Day 1 - Presentations v1.2

Bankable Format – The “selling document” EE Measure 1 EE Measure 2DescriptionSavingsInvestmentEconomic IndicatorsAdvantages on Quality ImprovementReduction of WasteAdvantages on MaintenanceAdvantages on Human ResourcesAdvantages on Cost ReductionMeeting Future Extension and DevelopmentOther Advantages 51

Types of Risk to be addressed by managers andbankers Energy savings are affected by: • Construction / installation process • O&M of the equipment • Performance of installed equipment • Usage Cost of construction overrun is another major risk Monetary energy savings are affected by: • Interest rate structure • Inflation 52

CONSTRUCTION/INSTALLATION Risk• Implement “On Time” and “On Budget”• Manage Contractors & Vendors• Achieve “Turnkey” Installed Price• Adhere to Design Specifications• Meet Completion Deadlines• Meet Commissioning Requirements• Comply with Regulatory and Legal Issues 53

Operation RiskObviously EE Measures must be operational to generate savings• What happens if equipment broke (even with warranty)• Effect of off-time on overall savingsExample:A new condensing boiler breakdown on warrantybut requires 3 months for replacement. Most of thepeak heating season savings are lost. So theproject will support additional financing up to thenext heating season and loose one year ofcontract. 54

Performance Risk• Performance may be compromised by poor design or implementation.• Manufacturers claim may not materialize in the field• Equipment performance may change over time, due to degradation and/or poor O&M practices. • If Owner conducts O&M, will the suppliers/installers be responsible for poor O&M practices? • If a third party conducts O&M, what is the scope of services and at what the cost? • What about repair & replacement? • What if equipment life < loan term?• These are factors that the borrower normally (but not always) controls. 55

Usage Risk• Usage can vary as a function of change in occupancy, utilization of the facility or external factors. It comprises of: • operating hours (lighting, equipment, ventilation) • Energy use and savings fluctuate with equipment and facility operating hours. • If the Owner reduces operating hours of equipment targeted by energy conservation measures and savings are not realized it may disrupt the debt service. • If the Owner increases operating hours of equipment not targeted by the project, utility bills will increase, which again disrupts debt service. • heating & cooling loads (& set points) • weather • production• These are factors that the Owner/Borrower (or no one) controls. 56

Loads• The Facility Owner/Borrower may make changes that affect equipment loads (e.g., additional air conditioning).• If loads increase and savings increase, the client will benefit from that, hence the credit risk will decrease.• If loads and savings decrease, it may spoil debt service capability of the client.• How will savings estimates be affected if: • The Owner adds or removes loads? • Adds building space? • Removes building space? • Changes thermostat settings? 57

User InteractionSome measures require users to interact withequipment for proper operation (or at least not overrideit.)If a measure does not work because the users do notuse something as intended, the debt service capabilitymay deteriorate. 58

User Interaction• Some measures require users to interact with equipment for proper operation (or at least not override it.)• If a measure does not work because the users do not use something as intended, the debt service capability may deteriorate.• How will user interaction be maintained (or minimized)? • Training? • Annual verification and reporting? • Lockboxes (e.g., on thermostats)? 59

Energy-efficient TechnologiesRisk Level: Common FacilitiesEnergy Efficiency Technologies Risk Level• High-efficiency lighting Low• Heating ventilation air-conditioning (Med to High) (HVAC) upgrades (High – difficult to measure)• New automated building and HVAC controls (Med to High)• Variable speed drives (VSDs) Low Low• High-efficiency chillers Low (Low if prices are stipulated)• High-efficiency boilers faucets Low• Combustion and burner upgrades• Fuel switching• Water conservation; i.e., toilets, showers,• Heat recovery and steam traps Low• Power factor correction Low 60

Energy-efficient TechnologiesRisk Level: Industrial SectorEnergy Efficiency Technologies Risk Level• New automated process controls Low• Heat recovery from process air and water Low• Cogeneration used for peak savings High (many variables)• Water recycling Low• Process equipment upgrades (Low to High)• Process changes (Med to high - depending on technology) 61

Risk Control – Contractor SelectionSources Solutions • Choose the • Make sure wrong contractor company with proven track record • Contractor has is selected to no motivation implement the project • Quality assurance guarantees to be provided upon payment62 62

