Evaluation of Energy Use: Watt Committee: report number 6

Published by: The Watt Committee on Energy Ltd 75 Knightsbridge London SW1X 7RB Telephone: 01–245 9238 This edition published in the Taylor & Francis e-Library, 2004. © 1979 The Watt Committee on Energy Ltd Dajon Graphics Limited, Hatch End, Pinner, Middx. 6–79 ISBN 0-203-20997-4 Master e-book ISBN

ISBN 0-203-26791-5 (Adobe eReader Format) ISSN 0141 9676

THE WATT COMMITTEE ON ENERGY

REPORT NUMBER 6

Evaluation of energy use A Basis for Discussion

A series of discussion papers initiated for The Watt Committee Consultative Council May 1979 and since extended for publication. Some discussion items have been included. General editing has been by C.W.Banyard, Institute of Cost and Management Accountants and J.M.Ferguson, Institution of Public Health Engineers.

NOVEMBER 1979

Contents Foreword INTRODUCTION—EVALUATION OF ENERGY

Page iii

SMALL COMBINED HEAT AND POWER SCHEMES AND HEAT RECOVERY:

1

CASE HISTORIES

USE

J.Claret in collaboration with Dr N.Kendall,

C.W.Banyard

Dr A.Melvin and A.A.Wittenberg

PART I—METHODS OF ENERGY EVALUATION

5

ENERGY ACCOUNTING FOR SMALLER

7

ENERGY ANALYSIS FOR BUILDINGS

A.E.Eagles in collaboration with J.Claret 13

Extracts from Discussion

66

ENERGY BALANCE STUDIES IN AGRICULTURE

67

AND FOOD PROCESSING

ENERGY ACCOUNTING

Dr J.K.Jacques

Dr A.Melvin in collaboration with Dr J.W.Bryant, M.H.Cadman and P.A.Hazzard MEASUREMENT AND PLANNING FOR

61

D.McGeorge in collaboration with Dr P.Yaneske

COMPANIES

CONCEPTS OF ENERGY ANALYSIS AND

Page 51

A STUDY OF ENERGY USAGE IN A UK

73

COMMUNITY

17

Professor N.Borg

ENERGY AUDIT AND ENERGY ACCOUNTING Dr J.K.Jacques in collaboration with J.C.R.Hewgill, MBE, and M.H.Cadman

Extracts from Discussion

84

PART IV—THE PAST, PRESENT AND FUTURE

87

Extracts from Discussion

23

OF ENERGY EVALUATION

PART II—ENERGY, MATERIALS AND CAPITAL

29

ECONOMIC MEASURES AND THE USE OF

89

ENERGY

GOODS

J.C.R.Hewgill, MBE TOTAL ENERGY CONTENT AND COSTS OF

31

SOME SIGNIFICANT MATERIALS IN RELATION

Comment by Dr Jacques

97

TO THEIR PROPERTIES AND AVAILABILITY

ENERGY EVALUATION IN PROJECT APPRAISAL

99

Professor W.O.Alexander

M.H.Cadman in collaboration with P.A.Chester,

Extracts from Discussion

37

P.A.Thompson and B.Wood

CAPITAL GOODS AND THEIR TOTAL

39

EVALUATION OF FUTURE ENERGY USE

ENERGY COSTS

Professor J.E.Allen in collaboration with

Dr J.K.Jacques

Dr. B.C.Lindley

103

Extracts from Discussion

43

Working Group for “Evaluation of Energy Use”

111

PART III—APPLICATIONS OF ENERGY

45

Watt Committee Aims and Executive

112

EVALUATION ELECTRONICS AND ENERGY

47

P.J.Willan in collaboration with C.W.Banyard

iii

THE WATT COMMITTEE ON ENERGY

Foreword with the present state of the art; from photosynthesis to the use of agricultural wastes. Energy education in all its aspects has been a continuing preoccupation of The Watt Committee, and it is hoped that the “gorgeous” maps reproduced at a much lower price in the supplement to Report No. 4 will be of real help to schools, colleges and local authorities.

