MODULE

2
ENERGY SYSTEMS AND ITS ANALYSIS
Energy storage systems: Thermal energy storage methods, Energy
saving, 1hermal energy storage systems
Energy Management: Principles of Energy Management, Energy
demand estimation, Energy pricing
Energy Audit: Purpose, Methodology with respect to process
Industries, Characteristic method employed in Certain Energy
Intensive Industries
Economic Analysis: Scope, Characterization of an Investment
Project
2.1 INTRODUCTION
Energy storage (ES) has only recently been developed to a point
where it can have a significant impact on modern technology. In
particular, ES is crítically important to the success of any inter-
mittent energy source in meeting demand. For example, the need
for storage for solar energy applications is severe, especially when
solar energy is least available, namely, in winter.

ES systems can contribute significantlyto meeting

society's needs
for more efficient, environmentally benign energy use in building
heating and cooling, aerospace power, and utility applications. The
use of ES systems often results in such significant benefits as
reduced energy costs
reduced energy consumption;
improved indoor air quality;
increased flexibility of operation; and
reduced initial and maintenance costs.
 ENERGY SYSTEMS AND ITs ANALYSIs -17
In addition, Dincer (1997) point out some further advantages of
ES
reduced equipment size;
more etficient and etfective utilization of
equipment,
conservation of fossil fuels (by facilitating more efficient
energy use and/or fuel substitution); and
reduced pollutant emissions (e.g., CO, and chlorofluoro
carbons (CFCs).

2.2 ENERGY DEMAND

Energy demand in the commercial, industrial, public, residential,
and utility sectors varies on a daily, weekly, and seasonal basis.
Ideally, these demands are matched by various energy-conversion
systems that operate synergistically. Peak hours are the most difficult
and expensive to supply. Peak electrical demands are generally met
by conventional gas turbines or diesel generators, which are reliant
on costly and relatively scarce oil or gas. ES provides an alternative
method of supplying peak energy demands. Likewise, ES systems
can improve the operation of cogeneration, solar, wind, and run-of-
river hydro facilities. Some details on these ES applications follow

be used to
Utility. Relatively inexpensive base-load electricity or seasonal
can

charge ES systems during evening or off-peak weekly

periods. The electricity is then used during peak periods,
reducing
the reliance on conventional gas and oil peaking generators.

industrial
waste heat from various
Industry. High-temperature
processes can be stored for use in preheating and other heating

operations.
heat and
Cogeneration. Since the closely coupled production of
matches demand exactly,
Clectricity by a cogeneration system rarely use.
heat can be stored for subsequent
EXcess electricity or

these can
systems
Wind and run-of-river hydro. Conceivably,
electrical storage system
operate around the clock, charging an
 18 ENERGY AND ENVIRONMENT
during low-demand hours and later using that electricity for peakind.
king
purposes. ES increases the capacity factor for these devices, usually
enhancing their economic value.

Solar energy systems. By storing excess solar energy received

on sunny days for use on cloudy days or at night, ES systems Can
increase the capacity factor of solar energy systems.

2.3 ENERGY STORAGE

Mechanical and hydraulic ES systems usually store energy
by converting electricity into energy of compression, elevation, or
rotation. Pumped storage is proven, but quite limited in its applica-
bility by site considerations. Compressed-air ES has been tried
successfully in Europe, although limited applications appear in the
United States. This concept can be applied on a large scale using
depleted natural gas fields for the storage reservoir. Alternatively,
energy can be stored chemically as hydrogen in exhausted gas
fields. Energy of rotation can be stored in flywheels, but advanced
designs with high-tensile materials appear to be needed to reduce
the price and volume of storage. A substantial energy penalty of up
to 50% is generally incurred by mechanical and
hydraulic systems
in a complete storage cycle because of inefficiencies.

Reversible chemical reactions can also be used to store energy.

There is a growing interest in storing low-temperature heat in
chemical form, but practical systems have not yet emerged. Another
idea in the same
category is the storage of hydrogen in meta
hydrides (lanthanum, for instance). Tests of this idea are ongoin

Electrochemical ES systems have better turnaround efficiencies

but very high
prices. Intensive research is now directed towa
improving batteries, particularly by lowering their ht-to-
storage capacity ratios, as needed in many vehicle
weign As
a successor to application
the lead-acid battery, sodium-sulfur and
sulfide alternatives, lithiun
among others, are being tested. A different yP pe
of electrochemical
system is the redox flow cell, so nameu
charging and discharging is achieved through reductioDn and
 ENERGY SYSTEMS AND ITS ANALYSIS 19
Oxidation reactions occurring in fluids stored in two separate tanks.
To make the leading candidate (an iron redox system) competitive
with today's batteries, its price would have to be at least halved.

Thermal energy storage (TES) systems are varied, and

include designed containers, underground aquifers and soils and
lakes, bricks and ingots. Some systems using bricks are operating
heat.
in Europe. In these systems, energy is stored as sensible
of
Alternatively, thermal energy can be stored in the latent heat
melting in such materials as salts or paraffin. Latent storages
can reduce the volume of the storage
device by as much as 100

times, but after several decades of research many of their practical

not been solved. Finally,electric energy can be
problems have still of
stored in superconducting magnetic systems, although the costs
such systems are high.

areas in the field of ES

Some current research and development
are as follows:
ES and conversion systems with phase
advanced
transformation, chemical
and electro chemical reactions;
well as
inside a single cell as
fundamental phenomena
into vehicles;
of whole battery packs
engineering integration
high-dielectric-constant polymers;
high K composites for capacitors; effects):
interfaces(low-andhigh-frequency
polymer electrode
integrated polymer capacitors.

METHODS
2.4 ENERGY STORAGE If we
storage is a crucial aspect.
For many energy technologies, embedded
of the energy
fuels as the storage
consider the storage of amounts of
example. The massive
an excellent
t h e m , then oil is
economic
necessary for
the reliable,
petroleum stored worldwide are
fuel oil, and petrochemicals.
availability of gasoline,
20
ENERGY AND ENVIRONMENT
Energy storage methods

Mechanical Chemical energy Biological Magnetic Thermal Energy

energy storage storage storage storage Storage
Electrochemical - Sensible heat
Hydrostorage
(pumped storage batteries storage
Latent heat
Compressed Organic
molecular storage storage
air storage
Flywheels

methods
Fig 2.1 A classification of energy storage
2.4.1 MECHANICAL ENERGY STORAGE
Mechanical energy may be stored as the kinetic energy of linear
or rotational motion, as the potential energy in an elevated object.
as the compression or strain energy of an elastic material, or as the
compression energy in a gas. It is difficult to store large quantities
of energy in linear motion because one would have to chase after
the storage medium continually. However, it is quite simple to
store rotational kinetic energy. In fact, the potter's wheel, perhaps
the first form of ES used by man, was developed several thousand
years ago and is still being used. As seen in Figure 2.1, there are
three main mechanical storage types that we discuss in this section:
hydrostorage, compressed-air storage, and flywheels.

2.4.2 HYDROSTORAGE (PUMPED STORAGE)

Upper reservoir: Like a conventional hydropower plant, a dam
creates a reservoir. The water in this reservoir flows through the
hydropower plant to create electricity. Using a reversible turbine.
the plant can pump water back to the
upper reservoir. This is done
in off-peak hours.
Essentially, second reservoir refills the upper
the
reservoir.
Lower reservoir: Water
exiting the hydropower plant flows nto
a lower reservoir rather than
re-entering the river and flowing
downstream.
Reversible turbine pump: Water back to the
done in off-peak hours. upper reservoir, this i3
By pumping water back to upper
plant has more water to generate reservoil.
electricity during periods of peas
consumption.
 ENERGY SYSTEMS AND ITs ANALYSIS
Head water pond Dam

Penstock Power housc with

pumps & turbines
Upper reservoir
Pump flow Head

Turbine Flow Tail water

pond Dam

Lower reservoir
Fig 2.2 Pump Storage
2.4.3 COMPRESSED-AIR STORAGE
In a compressed-air ES system, air is compressed during off-
peak hours and stored in large underground reservoirs, which may
be naturally occurring caverns, salt domes, abandoned mine shafts,
depleted gas and oil fields, or man-made caverns. During peak
hours, the air is released to drive a gas turbine generator.

