010 bmcg 2123 week 1

BMCG 2213FUNDAMENTALS OF

ENERGY MANAGEMENT

HAJI JUHARI BIN AB. RAZAKASSOCIATE PROFESSOR

FACULTY OF MECHANICAL ENGINEERING

WEEK 1

Definition and Objectives National Energy Policy Energy Efficiency

INTRODUCTION

ENERGY MANAGEMENT

The fundamental goal of energy management is to produce goods and provide services with the least cost and least environmental effect

INTRODUCTION

ENERGY MANAGEMENT: DEFINITION

“The judicious and effective use of energy to maximize profits (minimize costs) and enhance competitive positions”

(Cape Hart, Turner and Kennedy, 1997, Guide to Energy Management, Fairmont press inc.)

INTRODUCTION

ENERGY MANAGEMENT: DEFINITION

“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”

INTRODUCTION

ENERGY MANAGEMENT: OBJECTIVES

To achieve and maintain optimum energy procurement and utilisation, throughout the organization

To minimise energy costs / waste without affecting production & quality

To minimise environmental effects

ENERGY MANAGEMENT: MALAYSIA PERSPECTIVE

In the past, factory management cited the following reasons to refrain from reducing energy consumption or improve its efficiency:a. Energy prices are relatively low because of

government subsidies; b. Absence of incentives to encourage energy

efficiency; c. Lack of support system to undertake greener

measures; d. No proper financial scheme to help

companies; and e. Regulations do not address energy efficiency.

ENERGY MANAGEMENT: MALAYSIA PERSPECTIVE

Today, however, efficient energy management is possible and profitable.

Implementation of ongoing energy efficiency programmes, guided by the objectives of the National Energy Policy, help promote efficient use of energy resources across all sectors.

ENERGY TYPE

OIL & GAS Malaysia still has substantial reserves of oil and

gas resources. Globally, Malaysia ranks within the top 25 in crude oil reserves and the top 20 in natural gas reserves.

As of January 2004, Malaysia’s crude oil and available reserves stood at 4.83 billion barrels. With the remaining oil reserves and current national oil production target of 600,000 barrels per day, oil is expected to last until 2025.

At the current rates of production, Malaysia’s oil and gas reserves stand to last for another 18 and 35 years respectively.

ENERGY TYPE

COAL Most coal deposits are located in East

Malaysia in remote sites with limited infrastructure assets; the demand remains in Peninsular Malaysia. Thus extracting coal has not been as strong as other available energy resources. Coal production increased from 114,100 tonnes in 1995 to 310,000 tonnes in 2000.

ENERGY TYPE

ELECTRICITY Currently Malaysia has approximately 84

gigawatts of electricity generation capacity, of which 89.5% is thermal and 10.5% from hydropower. The Malaysian Government estimates that investment in the electric utility sector will reach RM 9.7 billion through 2010. Much of this will be invested in coal-fire plants as the country intends to shift away from reliance on natural gas for electricity power generation.

ENERGY TYPE

RENEWABLES Renewable energy is a commodity just

like any other form of energy. It has a major role in meeting energy demand needs and combating global warming. Presently, RE represents only 5% of all prime energy use, but by the year 2060, it is predicted to reach 70%.

NATIONAL ENERGY POLICY

Malaysia faces many challenges in the era of globalisation on its quest to achieve developed nation status.

Sustainable development of the energy sector is a pivotal factor to maintain economic competitiveness and progress.

For more than 20 years, Malaysia has successfully diversified its energy consumption by taking advantage of domestic energy resources such as oil and natural gas


The world oil crisis in the 1970s powerfully illustrated that concerns over resource scarcity were justified.

The situation exposed the vulnerability of the energy supply and the over-dependence on oil as a fuel.

These conditions lead to the necessity for the diversification of energy fuel resources.

Thus, this era triggered the development of energy-related legislation and policies to address energy requirements.


Energy policies and regulations play an important role in achieving the goals of sustainable development in Malaysia.

With strategic planning and sound evaluation, initiated decades ago, of energy resources, the country is able to meet current and future energy needs and supplies


National energy policies ensure that adequate and available supplies are reasonably priced to support national economic development objectives.

These measures place a priority on oil and gas resources serving the needs of the nation, while taking into account the need for conservation and environmental protection.


The National Energy Policy has three principal objectives that guide future energy sector developments based on:a. Supplyb. Utilizationc. The environment.


Supply The main aim is to extend the life of

domestic resources and diversify away from oil to promote other energy forms.


Utilization Depends heavily on the industry and

consumers to integrate energy efficiency programmes and develop demand-side initiatives to curb consumption.