Risk Control – Project DesignSources Solutions • Existing drawings • Verify data from drawings and specifications and specifications not updated • Avoid utilization of • Use of new lines unproved technology of equipment • Carefully work with unfamiliar processes • Always check references for a product • Include a contractual clause for return of defect equipment 63

Risk Control – Construction Cost EvaluationSources Solutions • Some contractors are • Obtain firm bid from not very familiar with contractors before turnkey cost presenting an offer to evaluation the client • They do not have • Maintain experience in cost contingencies evaluation • Evaluate site expenses • Include a clause allowing cost adjustment within 10-15% of estimation 64

Risk Control – Construction PeriodSource Solutions • The more on-site work • For a fixed duration delays, the more contract, the principal temporary financing payment start-up accumulates and the date may be fixed more the repayment when all the period shortens, if the measures are contract has a fixed implemented (flexible grace period). duration. 65

Risk Control – M&V Solutions Sources • Schedule easy retrofits first to obtain early • Difficulty in savings foreseeing impact of measures • Include a security factor depending on: for savings calculations • Change of • Obtain a performance behavior and operation guarantee from the • Equipment manufacturer/contractor performance • Use proven equipment • Equipment defect and technologies 66

Risk Control – Energy SavingsSource Solutions Audits and contract clauses • The energy efficiency project • Guarantee savings smaller than does not reach those calculated expected performance • Plan for higher energy management costs in the first months • Guarantee funds (created by the ESCO) • External insurance67 67

Monetary saving RiskEnergy Costs Thousands Savings with Constant Energy Prices $200 $150 $100 $40,000 $40,000 $50 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 68

Energy Costs ThousandsMonetary saving Risk Energy Costs Increase by 50% in Year 2 $200 $150 $60,000 $100 $40,000 $50 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 69

Monetary saving Risk Energy Costs and Savings at 3% Inflation $200,000Energy Costs $150,000 $62,000 $100,000 $40,000 $50,000 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 70

Risk Control – Maintaining Energy SavingsSources Solutions• Remodeling • Use qualified personnel and establish a maintenance plan• Labor stoppage • Establish realistic budget for• Changes in occupancy maintenance and a budget or operating reserve procedures • Training of personnel• Changes in regulation • Avoid assumption of• Insufficient maintenance and repair maintenance liability• Sharp increase in • Lock in long-term maintenance costs maintenance costs 71

Risk Control – Financial ParametersSources SolutionsFluctuations of: • Clause: Establish a floor on • Energy rates energy rates for cost • Interest rates can avoidance calculations dramatically reduce savings • Analysis of project payback period sensibility to interest and inflation rates. Contract period can be chosen according to the worst case scenario. 72

Risk Control – Change in Facility UseSource Solution• Building/industry use • Include clause permitting savings changes drastically hence adjustment in case of change in foreseen savings might not initial data be reached73 73

Case Studies of EE/RE Projects in PakistanExample Project – Nishat Mills Dyeing Unit 35 74

Key findings Total Savings: RS 95 million / year (~10% of total utility costs) • Process machinery is well maintained and staff engaged with resource efficiency initiatives • Staff is skilled and capable of developing and implementing resource conservation projects in house • Low Cost / No Cost Measures – • Annual Savings: ~RS 14 million (1.4% of total utility costs) • ETP Screen Cleaning, soft water turbine pump VFD, & Compressed leak management largest opportunities • Investment Measures • Annual Savings: • Rs ~81 million of utility costs (~8% of total utility costs) • Energy: ~8% / year, Water: 29% / year, CO2: 308 tons • Steam Savings: 31,000 tons / year or ~11% / year • Electricity Savings: 367,220 kWh / year or 1.7% /year • Investment: Project costs Rs 30 million and Simple payback of ~5 months 75

Energy EXCELLENT REDUCTION OPPORTUNITY FOUND.... EXTENSIVE PROCESS MACHINE REVIEW NEEDED TO 140 CLOSE GAP!Production Energy Intensity (GJ / ton) 23% Improvement with 119 120 recommended measures 100 30% off local benchmark... Extensive, machine 80 level study required to close this gap! 60 51 50 40 39 20 27 20 0 Nishat Current Nishat Post-Implementation Local Data Average Worst of Class Best of Class 76

