lean energy: a framework for achieving continuous increase in industrial energy productivity

WHITE PAPER SERIES – VOLUME I

of 12 © 2013 ZF Energy Development LLC. All Rights Reserved.

LEAN ENERGY

A Framework for Achieving Continuous Increase in Industrial Energy Productivity

This is one of a series of white papers on Lean Energy. Download the other papers in the series from http://www.z-fed.com/zf-energy-whitepapers

ZF Energy Development LLC is an energy management firm specializing in providing a low cost energy supply for industrial users. Copyright © 2013 ZF Energy Development LLC. All rights reserved. This document and translations of it may be copied and furnished to others, and derivative works that comment on or otherwise explain it or assist in its implementation may be prepared, copied, published, and distributed, in whole or in part, without restriction of any kind, provided that the above copyright notice and this section are included on all such copies and derivative works. However, this document itself may not be modified in any way, including by removing the copyright notice or references to ZF Energy Development LLC or Z-FED, without the permission of the copyright owners. This document and the information contained herein is provided on an "AS IS" basis and Z-FED DISCLAIMS ALL WARRANTIES, EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO ANY WARRANTY THAT THE USE OF THE INFORMATION HEREIN WILL NOT INFRINGE ANY OWNERSHIP RIGHTS OR ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. Published 2013 by ZF Energy Development, LLC. Any comments relating to material contained in this document may be submitted to Z-FED, 57 West Avenue, Wayne PA 19087, or by email to [email protected].

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INTRODUCTION ............................................................................................................... 4

THE LEAN ENERGY IDEA ..................................................................................................... 5

THE LEAN ENERGY EVOLUTION ............................................................................................ 7 Lean Principles ............................................................................................................................. 7 JIT Conversion ............................................................................................................................ 10

BIBLIOGRAPHY .............................................................................................................. 12


INTRODUCTION

‘Lean’ is a word often used in modern manufacturing. It’s used mainly as a contrast word. Whereas prior methods were ‘fat’, i.e., there was a lot of material volume in production processes, ‘lean’ trades volume for speed. By moving material faster, there is less of it in the system. Since, ‘lean’ has come to mean doing more with less in general.

What does ‘lean’ do for us? Most of the modern product flow is the result of this thinking, and per-worker productivity is now five times what it was in 1950. One may dispute the details, but the facts are this: lean manufacturing made the world we are in today. In fact, it has been so successful that it is not inconceivable that there will be a time when only 0.5% or less of the population will make everything we use.

Can we experience something similar with energy? Is there an analogous concept - lean energy – that would give us a similar revolution where everything we use requires only a

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Figure 1, Economic Output per Labor Hour 1948-2011; 2005=100, Source: (Bureau of Labor Statistics, 2013)

67% thermal and mechanical loss

10% transmission loss

4% lighting

10% fans

30% oven inefficiencyEnergy

input into

power plant

100#

33# 29.7# 28.5# 25.6#18#

Energy applied to

value added process

Figure 2, In most cases 18% or less of the total energy input for an industrial process actually creates value

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tiny amount of energy? How does lean energy bring economic benefits to American industry? Given the doom-laden predictions for man-made climate change, is there a possibility that lean energy might save the world?

As Amory Lovins put it, “We have nothing to lose but our waste”. In this first of a series of white papers we will discuss Lean Energy, how it works, and what it means to your industrial business.

THE LEAN ENERGY IDEA

Lean energy is simple, but not easy. The underlying idea follows the thinking of a just-in-time (JIT) material supply: needed energy is made available just at the time and place when it is needed to create value. Not earlier, not later. To understand what this means, let’s take a look at an example.

A widget manufacturer requires that their widgets are baked in an oven for five minutes as an intermediate manufacturing step. The baking oven has three energy inputs: a natural gas burner, a conveyor motor, and a blower. The conveyor motor and blower use a combined 20 Amperes at 480 Volts, or 9.6 kW. The burner is a 0.5 mmBTU/h system, or 146.5 kW.

In a conventional model, the widget manufacturer buys gas and electricity from a commodity supplier, plus a distributor that delivers the commodity to the factory. From there, pipes and wires are run to the oven. The electricity is purchased on the retail

market, and the source of that electricity is a mix, depending on whatever generation fuel mix is online at any given moment of time.

