NARRATOR Welcome to the DNV GL Talks Energy podcast series. Electrification, rise of renewable and new technologies, supported by more data and IT systems, are transforming the power system. Join us each week, as we discuss these changes with guests from around the industry.
MATHIAS STECK Today we want to talk about energy efficiency programs, and our guest is Ulrika Wising, Head of Department Sustainable Energy Use Europe, of DNV GL – Energy. Good morning, Ulrika.
ULRIKA WISING Good morning.
MATHIAS STECK Before we jump into the topic, Ulrika, it would be great if you could briefly introduce yourself, as well as what your section is actually doing.
ULRIKA WISING I'm a chemical engineer by training, and I have a PhD in energy efficiency in industry. And I've worked my whole professional life as a consultant working on energy efficiency issues, in different fields and in different settings. My team here in Europe, we work on mainly two different things. We work directly with industry, trying to help them both stay regulatory-compliant, as well as reducing their energy costs by becoming more energy-efficient. And then we also work towards government and large institutions, where we try to help them understand what the potential is for energy efficiency, but also evaluate programs that they've either managed, or ordered somebody else to run. So, we evaluate the effectiveness of those programs as well.
MATHIAS STECK Let's start with a very high level question. What would you say are the key issues when discussing energy efficiency programs and decarbonisation?
ULRIKA WISING COP 21 was agreed that we need to be better than the two degrees increase as projected. And it's more like a 1.5 degree increase of earth temperature, which means that the targets of decarbonisation is just going to get tougher and tougher and tougher for the globe, because now this is an agreement that most people could sign up to. So, when you talk about decarbonisation, one aspect of decarbonisation is energy efficiency. And then of course, another aspect of decarbonisation is to decarbonise the energy that we use. But the absolute cheapest and easiest to do is often energy efficiency.
And the International Energy Agency has created this statement where they say that energy efficiency's the first fuel, as in that is the best way to reduce our consumption of energy, and therefore decarbonise. So, energy efficiency programs, can be, first of all, run very differently. So, you have specific ways of running energy efficiency programs in different parts of the world. But at the end of the day, it's to help and encourage people to make changes, whether or not those changes are investments, or they're things that people do differently. The programs are intended to reduce the amount of energy we use.
MATHIAS STECK Okay. So maybe to understand better for whom these programs are relevant, you could maybe share a few industry examples, and talk a bit about savings that can be achieved? How you track those, and how the savings compare to the cost of an energy efficiency program?
ULRIKA WISING So I think, first, maybe we should talk about what is an energy efficiency program? Because I think there's a plethora of different definitions of what is energy efficiency program, and different views on what that is. And I think you have different forms. So, you have the energy efficiency programs that are run either by a utility or state body that gives incentives for people or industry or organisations to take action and become more energy-efficient. And then you have an energy efficiency program that could be run by an industrial organisation, which is within their assets. They run an internally-funded program in order to reduce energy consumption and energy costs.
So, I think it's important to keep those two things separate, because it's one thing if you get incentives to do something, and there's another thing if you take action yourself, as an organisation, to do something. And if you look at the things that industry are doing, so the self-funded energy efficiency programs, there are different levels of advancement in different companies and different industry sectors. And I would say the typical one would be that you have an investment program for replacing your equipment, and buying more energy-efficient equipment. And this type of approach has been used for a very, very long time. And it can actually be seen, if you look at statistics on how industry has become more energy-efficient compared to how buildings have become more energy efficient, or how transport has become more energy-efficient, you can see that industry has actually made a huge leap in comparison to the others. And the reason why, the main reason why they've done this leap, is because they've continuously invested in their processes. And when they do so, every time they buy a new pump, it is a little bit more energy-efficient. Every time they buy a new process equipment, it is a little bit more energy-efficient. So, because of that continuous renewal of the asset, it has become much more energy-efficient over time. So, that's the investment type, classic energy efficiency program that you will have in an industry.
