risk that this is carried out only for compliance purposes and the audit findings
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may be ignored or de-prioritised. This measure is intended to complement the existing requirement for mandatory energy audits by requiring organisations to implement an EnMS, thus providing a systematic approach to continually identify, measure, benchmark and improve energy performance.
6.2.1.4 International references
An EnMS requires an energy review to be conducted, which an audit can underpin; thus, ensuring that it is performed within a robust system, supporting corrective actions, management review and energy planning. The benefits of this approach are reflected in the results observed from Australia’s Energy Efficiency Opportunities programme, which mandated large energy using organisations to undertake energy audits as part of an EnMS framework. Results indicated that over 50% of identified opportunities were adopted by the organisations.
Alternately, evidence from schemes that have only focused on energy audits offers insight into potential issues. For example, in 2009, Russia published the Federal Law No. 261-FZ “On Saving Energy and Increasing Energy Efficiency”; the first direct legislative energy efficiency initiative in Russia with mandatory energy audits as one of the core requirements. In Russia, the industrial sector has traditionally been slow to take up new technologies as they are seen as untested and expensive. Due to a lack of financial incentives, and behavioural issues, many organizations have rushed their audits and viewed them simply as a “tick-box” exercise.
Due to these barriers, some countries, such as Denmark, Sweden and Ireland, developed their own EnMS standard, which was underpinned by a voluntary energy savings agreement between organisations and the government, and linked to incentives and support. Examples of incentives that have been used to encourage participation include, exemptions from policies, tax rebates, and subsidies for energy audits. In recent years, there are also a growing number of countries mandating EnMS for industries, including Kazakhstan, Singapore, India and Thailand. In Germany, a voluntary agreement is established that companies with certified EnMS are exempted from energy taxes, which has resulted in a drastic increase of ISO 50001 certification over the past 2 years. Japan’s energy conservation policies have mandated EnMS since it was enacted in 1979.
The primary lesson learned from these programmes is that an EnMS can help organisations move beyond isolated energy management activities, such as audits, to integrate and facilitate systems and processes necessary to achieve operational control and continual improvement of energy performance, which in turn helps address some of the barriers to implementing energy efficiency; i.e., an EnMS can reduce the perceived risk to management of energy efficiency projects, which, in turn, reduces the hurdle rate that a company requires for an energy efficiency investment.
6.2.1.5 Options and issues to be considered
The scope of the proposed measure could be extended to all large enterprises, but this is not encouraged as EnMS is mainly aimed at the industrial sector and may not be as effective for the commercial sector. However, energy intensive medium industrial enterprises could be included, as EnMS benefits are largely dependent on energy consumption rather than financial turnover or number of employees.
Certification of EnMS is a relatively costly process which does not necessarily add value to continual improvement of energy performance or the EnMS of the obligated enterprise. A criteria should be established to provide obligated enterprises an option whether to have their EnMS certified or not.
6.2.1.6 Cost benefit aspects of the proposed measure
The main cost elements of implementing and maintaining an EnMS includes development of the EnMS, internal and third party audits and certification cost. In actual cost terms, this involves expert resources, both internal and external to the enterprise. From an internal
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perspective, the most significant internal resource is the appointment of an energy manager (and internal resources for the energy management team) to develop and maintain the EnMS.
The major external cost factors could include training, professional consulting fees, third party audits and certification cost. As a general indication, EnMS implementation may cost anything from EUR 100,000 to EUR 250,000229. It is worth noting that this estimate is for large enterprise with a higher complexity in its energy needs (e.g. chemical sector with multiple industrial processes). The required effort reduces significantly for enterprises with a simpler energy needs, e.g. enterprises with few significant energy users, whereby medium enterprises often fall under this category. Implementation cost could also be significantly reduced/optimised when multiple sites are involves as resources and expertise could be shared out among the sites.
The operational cost of an EnMS involves appointed resources (i.e. energy managers and the associated energy management team) in maintaining and continually improving the EnMS.
Maintenance of the EnMS involves scheduled internal energy assessment (energy audits) and internal audits of the EnMS performed by internal resources. Enterprises are completely free to establish their internal audit schedules to suit their business needs as long as it complies with legal or other applicable business requirements. Energy managers and the energy management team are very often existing internal resources, without the need for additional hires. Essentially, EnMS maintenance cost should only a small fraction of the implementation cost when the EnMS is fully embedded into the enterprise’s business operation. The cost of any applicable recertification audits are significantly lesser than the initial certification cost.
Accounting treatment of internal resource could also significantly reduce EnMS implementation cost if resource diverted for EnMS does not have any significant impact on the core business.
The primary benefit of implementing and operating an EnMS is to generate energy cost savings. It ensures that ESOs are continually identified and assessed in supporting the enterprise’s effort in improving energy performance. As reported under the Clean Energy Ministerial (CEM) forum230, initial analysis of US companies adopting ISO 50001 EnMS standard found average savings of 10% within 18 months, with annual savings ranging from US$87,000 – 984,000, with results often achieved by low-cost (or no-cost) operational measures. Nevertheless, some ESOs with higher saving potential will often require additional investment.
