Industrial Utility Efficiency

# Determining the Economic Value of Compressed Air Measurement Systems

A common adage that has been quoted many times in this journal is: “If you don’t measure it, you can’t manage it.” This is partly true. It assumes that managers are willing and able to manage the costs and reliability of their compressed air system. Without data, however, they can’t do an effective job. But because managers are at times already overwhelmed with data, more data doesn’t automatically make them a better manager. A better way of saying it is: “Appropriate measurement can make you a better manager.”

For this article, I will focus on the energy cost of a compressed air system, so the measurement system will need to justify itself by helping to manage cost. But what do we mean by “managing cost?” Usually costs are managed at the project level. In other words, they are capital costs. Project engineers are held to very tight budgeting constraints for capital costs. They have a multi-stage approval process, and are very methodical. If that project is a project justified by energy savings, it has one other important number — energy savings. Who is watching over those costs? Is there anyone in the entire organization charged with making sure project energy cost savings are actually sustained over time? In some organizations, this is beginning to show up in actual job descriptions. For instance, the job title of “energy manager.” In the past, energy managers were more concerned with energy purchasing (getting the best deal for each energy source) and capitalizing on incentives. Now, more and more energy managers are equally concerned with maintaining energy savings at the process level.

### Supporting Your House of Cards

Without process-level energy management, the entire house of cards falls. If all of your projects are unmanaged once they are started up, then you can’t manage the aggregate energy used at the meter. The energy savings numbers become merely an abstraction, a way to get what you really want — an incentive check or a project approval. Once you get that, there might be little incentive to determine if you’re actually saving the money you thought you were. This article will be very helpful for those who want or need to know.

Properly implemented, a compressed air measurement system is partly an insurance policy. It is a way to ensure that you are still getting what you initially thought you were going to get. In other words, it is a way to prevent your project benefits from evaporating into thin air. Beyond being an insurance policy, it is a management tool for maintaining and increasing system reliability, which can pay for the project quicker than sustained energy savings.

This article will show one method to place a real dollar value on a compressed air measurement system. Using an actual example, it will show you how to define an appropriate budget for a measurement system. Subsequent articles will explain how to select components, design systems, and use the data from them.

### Definitions

Before I launch into the article, let me define several key terms:

Energy Management Information System (EMIS): “Energy Management Information Systems (EMIS) are software tools that store, analyze, and display energy consumption data.”1 This is in contrast to Energy Management Control Systems (EMCS) that include control.

Supervisory Control and Data Acquisition System (SCADA): An industrial computer system that monitors and controls a process.

Net Present Value: The current worth of a future sum of money or stream of cash flows given a specified rate of return, less the initial investment. Future cash flows are discounted at the discount rate, and the higher the discount rate, the lower the present value of the future cash flows.

Key Performance Indicator (KPI): This is a calculated value, based on real-time monitoring, that indicates the energy (or other) performance of a system.

Commissioning: “Commissioning ensures that the new building [in this case, process] operates initially as the owner intended and that building staff are prepared to operate and maintain its systems and equipment.”2

It can also mean to verify the energy savings of a project, but technically that is measurement and verification.

Measurement and Verification (M&V): The process for quantifying savings delivered by an energy conservation measure.

### Recommended Methodology for Valuing a Compressed Air EMIS

In a nutshell, I recommend an economic analysis of the declining savings that will probably occur without an effective EMIS. The recommended steps are as follows:

1. Acknowledge that compressed air projects decline in savings over time. Design your project to minimize slippage.
2. Properly commission your compressed air improvement project.
3. Establish KPIs and benchmarks from commissioning data.
4. Calculate the net present value of the project over the life of the project.
5. Calculate the net present value of the project with the declining value of energy savings, if the project is unmanaged.
6. Value the measurement and management system budget as a percentage of the difference between the two.

### Compressed Air Project Savings Can “Slip Away”

I know we all love to work in that imaginary world where our spreadsheets are “reality,” and we don’t want to be confused with the facts. Then we step into that other world where chaos reigns. Most of the time, it is just too much work to connect the dots between the two. Let me help you a bit by describing one project and why its energy savings declined.

### Project Example: Paper Mill Integration

This project integrated three 700-hp centrifugal compressors, consolidated dryers, and added a screw compressor (See Figure 1).

Figure 1: Large System Schematic.