This sixth report of The Watt Committee on Energy arises naturally from the reports and supplements already published. The first of these, “Energy Research and Development in the United Kingdom”, was a response to the ACORD (Advisory Committee on Research and Development) document Energy Paper No. 11 HMSO 1976. This critique requested by the Chief Scientist, Dr Walter Marshall, was followed at his suggestion, by an indepth study of one section of the first report. This was published as Report No. 2 “Deployment of National Resources in the Provision of Energy in the United Kingdom, 1975–2025”. In a later report No. 4 “Energy Development and Land in the United Kingdom, we investigated in some detail the amount and type of land demanded by the Government scenarios.

In summary, therefore. Report No. 6 arises from a continuing development of ideas in which education has been a major consideration. The attitudes that have been evident in the earlier work: spontaneous individual effort, indepth study and a willing response to the challenge of assisting Government bodies in assessing the R & D options, are all reflected in this latest report. The variety of topics discussed in this report arise from the wide range of member institutions and the capabilities of their members. Report No. 6 “Evaluation of Energy Use” is the first report wholly concerned with new concepts rather than hard facts. It permits the expression of a variety of opinions and has extended further the member institutions’ involvement in our working parties. It is hoped that, in the not too distant future, all 62 will have completed a specific role in tackling one or more of the numerous new projects at present being considered. Meantime, we would like to express our gratitude to those who have voluntarily given so much time and effort in the production of this latest publication.

Report No. 3 entitled “The Rational Use of Energy” was the result of a spontaneous action by those who produced the Energy Conservation section of Report No. 1. It covers a wide range of energy saving methods—from heat pumps to hospitals, but was dominated by three sections on housing and the home. This triggered off the production of our first paperback “A Warmer House at Lower Cost”. This is addressed primarily to the thoughtful homemaker. Report No. 5, “Energy from the Biomass”, arises from a teach-in on this topic that led to an immediate request for publication. The report deals in a relatively simple manner

J.H.Chesters Chairman The Watt Committee on Energy

iv

THE WATT COMMITTEE ON ENERGY

Introduction—evaluation of energy use

C.W.Banyard

Institute of Cost and Management Accountants

THE WATT COMMITTEE ON ENERGY

Introduction—evaluation of energy use The Committee

Future problem

The name “Watt Committee on Energy” may sound somewhat dry, but it does have an element of emotion and even humour. Taken in commemoration of the inventor James Watt with his great mixture of innovation and commercial practicality, it expresses effectively both the aims and attitudes of the Committee.

Before moving on to the main purpose of the following papers, another general aspect is worthy of mention. The best estimates available suggest that the present world population is 4,000 million people, and that by the year 2000 the world population will be some 6,000 million people. It is evident that this expansion in population will be by no means uniform.

Limitations to conventional methods of evaluation

Within 21 years some nations will find for every two people they have three and probably more. In energy terms it may be said the poor are getting poorer all the time. Another aspect is that over these same years critical shortages of specific fuel supplies have already been identified, even against current use.

We are happy to pay tribute to those who have achieved the methods of measurement of our civilisation that have stood so many tests and trials. In particular, accountants have been responsible for the meticulous following of events by methods of monetary measurement which have stood the test of time, and economists have succeeded in replacing the ‘old craft guilds unsophisticated rules of fairness with a system including such fascinating concepts as “alternate use” which stand us in good stead in our complex society. Yet it must be agreed that these systems of evaluating and carrying out transactions fall down in a number of ways.

Taking a thoroughly optimistic view it can be said that in 30 to 50 years mankind will succeed in overcoming the various problems resulting from the greater difficulty in obtaining fossil fuels, and even the restricted absolute availability of oil and natural gas to future generations. The problem is now! Somewhere in the near future, spreading over a 20 or 30 year time span, there is a very evident and even traumatic mis-match between the expected energy consumptions of those alive today and the fuels that will be available for those living through these years. This context of a forthcoming period of difficulty is briefly sketched in one of the papers covering “Some Methods of Energy Evaluation” and it is a message which bears constant repetition even though much has already been written.