Power transmission
Power transmission
Power hOuse
Powerhouse

Compensating
reservoir
Om
Generation
Underground
A Generation
Water shaft Pumping9 Air pipe
Air pipe
V Pumping
Constant pressure 50 bar
-650 m
Max pressure: 70 bar
Min pressure: 40 bar Dome storage MIxed rCk cavern

b)

Fig 2.3 Compresses air ES systems

(a) Sliding Pressure System
System
(b) Compensated Pressure

compress to air to store

technique used by such a system
The
In a conventional gas turbine.
Cnergy is relatively straightforward. two-thirds of the grosSs
gn-pressure hot gas is supplied, and about
ES
power output is used to drive the compressor. A compressed-air
 ENERGYAND ENVIRONMENT
22
and the turbine and onerato.
SYstem decouples the compressor air e
hours to produce compressed
former during ott-1peak hich
caverns, old or gas
oil wells, or poroue
isstored in natural
Is advantageous when an appreciahl.
formations. Such ES storage
is carried by nuclear stations, and wha
part of the power load
suitable spent salt caverns make it easy to build the compressed gas

reservoirs.

2.4.4 FLYWHEELS
The flywheel, a wheel of relatively large mass that stores
rotational kinetic energy, has long been used to smooth out the
shaft power output from one- or two-cycle (stroke) engines and to
this device, and of the other
adjust for uneven loads. New uses of
two mechanical storage techniques discussed in this section, take
advantage of the ability of the electric motor/generator operation
to reverse. Such a device can be designed to work both as a motor
when driven by electric power and as a generator when driven by
mechanical power.

Axes of Rotation
Upper
Magnetic
Bearings
Motor/
Generator a

Rotor
Protective
Shield

Vacuum Lower
Pump wwwwwws
Magnetic
Bearings

Fig 2.4 Fywheels Storage Energy

 ENERGY SYSTEMS AND ITS ANALYSIS 23
2.4.5 CHEMICAL ENERGY STORAGE
Energy may be stored in systems
chemical compounds that release or absorb composed of one or more
energy when they react
to form other
compounds. The most familiar chemical ES device
is the battery. Energy stored in batteries is
frequently referred to as
electrochemical energy because chemical reactions in the battery
are caused by electrical energy and
subsequently produce electrical
energy
2.4.6 ELECTROCHEMICAL BATTERIES
Batteries chemically store energy and release it as electric
energy on demand. Batteries are a stable form of storage and can
provide high energy and power densities, such as those needed
for transportation. The lead-sulfuric acid battery has long been
considered to be advantageous and has been widely applied.
Recently, fuel cells have demonstrated the ability to act as large
scale chemical storages like batteries.

2.4.7 ORGANIC MOLECULAR STORAGE

seasonal and
The intermittent availability of solar radiation, its
will limit
geographical variations, and its relatively low intensity.
resource until it can be converted
to forms
the exploitation of that
and transported. However.
of energy that can be efficiently stored
available for the utilization of
most technologies that are presently
conversion of solar radiation to
solar energy depend on the direct
both of which are dificult to
store.
low-grade heat or electricity,

2.4.8 BIOLOGICAL STORAGE

in chemical form
the storage of energy
Biological storage is important
and is considered an

by means of biological processes

of time.
method of storage for long periods
24 ENERGY AND ENVIRONMENT

2.4.9 MAGNETIC STORAGE

Energy can b e stored in a magnetic field (e.g., in 4

electromagnet). An advanced scheme that employs superconducu

materials Is under development. At temperatures ncar absolute zeio,
certain metals have almost no electrical resistance
and thus 1arge
tnis
circulate in them with almost no losses. Because
Currents can
in converln8
scheme stores DC electricity, some losses are incurred
and energy is used to d r v e
standard AC power to and from DC, some
low temperaturesS
the retrigeration device to maintain the requisite
Overall storage efficiencies of 80-90% are
anticipated for these
superconducting magnetic ES systems.

two main purposes. First, large

Magnetic storage is considered for
of storing 1000-10,000 MWh of
superconducting magnets capable
for central
could be attractive as load-leveling devices
electricity
be cost-effective at such capacities. Second,
power stations, and may
in the 10-kWh range may
smaller magnets with storage capacities
in smoothing out transmission line loads, to better
be cost-effective
match short-term customer demands and generating equipment
that can help in
characteristics. A small superconducting magnet
at the far end of a transmission line
meeting customer peak needs
could increase the effective load that the line can serve by as much
offset in whole or part the
as 25%, producing cost savings that could
additional costs of expanding the transmission line capability.

2.5 THERMAL ENERGY STORAGE (TES)

2.5.1 WHY THERMAL STORAGE
Primary energy source -Hydro, Gas, Coal and Nuclear fuels
transformed directly into Electricity as a power source for
industrial and household appliances.
In principle, electricity generation has to be balanced with
the exact time of the consunption to satisfy the fluctuating
demand at the lowest possible cost.

Fluctuating seasonal and specific time demands outside their

Control.
 ENERGY SYSTEMS AND ITS ANALYSIS 25
Utility companies generate clectricity using different types o
primary energy sources to offset peak.
Almost every modern society has a mid-day or late evening
peak electricity demand
This essential demand force utility companies to build new
additional peak demand power stations considerable
investment that operate only during peak demand periods
and shut down the rest of the time.
They use expensive primary energy sources and are subject
to the standard cost of maintenance, conscquently production
cost per kWh is 3-4 tinmes higher than the standard base load
electricity production cost.

2.5.2 DEFINITION OF THERMAL STORAGE

Charging Storing Discharging

Time

charging (lej), storing

in a general TES system:
Fig 2.S The three processes is infiltrating and is
Here the heat Ql
and discharging (righi). released, it will be
toward
middle), cold thermal storage. 1fit
is
positive in value for a will be negative. The
heat flow is
ilustraled for
the
ne surroundings and Ql all three processes
but c a n o c c u r in
Storing process,

at various
applications Storage
Thermal storage for HVAC
or cooling.
associated with heating
Temperatures
for later use ,
hours,
T h e collection of heat from solar energy multiuser
individual building,
months later, at
days or many
building
 ENERGY AND ENVIRONMENr

between
between day time and an

ed
be store
balanced

26 d e m a n d can
be
from
solar
llectors
collectors
c an
can red
stor
E x : e n e r g y

summer
heat
A n d cold
And
obtained fron
obtained
ob
winter.
winter.
time; in
night for use
s u m m e r
summer
air
air
c
coon
nd tioning.
diittiio
on i n g .

ovided for
seasonally
inter
provided
can be
winter
air
SYSTEMSs
STORAGE

THERMAL

TYPES
OF
2.5.3
I. Cold storage
storage
energy
Fabric and slab
2.
3. Solar storage

Rock Beds
4. Packed System
CO2 Storage
Temperature
5. Low
Thermo
chemical Energy Storage
6.
7. Sensible heat
8. Latent heat

1. Cold storage
and accumulating cooling capacity output
Storage receiving
from the refrigeration plant.

2. Fabric & Slab energy storage

heat/ cooling during a particular
Building materials absorbed
period and release it at another period.