They key difference between natural gas and electricity is that electricity is a value added product. In other

Figure 3, Energy Supply Chain for the curing oven of widget manufacturer

Time

Fuel SupplyCombustion

Grid

Thermal Energy∞

∞ Other Energy

Consumption

by motors

Conversion Cycle Time

Consumption

by burner

Ele

ctr

ical S

up

ply

Cha

in

Na

tura

l G

as

Su

pp

ly C

ha

in

Electrical

Generation

Fuel Supply

Motor

Motor

Gas

CombustionHot Air

Moving Air

Moving Conveyor

Lean Energy


words, someone else has already combusted or converted some other form of raw energy into electricity. For the oven, natural gas is not the value-added product, it is the heat that does the baking, and that is derived – converted – by combusting the gas.

The first law of thermodynamics asserts that energy can only be converted, or transferred, not created or destroyed, so therefore the naming of ‘generators’ is a physics misnomer. The oven burner converts gas to heat, and the generators on the grid convert fuel to electricity. The overall system input for the widget manufacturer is a variety of fuels.

The problem with this system is that it is wasteful. The conversion efficiencies along both the thermal and electrical value chains are such that the total 156 kW oven input requires at best 210 kW of input. In addition, the applied energy (exergy) is less than 156 kW. The conveyor and blower motors are conversion devices just the same, with their own losses: conveyor friction, motor losses, oven thermal losses, etc., actually bring the direct applied energy to much less than 156 kW.

In summary, lean energy is about eliminating waste and lowering cost. To understand how to apply this, we will focus on two things: How can we structure it such that Input ≈ Delivered. Put another way:

Consumed Energy – Applied Energy ⟶ 0

And how can we maximize energy productivity, i.e.,

Pe =

The remainder of this White Paper series will be dedicated to taking various perspectives on these two underlying relationships.

Thermal

Losses

Total Gas

(kW)

Electrical

Losses

Total

Electricity

(kW) Total kW

Input 183.1 27.3 210.4

Burner Conversion Loss 20% 36.6

Generation Combustion Loss 60% 16.4

Transmission Loss 8% 1.3

Delivered 146.5 9.6 156.1

Total System Losses 26%



THE LEAN ENERGY EVOLUTION

Lean energy is a discipline that seeks to (1) reduce energy cost and, (2) drive energy waste toward an achievable minimum (or, maximize exergy (Gundersen, 2011)). The idea emerges from lean management in general, or the principles of just-in-time supply that came from the Toyota Production System (Womack, Jones, & Roos, 1990). All of these ideas have the same underlying kernel idea: the most efficient possible use of capital in industrial processes. The Toyota Production System itself was borne in part from the teachings of W. Edwards Deming.

Lean energy centers on conversion cycle time, which is the time between acquired and applied energy (sometimes called exergy). The less time between these two events, the lower energy losses, the less capital invested in energy operations.

Like lean management in general, this simple idea has a plethora of sometimes non-obvious implications.

Lean Principles

The lean manufacturing movement arose from a lack of capital, particularly the money needed to finance large inventories. Taiichi Ohno and Shigeo Shingo determined in the 1960s that make-to-inventory was a drag on profits. In order to add value at minimal expense, they devised a system that accelerated the material flow through a factory to such speed that substantial inventory could not accrue. It sounds odd, but that is the net effect of a JIT, make-to-order system. The secret to its spectacular

efficiency is in the cycle time reduction of every step that adds value to material. Therefore, speed and inventory are inversely proportional to each other: as speed increases, inventory decreases. Reduce cycle time to 0, and costs and capital required for inventory management disappear.

Albert Einstein showed us that mass and energy are the same thing, separated by a constant. Does the energy analogy hold? If we decrease manufacturing cycles times, does energy consumption decrease?

Imagine a manufacturing process that consumes energy in making a product. Energy is drawn from its source, typically the ground, and conveyed to a generation plant. There the energy is converted, and the electrical energy output is transmitted via the grid to a

Energy Kaizen

Conversion Cycle Reduction

Standard Load

Standard Flow

Load Interval

Standard Demand

Economic Dispatch

Figure 4, Lean Energy Framework

Lean Energy


point of consumption. Other conversion output, such as heat and sound, are lost forever.