Further to the primary benefit, another major value of implementing EnMS is to ensure energy performance is formally assessed at board level, i.e. energy performance and ESOs will potentially have equal visibility as other business objectives at decision making level. When energy is assessed at board level, benefits of ESOs could be aligned, optimised and further exploited along core business objectives, yielding further strategic non-energy benefits (if available) which could potentially outweigh the energy benefits, such as increased revenue/market share due to improved competitiveness, increased output capacity due to excess energy available, reduction of carbon intensity, improved working environment, corporate social responsibility and etc.
Although the ESOs and its associated energy saving potential will gradually reduce as the enterprise improves its energy efficiency and energy performance, the cost of operating the EnMS will also reduce as the EnMS becomes an embedded system within the enterprise.
ICF observed that many energy intensive enterprises in the UK already have a robust EnMS established and maintained in line with the requirements of international standards. These enterprises have made a decision not to be certified as they recognise the value through energy (and non-energy) benefits rather than the certification itself.
229 Estimated based on an energy manager with 0.5 – 1.0 Full Time Equivalent effort for a single or up to a few sites, including training, minor consultation fees, pre-certification audit and certification.
230 http://www.cleanenergyministerial.org/Blog/the-value-of-energy-management-systems-and-iso-50001-42890
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Table 6.2 provides a simplified summary of the cost benefit ratio of implementing EnMS taking a case of a large enterprise with an energy bill of EUR 2,500,000 and a potential energy saving potential of 10% for the within 12 months of implementing the EnMS, purely based on a no- cost/low-cost ESOs. The energy saving potential then halves every year, as the enterprise improves its energy performance. The EnMS implementation cost is accounted as EUR 250,000, with reference to the high end of the above estimate. The EnMS maintenance cost is assumed to be EUR 50,000 for the following year, and gradually reducing thereafter. This yields a cost benefit ratio of 1.27 over the 4 years, whereas the ratios are much higher on a year-to-year basis.
Table 6.2 Simple cost benefit analysis of EnMS implementation for a large enterprise Year 1 Year 2 Year 3 Year 4 Total
EnMS cost 250,000 50,000 30,000 15,000 345,000
EnMS benefit 0 250,000 125,000 62,500 437,500
Cost benefit ratio - 5.00 4.17 4.17 1.27
6.2.1.7 Administrative aspects of the proposed measure
The study proposes to establish a threshold for obligated compliance based on the value of an enterprise’s annual energy bill. In consideration of the above case of a simplified cost benefit ratio, the study proposes that companies with energy bills equivalent to EUR 2,500,000 per annum should be obligated to comply with the measure. As the benefits of EnMS is proportionate to energy consumption, the study proposes that the measure be applicable to large and medium sized enterprises. Energy intensive medium enterprises may benefit significantly from the measure as they may have enough internal capacity to implement and maintain the EnMS.
Eurostat estimates approximately 15,900 and 72,000 large and medium enterprises within EU28 for the manufacturing sector (NACE C code). This implies that the measure may be applicable to a subset of this enterprises with energy bills meeting the threshold requirement.
Considering that it could take 12 – 18 months for enterprises to setup an EnMS, a proposed timeline of 2 years should be allowed for the preparation time to comply with the measure. The administration of the measure could benefit from the existing administrative efforts among MS in support of the existing Article 8 of EED on mandatory energy audits of large enterprises.
6.2.2 Mandatory sub-metering requirements 6.2.2.1 Proposed measure
This proposed measure mandates that significant energy consuming equipment or sections of the plant must be fitted with an energy meter to account for its specific energy consumption.
The measure will apply to new and refurbished equipment, where technically feasible.
6.2.2.2 Background
Sub-meters are installed after the utility meter in specified locations throughout the facility and are used to measure the amount of energy consumed by portions of the plant where major energy loads are known. Some of these metering systems communicate to a central system where the information is trended, stored or transferred to a data historian system for archiving.
Properly maintained systems allow an organization to establish metrics for these facilities and to gauge their overall energy performance, as well as facilitate the establishment of energy documentation and management systems, capable of handling data from multiple and distinct facilities.
192 6.2.2.3 Context of the measure
The key objective of the measure is to enable the enterprise to monitor their significant energy users with reliable metered data. At a minimum, this will raise awareness among enterprises on the actual energy consumption of significant energy users. This could also facilitate enterprises on further actions, should they decide to act upon it.