Environment Energy and the environment are linked at

every level, thus the requirement for mandatory assessments to address negative impacts.

PRINCIPLE OBJECTIVES

1. The Supply Objective: To ensure the provision of adequate, secure, and cost-effective energy supplies through developing indigenous energy resources both non-renewable and renewable energy resources using the least cost options and diversification of supply sources both from within and outside the country


2. The Utilization Objective:To promote the efficient utilization of energy and to discourage wasteful and non-productive patterns of energy consumption;


3. The Environmental Objective:To minimize the negative impacts of energy production, transportation, conversion, utilization and consumption on the environment.

STRATEGIES

1. Secure supply - Diversification of fuel type and sources, technology, maximize use of indigenous energy resources, adequate reserve capacity to cater for contingencies [adequate reserve margin for generation, upgrading transmission and distribution networks and distributed generation (islanding);

STRATEGIES

2. Sufficient supply - Forecast demand, right energy pricing and formulate plans to meet demand.

3. Efficient supply - Promote competition in the electricity supply industry.

4. Cost-effective supply - Promote competition and provide indicative supply plan to meet demand based on least cost approach using power computer software such as WASP;

STRATEGIES

5. Sustainable supply - Promote the development of renewable and co-generation as much as possible.

6. Quality supply (low harmonics, no surges and spikes, minimal variation in voltage) - Match quality with customer demand with variable tariffs;

STRATEGIES

7. Efficient utilization of energy - Bench marking, auditing, financial and fiscal incentives, technology development, promotion of ESCOs, Labelling, Ratings, correct pricing, energy managers; and

8. Minimizing Negative Environmental Impacts - Monitor the impacts, improve efficiency of utilization and conversion and promote renewable.

KEY POLICIES

Petroleum Development Act 1974 Established Petronas as the national oil company and vested it with the responsibility for exploration, development, refining, processing, manufacturing, marketing and distribution of petroleum products.

KEY POLICIES

National Energy Policy 1979 Set the overall energy policy with broad guidelines on long-term energy objectives and strategies to ensure efficient, secure and environmentally sustainable supplies of energy.

KEY POLICIES

National Depletion Policy 1980 Introduced to safeguard the exploitation of natural oil reserves because of the rapid increase in the production of crude oil.

KEY POLICIES

Four Fuel Diversification Policy 1981 Designed to prevent over-dependence on oil as the main energy resource, its aim was to ensure reliability and security of the energy supply by focusing on four primary energy resources: oil, gas, hydropower and coal.

KEY POLICIES

Fifth Fuel Policy (Eighth Malaysia Plan2001-2005) In the Eighth Malaysian Plan, Renewable Energy was announced as the fifth fuel in the energy supply mix. Renewable Energy is being targeted to be a significant contributor to the country's total electricity supply. With this objective in mind, greater efforts are being undertaken to encourage the utilization of renewable resources, such as biomass, biogas, solar and mini-hydro, for energy generation.

KEY POLICIES

Energy Efficiency and Renewable Energy (Ninth Malaysia Plan 2006-2010) - The Ninth Plan strengthens the initiatives for energy efficiency and renewable energy put forth in the Eighth Malaysia Plan that focused on better utilisation of energy resources. An emphasis to further reduce the dependency on petroleum provides for more efforts to integrate alternative fuels.

NATIONAL ENERGY BALANCE

As the population and GDP grow in the next few years, the overall demand for energy is expected to increase.

Per capita consumption will see nearly a 20% rise by 2010, and energy intensity of the economy is also projected to increase.

Total energy supplies are expected to increase too, with crude oil and petroleum contributions declining and natural gas and coal reserves rising.


The National Energy Balance (NEB) is designed to present basic supply and demand data for all fuels expressed in a common energy unit.

It serves as an important reference in formulating new policies for the energy sector.

Key energy data and indicators allow policy makers to implement programmes to meet future energy demand and secure supplies.


The NEB utilises the Malaysia Energy Database and Information System (MEDIS) that acts as an information centre for economic, demographic and other energy related data.

The NEB is a cooperative effort by government agencies, power utilities, independent power producers, private oil companies and other industries

INCENTIVES

Companies Providing Energy Saving Services: Pioneer status with tax exemption of 70% of statutory

income for a period of 5 years or Investment Tax Allowance of 60% on the qualifying capital expenditure incurred within a period of 5 years with the allowance deducted in each year of assessment be set-off against 70% of statutory income; and

Import duty and sales tax exemption for equipment used in the related project, which are not produced locally. Equipment purchased from local manufacturers is given sales tax exemption.