Internationally, the frayed edges of monetary transactions show where national or other groups find it necessary to revert to threats of war, or war itself, to achieve their aims. Whether directly concerned with energy matters or not, there can often be a major energy impact, as in 1979 with the change of Government in Iran and the consequent effect upon world supplies. Nationally, the UK is a clear example of price being unable to reflect the relative merits of fuels. There is widespread understanding that natural gas supplies are of limited duration and that gas has special qualities as a premier fuel for selected applications. It should therefore be thus preferentially used and be an expensive fuel for other purposes. In practice gas is a cheap fuel for many industrial furnace applications though its special qualities are unnecessary.

Variety of ideas The report combines describing overall situations on the one hand, and giving various specific practical information on the other. In this way, a picture is built up of the situation regarding the “Evaluation of Energy Use”. The substantial variety of unanswered questions demonstrate the progress there is to be made before use of energy is appraised with the realism required to match the challenging need of modified life-styles over the next 20 or 30 years.

At a business level, the price mechanism again has difficulties. An example of this is the business with a number of processing plants in different parts of the UK. Such a business will find that electricity and other fuels are provided at different prices according to the factory location. Thus in carrying out its load-balancing operations between sites it is moved to use less efficient plant (therefore more electricity or other fuels) because price differentials give a better economic answer for the company through the use of less efficient equipment. Electricity is particularly worth a mention since, ironically, there are vast movements of electricity supplies through the grid to achieve the very load-balancing efficiency pattern which is then denied industry through the price mechanism.

One paper draws together a rationale for thinking that a form of evaluation of energy use, possibly even an energy unit of measure, might at some point become a central measure or analogue for all economic activity. Be that as it may, most of the people participating in preparing the papers now presented have felt that the undoubted successes of “Energy Audit” might in due time be followed by substantial successes through the use of “Energy Accounting”. Yet it is clear that there is a big difference in commitment between periodic exercises, such as an energy audit, with which there can be a pause for evaluation of benefits gained, and making a continuous commitment to the measuring instruments and staff necessary for the continued activity implied in adopting energy accounting. This report endeavours neither to be dismissive nor laudatory, but through the drawing together of a number of views aims to set out the situations where energy accounting may well be beneficial and to give cautious warning as to its use in other circumstances. Perhaps what is most evident is that the practice of energy accounting concepts can be valuable for process industries with a high energy use.

Domestically, price as a mechanism is thwarted in ways that can hardly be dear to the hearts of either accountants or economists. There is still considerable practice in more rural areas of burning wood which is obtained for no price at all, or perhaps by barter. This might be an intelligent use of resources although a great deal of time and effort is spent by environmentalists acclaiming that wooded areas should be left in a natural state.

2

INTRODUCTION—EVALUATION OF ENERGY USE

A feature of this report is the wide variety of related subjects covered by various papers. These range from drawing attention to the energy content and related costs for different materials which are often used for the same end purpose, through to an examination of the total use of energy found from a statistical analysis of a particular UK community. The value of these various contributions will vary according to the purpose contemplated by the reader in his study of the papers. However, such is the complexity of our community and the changes with which the community is faced, an expression of views on these and other diverse subjects has seemed well worthwhile, if only to promote general discussion of the complex issues involved.

Need for future study In summary, the Watt Committee and the authors concerned take pleasure in submitting for your interest and hopefully criticism a mix of papers on “Evaluation of Energy Use” which throw up the practices available today and the shortcomings that may increasingly require attention as the future pattern of energy demand and supply unfolds in the reality of changing life-styles for us all. There are two final observations I feel bound to make in this introduction. Firstly, there are many aspects of “Evaluation of Energy Use” on which readers will have fact and opinion which will in some way enhance or challenge the observations made in this report, and any such that are sent to the Watt Committee on Energy will be much welcomed. Indeed, it is felt that in producing this particular report the Watt Committee has made a beginning on a subject which will be of increasing importance as experience is gained with new patterns of energy availability, and that it is a subject to which it will inevitably be necessary to return.