3. Solar storage
Solar collector along with its associated pump to conve
solar radiation into heat.
The store which receives the heated water from the collector
delivers heated water to the space heating heat exchanger.
I t contribute to the building's hot water requirements of
between 6% and 12%.
 ENERGYSYSTEMS AND ITS ANALYSIS 27
4. Packed Rock Beds
A packed rock bed utilizes the available thermal energy by
means of circulating through a packed rock bed to add heat
or remove heat fronm the
system for charging and discharging
respectively.
The energy can be transferred from a fluid but the most
utilize air due heat transfer
common systems to the high
coefficient between air and rock.

5. Low Temperature CO, Storage System

Carbon dioxide offers the most compact latent heat storage
system due to the commercially obtainable triple point which
allows the utilization of a single substance as static latent
heat of fusion storage.
Carbon dioxide can be stored at it's triple point of -57 Deg C
and 518 kPa with solid fraction of 70-80 % by mass and the
system can provide 140 kJ/kg thermal storage capacity.

6. Thermochemical Energy Storage

alcohols and ketones
Recent research shows that various
thermochemical storage media but due to the
are potential
viable systems
relative cost and complexity, no commercially
have yet emerged.
the mixture of Sulphuric Acid and
Typical examples are
and water.
Sodium Hydroxide
water, and alternatively
the water is separated by the heat input
to
Systems in which
are mixed, the
as the two substance
the mixture and as soon
substances liberates heat.
chemical reaction of the

7. Sensible heat storage:

uses a heat storage
medium, and where
Aheat storage system that
change in temperature.
the additional or removal of heat results in a

Solar Pond Technology consists of

of salt-gradient solar pond
The vertical configuration
following three zones:
 ENERGY AND ENVIRONMENT
Adjacent the surtace there is a
homogencous cons
zone that serves as abuffer zone between
enviro convective
fluctuations at the surface and conductive heat
transDort
the layer below. This is the
upper convective zone (UCZfrom
At the bottom of the pond there
another convective zor
is
the lower convective LCZ. This is the
zone or Z0ne,
layer with th
highest salt concentration and where the
high temperature are
built up.
For given salinitiesand temperature in the
upper and
convective zones, there exists a stable intermediate lower
zone. This zone keeps the two
gradient
convective zones apart and
gives the solar
pond its unique thermal performance. This
intermediate zone provides excellent insulations
for the
storage layer, while simultaneously
radiation. To maintain
transmitting the solar
a solar pond in this
stationary state, it is necessary to replace thenon-equilibrium
amount of salt
that is transported by molecular diffusion
from the LCZ to
the UCZ. This means that salt must be
added to the LCZ,
and fresh water to the UCZ
whilst-brine is removed. The
brine can be recycled, divided into
water and salt (by solar
distillation) and returned to the pond.

Solar radiations

Fresh Low salt content cool

water Brine
water floats on top
lighter layer

Gradient Zone
igh salt content hot water heavier
layer"
SJo boony
Salt
Fig. 2.6
Principle of solar pond
 ENERGYSYSTENS AND ITS ANALYSIS 29
The major heat loss occurs from the surface of the small pond.
This heat loss can be prevented by spreading a plastic grid over the
ponds surface to prevent disturhance by the wind. Disturhed water
tends to lose lieat ransler laster than when calm

S. Latent heat storage:

A heat storage systenm that uses the energy absorbed or released
during a change in phase, without a change in temperature
(isothermal).

Phase Change Materials (PCMs)

When a material melts or vaporizes, it absorbs heat; when it
releases
changes to a solid (crystallizes) or to a liquid (condenses), it
this heat. This phase change is used for storing heat in PCMs.
Typical PCMs are water/ice, salt hydrates, and certain polymers.
freezes and
The eutectic salt does not expand or contract when it
The eutectic
melts: so, there is no fatigue on the plastic container.
salt-filled containers are placed in a tank, typically in a below-grade
concrete or gunite structure.The containers occupy about two-thirds
the tank is occupied by
of the tank's volume, so that one-third of
medium. Since energy densities
the water used as the heat-transfer
smaller and lighter
for latent TES exceed those for sensible TES,
lower storage losses normally result.
storage devices and
THERMAL STORAGE POWER-BLOCK
SOLAR FIELD

Hot
Tank
Htrn
H
Fig. 2.7 Principle of use of PCM

"eutectic plates" used

Other early applications of PCMs included
railroad transportation applications.
cold storage in trucking and
Tor
is association with space
Another application of PCMs
important
 ENERGY AND ENVIRONMENT
30
technology, with NASA sponsoring a project on PCM applications
for thermal control of electronic packages.

2.5.4 SITUATIONs FAVOR THE USE OF THERMAL

STORAGE SYSTEMS
The storage systems are most likely to be cost-effective in
situations when :
A facility's maximum cooling load is much greater than the
average load.
Limited electric power is available atthe site;
Backup cooling capacity is desirable;
Loads are of short duration, infrequently, cyclical in nature
Loads are not well matched to the availability of the energy
Source

2.5.5 WHY STORE SOLAR ENERGY

solar energy is a time-dependent energy resource
load does not match available energy
cost consideration (avoid peak use)
short term or long term storage

2.5.6 STORAGE CAPACITY

Storage capacity of solar system depends on:
the availability of solar radiation.
the nature of the thermal
process.
physical and chemical properties of the storage medium
employed.
2.5.7 STORAGE MEDIA
The choice of
storage media depends to a large extent on the
nature of the solar thermal
process.
water storage.
air based thermal storage (e.g., packed-bed storage).
storage walls and floors. buried earth thermal
storage.
 ENERGYSYSTEMS AND ITS ANALYSIS
31
2.5.8 WATER STORAGE
Water is the ideal material in which to store useable heat because
it is low in cost and has a high specific heat.

The use of water is particularly convenient when water is used

also as the mass and heat transfer medium in the solar collector and
in the load heat exchanger.

To *******
Ts to Load

JO1pa|t Tank at Ts

T Ts
To Collector Return from Load
Fig A typical system using water tank storage, with water
circulation through collector to add energy and through the load
to remove energy

2.5.9 STORAGE WALL

A storage wall (Storage Walls e.g. Trombe wall) is a sun-facing
wall built from material that can act as a thermal mass (such as
stone, concrete, adobe or water tanks), combined with an air space,
insulated and vents to form a large solar thermal collector.
glazing
and
During the day, sunlight would shine through the glazing
warm the surface of the thermal mass. At night, if the glazing
not too low,
nsulates well enough, and outdoor temperatures are
mass will be signiticantly
tne average temperature of the thermal will flovW into the house
gner than room temperature, and heat
interior.
32 ENERGY AND ENVIRONMENT
Vent LA
Warm air
Incident
solar
radiation Convection
to rooms

