Innovation for Energy Efficiency: Proceedings of the European Conference, Newcastle upon Tyne, UK, 15–17 September 1987

Ltd

KEYNOTE ADDRESS

The Plant Manufacturer in the Energy Market

P.C. Warner, M.A., C.Eng., F.I.Mech.E., F.Inst.E., F.B.I.M.,     Director of Corporate Engineering, Northern Engineering Industries plc

ABSTRACT

The manufacturer of energy plant aims to be energy efficient, not only in his own manufacturing operations, but also by designing the plant to be efficient in service. Increasingly his customers are choosing to weigh up the total cost of ownership of the plant they purchase, covering both its first cost nd its energy consumption (and of course its reliability); so low losses become an objective of product design. The energy industries in the United Kingdom are well used to assessing total cost of ownership and to taking initiatives in developments, in which the plant manufacturer is able to collaborate, in both traditional and. new energy systems. The resulting advances in the technology are to the benefit of the general customer both at home and in the export market.

KEYWORDS

manufacturer

plant

energy

efficiency

fuel consumption

service

lifetime

INTRODUCTION

Conventional analysis of energy matters commonly envisages two parties only: the consumer of the energy, and its supplier. Almost invariably there is a third one, namely the provider of a whole variety of mechanical and electrical plant and systems for the industrial, commercial, and domestic markets, which are needed to bring the energy to the point where it is needed by the consumer, and to enable him to employ it as he wishes. The provider is, in other words, the plant manufacturer, and he is the subject of this paper. As in all businesses, the overall objective is to satisfy the market and thereby to earn enough money to service the borrowings and to renew the enterprise.

The theme of energy efficiency pervades this particular field, and there are three aspects to its impact on the manufacturer:

1. The energy consumed in the whole cycle of production from design and development to delivery.

2. The energy that the products actually use in service (they are designed to use as little as possible).

3. The energy losses in the operation of the plant provided to the energy supply industry and employed in the handling and conversion of energy itself (that plant too is designed to be as efficient as possible).

All three aspects are considered in this paper.

WHY ENERGY EFFICENCY

Efficiency was not always the major theme it is today, because there seemed to be plenty of energy around. The Industrial Revolution was in a period of cheap coal, to be displaced as the dominant fuel by cheap oil in the years following the second world war; oil is now so established as a world commodity that shifts in its price are reflected by coal and gas and other fuels.

We saw two big jumps in oil prices in 1973/74 and in 1979 as the producer nations came to realise and exert their collective marketing strength. Then in 1986 they found they had overreached themselves and oil prices dropped quite sharply. The two upward moves had been useful shocks to the Western economies, who had grown complacent from the long years of apparently plentiful energy at low prices and the enormous growth in worldwide oil production. Most countries started to take a grip on their energy consumption, and to invest in ways of employing it more efficiently. The more recent fall in oil prices has eased the pressure, especially on countries in the developing world that are not themselves producers. On the other hand, some commentators and makers of policy have been treating the reduction as permanent, almost as though we could now relax our efforts to use energy efficiently. That would be a mistake. Looking ahead, we must prepare for a scarcity of fossil energy resources that is genuine, not merely caused by political factors, because by and large we are burning fossil fuels faster than we are discovering new reserves: exploration and recovery costs will rise, carrying prices with them. The shortages of the 1970s were man-made in the sense that they were the creation of the OPEC cartel. The political forces behind that may be in temporary retreat but only until the underlying shortages assert themselves. It may turn out to have been a useful rehearsal.

Obviously oil is not the only fuel. Others are more abundant, but they have their drawbacks, which count against them economically. Coal is environmentally difficult; so, it is widely supposed, is nuclear power, but it is more realistic to say that it has problems of public acceptance; the very large reserves of gas are not in convenient geographical places, and while pipelines are a solution overland, gas is not easy to transport by sea; and finally, renewables are a relatively small contribution, some of them still requiring much development.