To develop an energy picture of a facility, plant operators need accurate, real-time energy data to evaluate the performance of individual processes, pieces of equipment, departments and benchmark energy levels at multiple facilities. Sub-meters can measure electric, gas, steam, British thermal unit (BTU)231 and other parameters to analyse various issues, including the profiling of individual or aggregated loads on equipment to pinpoint peak usage, so operational staff can employ load controlling devices to set high/low thresholds, control loads and reduce energy costs; allowing facilities to identify exact energy costs by production line, production run, individual piece of equipment or the entire facility, which enables the accurate allocation of energy costs to individual products or customers; monitoring usage and identifying potential failures, thus allowing facility managers to take proactive steps to schedule repairs before the equipment fails, thus avoiding costly and unexpected downtimes; and enabling organisations to separate production costs from other departments to support accurate budgeting. Sub- metering is often viewed as a cost component instead of an ESO. However, it plays a vital role in supporting implementation of ESOs. Table 6.3 summaries the estimated technical potential of energy savings.
Table 6.3 Technical potential of energy savings attributable to appropriate sub-metering
Sector
Technical energy saving potential (kTOE)
2030 2050
Pulp, paper and print 361 231
Iron and Steel 763 801
Non-Metallic Mineral 457 405
Chemical and Pharmaceutical 1,045 1,075
Non-ferrous Metal 199 170
Petroleum refineries 424 448
Food and beverage 680 603
Machinery 701 671
Section 5.2 highlights numerous barriers deterring uptake of ESOs due to organisational behavioural issues. Sub-metering is an effective tool for enterprises to systematically address some of these issues.
Imperfect evaluation: It is difficult to evaluate the effectiveness of an ESO without metered data to back up the evaluation. Sub-meters play a crucial role in ESO evaluation by providing metered data, serving as an accurate picture rather than relying on theoretical assumptions.
Bounded rationalities: The availability of sub-meters provides accurate evidence in challenging poor or unreliable assumptions associated with ESOs. This could eliminate many bounded rationalities which may have been established. Metered data also provides much more credibility to ESO proposals as there is a tangible method of estimating and verifying savings of potential ESOs.
231 Traditional unit of energy equal to about 1055 joules.
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Although there are numerous benefits to sub-metering, identifying and implementing an appropriate hardware and installation configuration are the key implementation challenges.
Sub-metering at an industrial plant is complex because the current and the voltage feeding the equipment both need to be measured. While current can be measured with clamps and does not require power interruption, voltage measurement typically requires wire installation, which requires a temporary power outage. Meters can also fail or report incorrect data, so a preventive maintenance plan that manually checks all meters, including software and real-time data, so abnormalities are reported would be required to ensure the proper functioning and interacting of the system.
Risks: Sub-metering provides reliable measured data which facilitates the development of robust ESO engineering designs. In the absence of metered data, alternative methods and calculations are deployed which increases the design risk. After an ESO is implemented, metered data could be utilised to verify the actual energy savings achieved, making the investment more tangible than relying on estimated savings. If sub-meters are installed on new or refurbished equipment or facility, this minimizes the risk of disruption to the main business activity.
Policy: Article 9 of the EED stipulates that Member States shall provide smart meters to final customers when an existing meter is replaced or a new connection is made in a building or a building undergoes major renovations. However, these requirements aim to both measure individual consumption and consumption at the building-level in multi-apartment/multi-purpose buildings. Limited attention is paid to the need and opportunity within the industrial sector. The use of sub-metering in industrial sectors addresses the need to improve internal competences for effective monitoring and measurement of energy consumption of energy intensive equipment. With metered data, enterprises will be able to disseminate energy consumption data to all parties having influence on operations; develop appropriate benchmarks for internal and external comparison; use regression analyses (including multivariable regression analyses) and Cumulative Sum Control Chart (CUSUM) to better monitor energy use, consumption and performance; and develop scatter plots to inform on leaders and laggards and on worst and best practices within a portfolio.
6.2.2.4 EU References of the proposed measure
In the UK, new non-domestic buildings are required to have sub-metering in place for at least 90% of each incoming energy source to account for the different types of energy use. It also states that any output from renewable systems should be separately monitored.
6.2.2.5 Options and issues to be considered
The measure may be applied not only to significant energy using equipment, but it should also be applied to significant energy intensive processes and sections of the industrial plant with high energy consumption. Measurement could take form of direct metering or indirect metering, whereby energy consumption could be obtained from other proxy measurements applicable to the quantification of energy consumption.
6.2.2.6 Cost benefit aspects of the proposed measure
The cost of metering differs significantly with respect to the energy type and application features of the meter. Individual electrical and heat meters could cost between
6.2.3 Mandatory requirement of energy managers for large energy intensive enterprise 6.2.3.1 Proposed measure
This measure proposes that Member States shall ensure that energy intensive large enterprises shall appoint a dedicated energy manger within obligated sites. The scope shall only be applicable to energy intensive sites within the industrial sector. Energy intensive is to be defined as sites with a final energy consumption equivalent or over a prescribed threshold (to be determined) expressed in monetary terms or tonne of oil equivalent (TOE).