These incentives are for applications received from 28 October 2000 until 31 December 2005. Companies are required to implement their projects within one year from the date of approval of the incentive.

INCENTIVES

Companies Which Incur Capital Expenditure For Conserving Energy For Own Consumption: Accelerated Capital Allowance on related

equipment to be written-off within a period of 1 year. The incentive is effective from the year of assessment 2003; and

Import duty and sales tax exemption on equipment used in energy conservation which are not produced locally. Equipment purchased from local manufacturers is given sales tax exemption.

INCENTIVES

To encourage the generation of energy using biomass: Pioneer status with tax exemption of 70% of

statutory income for a period of 5 years or Investment Tax Allowance of 60% on the qualifying capital expenditure incurred within a period of 5 years with the allowance deducted each year of assessment to be set off against 70% of statutory income; and

Equipment used for the project will be given import duty and sales tax exemption if not produced locally. Equipment purchased from local manufacturers will be given sales tax exemption.

INCENTIVES

The scope of the incentives is also extended to the use of other sources of renewable energy as follows:

a. Hydro power (not exceeding 10 megawatts)

b. Solar power.

INCENTIVES

These incentives are effective for applications received from 28 October 2000 until 31 December 2005. Companies are required to implement their projects within one year from the date of approval of the incentive.

These incentives are for companies that sell energy generated from resources that are renewable and environment-friendly such as biomass, hydropower and solar energy whereas companies that generate such energy for their own consumption are not qualified to receive this incentive.

ENERGY EFFICIENCY (EE)

Energy drives the nation, its progress and aspirations. The industrial sector not only contributes to economic growth but fuels increases in energy demand.

Industry is Malaysia’s second largest energy consumer after transportation. Notwithstanding the immense environmental problems derived from fossil fuel use, rising market prices for energy place a heavy burden on industry, government and consumers.

To counter the negative effects of excessive and non-productive use of energy, all energy users are urged to maximize every unit of energy. The key to achieving this goal is through successful execution of energy efficiency.


SUCCESS STORIES: Cargill Palm Products Sdn. Bhd. – Invested

RM 1.3 million on energy saving projects that lead to RM 2.0 million in savings per year in energy costs.

Malayawata Steel Berhad – Decided to invest RM 400,000 for cost-effective energy measures after an energy audit, and now saves 6581 GJ at the cost of RM 322,000, coupled with a reduction of 1,256 tonnes of CO2 per annum.


In line with Malaysia’s strategy to moderate trends in increased energy intensity and avoid wasteful energy usage, the Malaysian Industrial Energy Efficiency Improvement Project (MIEEIP), launched in 1999, led the way to successful execution of EE improvement initiatives in eight sub-sectors: wood, pulp and paper, iron and steel, cement, rubber, glass, ceramic and food.


Nearly 60 companies in various manufacturing and building sectors completed an energy audit to identify energy saving measures ranging from good housekeeping methods to replacing inefficient equipment or processes.

Collectively, the 54 industrial companies audited stand to save over RM 22 million annually by just implementing MIEEIP’s recommended measures.

EE: BENEFITS

Monetary benefits – An estimated savings of RM 1 billion in energy-related costs for users and additional savings – RM 5 billion - related to investments in utility infrastructure.

Save fossil fuels – Using energy efficiently saves overall fuel consumption and extends the lifetime of scarce reserves, all of which add up to energy cost savings for users.

EE: BENEFITS

Preserving the environment – Burning fossil fuels emit noxious chemicals and massive amounts of carbon dioxide (a greenhouse gas) into the atmosphere that cause health risk and add to global warming problems. Adopting EE strategies reduces tonnes of these emissions that help protect the environment.

Improving foreign reserves – Successful EE implementation translates into less money spent on imported fuels and less money flowing out of the country, thus leaving more to explore local resources that earn, not deplete, foreign exchange.

EE: INSTRUMENTS

Energy Management Systems – A low cost measure that can achieve 10% energy savings for industry and business and recover investment costs within 3 years. National energy consumption decreases by up to 5% when EMS penetrates commercial operations.

Standard Measures – Efficient technology at medium cost is key for realizing energy savings. Applicable across all sectors, high efficiency motors expect to provide substantial energy savings of over RM 500 million.

Co-generation Potential – Enhancing energy efficiency from 35% to 90%, co-generation reduces energy use and saves fuel loads by 25%. Initially high capital costs are offset by long-term gains in the quantum of energy saved.

EE: MAIN FOCUS

Independent Power Producers (IPP) - Electricity supply service in Malaysia is vertically integrated with three main electricity utilities – in Peninsula, Sabah and Sarawak - operating generation, transmission, distribution and supply activities. In addition, there are 18 investor-owned independent power producers supplying power to these utilities. Several mini-utilities generate electricity or purchase power from the main utilities for their own use with excess power supply sold to consumers within certain dedicated areas.