On energy supply grounds alone, there is a strong case for using efficiently what we have. When environmental considerations are thrown in, it becomes even stronger: no source of energy is without some impact and we should keep the level as low as possible.

ENERGY IN PLANT MANUFACTURE

As a rule, plant of the type discussed in this paper is produced as one-off or in batches, with little quantity production except perhaps for small bought-in components or instruments. The processes of production are not energy intensive in the same way as, for instance, in the materials or chemical industries, and it is not an explicit objective of product design to reduce the energy actually going into its manufacture. This is not to imply that production as a whole does not consume a fair amount of energy, but it does not depend directly on the design of the product. There is scope for economy within some of the production processes; and in matters like lighting, heating, and the provision of services.

Savings designed to reduce energy consumption normally require some investment, which ought to be viewed in the same way as other investment proposals. The ultimate objective is to improve the efficiency with which the organisation’s resources are being used, and to the extent that production costs will fall if the intended energy savings are achieved, then normal financial criteria (return on capital employed and availability of cash) will determine whether the investment is worthwhile. It ought not to be necessary to impose special rulings giving energy saving investment preference over other forms, and the criteria set by management in a properly run business should produce the desired results. Even so, it has to be recognised that attention to opportunities for energy saving have not until the mid 1970s been part of the normal experience of management and it was a new concept to many staff. It was therefore found valuable to appoint Energy Managers who could perform energy audits, advise the energy users throughout the offices and factory, calculate for them their energy costs and potential savings, suggest improvements that would not perhaps be immediately obvious, and perform technical evaluations. In a group of companies heavily engaged in the supply of mechanical and electrical engineering plant directed at the use and conversion of energy, there is ample technical knowledge available to ensure that all activities are duly economic thermodynamically, but it still pays to direct attention specifically to that end.

THE ENERGY INDUSTRY

We now turn to two areas concerned with the behaviour of the products in service, but distinguishing between those for the general customer who is using energy, and those for the energy specialist to help him in his task as a supplier of fuel or electricity. By way of background, it is helpful to look in outline at the structure of the energy industry.

Fig. 1 shows the three groups: consumers, suppliers, and manufacturers. The consumers include people, who live in houses, drive cars - and also obtain services and buy goods; other consumers are the industrial and commercial organisations large and small who provide those goods and services and use energy to do it. Consumers choose between electricity, or gas, or coal, and decide how much. They have an influence on the energy suppliers, essentially the electricity supply industry and the fuel companies (coal, oil, and gas). Consumers must equip themselves with devices appropriate to the particular form of energy they have selected, and they get those from plant manufacturers. As an obvious example, a railway must choose whether to operate its trains on electricity or on oil, and that decides whether it will purchase electrical or diesel locomotives. It does not matter why the consumer behaves as he does: whatever his reasons, they lead to those two influences, a fuel choice influence on the energy supplier, and a plant choice influence on the manufacturer. It is not open to a consumer to switch to a cheaper fuel at short notice unless he has already installed the relevant plant. For instance, if he has gas central heating, he cannot take advantage of lower electrical prices without storage heaters, which may be expensive to hold merely for stand-by. Few general consumers do have alternative equipment.

FIG. 1 THE ENERGY INDUSTRY

The manufacturers of plant are a composite group made up of many different firms: they supply equipment and systems to one or more of the consumer markets, domestic, commercial and industrial; and to the energy suppliers. A manufacturer reacts to perceived market need in the classic manner by trying to adapt his products to it and to improve competitiveness for price, quality, and delivery. That would be backed up by new product investment, design and development work on the products, and by regular up-dating of the manufacturing facilities.

So much for background; we shall be returning to a number of these points in what follows.