Throughout the papers high tolerance has been given to the inclusion of authors’ held views however controversial these may be and this is a recognition that, in contrast to some subjects studied by the Watt Committee, there is no large area of unassailable ground on the “Evaluation of Energy Use” but rather a shifting emphasis as one unpredicted event after another impacts upon the energy scene. This kaleidoscope of papers could hardly be put into a fixed pattern and a final section on “The Past, Present and Future of Energy Evaluation” does not take that approach, but draws attention to those features of the future in which the community can be aided by further analysis, development and demonstration of alternatives, and in which the professional resources drawn together through the Watt Committee can play a further part.

Secondly, and on a personal note, the Watt Committee has developed by stages since 1976, the year of its first Consultative Council. Having been responsible for guidance in its constitutional development including its progression to charitable status, I have particular pleasure in arranging and editing this sixth report at a time when charitable status is about to be conferred.

3

THE WATT COMMITTEE ON ENERGY

Part I Methods of energy evaluation

ENERGY ACCOUNTING FOR SMALLER COMPANIES A.E.Eagles, The Plastics & Rubber Institute CONCEPTS OF ENERGY ANALYSIS & ENERGY ACCOUNTING Dr A.Melvin, Institute of Physics MEASUREMENT AND PLANNING FOR ENERGY AUDIT & ENERGY ACCOUNTING Dr J.K.Jacques, The Chemical Society

MAIN CONTRIBUTORS TO DISCUSSION Dr P.J.Agius

Royal Institute of Chemistry

H.Brown

Institution of Plant Engineers

C.Davies

Operational Research Society

J.R.Monon

Royal Meteorological Society

W.B.Pascall

Royal Institute of British Architects

THE WATT COMMITTEE ON ENERGY

Energy accounting for smaller companies

A.E.Eagles

The Plastics & Rubber Institute

In collaboration with J.Claret

Institute of Cost and Management Accountants

THE WATT COMMITTEE ON ENERGY

Energy accounting for smaller companies areas requiring research and development and to provide up-todate information on the present usage of energy in industry. During these visits, data has been collected indicating the level of activity towards the more efficient use of energy in terms of the appointment of full time or part time energy “managers” and the application of energy auditing or accounting in industry.

Introduction During the past few years the world has become more conscious of the importance of energy. This has been due to the increasing demands for energy more particularly in the developing countries, the actions of oil-producing countries affecting pricing and availability and the reliance placed on fossil based fuels. The UK, despite the bonus of the discoveries of oil and gas in the North Sea, is seriously affected, being a highly populated island with high energy demands for industry, commerce, the home and transportation.

The indications from this data, analysed up to mid 1978 from 13% of all companies employing 25 or more on site, are that full time energy managers have been appointed in 4% of the 2052 sites visited, part-time energy managers in 37% of the sites and no specific action has been taken in 59% of the sites. Some form of energy auditing or accounting is practised in 26% of the sites visited and no action has been taken in 73% of the sites. The results for the various Standard Industrial Classifications (SICs) are given in Appendix 1. They range, for the sites analysed, for energy management from 0% to 9% for full time appointments, from 10% to 51% for part-time appointments and from 45% to 90% for no action; and for energy auditing or accounting from 0% to 50% with positive action and 50% to 100% with no action. The effect of company size has not been analysed in detail, but clearly the small companies are less well placed to provide such activities.

Estimates by the Department of Energy1 for the cost of energy in the UK in the future suggest that the costs of delivered fuels, at constant monetary value, could increase from about: for oil (p/therm) 17 in 1977 to 35 in 2000 and 61 in 2025 for coal (p/therm) 13 in 1977 to 17 in 2000 and 25 in 2025 for gas (p/therm) 16 in 1977 to 37 in 2000 and 53 in 2025 for electricity* (p/therm) 82 in 1977 to 111 in 2000 and 117 in 2025