Radiation
Glazing to rooms

Vent EZZA Roorn air

Fig Storage Wall

2.5.10 BENEFITS OF TES
Although TES is used in a wide variety of applications, all are
designed to operate on a cyclical basis (usually daily, occasionally,
seasonally). The systems achieve benefits by fulfilling one or more
of the following purposes:
Increase generation capacity. Demand for heating, cooling,
or power is seldom constant time, and the excess
over
generation available during low-demand periods can be used
to charge a TES in order to increase the effective generation
capacity during high-demand periods. This process allows a
smaller production unit to be installed (or to add
capacity
without purchasing additional units), and results in a higher
load factor for the units.
Enable better operation of cogeneration plants. Combined
heat and power, or cogeneration, plants are generally operated
to meet the demands of the connected thermal load, which
often results in excess electrical generation during periods of
low electricity use. By incorporating TES, the plant need not
be operated to follow a load. Rather, it can be dispatched in
more advantageous ways (within some constraints).
Shift energy purchases to low-cost
periods. This measure
constitutes the demand-side application of the first
purpose
listed, and allows energy consumers subject to time-of-day
pricing to shift energy purchases from high- to low-cost
periods.
 ENERGY SYSTEMS AND ITS ANALYSIS
33
.Increase system reliability. Any form of energy storage,
from the uninterruptable
power supply of a small personal
computer to
large pumped storage project,
a

increases system reliability. normally

.Integration with other functions. In applications where
on-site water storage is needed for fire
protection, it may be
feasible to incorporate thermal storage into a common storage
tank. Likewise, equipment designed to solve
problems may be adaptable to energy storage purposes.
power-quality

2.6 ENERGY SAVINGS

Thermal energy storage (TES) is a key component of many
successful thermal systems. TES should allow for the minimum
reasonable thermal energy losses and the corresponding energy
savings, while permitting the highest appropriate extraction
efficiency of the stored thermal energy.

TES systems are an important element of many energy-saving

programsin a of sectors, residential, commercial, industrial,
variety
and utility, as well as in the transportation sector.

TES can be to reduce energy consumption or to

employed
one period to another. The consumption
transfer an energy load from
that
reduction can achieved
be storing excess thermal energy
by
such as heat produced by
would normally be released as waste,
and even by occupants.
equipment and appliances, by lighting,
achieved by storing energy at given
a
Energy-load transfer can be
to TES for either heating
or
time for later use, and can be applied
cooling capacity.
 34
ENERGY AND ENVIRONMENT
2.7 ENERGY MANAGEMENT AND
AUDIT
2.7.1 DEFINITION &
OBJECTIVES OF ENERGY MANAGEMENIT
The fundamental
goal of energy management is to produce gou
and provVide services with the least
effect.
cost and least environmenta

The term
energy management means many things to many
people. One definition of
energy management is
"The judicious and effective use of energy to maximize profits
(minimize costs) and enhance competitive positionsS

(Cape Hart, Turner and Kennedy, Guide to Energy Management

Fairmont press inc. 1997)

Another comprehensive definition is

The strategy of adjusting and optimizing energy, using systems
and procedures so as to reduce energy requirements per unit of
output while holding constant or reducing total costs of producing
the output from these systems"

The objective of Energy Management is to achieve and maintain

optimum energy procurement and utilisation, throughout the
organization and:

To minimise energy costs/waste without affecting production

&quality
To minimise environmental effects.

2.7.2 ENERGY AUDIT: TYPES AND METHODOLOGY

Energy Audit is the key to a systematie approach for decision-
making in the area of energy management. It attempts to balance
the total energy inputs with its use, and serves to identify all the
energy streams in a facility. It quantifies energy usage according
to its discrete functions. Industrial energy audit is an effective
tool in defining and pursuing comprehensive energy management
 ENERGY SYSTEMS AND ITS ANALYSIS 35
programnme. As per the Energy Conservation Act, 2001,
Energy
Audit is defined as "the verification, monitoring and
analysis of use
of energy including submission of technical report containing rec-
ommendations for improving energy efficiency with cost benefit
analysis and an action plan to reduce energy consumption".

2.7.3 NEED FOR ENERGY AUDIT

In any industry, the three top operating expenses are often found
to be energy (both electrical and thermal), labour and materials. If
one were to relate to the manageability of the cost or potential cost
savings in each of the above components, energy would invariably
emerge as a top ranker, and thus energy management function
constifutes a strategic area for cost reduction. Energy Audit will help
to understand more about the ways energy and fuel are used in any
industry, and help in identifying the areas where waste can occur and
where scope for improvement exists.

The Energy Audit would give a positive orientation to the

control
energy cost reduction, preventive maintenance and quality
activities.
programmes which are vital for production and utility
Such an audit programme will help to keep focus on variations
which occur in the energy costs, availability and reliability of
supply of energy, decide on appropriate energy mix, identity
conservation retrofit for energy conservation
technologies,
energy
equipment etc.

translation of conservation
n general, Energy Audit is the
solutions with
Ideas into realities, by lending technically feasible
considerations within a specified
economic and other organizational
time framne.
to
The primary objective of Energy Audit is to determine ways
unit of product output or to lower
Educe energy consumption per bench-mark" (Reference
"

perating costs. Energy Audit provides

a

in the organization and also provides

pOlnt) for managing energy throughout the
tne basis for planning a more effective use of energy

organization.
36 ENERGY AND ENVIRONMENT

2.8 TYPE OF ENERGY AUDIT

The type of Energy Audit to be performed depends on:
Function and type of industry
Depth to which final audit is needed, and
.Potential and magnitude of cost reduction desired

Thus Energy Audit can be classified into the following two types.
i) Preliminary Audit
ii) Detailed Audit

2.8.1 PRELIMINARY ENERGY AUDIT METHODOLOGY

Preliminary energy audit is a relatively quick exercise to:
Establish energy consumption in the organization
Estimate the scope for saving
Identify the most likely (and the easiest areas for attention
Identify immediate (especially no-/low-cost) improvements/
savingS
Set a 'reference point
Identify areas for more detailed study/measurement
Preliminary energy audit uses existing, or easily obtained
data

2.8.2 DETAILED ENERGY AUDIT METHODOLOGY

A comprehens1 ve audit provides a detailed energy project
implementation plan for a facility, since it evaluates all major
energy using systems.
This type of audit offers the most accurate estimate of
enerE
savings and cost. It considers the interactive effects of all projects,
accounts for the energy use of all major equipment, and includes
detailed energy cost saving calculations and project cost.

In a
comprehensive audit,
of the key elements is the energy
one
balance. This is basedon an inventory of
energy using systens,
assumptions of current operating conditions and calculations
O
 ENERGY SYSTEMS ANDITS ANALYsIs 37
energy use. This estimated use is then compared to utility bill
charges.
Detailed energy auditing is carried out in three phases: Phase I,
lI and IlI.
Phase I - Pre Audit Phase
Phase I1 - Audit Phase

Phase III - Post Audit Phase

Audit at a Glance
A Guide for Conducting Energy
A udits needs
Industry-to-industry, the methodology of Energy
to be flexible.

for conduct Energy

of
A comprehensive ten-step methodology
below. Energy Manager and Energy
Audit at field level is presented as per
follow these steps to start with and add/change
Auditor may
their needs and industry types.
38 ENERGY AND ENVIRONMENT
2.8.3 TEN STEPS METHODOLOGY FOR DETAL S
ENERGY AUDIT

Step PLAN OF ACTION PURPOSE RESULTS

No
PhaseI-Pre Audit Phase
Step I Plan and organise Resource planning Establish/organize a
Walk through Audit Energy audit team
Informal Interview with Organize Instruments &time frame
Energy Manager, Production Macro Data collection (suitable to type of
/Plant Manager induslry.)
Familiarization ofi process/plant activities
First hand
observation &
current level operation and Assessment ofl
practices
Conduct of bricfmeeting /| Building up cooperation
awareness programme with Issue questionnaire for each
all divisional heads and| department
persons concerned (2-3 hrs.)
Orientation, awareness creation