THE CONSUMER’S PURCHASING PRACTICES

We have seen that from time to time the consumer of energy will also purchase the devices in which the fuel will be used, namely the engineering plant which are products for instance of NEI companies; and that in principle he has two sets of choices, one about the fuel, and one about the devices to select. For many purposes (machine tools, cranes, etc) there is no real choise of fuel: they have to be driven electrically, so the energy plant takes the form of electric motors, with the switchgear, transformers, and other distribution devices inseparable from its use. For other purposes associated either with the production process or with the heating or ventilation of the works and offices, a fossil fuel may be more appropriate, and the list of devices lengthens to include boilers, heaters, fuel handing and ash disposal plant, etc. Either way, the consumer of energy is also a purchaser of devices and it is important for manufacturers to understand the factors that may influence him.

Traditionally, preference was given to the cheapest plant; and purchasing rules would stipulate a minimum of three tenders with the contract awarded to the lowest except in special circumstances. Fortunately, it is now being more widely realised that it is the total cost of ownership over the effective life of the purchase that should be the determining argument, not merely the first cost.

The emphasis on plant reliability and the recognition that enforced outages and remedial work represent potentially high costs throughout its life have spurred the development of Quality Assurance with its concept of minimum quality cost, i.e. the aggregate of production, inspection, and remedial costs. At the tender evaluation stage, it is difficult to be confident numerically about remedial costs, so they are usually dealt with through an assessment of the vendor’s quality performance, giving a limited list of approved tenderers. Quality requirements are imposed increasingly by customers, especially by the more technically conscious, but a surprising number are reluctant and there are obvious contrary pressures. For instance, the personal performance of a procurement executive is unlikely to be measurable by his achievement of the lowest total cost of ownership, for the obvious reason that the proof of success lies in the future - and the benefit will be credited to an operating rather than a purchasing department. It is altogether easier to measure success by relating the combined purchases to the allowed budget. The purchasing process as a whole remains biased in favour of low first cost.

ENERGY PLANT FOR THE GENERAL CONSUMER

We have seen that purchasing departments in industry and commercial organisations, and for that matter the ordinary domestic householder, have traditionally had a bias towards low first cost, but that better understanding of the total cost of ownership is beginning to favour plant with good reliability. Assessing the cost of ownership has a bearing also on energy considerations. For one thing, there are differentials in price between the various fuels, which will not remain constant throughout life (expressed per unit of energy). For another, different devices have differing efficiencies, either because of the choice of fuel (a gas fired boiler being more efficient than a coal fired one, for instance, and neither as efficient as an electrical heater), or because of features in the design of the device itself. The plant purchases are capital investments that commit their owner to a definite type of fuel and to a particular efficiency of its use for the period of exploitation. Higher efficiency usually implies higher first cost, but if it gives a lower cost of ownership it is still worthwhile.

The prospective owner would need to estimate what fuel supplies and prices would be like. Ideally, he should be trying to think about the behaviour of fuel prices and their availability over the period for which he will be owning the plant. He might, for instance, to be asking himself about likely developments in all primary sources of energy, namely coal, oil and gas, and nuclear; whether and how soon the investment in new coal fields is likely to result in increased supply, how that coal is likely to be processed, i.e. how it may be converted into secondary fuels (electricity, substitute natural gas, etc.); what the depletion policies for North Sea oil and gas are likely to be, and how soon therefore UK supplies may cease to provide a protective cushion against action by the OPEC countries; and generally what is to be the effect of all this on future fuel prices, that is to say how more steeply will the prices of the different fuels individually move than the general price rise in the economy due to inflation? He might even try to weigh up political influences, domestic and international.

However, only specialist organisations like the fuel industries carry energy analysts capable of formulating that kind of long term view, and the average domestic or organisational consumer cannot be expected even to try. Besides, if he did, his estimate would be too tentative to be a basis for an important investment decision. There are several ways out of this difficulty. The most popular perhaps is to assume that fuel prices will stay constant in real terms, which can be a serious distortion over the ten years or so that the plant will be in use. That is partly compensated by choosing a much shorter pay-back time, which may happen also to suit both the organisation’s view of its cash resources, and possibly also the preference of financial markets for a rapidly moving business performance.