Water GREAT PERFORMANCE AFTER IMPLEMENTATION OF RECOMMENDATIONS!Water Consumption Intensity (litre/kg) 250 Extensive process 29% Improvement 200 technology review post- required to reach implementation 200 best in class... 9% Better than 150 local average! 113 100 89 64 70 50 5 Nishat - Current Nishat - Post Local Data Average Worst of Class Implementation 0 Best of Class 77

Low Cost / No Cost measures• Steam Management• Compressed Air Management• Optimization Of Motor Rewinding Practice• Water Management 78

Steam distribution Continuous Management Savings: RS 5.5 million /year, 1% total Cost • Continuous diagnosis of steam traps • Savings: RS 5 million / year, 1% total utility costs • Assuming 5% savings on dry steam loads • (drum dryer, CRU evap, sunforizer) • Survey Sample Results: • 61% trap faults → L-Box 2:• 80% trap faults → Mercerization:• Continuous Management Of Steam Leaks• Savings: RS 0.5 Million / year. 0.5% total utility costs Action Operationalize continuousRequired.... steam distribution loss management and assign to appropriate team member! 79

Steam Loads by heat delivery mode Distribution Leaks Supply and Distribution Losses Heat Loss to Atmosphere Useful Convection and Radiant Losses Consumption Chemical Solution Heating 500,000 1,000,000 1,500,000 2,000,000 2,500,000 Steamers (Bleaching and Dyeing Machines) Hot Washes(Bleaching, Mercerization, Pad Steam dyeing) Indirect Heating(Drum Dryers, CRU Evaporators, Sunforizing) Total Steam Load 0 Steam Energy (MJ / Day) 80

Water Management & Recycling Savings: RS 5.25 Million with minor investments • Clean mechanical screen with treated effluent in place of fresh water: • Savings: RS 2.63 million / year , 52,560 m3/year • Costs: Minimal (Treated effluent collection tank, piping, booster pump) • Use cooling wastewater in place of soft water for singeing fluff removal • Savings: RS 2.1 million / year, 42,340 m3 / year • Costs: Minimal (collection tank, piping, booster pump) • Use raw water in place of soft water for floor cleaning • Savings: RS 0.2 million / year, 25, 185 m3/year • Cost: None (change in behavior only) • Re-use of softener recharge water • Savings: RS 0.02 million / year, 6,680 m3/year • Costs: Minimal (Collection sump/tank, piping, distribution pump 81

Motor / Pumps Savings: RS 1.7 million /year• Install variable speed drive on soft water turbine pump Motor Performance Chain • Savings: RS 1.1 million / year • Investment: RS 1 million – 1.5 million • Simple Payback: 11-16 months • Implementation: Install variable speed drive with pressure modulation • Eliminate pressure regulation by valve throttling (valve 50% throttled)!• Integrate repair-replace decision model into motor management process • Savings: RS 0.6 million, 40,595 kWh • Assume 1% savings on 25% of total motor load • Implement EASA Repair-Replace Decision Model:• Guided by EASA / AEMT publication “Good Practice Guide to Maintain Motor Efficiency”, 2003• Repair-replace decision model guides critical analysis for replacement based on key factors:• Motor application analysis See appendix for EASA• Stator core condition repair-replace decision• Failure assessment• Rotor condition model• Motor technology / efficiency upgrade assessment 82

Improve compressed air management Savings: RS 1.65 million / year,• Improving Compressed Air System Maintenance / Monitoring: • Savings: RS 1.6 million / year• Conduct regular maintenance of air dryers Remember!• Conduct Receiver tank / tank safety valve testing• Conduct regular leakage detection Compressed air• Calibrate gauges regularly production is highly• Install pressure gauges for on dryers energy intensive!• Improving End Use Practices: 89%-95% of electricity is converted to waste • Savings: RS 0.05 Million / year heat! • Install pressure guns on hoses for cleaning use • Reduce cleaning of singeing machine 83

Investment opportunitiesShort payback at moderate investment Overall Cost Savings• 81 million / year • Water Waste Stream Recovery• 14 % of total utility costs  Savings: RS 53 million (5.4%),  Investment: RS 7 million (14 MoInvestment payback)• RS 30 million• 4.4 mo. payback • Steam distribution system measures  Savings: RS 18 million / year (1.9%)Energy Savings  Investment: RS 6 million (4 month payback)• 367 MWh annual• 8% of total energy • Lighting measures  Savings: RS 5 million / year (~1%)Water Savings  Investment: RS 5 million (13 month• 486,500 m3 /year payback)• 29% of total • Advanced Metering  Savings: RS 5 million / year (~1%)  Investment: RS 5 million (13 month payback) 84