The concept of energy accounting is a comparatively new feature and stems from the growing importance of energy as a factor in the industrial equation. Material, labour and overhead costs have been carefully controlled as has capital investment, as these were major items, but energy costs have now risen so much that they too require similar treatment. In the case of smaller companies, the detailed procedures now available, such as those shown in the Fuel Efficiency Booklets 1 and 11, of the Department of Energy,4 and those prepared by S.S.W.Lam of the University of Stirling,5 may be too complex and time consuming. To meet the needs of such smaller organisations, suggestions for simple procedures are made in this paper.

and that demands for energy will have increased to about 170% of 1976 levels by 2000 and to 200% by 2025 in the low growth prediction or to 190% and 300% in the high growth prediction. The effects of the changes in the price and availability of energy to UK industry can be demonstrated by the change in the energy proportion of costs. In the period immediately before the energy crisis of 1973 the cost of energy to manufacturing industry was about 2.1% of the value of sales and work done, whereas in 1977 this had increased to about 4.8%.2 For individual sectors the figures are higher or lower but the increase is still significant. For example, for the chemical industry the comparable figures are 3.7% and 9.5%.3† This trend of increasing significance of energy in the overall cost of running industry is likely to continue and accelerate in view of the predictions for fuel and energy prices quoted. Whereas at 1973 levels a saving of 10% of energy used, the savings level associated with “good housekeeping”, would represent about 0.2% of turnover, the same percentage saving will now represent about 0.5% of turnover. With the short pay-back usually associated with the “good housekeeping” measures, these savings will present a direct contribution to the profitability of the company probably within a year or so.

How to approach energy accounting The concepts adopted in these suggestions are based on the use of readily available sources of data and systems of reporting which can give to the company a reasonably accurate picture of their energy situation by employing available staff. These suggestions result from active discussion of systems which have been applied in industry. The important inputs to the accounting are the energy bills rendered to the company on a monthly or quarterly basis from oil suppliers, gas boards, electricity boards and water boards. These provide two sets of information, the price paid and the quantity of energy delivered to the site. To match this input data some measure of the output is also essential. This can frequently be the money value of the production achieved or sales made or alternatively the number of units of production manufactured. The data on the above basis may be thought to be too remote to the activities in hand, particularly if quarterly data is involved. In such circumstances the instigation of weekly or monthly readings of energy meters and oil stocks, if not already made and used, may be desirable, combined with the corresponding measure of output.

Background As part of the government’s policy of promoting the more efficient use of energy by industry, visits have been made to a considerable number of companies in the Industrial Energy Thrift Scheme (IETS). The main purposes of this scheme were to encourage industry to conserve energy, to identify problem *

This is an unrestricted tariff at P/KWh 2.8 in 2000 and 4.0 in 2025 Energy Cost as a percentage of sales, including feedstocks. CIA information suggests for 1977 an energy (fuel) consumption of about £600m (4.3% of turnover) and £550m for feedstock (fuel type) giving total energy input of about 8.5% of turnover.

†

The collected energy input data should then be 8

PART I–METHODS OF ENERGY EVALUATION

transferredto a suitably designed proforma which will incorporate columns for the conversion of the units from the readings to consistent energy units, for example, Therms, Mega Joules, Kilowatt/ hours. In the case of electricity in particular, additional columns may be required for other charges, standing charges, maximum demand charges, power factor charges, etc., which all come into the overall cost of electricity to the company. Such a proforma could be used by a clerk or fitter to incorporate the data and by a clerk to effect the necessary conversions. Input data on production would be supplied from the appropriate source, probably on a separate proforma, to enable indices of energy cost and quantity per measure of production to be added. The completed proformas should then be passed to the management appointee for information and for prompt action where some abnormality is indicated.

The pattern of charging varies from electricity board to electricity board. The difference between the second and third month is mainly due to a different cause, the balance between the units consumed at day rate and at night rate, with a smaller effect from the maximum demand component due to the different maximum demands. Considering the data in Proforma B the upper section contains the breakdown of the inputs between sources in both energy and cost terms and the lower half relates the summated data to the measure of production and previous data. The input section shows the relative usages and costs of the energy components. In the output section points for attention are the changes in cost/therm of energy both between years with a significant increase and also between months. The energy requirement per production unit clearly shows the improvements achieved between the two years. The data in the last columns give the important answer as to the cost control of energy that is being obtained.

