7106_T5 VTM Training Day 1

Multiple Benefits:Quality Assurance and ReliabilityBenefit Area Energy Efficiency LinkagesReduced Operator Error  Improved lighting improved inspection efficacy  Improve ambient conditions (lower temperatures / humidity, etc.) reduces operator fatigue  Robust energy management and energy KPIs promotes reliability cultureMaintenance  Energy management best practice encourages predictiveServices O&M  Energy sub-metering data can help identify maintenance issues  Innovative energy efficiency finance solutions often includes O&M outsourcing to ensure performance  Closer vendor relationships can support internal case for technology investment 51

Multiple Benefits :Environmental ComplianceMitigation Area Energy Efficiency LinkagesImproved Sewage Treatment  Treatment process technology and control improvements – especially blower retrofitsReduction of Water Use  Hot water load stream cyclingEnvironmental Emissions  Reduction of soft water useExcessive sound levels  Increasing cycles of concentration in process  Reduction of pump energy through improved water/process interlock  Change onsite power generation technology (e.g. coal to gas)  Combined heat an power / biomass gasification systems  Process improvements can reduce environmental emissions (CFC’s, mercury, thermal, etc.)  Waste feedstock re-use to reduce process energy intensity (e.g. use of slag in cement)  Vibration=energy loss 52

Multiple Benefits :Health and Human SafetyMitigation Area Energy Efficiency LinkagesEnergized Fluid Burns  Improved pipe insulationAmbient Air Quality  Steam / hot water / compressed air leaksUndiscovered Operational Hazards  Hazardous emission management for energy recovery –Excessive sound levels reduce exposurePoor lighting  Reduced hot air / moisture mixing – reduce ambient air mixing  Improved operating conditions and health  Predictive maintenance  Sub-metering to monitor energy waste can uncover hazards • Reduction of vibrations reduces energy loss • Modernizing technology (e.g. blowers) can reduce sound emissions • LED lights can improve visibility, reduce mistakes, reduce eye strain 53

Multiple benefits:Health and Human SafetyAdditional Points to Consider • Health and human safety affect quality control and hence costs • Large corporate customers often put a high value on supply chain sustainability issues – health and human safety actions can pay off in value to client’s CSR profile • Industrial accidents from poorly maintained equipment can induce large costs from production interruption – this should be used as a savings associated with energy management and energy efficiency retrofits • Organize with industry peers to identify and develop more sophisticated, supply chain integrated energy efficiency measures to solicit funding from top of the chain corporate customers 54

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Pakistan EE&RE Finance Landscape 56

Types of Financial Instruments• Cash Equity Cash• Bank Loans financing• Vendor Financing• Preferred (SOFT) LOANS Dedicated Corporate• Capital Lease EE funds loans• Operating Lease• Equity Fund Lease Vendor• Collateral financing• Corporate Guarantee• Letter of Credit Soft and• Credit Risk Guarantee Scheme concessi• ESCO Loan Buyback• Assignment Of Payment onal loans 57

Green Banking Guidelines• State Bank of Pakistan introduced Green Banking Guidelines (GBGs) in 2017 and gave banks & development finance institutions (DFIs) a year to comply.• The guidelines encourage banks to lend generously to environment-friendly projects• All banks and DFIs required to make their infrastructure and operations environment-friendly.• Central bank wants banks and DFIs to create green financing portfolios for making loans for alternative energy , sewage treatment, water conservation, waste disposal, wastewater treatment and public transport• It calls upon banks to consider earmarking a certain % of their overall financing & investment portfolio as a dedicated fund for green investment• Aims at a culture change within banks to encourage sustainability including EE & RE 58