And then you have the industrial companies that are a little bit more advanced, and that have gone towards an energy management system, and are looking more at how can we run our assets more energy-efficient with the equipment we have? Of course we're going to continue to invest, but even with the equipment we have, can we be better, can we do things better? And I think that's a key area where we've been working for the last few years, and trying to help industrial organisation and specific sides to understand what is driving their variability of energy use. Because if there can always be an optimal energy consumption for whatever process or whatever type of product they're producing, well then that would lead to significant energy savings. And we're typically talking between 5 and 20% energy savings, just by running your process optimally. But often these processes are very dynamic. It's hard to really indentify the root causes of things. And we'll also tend to have an approach of running at, with a certain safety margin. We're afraid of not producing the right quality, so we put a little bit more energy into the process in order to really make sure we're producing the right quality. And it might be that we're keeping boilers on standby, because we're afraid that if our main boiler goes down, it's going to take too long to start up a new boiler from cold, and therefore we keep these boilers on standby, and very seldom is there an evaluation of the cost of that safety margin, and what is actually the probability of those things happening. So, these are things that we work on and where we try to, we use, actually, data-mining as a tool to identify what are the root causes for all this variability, and what is the safety margin costing you, and what are the root causes of over-producing quality or overusing energy when you're running a process.
MATHIAS STECK Do you have, like, a concrete industry examples where you could tell us what, for example, what a change in behaviour is doing?
ULRIKA WISING Sure. Yes. So, I have a couple of examples that I could share with you. First, there's an example of a lime producer, where, when you make lime, you basically grind stone. That's what you do. You grind , the grinder is the main energy-consuming component in a lime factory. And the smaller the particles, so the more energy you put into the grinder, the more reactive is the lime. So, the customer, of course, wants to have the smallest particle possible, but typically there's a specification from the customer. But what happens is that the operator that runs the grinder are afraid to not meet the specification. And because it's very difficult to measure, in real time, where they are with regards to size, they tend to over-grind and produce an over quality, too high quality for what they're actually getting paid for. And this is, of course a waste, because they're putting a lot more energy into the process unnecessarily, because they could run it much, much leaner and just run to specification. But again, that’s that safety margin thinking.
Another example I have is a distillation column, where a distillation column is really difficult to shut down. It takes a week, and then it takes a week to get it back up and running. So, because of that, when there's an issue, a distillation column, you typically just re-circulate a distillation column. And of course, when you re-circulate a distillation column, you use the same amount of energy again; you're basically reproducing the same product again. So, that's an enormous waste of energy. And typically it's with regards to, again, safety margins that people are running this distillation in recirculation rather than continue to produce, or maybe even bringing the distillation column down to a lower production level. Because then you would re-circulate at a lower rate and lose less energy. Again, it's a question of, does the operator understand, really, what's at stake when he re-circulates, how much it costs to re-circulate? And is it really necessary? And again, we're talking about those safety margins. Is it necessary to re-circulate? So, that's another example.
MATHIAS STECK Well, that's interesting. I think, when we look at the US, and correct me if I'm wrong, but there are some top brands over there who obviously also use energy efficiency as something defining their brand, because they might think their customers expect it from them. So, in the US, there seems to be quite a culture also looking at our own business. How is that in other regions of the world, in Europe or also here in South-East Asia?