Recover and recycle waste Water streams! Savings: RS 53 million (5.4%) / year, Investment: RS 10 million (14 month payback)• Recover waste water streams from: • Cold water washes • Cooling water (drying drums, CRU condenser, pumps) • Hot water streams Implementation Requirements: Installation of collection tanks, piping, & distribution pumps• Projects are... • Low cost, • Low risk, • Achievable with in Nishat staff 85

Steam distribution system measures Savings: RS 18 million / year (1.9%), Investment: RS 6 million1. Re-use of steam condensate as process water Savings: RS 15.4 million / year (1~%), Investment: RS 5 million • Key Implementation Issues... • Condensate is valuable for water quality and heat recovery potential • Power plant tariff does not charge for condensate return, so apparent incentive for Unit-35 to return it; • More advanced analysis, including central power station evaluation, required to determine feasibility; • Implementation by Nishat will require a high level of coordination. 2. Insulate bare hot pipelines and surfaces with serviceable insulation systems Savings: RS 2.6 million / year, Investment: RS 1 million • Implementation actions: • Use removable jacket and blank insulation systems • Low – moderate risk • Can likely be implemented with Nishat staff, but may require outside expertise 86

Lighting measures Annual Savings: RS 5 million / Investment: RS 5 million• Replacement of T8 tube lights with T5 tube lights• Implementation.....  Very low risk  Achievable with Nishat staff;  Care must be taken with inspection areas lighting retrofits to ensure appropriate light quality for tasks. 87

Investment opportunities Annual Savings # Measure Water Gas Electricity Steam Cost Pay Back (m3/yr) (m3/yr) (kWh/yr) (t/yr) Rs x RSx10^6 (Months)Water Recycling Measures 10^6 Cold Wastewater Stream Recycling 403,200 - 49,770 19,590 53 19 4.2 1 Reuse of water from singeing fluff removal system & rotary filters of L-Box 1 and L-Box 2 2 Reuse of post bleaching cold water wash in wash boxes of same machines 59,850 - 5,985 3.0 2.00 8.0 3 Reuse of post scouring cold wash water in wash boxes of same machines 16,800 - 3,360 0.8 1.00 14.3 4 Reuse of mercerization wash water for making caustic soda solution in L-Box machines 16,800 - 3,360 - 0.8 1.00 14.3 5 Reuse of water supplying at exit points of steamers of L-Box-01 & 02 machines in the process 1,120 - 0.3 1.00 42.9 6 Reuse of water supplying at exit points of steamers of Pad Steam dyeing machines 5,600 - 1,925 - 1.0 1.50 18.8 19,250 - 4,060 - 2.0 3.00 17.7 Cooling Water Recycling 40,600 - 7 Reuse of cooling drum water of Singeing Machine-01&03 8 Reuse of cooling drums water in the process 45,500 - 9,100 2.3 0.05 0.3 9 Reuse of warm condenser cooling water of CRU condensers in process 168,700 - 5.0 16,870 - 8.4 3.50 1.3 Hot Wastewater Stream Recycling -- 10 Reuse of hot wastewater from steamers of to wash boxes of L-Box-01 & 02 machines - 16,450 28.5 3.00 11 Reuse of hot wastewater from steamers to wash boxes of Pad Steam dyeing machines 9,800 - - 1,960 1,040 2.1 1.00 5.9Steam Distribution Measures 20,300 - - 2,030 2,100 4.2 1.50 4.3 83,300 18 3.9 12 Insulation of bare hot pipelines and surfaces - 11,434 3.0 6 4.0 13 Reuse of steam condensate as process water -- - 1,984 15.4 1.00 3.9 83,300 - 9,450 5 5.00 1.1Lighting Measures -- 4.76 13.2 -- 317,450 - 76 5 4.7 14 Replacement of T8 tube lights with T5 tube lights 486,500 317,450 - 5.25 367,220 31,024 30Project Overall 88

Tools for EE/RE Project Technical and FinancialEvaluation.RETScreen Clean Energy Management Software 89

