Energy
Saving = Higher Profitability?
Energy
forms one of the largest components in production costs for majority of the
manufacturing units. This is true whether a manufacturing process is
energy-intensive or not. The energy costs have been consistently rising and the
trend is likely to continue in the foreseeable future as India continues to
grow.
Make-in-India and Chinese slowdown are other factors which
are seen as contributors to rising energy demand in India. The
demand-supply gap will keep on rising especially in the power space as could be
seen in the figure below.
Fig. 1 - Energy Cost Trend & Supply-demand Gap in India
In the
current situation of intense competition cost control is one of the comparatively
easier routes to improve profitability. In fact majority of the well-known
Companies consider cost control as central objective of the finance department
and purchase department. Market-driven factors aside, Companies are focused to
improve the internal efficiency at all levels such as manpower efficiency,
energy efficiency, equipment efficiency, procurement efficiency etc. With
appropriate management processes in places the non-technical efficiency can be
achieved.
With regards to technical efficiency it is mandatory for
Companies to rely upon one of the easier routes of energy which forms a
significant component (as high as 20% in some cases) of the overall cost
of manufacturing. The good news, however, is that the energy can be
controlled by implementing Energy Efficiency and Energy Conservation measures.
Fig. 2 – Energy Cost as part of overall
Production Cost
So are Energy Conservation and Energy Efficiency different?
While both contribute to the same goal i.e. reducing overall energy
consumption in the facility without hampering productivity, quality and output.,
the 2 are different in terms of the path taken to achieve that goal.
Basically they are defined as -
Energy Conservation - To arrest leakages within the existing systems
through plugging the leakages, altering operations and changing human behavior.
Energy Efficiency - Implementation of new-age equipment through retrofitting
or replacement of existing systems which improves overall system efficiency
thereby giving more output per unit of energy consumption.
Sometimes the above two terms are used interchangeably
which, as you could see, is not correct. Both the measures should be used
collectively and not in isolation. Energy Optimization is a joint term to
indicate both the above. For a plant to have optimum energy levels both Energy
Conservation and Energy Efficiency are necessary. Not just for saving on
production cost but also as a sustainability measure.
Majority of the plants where we have conducted Energy Audit have had energy as a significant cost component in the range of 10% to 30% with a median of 17%. So any reduction in energy through Energy Audit or going for Renewable energy has a significant and direct impact on Company's profitability. Even assuming a basic 7% reduction in energy bills (power, fuel, gas, coal etc.) can result in a saving of 1.20% in the total cost of production.
Fig. 3 – Energy Saving Calculations and
Impact on Cost of Production
As can be seen in Fig. 3 above savings on energy can have a
positive and direct impact on a Company's profitability through cost control.
It is thus a mandate now for Energy-intensive Industries to carry out frequent
Energy Audits. Irrespective of the type of industry a plant should carry out
Energy Audit at frequent intervals. Ideally once every 2-3 years is a good time
for Energy Audit to reveal good opportunities for Energy Saving.
To know more or to enquire about Energy Audit, contact us at Enerco Energy Solutions LLP through -
Our website : www.econserve.in
Email id : info@econserve.in
Whatsapp / Phone : +91 9890737447