 Projected Savings vs. Realized Savings After 5 Years Projected Energy Savings 5,500,000 kWh/yr ($220k/yr) Actual Energy Savings (2009) 4,200,000 kWh/yr ($168k/yr) Project Cost $1,000,000 Reduced Savings (2014) 2,400,000 kWh/yr ($96k/yr) Slippage Over 5 Years $72k/yr  Time Until Savings Disappear Additional Slippage per Year$14k Years Until Savings are Gone 7 more

A million-dollar project’s savings can evaporate in 12 years or less. Fortunately, there are other project benefits. However, the one that was used to finance the project will be gone. Currently, we are tuning up the system, and hope to not only recover the lost savings, but improve from the commissioned state by 1,200,000 kWh/yr ($48k/yr), or over 10 percent. ### What Caused the Savings to Evaporate? In this case, the following reasons became evident during the tune-up assessment: • Staff Turnover: The programmer who set up the PLC controls left the company, and the new staff members were not aware of the correct algorithm. • Incomplete Implementation: Several items relating to comprehensive control were not implemented in the initial project, which led to its being “fragile” to small changes. It was not a “robust” design. • Lack of Monitoring System: They had current and flow meters, but no total system performance metric. They had no idea that all four compressors did not need to run. • Demand-Side Measures Were Undone: The blowers used for air-bar replacement were not reliable. Inlet filters clogged. My point is that compressed air systems are not static. They will slip in savings — period. It is simply a matter of time. If it isn’t for the above reasons, some other factors will raise their ugly heads. The world will never be perfect, even if the project design seems to be perfect. You need a measurement and management system in place to correct it when it happens. ### Steps to Properly Commission Your Compressed Air Project 1. Comprehensively Measure the System This doesn’t mean to overdo it. It just means that every compressor needs to be monitored for energy input, and there needs to be some reasonable metric that total flow can be derived from. Although it is ideal to have monitoring embedded into the capital project, it is hard to get accomplished with all the other aspects of the project. The minimum measurement is as follows: • Compressor current (power is better but not always practical). • Indication of compressor flow percent: This depends on the compressor. An actual flow meter is preferred, but not always possible during commissioning. • Pressure at the compressor control point(s): Pressure in a different location will not tell you how the compressor controls are actually performing. 2. Calculate System Performance The following can be derived from the data: • System total flow and power (See Figure 2). • System efficiency curve — power versus flow: This shows the “turn-down” of the system. Does it shave power as flow reduces? (See Figure 3). • Control plots: These show if the compressor load controls are operating correctly and efficiently (See Figure 4). Figure 2: Overall System Performance Data ##### Click here to enlarge Figure 3: System Efficiency Curve ##### Click here to enlarge Figure 4: Compressor Controls Plot ##### Click here to enlarge ### Establish Key Performance Indicators (KPIs) and Benchmarks From Commissioning Data 1. The following KPIs were developed from the commissioning data:  Total Flow 5767 scfm Total Power 1225 kW (total, incl. dryers) System Efficiency 4.71 scfm/kW System Efficiency Slope 15.5 kW/100 scfm The Dead Load Was Unkown There was no downtime in the dataset. 2. The following benchmarks are available for this type of system and load:  System Efficiency 5.5 scfm/kW for an optimal system System Efficiency Slope 18.2 kW/100 scfm for an optimal system ### Calculate Net Present Value of Project with Initial Energy Savings Energy savings are basically a cash-flow stream. You want to keep it flowing full-bore, providing benefit to your bottom line. See Table 1 for the project economics. I want to highlight one number, the net present value (NPV) of the project, which is \$674k.

Table 1: Original Project Economics

This project’s stream is drying up, and by year 12, it will be a dry ditch. See Table 2 for the project economics. I want to highlight the NPV of the project, which is \$300k. That is \$374k less than the initial projections. If savings are increased by just 3 percent /year, that goes up to \$508k. Table 2: Declining Savings Project Economics Click here to enlarge ### Determine Value for Measurement and Management System Budget So how much would you pay to greatly increase the probability of not losing \$400k, or increasing the chance of gaining another \$100k? In my view, it is worth from 10 to 20 percent of that, or \$50 to \\$100k. For a system this size, that is a more than adequate budget for a robust compressed air SCADA system that includes an EMIS. Training needs to be included in that budget so it becomes part of your management system. The cost of integrating it into your exiting IT system also needs to be included. It can be spent through direct hardware, software and staffing within your own facility’s department. It can also be done completely separately, even as a performance contract, with leased equipment in conjunction with a service contract. At the end of the day, it’s your money, and you make the call on how to spend it. If it were mine, I would want to do it right by installing a robust SCADA with an EMIS overlay. I would use it as a model for other processes in the plant.

References

1Page i, Inventory of Industrial Energy Management Information Systems (EMIS) for M&V Applications. Prepared by PECI for the Northwest Energy Efficiency Alliance. June 2014

2Building Commissioning. Building Technology and Urban Systems Division, Energy Technologies Area, Berkeley Lab, Department of Energy. http://cx.lbl.gov/cx.html

For more information, contact Tim Dugan, P.E., President, Compression Engineering Corporation, tel: (503) 520-0700 or visit www.comp-eng.com.