To establish normal levels the data collection and recording should be applied to the previous twelve months, or more, of operation so that the variation on indices associated with seasonal variation in the environment and in levels of production can be determined.

For this particular example the monetary value of the improvement has been determined. If this year’s production had been at last year’s costs an additional £554.15 would have been required for energy purchased for the three month period shown, a useful contribution to the profitability of the company.

The effective operation of such accounting procedures depends critically on the policy of the company. The company must clearly define the responsibility and accountability of the member of staff appointed to control energy consumption and provide him with the full authority to prosecute required actions.

Future development After the implementation of a simple scheme to indicate the relative importance of energy factors to the company and to exercise more control of the use and cost of energy, further refinement of energy accounting will probably be desirable. This is well described in the references quoted, i.e. Fuel Efficiency Booklets 1 and 11.4 Analysis could be based on the function of the energy, for example, the components required for space heating, air conditioning, domestic type applications, processing or by location, such as the boiler house, offices, canteen, processing departments, warehouses and stores.

Example of possible procedure A possible form for use in making up these accounts is given in Appendix 2 together with a list of key steps required to instigate and operate the procedures. It has been developed from ideas discussed with industrial companies who are using similar procedures, with success, in their organisations. Considering the examples of possible proformas given; the composition of the input data to be compiled from the bills and/ or meter reading will require modification to align them with the actual inputs to the site. This applies particularly to inputs of electricity where tariffs from different electricity boards require different combinations of the factors involved. The important principle is to ensure that all factors which affect the costs are included, in consistent units.

These developments will clearly require the availability of sub-metering of energy supplied to the various functions or locations which will involve some capital expenditure in purchasing and installing the equipment and some manpower to read instruments, collect and collate the data obtained. Some indications of the breakdown of energy use by function can be achieved without additional instrumentation by a careful study of the data collected and tabularised in the suggested scheme. In some cases a particular source of energy is used only for a particular function, for example, in the proforma shown in Appendix 2 the 35 second oil may be used only for providing space heating and the 3500 second oil for processing purposes. In other cases an examination of the variation in energy use at different periods may enable an approximate estimate of the energy required to establish an environment may be obtained. The energy levels on the months when space heating is not in use can be regarded as an approximate indication of the demand for processing. This can be reasonably consistent over the whole year if production levels are reasonably constant so that the division between environmental energy and processing energy can be estimated by scaling up the processing energy to cover the full year and subtracting the result from the total input.

The second proforma is designed to provide management with key indices for rapid appraisal of the energy situation and to incorporate any essential data which may be of a confidential nature. In the examples shown in Appendix 2 actual figures from a small company are included with its permission which is gratefully acknowledged, in the spaces for the first three months of a year together with the corresponding figures for the previous year. Considering the data in Proforma A the effect of an oil price increase is seen in the third month figures for the 35 sec oil. Water figures are included as the supply of water involves energy and can be difficult in dry spells. In the electricity data the variation in cost, as shown in the p/KWh or p/Therm figures, is important and the reasons for these changes require study. In the first month, January, the high cost is due to the high level of maximum demand charge in midwinter. The particular electricity board has the highest charge levels in December and January, an intermediate level in November, February and March and a low charge for the rest of the year.

These types of analysis can be helpful in highlighting the areas where energy conservation is likely to be most effective. 9

THE WATT COMMITTEE ON ENERGY

APPENDIX 1 Employment of energy managers and of auditing in industry

APPENDIX 2 Key steps in setting up energy accounting 1) Establish proformas appropriate to site. 2) Arrange for data collection on regular basis. 3) Arrange for required conversions and calculations.

4) Build up historical data for previous year/s. 5) Appoint nominee to study and with authority to act on data. 6) Inform all concerned of progress and inefficiencies. 10

PART I–METHODS OF ENERGY EVALUATION

Conclusions

References

A greater degree of control of the use of energy in the small companies can be achieved by the application of commonsense simple procedures on the lines suggested in this document. These can draw attention to inefficiencies which are causing unnecessary expenditure on energy and reduced profitability and subsequently monitor the effectiveness of measures undertaken to improve energy utilisation. The use of such simple procedures can initiate more sophisticated procedures which can lead to even greater benefits.

