energy management

Energy System Financial Aspects

Important factor in the Energy System Financial Aspects is the Energy Management and we need to analyse and utilise it to get full result. Below section show the all the thing you should consider with energy management.

Energy Management

Energy Management Begins at Home

Electricity saving in the households

  1. lighting
  2. television
  3. heating applications (ironing)
  4. refrigeration
  5. motive power (pumps, appliances)


Lighting consumes 50-100 kwh per month only a smaller share of electricity used in households in middle and upper consumption blocks appropriate use of cfls, avoid use of poor-quality ballasts, light-colored walls, curtains, floor and furniture, optimum use of daylight and clean fittings.

As example we can use task-oriented lighting to save large amount of light energy.

Table Lamp
Table Lamp


Fans consumes 20-30 kWh per month for overnight use per fan and Ceiling fans consume 80 Watt. Uses 1 kWh of electricity for a 12-hour run instead use Wall/pedestal fans use only 40 W.


Television consumes around 20-30 kWh per month. Larger TVs use more electricity so do not keep the TV on standby for long hours. Switch-off from the wall socket overnight and using Wireless handsets is reducing power consumption. Also needed to Switch-off when not needed.


Iron is usually consuming 30-45 kWh per month so reduce the use of electricity for heating. Iron all the item in one time for week or few days save lot of energy. Also do not use hotplates and electric kettles are better than them. Also, any equipment with overheating is sign of wastes electricity try to replace them or fix them.


Refrigerator is usually consuming around 40-100 kWh per month it is better to use Size the fridge to suit the requirements of ours. Main things are to reduce refrigerator consume is to Stop frequent opening of refrigerator and check the door seal or not properly once a year or some periodically time. Also auto defrost consumes more so you need to fix the machine to remove them. Refrigerator need to keep a space at the back and need to keep away from sunlight.

Pumps and appliances

Pumps and appliances are usually consuming 40-100 kwh per month so do not waste water 85% of water cost is electricity to pump them and purify it. We need to use appliances wisely and manage the washing.

Energy Management in Industries, Commercial Customers

Both demand and energy use must be managed

Packaging Material Industry Energy Management
Packaging Material Industry
Beverage Industry Energy Management
Beverage Industry
Resort Energy Management
Cement Industry
Cement Industry
Airport Terminal Air Conditioning System
Airport Terminal Air Conditioning System

Analysis of a Few Typical Customers

These results are only indicative and based only on a 48-hour snapshot profile. They represent some the worst-case customers, who would have to work harder to manage the demand in the peak period

Role of energy management in industry

Manufacturing industry energy manufacturing industry energy costs up to 50% of recurrent costs and costs up to 50% of recurrent costs. Energy intensive industries are also energy intensive industries are also the high value adders, generate the high value adders, generate employment, hence they should be protected hence they should be protected. Most industries have potential to most industries have potential to save 10% to 30% of energy costs. Buildings also have substantial potential to save, especially in ageing air conditioning and lighting systems and efficiency improvement potential at least 10%.

Energy management the way forward

In addition Good work implemented, lacks systematic and regular energy management effort. Requires energy data to be regularly analyzed in detail, deviations investigated. In addition Establish targets, plans and projects to achieve targets.

Energy metering

Also Supplier’s meter is the only electricity meter in most buildings. Fuel meters do not exist and need to calibrate meters also need to calibrate meters.

Energy auditing

Systematic analysis of energy flows in a process and Part of an overall Energy Management exercise Objective of using energy more efficiently Should be an on-going process not an attempt to “catch the culprits”, rather the application of known principles in practice.

Calculate Specific Energy Consumption
Calculate Specific Energy Consumption
bench marking and monitoring Energy Management
bench marking and monitoring

Saving Fuel Used for Transport

  1. due to Use public transport
  2. due to much needs to be done by the Govt to improve services
  3. Use common/shared transport
  4. Use communication facilities to the maximum, avoid travel
  5. due to Railway electrification

Energy Economics

Energy Economics are Important analysis since its necessary to estimate the whether our investment give us the required output or profit without concerning it is private or public project


Why conduct economic/financial evaluation?

