Energy Efficiency for Manufacturers – MES #5

March 4, 2021 – In the final video of our Manufacturing Energy Success series, Senior Energy Advisor Michael Zaura, CEM talks about the process of choosing an energy efficiency project.

Video Transcript

Hello, and thank you for joining me for our final installment of Manufacturing Energy Success. Thank you for watching!

Your monthly energy cost can be thought of as a simple equation: the rate you pay times your monthly energy usage. In today’s video, we’re going to talk about energy efficiency as a permanent way to reduce the usage portion of that equation.

We’re going to talk about efficiency projects and how to identify those in your facility. We’re then going to talk about which projects should be done in order of importance. And lastly, we’ll touch on ways to finance those projects so they can get completed.

Step 1: Undergo an energy audit.

The biggest impact to your energy cost is that kilowatt-hour or therm that is never used. An energy efficiency project helps eliminate that waste from old or outdated equipment. The first step in this process is to undergo an energy audit.

An energy audit identifies how energy is being used in a facility and highlights cost reduction opportunities.

A first-level audit is typically just a walkthrough of your facility. It takes two to three hours, maybe more depending on the facility’s size, to identify those cost reduction opportunities. This could be in the form of LED lighting, HVAC, building automation systems, or maybe a boiler or a chiller.

The auditor will then present a report on which opportunities exist for energy efficiency. This usually includes a list of incentives available as well. There are higher-level audits, depending on how detailed you want to get. Once you review the report that the auditor gives you, it will help you identify which projects to tackle first.

Step 2: Prioritize your projects.

So, your energy audit is now complete. The energy auditor hands you a list of cost reduction opportunities, and you’re wondering which project to prioritize first. Most organizations will use a metric like simple payback period in order to determine that.

Say your organization has a simple payback period of three years or less for any capital improvement projects. You might choose, say, a compressed air system to upgrade or fix the leaks in it versus a boiler system. The simple payback on a compressed air system is much lower due to the utility incentives available, and you can usually fix leaks in a compressed air system at little or no cost.

Another factor to consider when prioritizing your efficiency projects is utility or federal incentives.

A good example of this is an audit that was done for a manufacturing client of ours three years ago. The simple payback on that project was 3.2 years. New federal incentives have since become available, and that proposal was updated just a couple weeks ago to include $60,000 worth of incentives. That took the simple payback from 3.2 years to 1.1 years for an LED lighting upgrade.

So, federal incentives, utility incentives, and simple payback are all factors to consider when prioritizing your efficiency projects.

Step 3: Choose a financing option.

Now, you’ve identified which efficiency project you want to complete first. How do you pay for it?

Two options our clients typically consider. The first is simply CapEx. The have the funds available, they pay for the project, and it gets completed.

Option two — what if you don’t have those funds available or it’s just simply not in the budget for that year. You may want to consider on-bill financing.

With on-bill financing, there’s little to no upfront capital required to complete that energy project. An energy supplier, in exchange for a supply agreement, will pay for those project costs upfront. Over the course of the agreement, you’ll get a line item on your bill repaying those project costs. So, you can pay this back over time instead spending all that capital upfront.

While there are other options available for financing and energy efficiency project, these are two of the options most of our clients consider most often.

Thanks for watching!

Thank you for watching today and over the last four weeks of our video series Manufacturing Energy Success. If you missed any of the previous weeks’ videos, please feel free to click on the links below.

I look forward to any comments, conversations, or feedback you have for me on your unique energy situation. I hope you found these videos valuable, and I hope you have some takeaways to utilize in your energy strategy. Thank you!

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Previous Videos:

MES #1: Kickoff Video

MES #2: Contract End Dates

MES #3: Special Edition – Operational Flow Orders

MES #4: Demand Response

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