1. G.Leach. A Low Energy Strategy for the UK, Science Reviews Ltd., London, 1979, p. 15, p. 13. 2. Business Monitor, PA 1000, HM Stationery Office, 1977. 3. CEFIC (European Council of Chem. Manufacturers Federations), Energy Statistics 1977—Brussels 1978. 4. Dept. of Energy, Fuel Efficiency Booklets Nos. 1 and 11, HM Stationery Office, 1976 and 1977. 5. S.S.W.Lam, University of Stirling. A Feasibility Study on Energy Accounting, MSc Thesis, 1977.

Proforma A

Continuation—Proforma A

Proforma B

ENERGY INPUTS AND OUTPUTS INPUTS

Continuation—Proforma B

OUTPUTS

11

THE WATT COMMITTEE ON ENERGY

Concepts of energy analysis and energy accounting

Institute of Physics

Dr A.Melvin In collaboration with Dr J.W.Bryant M.H.Cadman P.A.Hazzard

Operational Research Society Society of Business Economists Institute of Cost and Management Accountants

THE WATT COMMITTEE ON ENERGY

Concepts of energy analysis and energy accounting The aim of this paper is to comment on general themes which run through a number of the papers in this report. Many of the concepts used in this area of study are still developing and the application of conventions is often not as self-consistent as it should be. The general position is that energy analysis is a macro-activity which underpins existing and proposed practices of energy accounting at the micro-level: the firm. Papers in Part II deal with particular applications of energy analysis and necessarily have to assume that the conventions used in these applications of energy analysis are generally accepted and self-consistent. Other papers deal with energy accounting in relation to the activities of individual firms and seek to establish conventions. This paper attempts to raise questions on both these areas and make recommendations for exploring these questions further.

In considering applications of energy analysis, it is important to realise that this debate is very much alive and that the principles of energy analysis are likely to change as its interaction with economic principles becomes stronger. This is not to say that applications of energy analysis should cease until the subject is put on a firm foundation. As long as the IFIAS 1974 conventions are strictly adhered to, there would at least be common ground for interchange of ideas and results. Real difficulties are, however, likely to arise if particular studies introduce ad hoc conventions, e.g. in differing ways of treating the gross energy requirements for imported ores.

Energy accounting Energy accounting has been defined as ‘the analysis, classification and recording of energy transactions, and the ascertainment of how such transactions affect the technical performance and financial position of a business’.1 Here it is assumed that the transactions of interest involve energy transfers across the boundaries of the system under investigation.

Energy analysis The definition of energy analysis adopted by this group is that set out by the IFIAS Workshop on Energy Analysis held in Sweden in 1974: “Energy Analysis is defined as the determination of the energy sequestered in the process of making a good or service within the framework of an agreed set of conventions or applying the information so obtained”. At its most aggregated level, input-output methodology can be applied to trace energy sequestration throughout an entire economy. At a more detailed level, the technique of process analysis has been used to study actual energy flows associated with specific processes, e.g. the different energy consumptions in the winning and re-cycling of traditional and new materials, as outlined in the paper titled “Total Energy Content and Costs of some Significant Materials in Relation to their Properties and Availability”. (Page 32).

There are a number of basic aspects of energy accounting activity. Firstly, the basic framework and conventions to be used need to be defined. This covers such matters as the unit of account and measurement scale to be used, the system boundaries in time and space and the rules of analysis or classification to be applied. Secondly, the method of collection of information has to be determined. Thus not only has it to be decided what monitoring systems are to be established, but interfaces with other databases from which information may be drawn or to which data may be sent must be arranged. Thirdly, the analytical techniques used and their role in aiding management’s function of problem-solving and decision-making must be considered. In this area the nature of the criteria used (such as net energy value) and the approaches used (such as variance analysis) must be taken into account.