It is conduct to weigh the costs and benefits of an investment and compare with norms and compare projects for  their profitability,  especially   when investment  funds  are  limited.

Analyses are required for both private projects (e.g.: manufacturing industry) and public projects (e.g.: power generation, transport)

Economic and Financial Evaluation of Energy Projects – Energy Economics

  • Due to purpose of analysis and definitions
  • Due to simple payback analysis
  • Discounted cashflow analysis
  • examples

Economic vs Financial evaluation for public projects


  • All costs and benefits are measured in economic terms
  • They reflect the point of view of the country due to Economic
  • Prices exclude all taxes and customs duty, which are local transactions.


  • considers all costs and benefits of the project, measured in current units of currency due to Financial.

Economic vs financial evaluation for public projects


  • Typically applied to infrastructure projects due to they are simply public
  • Roads, electricity, irrigation, water supply
  • They are expected to be economically viable ventures due to they are simply public
  • Profit is not the only objective due to they are simply public


  • Typically applied to business ventures, mostly with a clear profit motive due to they are simply private

Economic costs and financial costs

Economic costs or border prices

If cost of imported goods or services. Local costs and services are converted to border prices by applying a conversion factor.

Financial costs

Actual costs at market prices.

Constant terms and Current terms

Costs in constant terms

Also costs measured in the currency of a (past) reference year. Hence, they exclude inflation.

Costs in current terms

Also costs measured in the currency of the day.  Includes   inflation, escalation and all other effects.

Economic Indicators


The increase in current costs of a predefined mix of goods and/or services In addition Inflation includes escalation.


The change in the costs of pre-defined goods and/or services, in constant currency terms.  Escalation excludes inflation.

Interest rate

The percentage increase in the value of money over a period of one year. In addition to the time value of money, interest rate includes the effects of inflation and escalation.

Discount rate

The time value of money, as perceived by an investor. Usually expressed in percentage per year. Depending on the context, a market discount rate or a real discount rate may be defined. Also For public infrastructure projects, it is common to use the real discount rate and to work in constant currency terms. In addition Escalation may be applied if desired.

Simple pay-back period (SPP) – Energy Economics

SPP = Investment (USD)/Monthly Savings (USD/month) SPP is a “static” index. Also It does not consider the time-value of money

Discounted cash flow analysis

All public and private energy projects with longer (say over 2 years) SPP are usually evaluated using the discounted cashflow analysis technique. In addition The technique attaches a time-value to the expenditure and income that occurs in the future.

Discounted cash flow analysis example

USD 10 million is to be invested in a new boiler for a factory. The fuel savings will be USD 1.3 million per year. Also At the end of 10-years, it is considered to have fully depreciated.

Is the investment viable?

Assume Discount rate = r

Discount rate Energy economics
Discount rate

Let r be 10%

Energy economics Discount rate as 10%
Discount rate as 10%

So All costs are in constant terms of year zero. Also Assume a real discount rate of 10%. Neglect escalation.

Energy economics Discount rate example
Discount rate example

Net present value = 7.99-10 = -2.99

Hence the project is not viable.

Present value factor

Useful index when cash flows are equal over several years

Present value equation energy economics
Present value equation
Present value table
Present value table

Benefit-cost analysis – Energy management

Net present value

Present value of costs

Present value of costs
costs Present value

Present value of benefits

Present value of benefits
benefits Present value

Net present value

NPV = B – C

Project accepted if NPV > 0

Benefit-cost ratio – Energy management

Benefit to cost ratio
Benefit to cost ratio
  • Project accepted if CBR > 1
  • Highest CBR preferred when there are optional projects.
  • The company may have a lower limit, below which projects are not Consider      e.g. CBR >1.8

Internal rate of return – Energy management

Internal rate of return (IRR), is the value of the discount rate r, at which

B = C

  • Project accepted if IRR is above the investor’s norm
  • Highest IRR preferred when there are optional projects.
  • IRR must be above the discount rate/bank rates, for projects to be accepts.