ULRIKA WISING So, I think that one thing that they have in the US, which we don't necessarily have anywhere else, are utility obligation schemes, where the utilities are obliged to help their customers save energy. And in a lot of areas in the US, there are programs for industry. So, industry can get funding from their utility, to actually become energy-efficient. So, it's become an important part of the agenda in the US. That said, I think that, when you look at where we're at with regards to energy efficiency, and especially with industry, the European industry is by far the most energy-efficient industry, if you look at different regions of the world. And I think that has to do with, for a long time, I would say ever since the oil crisis, that energy prices have been higher in Europe than elsewhere, so we've, in order to stay competitive, been forced to reduce our energy demand. And it's also the question of security of supply, so there have also been incentives from government to reduce energy consumption. And also there's a different thinking in Europe. In the US, companies, typically, they have a very short-term objective, because it's driven by the stock market. So, they have very, very low investment, high profitability type approach in the US. Whereas, the European industry has taken a much, much more long-term view on energy investment and energy efficiency, because the demand from their owners through the stock market has been less on short-term returns. And then if you look at Asia Pacific, you have a different situation, where it's a much newer asset base compared to Europe or compared to the US. And you also have a culture, in industry, to follow what happens elsewhere. And often it's also multinational companies that have assets in Asia and the Pacific, that also have factories elsewhere. So, it's more of a trend of follow that I've seen in that region. But that said, there's a big trend globally, right now, to go towards energy management systems and ISO 500001, which is the ISO standard for energy management system. And that is being rolled out by companies across the globe, and of course that includes their assets in Asia Pacific.
MATHIAS STECK That's interesting. Now, let's look ahead a little bit, what will happen in the future? We recently saw that, in California but also in Dubai, solar deals were signed where solar costs three US dollar cents per kilowatt hour. We might even have the vision energy is for free at some point in time, and you only pay for the service provided to yourself. In addition to this, we have this whole internet of things, digitalisation, demand-response, storage, distributed generation coming in, these game-changers, at least in the electricity industry. What is your view on these impacting the imperative of being energy-efficient?
ULRIKA WISING So I think that, first of all, when you talk about energy, we have to remember that there are two main components of energy. We have electricity, but we also have fuel. And when you look at industry, and especially energy-intensive industry, the majority of the energy they use is fuel. And yes, there's a current dip in oil prices, so fuel is actually more inexpensive that it used to be, but we actually haven't seen a negative trend when it comes to energy efficiency. Because at the same time, as the prices are going down, the regulatory requirements of decarbonisation are going up. Which forces companies to still become more energy-efficient, because the penalties of not doing so would largely overbear the cost of actually becoming more energy-efficient. So, I think that's one aspect of it, is that the regulatory environment is still pushing, on the fuel side, companies to become more energy-efficient and emit less CO2.
Now, if electricity is all green and is cheap, on the electricity side, you might, in the future, see less need to become more energy-efficient. But I actually don't think so, because we also have an increased population. We're increasing all the time. We have more and more decentralised energy, like you said, which will create challenges, because where the really cheap green electricity is being produced, might not be where the people live, or where the factories are. So, you might also have a higher cost in distribution of that energy. And you might have higher costs, because you need to store it, because it's intermittent. So, I actually don't think that the fact that renewable energy prices are going down means that we're going to see less of energy-efficiency, and less need for energy-efficiency.
MATHIAS STECK What about these new technical advancements of maybe loads, generation, transmission and distribution becoming much more intelligent? What impact does that have on this topic?
ULRIKA WISING I actually think that's an opportunity, because if you look at the industrial sector, it's a huge demand. So, the demand for energy in industry is still one of the biggest that we have in society. And it's also centralised in a few locations. Whereas, building in housing is still, at least in the UK, the biggest CO2 emitter, but it's all distributed across the country. Whereas, if you look at industry, it's the second biggest, but it's concentrated maybe at 300 sites, main sites. So, the role that those sites can play in a demand-response kind of world can be quite significant. And if they at the same time, then, use less energy themselves, they can pay a bigger role in such a market, in such a system. So I actually think it's a great opportunity for energy efficiency, this digitalisation, and this internet of things, and the distributed energy, and the demand-response potential.
MATHIAS STECK Thank you very much, Ulrika. We are unfortunately at the end of our time. This was Ulrika Wising, Head of Section Sustainable Energy Use Europe, on energy efficiency. And I hope you come back for the next series. Thank you very much for listening.
NARRATOR Thank you for listening to this DNV GL Talks Energy podcast. To hear more podcasts in the series, please visit dnvgl.com/talks energy.