Operations & Management
Industrial bakery waffles over freezer lighting
By Anatoli Naoumov GreenQ Partners
Retrofit welcomed for non-energy operational savings
By Anatoli Naoumov GreenQ Partners
Nov. 15, 2016 – Lighting retrofits in industrial environments are known to be short-payback energy management solutions due to significant energy savings and incentives. In the case described below, however, the cost of a massive energy waste prior to retrofit was actually immaterial when non-energy benefits were considered.
In fact, the avoided cost of wasted energy was dwarfed by non-energy operational savings resulting in a 2.6-day payback. That’s eight shifts.
The case involved an industrial bakery. When we discussed the benefits of energy management with the bakery manager, he showed little interest.
“Our main problem is not the cost of energy; it’s an imbalance between our baking capacity and our freezing capacity,” he explained. “Our freezer is a bottleneck. If only we could get CAPEX to increase freezing capacity.”
Although energy management is rarely about installing more powerful equipment, we went to see the production process.
Production floor surprise: MH lighting in the freezer
Inside the walk-in freezer we saw 12 metal-halide fixtures that were never turned off. Just how expensive is this? Each fixture emits heat, effectively creating a 6.6kW heater (12•0.55kW) inside the freezer. To offset this heat, the freezer consumes about 8.6kW (6.6kW•1.3, where 1.3 reflects freezer efficiency).
This particular freezer uses two 15hp compressors that, conservatively, consume 22.5kW (2•15•0.75). Effectively, the 8.6kW of the 22.5kW freezer offsets a built-in lighting heater (24/7/365).
From the 29.1kW capacity of the freezer with lighting, 15.2kW (6.6kW+8.6kW) or 51 per cent is wasted.
Lighting retrofit payback based on energy savings
These numbers are actually irrelevant for the business case at hand. Now we’re getting to the fun stuff.
The 15.2kW combined power of freezing and lighting for a whole year costs about $15,000 between energy and demand. The cost of installing LED lighting is about $3000, or $1500 when you take the time to apply for an incentive (where available). Unlike MH lighting, LEDs do not take time to restart, so LED lighting can be turned Off/On as needed, making energy consumption immaterial and bringing payback to about 36 days. Not bad. Now, the fun part.
Payback based on non-energy operational savings
The cost of avoided energy waste barely scratched the surface. Prior to the retrofit, this bakery shipped part of their products to a third-party holding freezer. After the retrofit, freezer capacity became sufficient to cover production needs.
Exercising the option of a third-party warehouse conservatively comes to $24,000 annually: the space rental is 18,000; the food audit of the holding freezer is a minimum $5000; and third-party personnel training is $1000. This cost only covers the option of shipping product to another freezer.
The cost to ship and hold a truck of product is $250 plus $35 for logistics management. Each shipment causes at least 1 per cent product waste; $80 in this case, followed by the cost of waste utilization — another $35 in administrative cost. Altogether this comes to $400 per shift.
The real problem, then, is the bakery runs 936 shifts per year, which brings the annual cost of having metal-halide lighting within the freezer to a mind-boggling $413,400:
• $15,000 for energy
• $24,000 for requiring third-party storage
• $400•936 = $374,400 for shipment
With these costs, the payback of a $3000 LED lighting retrofit comes to under three days!
And consider that, in the discussion above, I did not factor in the risk of product contamination, which is always present at a multi-user warehouse. Should it materialize, losses through litigation and reputational damage could be measured in the millions.
So when your client or upper management hesitates at the thought of spending money for something like a lighting retrofit, bring their attention to the total cost of energy mismanagement, and the savings that could be realized through non-energy operational savings.
A managing partner at GreenQ Partners, Anatoli Naoumov, MBA, MSc, CMVP, has been involved in various areas of business analysis and development for over 15 years for companies in Canada, The Netherlands and Russia. He has been certified as measurement and verification professional (CMVP) by The Association of Energy Engineers (AEE) and The Efficiency Valuation Organization (EVO). He can be reached at email@example.com.
This article was originally published in February 2016 issue of Electrical Business, a sister publication of Manufacturing AUTOMATION.