Phase II-Audit Phase

Primary data gathering Historic data analysis, Baseline data
Process Flow Diagram. &
collection
Energy Utility Diagram Prepare process flow charts
All service utilities system diagram
(Example: Single line power distribution|
diagram, water, compressed air & steam
distribution.
Design, operating data and schedule of
operation
Annual Energy Bill and
energy consumption
patterm (Refer manual, log sheet, name plate
interview)
Conduct survey and
monitoring Measurements
Motor survey, Insulation, and Lighting|
survey with portable instruments for
collection of more and accurate data
Confirm and compare data
operating with
Conduct of detailed design data.
trials
experiments for selected
energy guzzlers
Trials/Experiments:
4 hours power monitoring (MD. PE: |
kWh etc.).
Load variations trends in pumps, fan
compressors etc.
 ENERGY SYSTEMS AND ITS ANALYSIS 39
Boiler/Eficiency trials for (4 8
hours)
Furnace Efficiency trials
Equipments Performance
experiments etc
Stepo Analysis of energy use Energy and Material balance & energy
loss/waste analysis

ENCON
Step 7 Identification and Identification & Consolidation
developmentof EnergEy measures
Conservation (ENCON) Conceive. develop. and refine ideas
oPportunities Review the previous ideas suggested by unit
personal
Review the previous ideas suggested by
energy audit if any
Use brainstorming and value analysis
techniques
Contact vendorsfor new/efficient
technology

Step Cost benefit analysis Assess technicalfeasibility, economic

viability and prioritization of ENCON
options for implementation
Select the most promising projecis
Prioritise by low. mediumn, long term
measures

Step9 Reporting & Prescentation to Documentation, Report Presentation to the

the Top Management top Management.

Phase III-Post Auditphase

Step10 Implementation and Follow- Assist and Implement ENCON recommendation
measures and Monitor the performance
up Schedule for
Action plan,
implementation
Follow-up and periodic review

PHASE ACTIVITIES
2.8.4 PHASE 1 -PRE AUDIT audit is
to carry out an energy
A structured methodology
of the site should
for efficient working. An initial study
necessary
the planning of the procedures necessary
always be carried out, as
for an audit is most important.
 ENERGY AND ENVIRONMENT

40 Detailed

for
Initial Site Visit and Preparation Required
Auditing the Energy
An initial site visit may take one day and gives concerned,

personnel
to meet the rocedures ne
Auditor/Engineer an opportun the proceuu
to tamiliarize him with the site
and to assess

to out the energy audit.

carry
essary
Auditor/Engineer
site visit the
Energy
During the initial
actions: -

should carry out the following aims or

the
the
with the site's senior management
Discuss

energy audit. associated with the

the
Discuss economic guidelines
recommendations of the audit. relevant
with the
consumption data
Analyse the major energy
personnel. layout,
where available
building -
O b t a i n site drawings electricity
air distribution,
steam distribution, compressed
distribution etc.
engineering/production
Tour the site accompanied by
of this visit are: -

The main aims

team
. T o finalise Energy Audit to
energy consuming
areas/plant items
T o identify the main
the audit.
be surveyed during
instrumentation/ additional metering
To identify any existing
required.
will have to be installed prior
T o decide whether any meters
oil meters.
or gas
to the audit eg. kWh, steam,
out the
identify the instrumentation required for carrying
To
audit.
time frame
To plan with resources, major
on plant energy
T o collect macro data
energy consuming centers

T o create awareness through meetings/ programme

 ENERGYSYSTEMS AND ITS ANALYSIS 41
2.8.5 PHASE II- DETAILED ENERGY AUDIT ACTIVITIES
Depending on the nature and complexity of the site, a
comprehensive audit can take from several weeks to several months
to complete. Detailed studies to establish, and
investigate, energy
and material balances for specific plant departments or items of
process equipment are carried out. Whenever possible, checks of
plant operations are carried out over extended periods of time, at
nights and at weekends as well as during normal daytime working
hours. to ensure that nothing is overlooked.

The audit report will include adescription of energy inputs

and product outputs by major department or by major processing
function, and will evaluate the efficiency of each step of the
manufacturing process. Means of improving these efficiencies will
be listed, and at least a preliminary assessment of the cost of the
improvements will be made to indicate the expected payback on
any capital investment needed. The audit report should conclude
with specific recommendations for detailed engineering studies
and feasibility analyses, which must then be performed to justify
the implementation of those conservation measures that require
investments.

The information to be collected during the detailed audit

includes:-
1. Energy consumption by type of energy. by department, by
major items of process equip ment, by end-use
2. Material balance data (raw materials, intermediate and final
products, recycled materials, use of scrap or waste products,
production of by-products for re-use in other industries, ete.)
3. Energy cost and tariff data
4. Process and material flow diagrams
S. Generation and distribution of site services (eg.compressed
air, steam).
6. Sources of energy supply (e.g. electricity from the grid or
self-generation)
42 ENERGY AND ENVIRONMENT
7. Potential for fuel substilition, process modifications. and

the use of co-gencration systems (combined heat and neswe r

generation).

8. Energ Management procedures and energy awareness

within the establishment.
training programs

and reports are useful to

Existing baseline information get

consumption pattern, production

cost and productivity levels in
audit team should col-
terms of product per raw material inputs. The
lect the following baseline data:

Technology, processes used and equipment details

Capacity utilisation
Amount & type ofinput materials used

Water consumption
Fuel Consumption
Electrical energy consumption
Steam consumption
etc
Other inputs such as compressed air, cooling water
Quantity & type of wastes generated
.Percentage rejection/reprocessing
Efficiencies/ yield
ENERGY SYSTEMS AND ITS ANALYSIS 43
SAMPLE REPORT CONTENTS OF DETAILED ENERGY AUDIT

i. Acknowledgement
ii. Executive Summary
Energy Audit Options at a glance & Recommendations

1.0 Introduction about the plant

1.1 General Plant details and descriptions
1.2 Energy Audit Team
1.3 Component of production cost (Raw materials, energy
chemicals, manpower, overhead, others)
1.4 Major Energy use and Areas

2.0 Production Process Description

2.1 Brief description of manufacturing process
2.2 Process flow diagram and Major Unit operations
and Costs
2.3 Major Raw material Inputs, Quantity

3.0 Energy and Utility System Description

3.1 List of Utilities
each utility
3.2 Brief Description of
3.2.1 Electricity
3.2.2 Steam
3.2.3 Water
3.2.4 Compressed air

3.2.5 Chilled water

3.2.6 Cooling water

Material
flow diagram and Energy &
4.0 Detailed Process
balance pressures
of
flow rate, temperature,
4.1 Flow chart showing
all input-output streams

for entire industry

4.2 Water balance

and process systems

Energy efficiency utility
S.0
in
consumption
5.1 Specific Energy
assessment
5.2 Boiler efficiency assessment
Heater performance
5.3 Thermic Fluid
44 ENERGY AND ENVIRONMENT
5.4 Fumace efficiency Analysis
5.5 Cooling water system
performance assessment
5.6 DG set performance assessment
5.7 Refrigeration system
performance
5.8 Compressed air system
performance
5.9 Electric motor load analysis
5.10 Lighting system

6.0 Energy Conservation Options & Recommendations

6.1 List of options in terms
of No cost/ Low Cost, Medium cOst
and high investment Cost, Annual
Energy & Cost savings,
and payback
6.2 Implementation plan for
energy saving measures/Projects

ANNEXURE
A1. List of Energy Audit Worksheets
A2. List of instruments
A3. List of Vendors and Other Technical details
ENERGY SYSTEMS AND ITs ANALYs1s 45
2.9 WHAT IS ENERGY MANAGEMENT
Utilization of minimum quantity of energy for a task at an
appropriate quality neither better nor worst than needed.
task in energy use

.Tominimize the energy cost without effecting production &

quality.
Energy forms of high quality/grade shouldn't used for low
grade applications.
The fundamental goal of energy management is to produce
least
goods and provide services with the least cost and
environmental effect.