State Bank scheme for RE• Category 1; financing will be provided for large RE projects 1 MW to 50 MW).• Category 2; financing will be provided for small scale RE solutions (< 1 MW) to promote RE among consumers following NEPRA’s Net Metering Regulations 2015.• Scheme available for power generated by using alternative / renewable energy sources (solar, wind, hydro, biogas, bio-fuels, bagasse cogeneration, and geothermal as fuel). Financing for civil works has also been allowed to promote Project Financing• Financing facilities will be provided through all commercial banks and development finance institutions (DFls).• Tenor of loan extended from 10 to 12 years, including maximum grace period of two years. Banks’ spread under the scheme has been increased by 100 bps (reaching 4.00 percent). 59

Fiscal Incentives• There is no tax on income derived from generation of electricity since renewable energy and all power projects are exempted from income tax in Pakistan• Equipment for renewable energy projects is exempted from import duties• Solar projects are not exempt from sales tax, but in the case of the sale of electricity, NEPRA has provided that this can be passed through to the off-taker under the EPA. 60

National Energy Conservation Fund• National Energy Conservation Fund (ECF) initially $3m.• Active revolving fund• Intends to offer soft loans for SMEs for EE• Extends funds to leasing institutions to promote EE equipment• ECF lends with management fee of 3-4%• Financial support for EE lighting 61

Other Financial Supports• Technology Up-grading fund for Textile Sector • In effect from 1/7/16 to 30/6/19 • Rs 6bn • Measures related to improvement in productivity, EE and environmental compliance eligible for support• Sindh Enterprise Development Fund (SEDF) has launched a Balancing, Modernization & Restructuring scheme offering soft loans to rice mills to encourage them to replace outdated machinery with state of the art equipment.• Should reduce operational losses by 15% and make rice mills more energy efficient • Loan mark up is 9% with the mill charged 2.75% and the remaining 6.25% born by the SEDF • SEDF will provide partial credit guarantee cover of 30% to banks against outstanding loans • Financing for max of 5 years with max borrowing PKR 10m 62

Other sources of finance• Development Banks • Funds for EE with enhanced borrowing conditions – typically >$2m • African Development Bank • Islamic Development Bank • Inter-American Development Bank • Asian Development Bank• International Financial Institutions • UNDP and UNEP - can tap in the resource of the Global Environment Fund (GEF) for grant. • World Bank • IFC (private sector oriented) • EBRD 63

Other sources of finance• Bilateral Development Agencies • Available funds for specific projects linked to sustainable development objectives • Canadian International Development Agency (CIDA) • Danish Int’l Development Agency (DANIDA – Denmark) • United States Agency for Int’l Development (USAID – USA) • GiZ, Germany • AFD, France• Export Credit Agencies • Support exports and overseas business opportunities for domestic firms • Ex-Im banks (US, China, India) • Export Development Canada • Export Credit Guarantee Department (UK) • Japan Bank for International Cooperation 64

Other sources of finance• Development and environmental funds • Global Environment Facility (GEF) • Arab Fund for Economic and Social Development • Fond Français pour l’Environnement Mondial (FFEM) • European Energy Efficiency Fund (EEE-F)• Leasing Companies• Carbon traders • Purchase CERs - Provide cash flow to project once implemented• Carbon Trading – global scale • Kyoto Protocol (127 countries) - Clean development mechanism (almost closed except for least developed countries) - One country buys carbon from another at a negotiable rate • For a project - Grant repayable on CO2 reduced - Current trading: USD 3 to 5 per ton of CO2 65

Module 2Value Add Services for EE&RE 66

Module 3Standards Based Energy Management 67

What is ISO50001?• Management systems all based on PDCA – Plan Do Check Act• ISO is the International Standards Organisation which develops standardised approaches to common problems developed by international experts from many countries• Have developed 9001 Quality, 14001 Environmental, 18001 Health and Safety• 50001 published in 2011• Over 20,000 companies certified (end 2016) 68

Unstructured approach to energy management Costs high Costs high again: = Audit Where’s that last audit? Waste cutting, some investment Costs Here we go again! +5% 0 Under control.-5%-10% Years 5-15%-20%-25% 0 69