Let’s consider total energy consumed from a fuel supply. Over time, this amount simply accumulates, and we can represent this abstractly as a cumulative line, as shown in

Figure .

This graph represents the manufacturing process input. The output of that process we’ll call ‘Applied Energy’, culminating in a product that is sold or creates value. It contains all the cumulative energy input consumed by the manufacturing process.

So we can show the Cumulative Applied Energy as offset from the Cumulative Consumed Energy by some amount of time (Figure ).

The energy consumed at time t’ is converted into revenue at time t”. We’ll call that the Conversion Cycle Time. This includes the conveyance of fuels to conversion to the point of use.

Figure 5

Figure 6



Now, energy change is simply a transient state of matter, it doesn’t hang around. Energy seeks diffusion and moves quickly. And, as it is converted, energy is rejected. This means that less energy is applied than is consumed, as is described by the laws of thermodynamics.

That means the energy Consumed at time t’ is immediately applied at t as well. Therefore, the difference between the Consumed curve and the Applied curve at t’ is the Conversion Loss.

One can see that, indeed, Conversion Cycle Time is proportional to Conversion Loss. If we bring the blue and red lines closer together by reducing Conversion Cycle Time, Conversion Losses decrease.

Figure 8

A student of the laws of thermodynamics might conclude that if the slope, or rate of change, of cumulative consumption and application is the same, then no losses would occur. Since losses are a fact, the two curves cannot have the same slope.

Converting a fuel supply at the very moment that the resulting energy can be applied to a paid order can similarly reduce Conversion Cycle Time. If combustion is brought close to the value added process, both heat and electrical output are used, therefore reducing conversion losses (the inventory analogy). Therefore, JIT conversion – energy delivery that occurs just in time at the value added process – is at the core idea of lean energy in manufacturing.

Lean Energy


JIT Conversion

We’ve demonstrated that JIT conversion promises reduced conversion losses. An electric motor, of course, does exactly that. High HP Motors are more than 90% efficient, and produces kinetic energy in fractions of a second. Getting that electricity to the motor--not so much.

JIT conversion principles have to apply to the system as a whole: the entire process between stable input fuel and value added. Conversion steps along the way produce energy in more usable forms for purposes of conveyance, such as electricity, so the efficiency of each step is critical. And each step along the way consumes capital, so the total capital application governs the feasibility of the system.

We apply this principle in two ways – how efficient are the conversion devices in the supply chain, and how productive is the process, i.e., what is the overall value-added energy cost of the system?

Efficiency Productivity

Conveyor Motor What is the lowest consumption method to move product through the curing process?

How can I lower the cost of energy conversion?

Blower Motor What is the lower consumption method to apply heated air to product surface

Thermal What is the lowest consumption method to heat air?

The distinction between efficiency and productivity is important to an industrial company or manufacturer.

The goal of lean energy is cost minimization. We could lower demand to the outer envelope of technological state-of-art, but the choice of fuel, for example, may make a significant cost difference at identical demand rates.

Furthermore, demand improvements typically require capital investments, and the returns on such investments are compared against a current performance baseline. As changes in supply logistics shape that performance baseline, investments in demand reductions take on a different ROI.



Therefore, energy efficiency describes the measure of cycle time reduction, while energy productivity tells us about the effort required to attain such reduction. In practical terms, the real world, we must consider both.

ROI %

Investment $

Energy Efficiency Investments

Energy Productivity Investments

0

Figure 9, Relative Economic Elasticities of Productivity and Efficiency Investments

Lean Energy


Bibliography

Bureau of Labor Statistics. (2013, August 26). Multifactor Productivity Home Page. Retrieved August 26, 2013 from US Department of Labor, Bureau of Labor Stastics: http://www.bls.gov/mfp/

Gundersen, T. (2011). The Concept of Exergy and Energy Quality. Trondheim: Norwegian University of Science and Technology.

Lovins, A. (2011). Reinventing Fire. White River Junction, Vermont, USA: Chelsea Green Publishing.

McKinsey Global Institute. (2012). Manufacturing the future: The next era of global growth and innovation . Seoul, San Francisco, London: McKinsey Operations Practice.

Womack, J., Jones, D., & Roos, D. (1990). The Machine That Changed The World. New York, NY: Harper Perennial.


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