2.9.1 PRINCIPLES OF ENERGY MANAGEMENT

.Historical Energy Use
Energy Audits
House keeping & maintenance
Analysis of Energy use
More efficient equipments
More efficient process
reduce losses & recover
Energy containment-confineenergy,
heat
Substitute materials
Aggregation of Energy
sources

Alternative Energy Sources

Constructionof new facilities.

energy etficiency.
Manage the energy at the highest
Reuse and recycle energy by cascading.
Use most appropriate technology.
losses.
Reduce the available
Economic Evaluation
 46 ENERGY AND ENVIRONMENT
2.10 ENERGY DEMAND
ESTIMATION
Energy Demand estimation (EDE) means
demand for power. by managing of the
utilities/Distribution companies, among some
all its customers to meet current
or
or future needs.
EDE programs
result in energy
and/ or demand reduction. For example, under this
process. the demand can be shifted from
thereby reducing the need for buying peak to off peak hours
during peak hours. EDE also enables end expensive imported power
users to better
their load curve and thus manage
improves the profitability. Potential energy
saving through EDE is treated same as new additions on the
side in MWs. EDE can
reduce the capital needs for supply
expansion. power capacity

2.11 ENERGY PRICING

and
Understanding energy cost is vital factor for awareness creation
saving calculation. In many industries sufficient meters
be available to measure all the may not
energy used. In such cases, invoices
for fuels and
electricity will be useful. The annual company balance
sheet is the other sources where
fuel cost and
power are given with
production related information. Energy invoices can be used for the
following purposes:
They provide a record of energy
which gives a purchased in
base-line for future reference
a
given year,
Energy invoices may indicate the
related potential for savings when
to
production requirements or to air
requirements/space heating etc. conditioning
When electricity is
demand tariff
purchased on the basis of maximum
They can suggest where savings are most
In later years invoices likely to be made.
can be used to
cost savings made quantify the energy and
through energy conservation measures
2.11.1 POWER COSTS
Electricity price in lndia not only varies from State to
also city to city and consumer to State, but
consumer though it does the
same
 ENERGY SYSTEMS AND ITS ANALYSIS
work everywhere. Many factors are
47
involved in deciding final cost
of purchased electricity such as:

Maximun demand charges, kVA (i.e. How fast the

used?) electricity is

Energy Charges, kWh

(i.e. How much electricity is consumed?)
TOD Charges. Peak/Non-peak period
(i.e. When electricity is utilized ?)
Power factor Charge, P.F
(i.e., Real power use versus Apparent power use factor)
Other incentives and penalties
applied from time to time
High tension tariff and low tension tariff rate changes
Slab rate cost and its variation
Type of tariff clause and rate for various categories such as
commercial, residential, industrial, Government, agricultural,
etc.
Tariff rate for developed and underdeveloped area/States
Tax holiday for new projects

NUMERICALS

1. A thermal power plant of210 MW capacity has the maximum

load of 160 MW. Its annual load factor is 0.6. The coal
consumption is 1 kg per kWh of energy generated and the
cost of coal is Rs 450.00 per tonne. Caleulate (a) the annual
revenue earned if energy is sold at Re 1 per kWh and (b) the
capacity factor of the plant.
Ans: Annual load factor =(average load)/(peak load)
Average load 0.6 160 96 MW
= x =

96 x 8760 MWh
Energy generated per year
=

= 840,960 x 10* kWh

Coal required per year = 840,960 x 10' kg = 840,960 tonnes

Cost of coal per year = 840,960 x 450= Rs 378.432 x 10

48 ENERGY AND ENVIRONMENT
Cost of energysold-Rs 840,960
Revenue earned by the power plant
10'= Rs 840.96 x

1
per year
Rs 840.96 x
10° - Rs 378.432
-

=
Rs 462.528 10°
10
=
Rs 46.25 crore

2. It is proposed to supply a load with

demand nf
a
maximum
500 MW and load factor of
70%%. Choice is to be made froma
nuclear power plant & a hydraulic power
plant.
overall cost per kWh in case of each scheme as Calculate the
given below
Cost Hydro electric Nuclear
power plant power plant
1. Capital cost per MW installed Rs 4 crore Rs 5 crore

2. Interest 5% 5%

3. Depreciation 4% 5%
Operating cost (including fuel) per
5 paise 15 paise
kWh
Transmission and distribution cost per
3 paise 2 paise
KWh
Ans: Hydroelectric power plant:
Capital cost = Rs 4x 500 crore = Rs 2000x 107
Interest 0.05 x 2000 x 107 Rs 100x 107
Depreciation =0.04 x 2000x 107= Rs 80 x 10
Annual fixed cost = interest + depreciation R s 180 x 10

Rs. 180x 10?

Fixed cost/kWh = = 0.59
306.6x 107
Running cost/kWh =5 +3 =8 paise
Overall cost/kWh = 0.59 +0.08 = Re 0.67

Nuclear power plant:

Capital cost = Rs 5 x 500 crore = Rs 2500 x 10

Interest 0.05 x 2500x 10 Rs 125 x 10

Depreciation =0.05 x 2500x 10 Rs 125 * 10
Annual fixed cost = Rs 250 x 10
 ENERGY SYSTEMS AND ITS ANALYSs1s
Rs. 250 x 10
Fixed cost/kWh = 0.82
306.6 10'kWh
306.6 x 10' kWh Runningcost/kWh 15+ 2-17 paise
Overall cost/k\Wh = 0.82 +0.17= Re 0.99
Therefore, the overall cost/kWh is minimum in case of

hydroelectric power plant.

3. Apower plant of210 MW installed capacity has the following
particulars:
Capital cost =
Rs 18,000/kW installed
Interest and depreciation = 12%

Annual load factor = 60%

Annual capacity factor = 54%

Annual running charges = Rs 200 x 10

6%
Energy consumed by power plant auxiliaries
=

Calculate the cost of power generation per kWh

Ans
Load factor averageload capacity of the plant
Capacity factor maximum demand average load

0.60 210MW

0.54 maximum demand

Maximum demand (210 x 0.54)/0.60 = 189 MW

MW
Reserve capacity =210- 189 =21
Average load
=
load factor x maximum demand
= 0.6x 189 =113.4 MW
113.4 x 10* x 8760
Energy produced peryear=
= 993.384 x 10° kWh

0.94 x 993.384 x 10
Net energy delivered
=

=933.781 x 10°kWh

Annual interest and depreciation (fixed cost)

0.12x 18000 x 210 x 10
= Rs 453.6 x 10°

Total annual cost= fixed cost t running cost

= 453.6 x10° +200 x 10°
= Rs 653.6 x 10°

Rs.653.6x 10°
Costof power generation- 933.781x 10° kWh
=
Rs. 0.70 or 70 paise
50 ENERGY AND ENVIRONMENT

4. Calculate the cost of generation per kWh for a power station

having the following data:
Installed capacity of the plant - 200 MW

Capital cost = Rs 400 crores

Rate of interest and depreciation = 12%

Annual cost of fuel, salaries and taxation = Rs 5 crores

Load factor = 50%

Also estimate the saving in cost per kWh if the annual load
factor is raised to 60%.
Ans: Assuming the maximum demand equal to the capacity of the
power plan
Load factor=averageload
maximum demand

0.5 = average load

200
Average load = 200 x 0.5 = 100 MW

Energy generated per year = 100x 103 x 8760

10' kWh
=
87.6 x

Interest and depreciation (fixed cost)

0.12 x 400x 107 Rs 48
= = x 107
Total annual cost = 48 x 107+ 5 x 107= Rs 53 x 107
Rs.53x 10
Cost perkWh 87.6x 10kWh Rs.0.61or 61 paise -
=

When the load factor is raised to 60%,

Average load 0.60 x 200 120 MW
Energy produced per year = 120 x 10 x 8760
= 105.12 x10'kWh

Total annual cost will remain the same.