Structured Approach Senior managementcommit to programme Costs Initial savings +5% sustained 0-5% Housekeeping first – then-10% investment-15%-20% Becomes company culture-25% 0 Investment Years 3 70

3 Elements to systematic Energy ManagementOrganisational Balance all 3 for the optimum outcome Management commitment,resources, planning Technical PeopleUnderstanding Develop an your energy energyusage and how efficiency to control it culture 71

Greater savings through formal Energy Management 72

No/low cost savings due to formal EnMS• Egyptian Steel Company – saved 1.6% of total energy consumption within 6 months with minimal capital investment• Egyptian Petrochemical Company – saved 3% of total energy consumption within 6 months with no capital investment• Iranian Petrochemical Company – saved 2% electricity and 8% natural gas within the first year through improved operational control• Turkish packaging company saved 4.5% of electricity consumption in year 1 with low/no cost measures• Turkish textile company saved 5.5% of total energy consumption in year 1 with low/no cost measures• Volvo construction equipment saved 25% electricity – 20.1 GWh, $2m - through reducing idle electricity consumption 73

5 Steps to EnMS & ISO50001• Step 1 – Management Commitment• Step 2 – Plan• Step 3 – Do• Step 4 – Check• Step 5 - Act 74

Step 1 – Management CommitmentTop Level Management• Develop, publish and promote Energy Policy – stating senior management commitment to managing energy• Provide resources needed to improve energy performance – mainly human resources but also capital where it makes business sense• Identify scope and boundaries of EnMS (what will we manage?)• Appoint Management Representative• Monitor progress regularly to ensure targets are achieved – make adjustments if necessary• Conduct management review of energy management system 75

Human Resource Requirements – Example energyteam Management Representative Energy ManagerProduction Quality Maintenance Environmental Finance Manager Manager Manager Manager 76

Step 2 - PLAN• Analyse Energy consumption and establish Baseline • How much energy do we consume and at what cost? • Consumption and cost trends – past, present and future • What drives energy consumption up & down? • Develop Energy Performance Indicators (EnPIs) • What are the Significant Energy Uses (SEUs)• For SEUs: • Identify critical operational and maintenance parameters • Identify critical people • Identify Opportunities for Improvement • Set Objectives, Targets and Action Plans for performance improvement 77

PLAN ISO50001:2011 78

Objectives, Targets and Action PlansObjectives Targets Action Plans• Longer term – • Specific • What? maybe 5 years • Measurable • Who? • Achievable • When?• Specific • Relevant • Is it complete?• Consistent with • Time Based • Was it • Support the the Policy successful? objectives 79

Step 3 - DO• Implement Awareness & Behavioural Change initiatives• Implement Training Plans focussed on SEUs• Develop necessary Documentation – Procedures & Records• Implement Action Plans• Monitor Progress via EnPIs• Address any Legal compliance issues relating to Energy• Consider Energy Efficiency in Capital Investment decisions - new processes, buildings etc.• Consider Energy Efficiency in Procurement decisions for all equipment & services affecting energy consumption 80

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Step 4 - CHECK• Are we doing what we said we would do? • Check implementation of action plans, training plans etc.• Does it comply with the standard? • Check for non conformances against ISO50001• Is it working? • Are action plans delivering the planned savings • Do EnPIs are showing improvement• Carry out formal Management Review 82

Step 5 - ACT• As per results of checking phase – correct what’s wrong – prevent it happening in the future• Continual improvement – develop new action plans and targets, identify new opportunities 83

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Leveraging formal energy management forbusiness opportunities• Implementing ISO50001• Documentation preparation• Internal Auditing• Monitoring & Targeting• Energy Monitoring Systems• Instrumentation• System tune ups• Energy efficiency projects 85