Also Other indices used to compare projects against each other

Life cycle cost – Energy management

The total PV of costs of a project to meet a given requirement are giving below due to life cycle cost

(if the product/service must be provided at any cost e.g. due to Electricity demand, due to health care, due to transport). Also Specific cost the long-term average cost of a unit of the product or the service to be provided. In addition as examples Long-term average cost of generation from a steam power plant will be 5.8 USD/kwh. Also Above things are more important in Energy economics and read next article for more energy economics details

Energy Pricing Consideration and methods

Energy pricing is doing for get optimum cost reflective prices and giving energy to users at reasonable price. In addition If you want to know more about energy system goes to main section.

Contents of Energy Pricing

  • Electricity
    • Costing of electricity supply
    • Electricity pricing
  • Petroleum and gas
    • Crude oil and bulk product costing
    • Pricing of petroleum products and gas
  • Discussion

Electricity Costing – Energy management

All energy commodities have a capacity cost  an energy cost and the above may vary according to  time of day , season (weather) and special occasions/events/festivals and additional dimension is at what voltage level is the supply deliver Also Electricity supply has all the complexities of costs and Electricity prices may or may not reflect costs so depends on pricing policies.

Daily Demand Curve Energy Pricing
Daily Demand Curve

Components of costs – Energy management

  • Generation: due to capacity cost and energy cost
  • Transmission: due to capacity cost and provision for losses, operations and maintenance costs
  • Distribution: due to capacity cost and provision for losses, operations and maintenance costs
  • Supply: due to metering, billing and other commercial services
  • Other charges for services, due to that are not relevant to the system: Penalties, pole shifting
Energy Distribution energy pricing
Energy Distribution

Customer Burden on the System – Energy management

Capacity costs in Energy Pricing

The burden impose by each customer on the system is different and If the customer comes up on peak, he is responsible for the entire capacity cost (e.g.: households) and If the customer demand is outside the peak hours, then he is responsible for his demand coincident with the peak only.

Responsibility for Capacity Costs of the System

Responsibility for Capacity Costs of the System

This group of customers have a peak demand occurring almost at the system peak, but slightly diversified. Their contribution to peak is about 90% of the measured maximum demand and If the measured maximum demand of the customer group is 1000 MW, and if the cost of a kW of capacity is Rs 2000 per kW per month, then this group of customers should be charged 90% x 1000 x 2000 = Rs 1.8 million per month

Energy costs in Energy Pricing

These costs are simply pass through from one level of the system to the other, considering Costs of generation during different times of the day and seasons of the year and Adjustments to account for losses.

Responsibility for Energy Costs of the System

Energy costs are not difficult to calculate, for each hour even real time calculations are possible. If smart metering is available, they can be charge for energy on real time, with the meter recording and displaying the true costs of generation (and adjustments for losses up to the customer) every hour and If not, their energy use at different times of the day have to be either, Estimated by conducting load research, and plotting load profiles Using TOU metering, with pre-programming facility to record energy use in several time intervals. Also, many different systems are use in worldwide.

How to Convert Costs to a Price Structure – Energy management

Meters and their limitations, Political and social demands for subsidies, Conflicts between desire to sell more and the need to conserve energy, Theft of energy, Need to make electricity utilities profitable or at least to breakeven, Energy probably is the most frequently used tool provide subsidies and to charge taxes, without much success.

Features of Metering and Price structure

Energy and demand metering

  • One-part metering for all LV customers (energy only)
  • Two-part metering for LV bulk and MV customers (energy and demand for apparent power)
  • Time-of-use metering for LV bulk and MV customers (presently 3-interval)

Price Structure

  • Increasing block tariff for household and religious customers. Other LV customers on flat tariff
  • Two-part tariff with 3-interval TOU pricing for energy for all LV bulk and MV customers.
  • See pricing sheet separately provided

Many different systems are use in worldwide.

Strengths and Weaknesses of the Electricity Price Structure

complicated it is in most similar developing countries and Very simple some advanced countries. Large cross-subsidies between customer categories and GROSS subsidies are also require, because industry cannot breakeven.

Petroleum Pricing

Less complicate than electricity pricing because Possibility of storage removes the need for demand measurement, TOU measurement and Capacity costs negligible, energy cost is the largest. Possibility to implement through a simple pricing formula to Retail supplier, no individual usage measurement and Inherently prevents subsidies through measurements.

For more details about Pricing visit these site and my energy system section.