Cost perk Wh Rs.53x 10'

=-

105.12x 10 =Rs.0.50or50paise
Saving in cost per k Wh =
61 - 50=1| paise
 ENERGYSYSTEMS AND ITS ANALYSIS
51
2.12 ECONOMIC ANALYSIS
2.12.1 CHARACTERIZATION OF AN INVESTMENT PROJECT
Expenses are generally those cash expenditures that are routine,
on-going. and necessary for the ordinary operation of the business.
Capital investments, on the other hand, are generally more
strategie and have long term effects. Decisions made regarding
capital investments are usually made at higher levels within
the organizational hierarchy and carry with them additional tax
consequences as compared to expenses.

Three characteristics of capital investments are of concern

when performing life cycle cost analysis. First, capital investments
usually require a relatively large initial cost. The initial cost may
occur as a single expenditure or occur over a period of several years

The second important characteristic ofa capital investment is

that the benefits (revenues or savings) resulting from the initial cost
occur in the future, normally over a period of years. The period
between the initial cost and the last future cash flow is the
life

cycle or life of the investment. If multiple investments are being

evaluated and if the lives of the investments are not equal, special
consideration must be given to the issue of selecting an appropriate

planning horizon for the analysis.

of capital investments is
The last important characteristic
after the initial
that they are relatively irreversible. Frequently,
or signiticantly altering the
investment has been made, terminating
substantial (usually negative) cost
nature of a capital investment has
of the reasons that capital investment
Consequences. This is one
levels of the organizational
decisions are usually evaluated at higher
decisions.
hierarchy than operating expense

2.12.2 CAPITAL INVESTMENT COST CATEGORIES

costs which occur over the life of a
In almost every case, the
be classified into one of the following
capital investment can

categories:
Initial Cost,
52 ENERGY AND ENVIRONMENT
Revenues,
Annual Expenses and
Replacement and Maintenance,
or
Periodic

Salvage Value.
Initial costs include all costs associated with preparing the
investment for service. This includes purchase cost as well

as installation and preparation costs. Initial costs are usuall

nonrecurring during the life of an investment. Annual expenses and
revenues are the recurring costs and benefits generated throughout
the life of the investment. Periodic replacement and maintenance
costs are similar to annual expenses and revenues except that
they do not (or are not expected to) occur annually. The salvage
(or residual) value of an investment is the revenue (or expense)
attributed to disposing ofthe investment at the end of its useful life.

2.13 PRESENT WORTH ANALYSIS

The present worth method of comparison is presented in Fig.
4.1.
R1 R2 R3 R Rn

0 3 j n

Fig Present Worth Analysis

In Fig. 4.1, P represents an initial investment and Rj the net
revenue at the end of the h year. The interest
rate is i, compoundea
annually. S is the
salvage value at the end of the rth year.
To find the
present worth of the above cash flow diagram tora
given interest rate, the formula is

PW)=-P +RI[1/(1
+
] +R2[1/(1 +P]t..
+

Ri[1/(1 i] + Rn{l/(1 + i"] +

+

formula, expenditure is assignedS[1/(1 i)

+
In this
and
revenues are
assigned positive sign.
a
a
negative sign"
 ENERGY SYSTEMS AND ITs ANALYSIS 53
f we have some more alternatives which are to be compared
with this alternative, then the corresponding present worth amounts
are to be compute and compared. Finally, the
alternative with the
maximum present worth amount should be selected as the best
alternative.

NUMERICALS

to invest in
1. Energy Management company is planning
two different machinery to achieve energy saving. If it isS
is
purchased under down payment, the cost of the machine
installment basis, the
Rs. 16,00,000. If it is purchased under
company has to pay 25%
of the cost at the time of purchase
annual equal installments
and the remaining amount in 10
the best alternative for
of Rs. 2,00,000 each. Suggest
worth basis at i
=
18%,
the company using the present
compounded annually.
alternatives available for the company:
Ans: There are two
Down payment of Rs. 16,00,000
10 annual equal
Down of Rs. 4,00,000 and
payment
installmentsof Rs. 2,00,000 each
The cash
worth calculation of the second alternative.
Present
shown in Fig.
second alternative is
flow diagram of the
10
2

2,00,000 2,00,000 2,00,000 2,00,000

i = 18%
4,00,000
second alternative.
Fig. Cash flow diagrum
for the
of the above cash flow diagram is
The present worth
computed as
18%, 10)
PW(18%)
=
4,00,000 + 2,00,000(P/4,
x 4.4941
=
4,00,000 + 2,00,000
= Rs. 12,98.820
 ENERGY AND ENVIRONMENT
fwo vestment
nvestment plans.
plans. "plan
In plan
proposes
years
,
the
Energy after 15 for every Rs.
2.
ABC
Rs.
12,000
1,000
for every Rs. 1,000 invested,
pays

In plan 2, the
company

sted now.
the end of the 10th yearthe
of the year an
Rs. 4,000at Rs
company
the
pays
end of
15th
Select the best
year. investment
4,000 at view at i
=
12%, compound.
investor's point of
from the
annually. for plan I is illustrated inn Fig
The cash flow diagram
Ans: Plan 1. 12,000

123 15
i 12%
1,000
Cashflow diagram forplan 1.
Fig.
The present worth of
the above cash flow diagram is

calculated as

PW(129%) =-1,000 + 12,000 (P/F, 12%, 15)

=-1,000 + 12,000(0. 1827)
= Rs. 1,192.40
Plan 2. The cash flow diagram for plan 2 is shown in Fig.
4,000 4,000

0 12 3 10i5
i= 12%
1,000
Fig. Cash fow diagram for plan 2.
The present worth of the above cash flow diagram
computed as
PW(12%)=-1,000 + 4,000(P/F, 12%, 10) + 4,000(P/E, 1
-1,000 + 4,000(0.3220) + 4,000(0.1827)
= Rs. 1,018.80

The present worth

of than that of pla
Therefore, plan I is theplan
1 is
best planmore
from the nveestor's po
of view.
 ENERGY SYSTEMS AND ITS ANALYSIS
2.14 FUTURE WORTH ANALYSIS 55
The future worth method of
comparison is presented in Fig.
RI R2 R3 R
Rn
0 3 n

P
In P represents an initial
Fig. investment. Rj the net-revenue at the
end of the yh year, and S' the salvage value at the end of the r" year.
The formula for the future worth of the above cash flow
diagram
for a given interest rate, i is
FWi) = -P(l + i " + R1(1 +i!+R2(1+ i)*2+..

+Ri(1 +i i +.+Rn +S
In the above formula, the expenditure is assigned with negative
sign and the revenues are assigned with positive sign.

Finally, the alternative with the maximum future worth amount

should be selected as the best alternative.