Value add for VTMs:50001 requires• Measurement (meters)• Monitoring (monitoring system software)• Performance improvement (VSDs, insulation, CHP, leak detection (air, water, steam) heat recovery,• Requires EE to be taken into account in procurement and design• Auditing (Energy audits and system audits)• EnMS implementation 86

Exercise – Main elements of Energy ManagementSystems 87

Module 4Energy Auditing 88

Energy Audit – ISO Definition• 3.4 energy audit• systematic analysis of energy use and energy consumption of audited objects, in order to identify, quantify and report on the opportunities for improved energy performance.• Key Objectives: • Determine energy end uses (i.e. what is it used for?) • Determine how much energy is being used • Determine The drivers for energy use • Determine energy performance of end uses or sub-systems 89

Introduction to ISO50002• An energy audit or assessment comprises a detailed review of the energy performance of an organization, of a process, or both.• It is typically based on appropriate measurement and observation of energy uses and consumption.• Audit outputs typically include information on current consumption and performance, and they can be accompanied by a series of ranked recommendations for improvement in terms of energy performance.• Energy audits are planned and conducted as part of the identification and prioritization of opportunities to improve energy performance 90

Energy Audit :Typical Energy Audit Steps ISO50002:2014 91

Energy Auditing: Key Technical ObjectiveEnergy Related Inputs Factory Scope Outputs Water ProductsEnergy Energy Balance WasteMaterials Emissions 92

Energy Auditing: Key Technical ObjectiveEnergy Related Inputs Outputs Water Products Sub-System Scope Waste Energy EmissionsMaterials Energy Balance 93

Energy Audit: Drivers of Energy Use MaintenanceWeather Equipment Type / SpecificationsProduct Volume / Type Schedule 94

Types and Uses of Energy AuditsAdvanced Feasibility Study / Large Facility / Complex EnergySub-System (ISO 50002 - Level 3 Energy Audit) Measurement & Verification (M&V) of Savings Detailed Feasibility Study / Complex Facility (ISO 50002 - Level 2 Energy Audit) Pre-Feasibility Study / Simple Facility (ISO 50002 - Level 1 Energy Audit)Source: Adapted from Natural Resources Canada,2005, Retscreen Clean Energy Project AnalysisTextbook 95

Selecting the Audit DetailKey Points• Level 1 energy audit is low cost investment and typically used for planning a more detailed audit or as a stand alone audit on simple facilities• More detailed audits should not be performed until a firm commitment to project implementation under agreed upon investment qualification criteria has been made• The audit detail should depend on the current risk level of the project and / or accuracy of the energy balance required. Risks depends on: • Complexity of the facility and measures • Availability of funding • Accuracy of data used to analyze opportunities and develop design concepts • Capacity of resource available to implement projects 96

Energy Management:Involvement of industry workforce• Relevance to workforce • The industry workforce at operational levels need to be motivated to adopt new approach. They often consider it additional workload on their already busy schedule in handling routine operations. • Most Energy Managers are usually utility or production operations staff members. The Energy Manager needs to be a highly motivated individual with full support from higher management. • Senior management on other hand is more interested to adopt a systematic approach. 97

ENERGY AUDIT DETAIL LEVELSEnergy Audit Levels Level I Audit • -30% savings, +30% costs accuracy(Walk-Through Audit) • Monitoring • Scoping • Qualification Level III Audit • -10% savings, +10% costs accuracy(Detailed Energy Audit) • EE Project Investment Targeting • Investment Validation • Detailed Design & Procurement SupportInvestment Grade Audit • -5% savings, +5% costs accuracy • Mitigating credit risk of project • Replaces Level III audit 98

Baseline ElementsThe baseline consists of the following elements: › A consumption and demand table for each energy type › The independent-variable data that correspond to the selected consumption invoice period › The operation modes of the facility for the selected period › Other adjustment factors 99

A Notional Baseline Baseline + AdjustmentsEnergy1,000,000 Savings 750,000 Reporting Period 500,000 Baseline Period 250,000 Metered Energy 100