RETScreen IntroductionThe RETScreen Clean Energy Project AnalysisSoftware is a unique decision support tooldeveloped with the contribution of numerous expertsfrom government, industry, and academiaIs free and can be used worldwide to evaluateenergy efficiency projects, energy production andsavings costs, emission reductions, financial viabilityand risk for various types of Renewable-energy andEnergy-efficient Technologies (RETs) 90

RETScreen Introduction The software (available in multiple languages) also includes product, project, hydrology and climate databases, a detailed user manual and a case study-based college/university- level training course that includes an engineering e-textbook http://www.retscreen.net 91

RETScreen Introduction• Objectives• Introduce key indicators of financial viability • Simple payback period • Net present value (NPV) • Internal rate of return (IRR)• Examine how debt financing affects financial viability• Introduce income tax analysis• Present the RETScreen® Financial Analysis page• Show how RETScreen® accommodates incentives, production credits, GHG credits and income taxes 92

Main Features of RETScreen®• Builds the capacity of planners, decision makers and industry to implement energy efficiency, renewable energy and cogeneration projects• Energy efficiency (EE) models for residential, commercial & institutional buildings, & for industrial facilities & processes• Renewable energy, cogeneration & EE models integrated into one software file & emerging technologies, such as wave & ocean current power• Climate database expanded to 4,700 ground-stations & NASA Satellite Dataset Integrated within the software to cover populated areas across the entire surface of planet• Project database providing users instant access to key data and information for hundreds of case studies & project templates• Software & databases translated into 35 languages that cover 2/3 of the world’s population, and available at the click of the mouse 93

Main Features of RETScreen®• Managed by CanmetENERGY (Natural Resources Canada)• Provided free of charge* on the Internet!• Main Collaborators:• National Aeronautics & Space Administration's (NASA) Langley Research Center• Renewable Energy & Energy Efficiency Partnership (REEEP)• United Nations Environment Programme's (UNEP) Energy Unit of the Division of Technology, Industry and Economics (DTIE)• Global Environment Facility (GEF) co-financed, UNEP-led Solar and Wind Energy Resource Assessment (SWERA) program• World Bank's Prototype Carbon Fund (PCF)• The Energy + Environment Foundation (EEF)• Leonardo ENERGY Initiative 94

More than 300,000 users spread over 222countries! 95

Questions?? Vs.• How accurate is an energy project analysis cost accuracytool? 96 • It depends on the tool • It depends on the accuracy of the inputs• How much does it cost to use an energyproject analysis tool? • It depends on the tool • It depends on the accuracy of the inputs

Motivation for Clean Energy: Consumer $Perspective $ $ • Cost savings • Payments for energy (kWh, GJ or mmBtu of gas, etc.) 97 • Payments for peak power demand (kW) • Operation and maintenance costs • Power factor charges • Potential Ancillary Benefits • Comfort, productivity and safety improvements • More reliable operation • Longer equipment life • Environmental Concerns • Greenhouse gas emissions related to global climate change • Local pollution of air, water and land • Addressing Risk • Future liability for pollution and emissions • Fuel cost volatility • Marketing • Green image

Motivation for Clean Energy: Government/UtilityPerspective • Environmental Concerns • Greenhouse gas emissions related to global climate change • Local pollution of air, water and land • Economic Competitiveness • Improved productivity • Reduce probability that fuel cost spikes lead to recession • Reduce reliance on imported fuels • Defer Investment in (Electrical) Infrastructure • Reduce (peak) demands on generation, transmission and distribution infrastructure (demand-side management)Image: RER 98

Energy Efficiency as an Element of a Clean EnergyProject • “Behaviour modification conservation”: Deliberate avoidance of energy- intensive activities (by modifying habits and mode of operation) • Efficiency: Reduce energy required to satisfy a given set of activities • Reduce waste in end-use of heat, hot water, compressed air, light, etc. • More efficient conversion of fuels and electricity into end-use form • Improve supply • Switching to cleaner fuels • Using renewable energyImage: Dockside Green 99

How to Approach Energy Efficiency Projects 2) How is “fuel” converted 1) What are to end product? 3) When/where iscosts for “fuel”? end product consumed?Fuel End-useUImndperorsvteand6) Optimize supply 5) Maximize efficiency 4) Reduce Waste 100