NUMERICALS
owns a premium plot. They have to decide
1. A Company
select in trying to obtain
which of the several alternatives to
investment. After much study and
a desirable return on their
the two best alternatives are as
calculation, they decide that
table:
given in the following
Build Solar Build Hydro
power plant power plant
20.00,000 36,00,0000
First cost (Rs.)
I,50,000
taxes (Rs.) 80,000
Annual property 9,80,000
Annual income (Rs.) 8.00,000
20 20
Life of land(years)
0
Salvage value (Rs.) method
based on the future worth
Evaluate the alternatives
at i= 12.
 ENERGY AND ENVIRON
Solar power plant ENY
4Iternative I - Build
20,00,000
Rs.
Firstcost
income A n n u a l income -Annual
Net annual -

Rs. 8,00,000 Rs. 80,000

-
perty ta
Rs. 7,20,000
Life 20 years
Interest rate
=
12%, compounded annually
The cash flow diagram for this ternative is depicted iin
7,20,000 7,20,000

0
20
i= 12%

20,00,000
Fig. Cash flow diagramfor alternative 1.
The future worth of alternative 1 is computed as
FW(12%)=-20.00,000 (FP, 12%. 20)+7,20,000 (F/A, 129%,20
=-20.00,000(9.646) + 7,20.000(72.052)
Rs. 3,25,85,440
Alternative 2- Build Hydro power plant
First cost=Rs. 36,00,000
Net annual income =
Annual income Annual
property ta
-

Rs. 9,80,000 Rs.

Rs. 8,30,000
1,50,000
Life 20 years
Interest rate 12%, =

he cash flow compounded annually

diagram for this alternative is shown in
F
8,30,000 8,30,000 8,30,000

20
i= 12%
36,00,000
Fig. Cash
low diagram for alternative 2.
ENERGYSYSTEMS AND ITs ANALYSIS
57
The future worth of alternative 2 is
calculated as
FW,(12%)=-36,00,000(F/P, 12%, 20) 8,30,000(F/A, 12%, 20)
=
-36,00,000(9.646) +8,30,000(72.052)
Rs. 2.50,77,560

The future worth of alternative 1 is

greater than that of
alternative 2. Thus, building the Solar power plant is the best
alternative.

2.15 ANNUAL EQUIVALENT ANALYSIS

The annual equivalent method of comparison is presented in
Fig S

R1 R2 R3 Ri Rn

0 2 3 n

P
Fig. Revenue-dominated cash flow diagram.
the net revenue at
In Fig. P represents an initial investment, Rj
value at the end ofthe nth
the end of the yth year, and S'the salvage
year.
net present worth of the cash flow
The first step is to find the
following expression for a given interest rate, i:
diagram using the
+ R2(1 + i)}+
PWi) -P+R1(1 + 1
=

+Ri/(1 + iy +...+ Rn/(1 )i" + S/(1 ir

+

is
In the above formula, the expenditure assigned
with a negative
with a positive sign.
sign and the revenues are assigned
In the second step, the annual equivalent revenue is computed
using the following formula:
A =PWi) 1(1+i)
(1+i)"-1
= PW(i(A/P,i, n)
 58 ENERGY AND ENVIRONMENT
where (4/P i, m) is called equal payment series capilal recovery
factor
If we have some more alternatives which are to be compared
with this alternative, then the corresponding annual equivalent
revenues are to be computed and compared. Finally, the alternative
with the maximum annual equivalent revenue should be selected as
the best alternative.
NUMERICALS
1. Two possible routes for laying a power line are under study.
Data on the routes are as follows:
Around the lake Under the lake

Length 15 km 5 km
First cost (Rs.) 1,50,000/km 7,50,000/km
Useful life (years) 15 15
Maintenance cost (Rs.) 6,000/km/yr 12,000/km/yr
Salvage value (Rs.) 90,000/km 1,50,000/km
Yearly power loss (Rs.) |15,000/km 15,000/km
If 15% interest is used, should the power line be routed
around the lake or under the lake?
Ans: Alternative 1 -Around the lake
First cost 1,50,000x 15 Rs. 22,50,000
=

Maintenance cost/yr =6.000 x 15 Rs. 90,000

Power loss/yr =15,000 x 15 Rs.
2,25,000
Maintenance cost and power loss/yr
Rs.90,000+ Rs. 2,25,000
= Rs. 3,15,000

Salvage value 90,000 x 15 Rs. 13,50.000

=

The cash flow

diagram for this alternative is shown in Fig.
13,50,000
i 15%
15

3,15,0003,15,000 3,15,000 13,50,000

22,50,000
ENERGYSYSTEMS AND ITS ANALYSIS 59
The annual equivalent cost expression of the above cash flow
diagram is

AE15%)-22.50,000A/P,15%,15)+3,15,000-13,50,000(A/F, 15%.15
22,50,000(0.1710)+ 3,15,000 - 13,50,000(0.0210)
Rs. 6,71,400
Alternative 2 - Under the lake

First cost =
7,50,000 x 5
=

Rs. 37,50,000
Maintenance cost/yr = 12,000x 5 Rs. 60,000

Power loss/yr = 15,000x5 = Rs. 75,000

Maintenance cost and power loss/yr
= Rs. 60,000+Rs. 75,000
= Rs. 1,35,000

5 Rs. 7,50.000
Salvage value 1,50,000 x

The cash flow diagram for this alternative is shown in Fig

7.50,000

0 15
1.35,000 1,35,000 1,35,000 1.35.000

37,50,000
alternative 2.
Fig. Cash flow diagramfor of the above cash flow
cost expression
The annual equivalent
diagram isS
AE,(15%)
=
37,50,000 (A/P,15%,15)
+1,35,000-7,50,000(A/F,15%,15)

= 37,50,000(0.1710) + 1,35,000 -7,50.000(0.0210)

= Rs. 7,60,500
alternativel is less than that of
The annual equivalent cost of lake for
Therefore, select
the route around the
alternative 2.
line.
laying the power
60 ENERGY AND ENVIRONMENT
LIST OF QUESTIONS
1. List the various thermal energy storage methods. Explain
sensible heat and latent heat storage methods.
2. Elaborate the benefits of thermnal energy storage.
3. Discuss the Principles of Energy Management.
4. Define Energy audit. Explain the need for energy audit.
5. Explain in the detail the various phases of energy audit
methodology.
6. A thermal power plant of 210 MW capacity has the
maximum load of 160 MW. Its annual load factor is 0.6.
The coal consumption is 1 kg per kWh of energy generated
and the cost of coal is Rs 450.00 per tonne. Calculate (a) the
annual revenue earned if energy is sold at Re I per kWh and
(b) the capacity factor of the plant.
7.
7. Describe the various capital investment cost categories in an
investment project.
8. A company must decide whether to buy plan A or plan B:
Plan A Plan B
Initial cost Rs. 4,00,000 Rs. 8,00,000
Useful life, in years 4 4
Salvage value Rs. 2,00,000 Rs. 5,50,000
Annual Expenses Rs. 40,000o 0
At 12% interest rate, which machine should be selected?
(Use future worth method of comparison).
9.
9 ABC Energy proposes two investment plans. In plan 1, the
company pays Rs. 12,000 after 15 years for every Rs. 1,000
invested now. In plan 2, for every Rs. 1,000 invested, the
company pays Rs. 4,000 at the end of the 10th year and Rs.
4,000 at the end of 15th year. Select the best investment plan
from the investor's point of view at i =129%, compounded
annually.
A company invests in one of the two mutually exclusive
alternatives. The life of both alternatives is estimated to be
5 years with the following investments, annual returns and
salvage values.
ENERGY SYSTEMS AND ITS ANALYSIS 61
Plan A Plan B

Investment (Rs.) - 1,50,000 1,75,000

Annual equal return (Rs.) +60,000 +70,000
Salvage value (Rs.) +15,000 +35,000
the annual equivalent
Determine the best alternative based on
method by assuming i 25%.
=

REFERENCE

. Bureau of Energy Efficiency notesand Applications, Ibrahim

2. Thermal Energy Storage Systemns
Publications,2012
Dincer and Marc A. Rosen, Wiley
Economics,R. Panneerselvam, PHI Learning
3. Engineering
Private Limited,2012