However, it can also result in undesirable fluctuations, as for instance with the sharp jumps in oil prices, upwards in 1973/74 and in 1979: behaviour was been essentially reactive, as consumers rushed to look for alternatives to oil. Domestically, local Gas Boards and heating contractors were swamped with enquiries about switching to gas, and for a time demand for gas may have outstripped supply. In industry, many firms hesitated over investment decisions which would continue their dependence on oil. The reactions were reversed when prices fell last year. Commentators treated the change as permanent; and even as showing the error of taking the previous higher levels as a guide for long term policy. Potential investments aimed at saving oil were cancelled or shelved, and the associated R&D was cut back. When we remember, as explained earlier, that the energy consumer’s fuel choices commit him (because they are accompanied by the acquisition of the associated plant) to ten years or more, this shorter term approach is to be wondered at.

None of this is an argument for meticulous forecasting of fuel prices as part of the energy consumer’s technique: given the shifting international influences, many of them political and therefore inherently impossible to predict, it could not be done. But to take today’s fuel prices as constant, and to use a very short plant life span, seems just as wrong at the opposite extreme and unnecessarily defeatist. It gives no weight to the potential saving if fuel prices go up in real terms (more likely than a fall as the reserves are finite); in other words, additional capital spend to secure higher plant efficiency provides insurance against such rises, and should be given credit for it.

Provided a fair proportion of the market are informed purchasers ready to calculate total cost of ownership, the manufacturer has an incentive to design his products for best efficiency, and he asks essentially the same questions as his customers. He needs to judge future trends in fuel price and the way they may affect his business; but his assessment is complicated by his customer’s limited ability or willingness to allow for those trends and the preference on the whole for short pay-backs calculated as if today’s fuel prices were not going to change.

EFFICIENCY IMPROVEMENTS

There have been signs recently that procurement policies are becoming more thoughtful about efficiency and energy losses. The informed purchasers have always given them proper weight, and have provided the necessary encouragement to R&D into methods of reducing losses. In fact modern equipment is already pretty efficient, but that does not mean that further improvements are ruled out.

They can happen in three main ways: improved materials; better techniques of analysis; and a changed configuration. Better material properties are regularly being achieved, whether by new alloys or processes. They would translate into energy savings by for instance permitting higher maximum temperatures in a thermodynamic cycle, or eliminating auxiliary cooling; the recently announced increase in the minumum temperature for superconductivity is another example. Better techniques of analysis allow materials and flow passages to be disposed more effectively. They make it possible to reduce auxiliary power absorption through better design of cooling systems (of electrical machines, for instance); to improve understanding of test results on fluid machinery so that features causing friction loss can be identified and corrected; and to give better characterisation of flames to improve combustion efficiency; and so on.

As regards configuration, one good example is the variable speed solid state drive by means of which fans and pumps can now be driven by synchronous A.C. machines at optimum speed over the load range. Another major group of changes in configuration for better fuel economy embraces all the thermodynamic variants, from heat pumps to back end heat recovery, not forgetting combined heat and power and many others.

The general rule is that energy economy can almost always be improved if some extra capital cost is incurred; and the economics can be calculated to see if it is worthwhile, with appropriate assumptions about future fuel prices.

PLANT FOR THE ENERGY INDUSTRIES

The energy industries themselves constitute a special market where things are rather different. In the United Kingdom, they have great technical strength, which may often overshadow the resources of the manufacturers. They are equipped to analyse long term trends in the availability and price of primary energy resources, and are conspicuous in the national debate on energy policies. Precisely because they are technically sophisticated, these customers habitually assess total cost of ownership, and will often initiate moves to enhance reliability or reduce energy losses. Again using the example of electricity, they are responsible for the whole chain of conversion from the original fuel, through combustion, steam raising, turbine generator plant, transformers, switchgear, transmission lines, etc., through to the customer’s terminals, domestic or industrial. At every one of these stages there is plant whose efficiency must be less than 100%, so there are losses and potential for cost effective improvements.