EE: MAIN FOCUS

The Malaysian Industrial Energy Efficiency Improvement Project (MIEEIP) – A leader in building capacity to create energy saving technologies and financial incentives, the project conducts audits and engineering services to plant operators, while promoting energy monitoring and better design aspects. The activities under the MIEEIP are implemented for eight industrial sectors: cement, ceramic, food, glass, iron & steel, pulp & paper, rubber and wood.

EE: MAIN FOCUS

Building Design - Energy Efficiency in buildings means using less energy for heating, cooling and lighting. It also means buying energy-saving appliances and equipment for use in a building. Integrating EE features into the architecture and conducting energy audits ensures that mechanical systems work together effectively and efficiently.

EE: MAIN FOCUS

Transportation – This sector is pivotal in the growth and functioning of the Malaysian econonmy, but it also consumes the most energy. To offset scarce and expensive petroleum fuels, viable alternative fuels – natural gas and biofuels – can provide huge savings for vehicles, especially when integrated with improvements in public transportation.

EE: MAIN FOCUS

Residential - Electricity in this sector is particularly very high and, together with the commercial sector, represents almost 28 % of the total demand for the country. That energy is used for cooling and lighting our homes, to operate appliances and machines, and water heating as well as for cooking. Placement, design, and construction materials used affect the energy efficiency of homes. Whereas, heat recovery and solar energy technologies are some options that are available to provide solutions for homeowners.

EE: ENERGY PRODUCTION

The electricity supply industry in Malaysia was privatised in 1990. There are three main utilities in the country – Tenaga Nasional Berhad (TNB), Sabah Electricity Sdn. Bhd. (SESB) and Sarawak Electricity Supply Corporation (SESCO). The power demand in 2000 was 10,600 MW, met by a total generation capacity of 13,280 MW. 5,090 MW or 38% is contributed by 13 independent power producers (IPPs).


At the end of 2003, power generation capacity totalled 19.3 GW, a 23% jump from available energy in the previous year that illustrates our appetite for consumption. Most production – 92% - is in Peninsular Malaysia, with Sarawak and Sabah each accounting for 4%. The peak demand for Peninsular Malaysia was 11,329 MW, with just over 1000 MW for East Malaysia.


Investments in energy production continue as the government expects US$9.7 billion to be needed in the electric utility sector through 2010. To help reduce the reliance on natural gas for power generation, the goal is to increase the share of coal electricity generation to 30% in 2006.


Six Independent Power Producers (IPPs) generated 35% of the total grid-connected capacity of 12,600 MW in 2001, with Tenaga Nasional Berhad providing the remainder in PM. In Sabah, 38% of 790 MW came from five IPPs and SESB. Two IPPs in Sarawak produced 320 MW out of a total capacity of 880 MW, the rest by SESCO.

EE: MANUFACTURING

The manufacturing sector has a pivotal role to play in energy management in Malaysia.

As the largest consumer of energy, inefficient use and wastage accelerates the depletion of fossil fuel reserves and weakens the national energy balance.

For every unit of energy wasted, taxpayers’ money is indirectly burnt in the form of government subsidies. However, the rise in global energy costs now make energy efficient a prime option to thwart price increases.

EE: MANUFACTURING

Under Vision 2020, the industrial sector is set to become the leading engine of economic growth. Malaysia is also on the path towards becoming a net importer of energy by the year 2010.

So far the cushion of government subsidies has created a safety net for energy consumers. For Malaysian manufacturers, there is no better time to start integrating energy management measures as part of good practices to bolster production and energy savings.

EE: BUILDING

Commercial and residential buildings, alone, account for about 13% of total energy consumption and 48% of electricity consumption.

Despite the variety of names - Low Energy Office (LEO), Zero Energy Building, Sustainable and Green building - energy efficient buildings have the same primary objective: to reduce energy use and maximize utilization.

EE: BUILDING

Constructing energy efficient buildings in the future helps Malaysia safeguard its depleting energy resources.

EE buildings increase construction costs up to 15% higher than conventional designs, however significantly low operating costs expect to offset these initial expenditures.

Everyone from architects, engineers, interior designers, and researchers play important roles to mold ideas into the creation of energy efficient buildings.

EE: BUILDING

SUCCESS STORY: Kuala Lumpur Securities Commission – Winner of the ASEAN

Energy Award for Energy Efficient Buildings, the KLSC building shines as an example of technical know-how and innovation that meets world standards in EE design and function.

Ministry of Energy, Communications and Multimedia Building – Designed to showcase readily available and cost effective energy efficient features, the MECM building in Putrajaya stands as a replicable model for others to follow.

Pusat Tenaga Malaysia Building – Based on the ZEO concept, the PTM building aims to spearhead the realization of utilization of energy efficiency and renewable energy i.e. solar and become a national icon to promote future endeavours in viable building energy management.

EE: HOUSEHOLD

Start With the Energy Bills Collect all your fuel and utility bills and add up the

amount consumed over the last six months to a year. If you calculate the costs on a per square footage basis, then you can determine how your bills compare with others and try to identify where savings opportunities exist to lower your consumption and monthly payments.

After adding up the bills, choose to conduct an energy audit or make an energy savings plan. List all your energy management needs and determine your priorities based on what you can afford to do.

EE: HOUSEHOLD

No Cost Selections Turn off the lights in unused rooms and watch costs disappear

from view. Use the energy saving dial on your appliances, such as

washing machines and refrigerators. Don't waste water by turning on spigots before you're ready to

do the chore. Close off cooling vents in unused rooms and turn up the

thermostat to a comfortable, but not freezing, level of comfort. Repair all those leaky faucets and running toilet bowls to save

5% on water bills. Close the curtains during the hottest part of the day to keep

your interior cool. Air-dry your clothes in the warmth of the sun, not a dryer, and

watch costs tumble down.

EE: HOUSEHOLD

Simple and Inexpensive Options Install water efficient faucet head in your

kitchen and bathroom sinks and a water saving showerhead that stops the cash drain.

Clean or change the air filter on all your air conditioning units.

Install compact fluorescent light bulbs in the fixtures you use the most.

EE: HOUSEHOLD

Spend a Little More, Save a Lot More Conduct a comprehensive energy audit to

identify sources where energy costs are inefficient.

Seal and insulate all cooling ducts and have regular check ups every year or two.

Install additional faucet aerators, efficient showerheads, and programmable thermostats.

Shade your windows and add solar gain control films to lessen the heat load in your home.

EE: HOUSEHOLD

Maximising Savings for the Future Install more compact fluorescent bulbs in your most

frequently used fixtures, even the ones outdoors. And replace exterior incandescent lights with fluorescents together with a timer or motion sensor if they're only needed for a few hours at night.

Make the sunlight work for you and convert to solar water heating.

Take stock and upgrade your water heater, air conditioners, and refrigerator to more efficient models. New units are really cost-effective when replacing old units that suck up energy.

Replace high-flow toilets with modern water efficient toilets that use 50-80 % less water

EE: TRANSPORTATION

Transportation has a critical role to play in saving energy.

As the second most energy-consuming sector in Malaysia, opportunities exist to implement energy efficient measures; reduce dependence on fossil fuels; and clean up the atmosphere in urban centres.

Already, under the Ninth Malaysia Plan, there is a strategic shift from private to public transport to increase the latter to 30% use in urban areas.

EE: TRANSPORTATION

Currently, there are several transportation programmes that are viable for Malaysia:

Increased Use of Public Transport – Large urban centres (Klang Valley, Penang and Johor Bahru) can maximize energy saving potential by increasing public transport to 50% by 2020, thus minimising urban congestion, air pollution and safety problems and significantly lowering fuel consumption attributed to the rapidly growing car population.

EE: TRANSPORTATION

Development of Intelligent Transport Information Systems (ITIS) - Improving traffic flow with proper road network capacity, together with better traffic management (signal operation, ramp metering, etc.), can reduce the problems related to urban congestion. INSIAX, SMART?

EE: TRANSPORTATION

Strategic Improvement of Vehicle Efficiency – Aimed at improving fuel efficiency for an entire vehicle fleet, these measures are geared towards establishing higher standards and promoting technologies to offset rising petrol prices. In addition to fuel cost savings, a move to lighten the road load will lessen the strain on the supply of transport fuels.

EE: TRANSPORTATION

Improvement of Pedestrian Network – Improvements for pedestrians (walkways, public transport access, etc.) reduces unnecessary intra-city trips by private vehicles and decreases traffic congestion. Connectivity with various transportation modes and making pedestrians a priority in planning helps to clear the roads from cars and pollution in dense urban centres.

ENERGY MANAGEMENT

Malaysia’s energy consumption per unit of national output is high compared to most developed countries and many developing ones.

The country’s industrial and transportation sectors consume nearly 40% each of all commercial energy use.

ACKNOWLEDGMENT

Suruhanjaya Tenaga Malaysia Pusat Tenaga Malaysia

010 bmcg 2123 week 1

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