These customers readily discuss their future needs with their plant suppliers, and since this is a field in which progress requires engineering studies in depth, followed by prototype testing and demonstration plants, the manufacturers are involved as a matter of course. At the level of the individual pieces of plant, the scope for efficiency improvements follows the pattern discussed earlier for the general market: improved materials and better techniques. The difference is that the customers, namely the energy industries themselves, take a much more active part in promoting fundamental advances and in examining how they might be embodied in product improvements, to the extent of inviting plant manufacturers to participate in R&D programmes and of putting their facilities at their disposal for demonstration purposes. For example in the electrical industry, an improved burner or an improved drive for an auxiliary would be tried out in an existing power station; advances in transformers or switchgear in the distribution systems, and so on.

Matters do not end with the individual pieces of plant. In each of the key energy areas (oil exploration and enhanced recovery, deep mining of coal, generation of electricity, recovery of gas, its distribution, and perhaps its synthetic production), there is a continual search for better system configuration and even for new concepts altogether. Collaboration may involve three parties: plant manufacturers either alone or in partnership, the energy industries in their role as customer, and Government who may provide part-funding. Among current examples are combined heat and power schemes for some of the major cities in the United Kingdom, tidal power both at Severn and at Mersey, and wind generating machines.

The technical resources of energy supply industries in export markets vary widely. Some are equipped, like those in the United Kingdom, to analyse plant proposals against a lifetime cost and to give credit accordingly for better efficiencies. Others are still at the stage where first cost seems the most critical factor, or may be required to treat it as such by political direction or by their need for financial credits.

PUBLIC POLICY

It is worth noting in this connection, that the scope for more efficient or improved methods of electricity generation is often a matter of keen public comment. There seem to be several reasons: one is the all-pervasive presence of electricity in the modern world, and the tendency to equate national energy policy with policy for electricity; another is the hightened interest in nuclear generation whose environmental implications are considered to be of a special kind, which has led to a concern with environmental aspects of electricity however generated, and spurred the search for so-called benign forms of electricity generation; yet another reason is the realisation that classical methods of generation inescapably imply substantial losses (for fundamental thermodynamic reasons). It might seem that all this public debate is not a primary concern of the plant manufacturer, but to the extent that sentiment and misconception may override the technical realities and unsettle or distort the market for his products, he will try to take a hand in the debate and hope to deploy his experience and knowledge on the side of objectivity.

CONCLUSION

Energy is expensive, and invariably has an impact environmentally. It should therefore be used efficiently, even by those countries who do not need to import it. Energy plant ought therefore to be chosen partly for its efficiency. We have seen that the message reaching the plant manufacturer from his market is a confused one. His customers have to decide whether to buy his products, and if so which ones, i.e. what fuels they will be using and, according to their lights, what level of energy efficiency they can afford. The manufacturer in his turn has to get his products ready and because that takes time he cannot simply wait for the customer’s specific investment decision: he must anticipate it, choose for himself his R&D priorities and decide where to put his effort on new product design.

The energy industries, who supply electricity, gas, coal, and oil to those same customers, are themselves a special group of customers with strong technical resources. The plant manufacturer must acquaint himself with their broad purchasing intentions and with the factors determining energy policy; he must also assess development trends, decide where to be involved in them, whether to form partnerships, and how to collaborate with his customers in prototypes and demonstration plants. All this advances the technology and should therefore have some benefit for the other parts of the market, at home and abroad.

The plant manufacturer will not neglect environmental aspects and the awakening interest of the public in energy matters generally.

SESSION PAPERS

Local Energy Planning in the UK: Past Experience and New Initiatives

A. Atkinson

ABSTRACT

Energy problems crowd into the headlines at ever more frequent intervals. Major studies in North America and continental Europe have pointed to energy efficiency programmes administered at the local level as providing a substantial part of the solution. However, local energy initiatives remain weak in the UK. This paper analyses the structure of Britain’s energy economy and the strategy which has been pursued by the country’s highly centralised energy institutions. It continues by taking a look at the interest that has been increasing at the local level to implement effective energy efficiency measures, including the development of municipal heat distribution systems (district heating - DH) that could make use of waste heat from electricity generation (combined heat and power - CHP) and other sources, to reduce local heating costs and the national energy bill. It goes on to note how so far central agencies have done little to bring about effective action and appear, rather, to have had a discouraging effect on these developments. The longer term answer is seen as involving substantial decentralisation of power in the energy field through institutional changes.

KEYWORDS

Local energy planning

energy economy

energy institutions

energy efficiency

combined heat and power (CHP)

decentralisation

INTRODUCTION

Recently energy issues have come with increasing frequency to occupy the top of the political agenda. One problem after another has claimed major media attention, sometimes over extended periods. Items include:

 Determination of the Government to restructure the coal industry precipitated the bitter miner’s strike of 1984–1985, which was informed by a determination to defend jobs and communities from imminent destruction; since the collapse of the strike there have been more than 50,000 redundencies in the industry.

 A spell of cold weather in early 1986 revealed how badly heated many people in Britain are in winter and how many old people are at risk of dying of hypothermia; the situation was repeated in early 1987; the solution of the moment was to provide warm blankets and ‘cold weather supplements’ and there was little or no discussion of more permanent solutions.

 The disaster at Chernobyl nuclear power station in the Soviet Union in April 1986 demonstrated the environmental hazards of nuclear power; whilst this shifted public opinion and opposition political parties further towards an antipathy for the technology, neither the electricity supply industry nor the Government were prepared to admit that there might be better economic and technical solutions to our need for electricity supply.

 In early 1986 the international crude oil price collapsed; this was the latest in a series of wild fluctuations in oil prices since 1973, leaving many in authority confused and fatalistic concerning the possibility to make rational calculations about the most economic investment for the satisfaction of future energy needs; meanwhile the depletion of North Sea oil and gas resources in the coming years represents a general threat to the economic wellbeing of the country.

In general there has been a tendency to see all these as predominantly technological or financial problems, in some cases exacerbated by ‘political motivation’. More considered judgement has, however, focussed upon existing institutional structures as being in part responsible for generating the problems, and then being badly adapted to heading off expected future problems. Major studies by the United States National Research Council (Stern and Aronson, 1984) and the International Institute for Environment and Society, funded by a number of national and international agencies (Joerges and Olsen, 1983), have concluded that local institutions and community organisation - involving a process of ‘remunicipalisation’ (Hennicke, 1985) - will have to play a major role in the future energy economy if these problems are to be successfully combatted. In many industrialised countries local utilities, often simply local authority departments, have continued to play a significant role in the national energy economy and are now being provided with additional resources and responsibilities. In the United States and Scandinavian countries local energy planning is now a statutory duty; in West Germany and France alternative possibilities for co-ordinated local activity in the energy field are obtaining substantial backing from central governments. The European Commission (ECC, 1982) is also committed to ‘far greater decentralisation of decision-making’ in the energy field.

The UK, on the other hand, with its extremely centralised energy institutions, has been relatively untouched by these developments. Virtually no official or academic recognition has been given to the possibility that local institutions might play anything but a marginal role in the national energy economy. This does not, however, mean that no local initiatives have been forthcoming, or that initiatives in process of formation now might not at some future stage provide the basis for more substantial initiatives in the medium-term future. This paper therefore looks first at Britain’s energy economy and institutions and then reviews the local energy initiatives which have appeared in the UK in recent years, and assesses the prospects and possibilities for their future development together with the problems which they