Although energy analysts disclaim that they are setting up an energy theory of value and that the results of their analyses are neutral in terms of decision-making, some economists have regarded such disclaimers as disingenuous and have stressed that energy analysis is incompatible with modern economic theory and practice and is literally useless. Energy analysts appear to have compounded this conflict by relatively naive pronouncements on economic principles and techniques and by attempts to reduce significant inputs of production to energy and labour terms only. In fact, energy economics studies of the past few years suggest that energy and capital are complements rather than substitutes and that one cannot avoid the mutual influence of capital investment in production and energy supply factors. Economists have claimed that energy analysis is invalid as a method of evaluating projects, cannot be used to make predictions of changes of relative prices for fuel against fuel or energy against labour and cannot be used to make a choice between alternative conservation projects. In discussions of the relative merits of energy analysis and economic analysis, considerable heat has been generated and it is difficult to assess whether energy analysis is complementary to or incompatible with economic analysis. To complicate the situation even further, at least one economist has entered the debate on the basis that the tenets of economic theory are not as sound as most economists like to think and that energy economics has something to learn from energy analysis.

Currently, the concepts of energy accounting are still relatively unformed in many of the areas mentioned above, and this lack of consistent and agreed methodology is a major shortcoming of the approach. A number of specific recommendations can be made in this respect: — a single unit of account (preferably the megajoule) should be used in energy analysis — system boundaries used should be clearly delineated in a study — use of generally accepted rather than idiosyncratic time bases should be encouraged — in the energy analyses required to provide the figures for energy accounts: — the IFIAS conventions regarding partitioning requirements for multiple products should be used — the IFIAS flowcharting conventions should be employed — the IFIAS unit of account, the gross energy requirement (g.e.r.) be used — the concept of available work as a measure of the quality of a fuel should be considered — an indication should be given of the amount of variability in any figures calculated 14

PART I–METHODS OF ENERGY EVALUATION

— the energy contents of products and services should as far as possible be made publicly available so that they can be used as inputs to other energy accounting systems — energy accounts should be kept in the conventional balance sheet format used for financial accounts and preferably in such a way that direct comparison is facilitated, possibly by juxtaposition of the figures — energy accounts should be kept by properly qualified professional personnel working in accordance with agreed standards, and should be subject to periodic audit — the energy accounting and financial accounting functions should act in close co-operation in providing information for management functions — until research has provided consistent methods of accounting analysis, the methods adopted should be fully explained and discussed in any presentation of material.

Energy accounting, like accounting for all monetary transactions, is appropriate at levels ranging from the small firm through large energy-using concerns and whole industries, to nationwide statistics. It is likely that different systems will develop to meet the needs of different organisations. ‘In the case of the smaller companies, the detailed procedures now available may be too complex and time consuming’.* The concept of energy accounting is by implication a routine system which corresponds to the traditional double entry accounting system. ‘Once an energy accounting system has been designed for its specific functions and sub-systemised into a multi-dimensional classification served by a number of separate accounts, the rest of the procedures are quite mechanical’.† It may be useful to show a suggested relationship between energy analysis and energy accounting at company level using a traditional management accounting approach. Figure 1 brings out the limitation of energy accounting unless it is associated with a feedback to the technical planning stage.

Beyond these recommendations there are a number of major issues on which further research is urgently required. These include: — energy as a capital asset and as a revenue item, and — the nature of depreciation in energy accounts

Energy accounting appears to place emphasis on the control of energy. Whilst cost and energy control are important management tools, the more dynamic cost and energy reduction techniques, where there is a greater interplay between technical and financial managers, can be critical. Energy

‘Energy accounting is a means rather than an end; when the information has been conveyed, the purpose has been accomplished. It is necessary, however, to identify specifically what the energy accounting system aims to achieve so that it can be tailored to carry out the prescribed functions. A knowledge of the user’s objective function is essential for the devising of the best system, which should process information efficiently and report quickly and accurately at low cost’.†

†See “Measurement and Planning for Energy Audit and Energy Accounting” (Page 18) *See “Energy Accounting for Smaller Companies” (Page 8)

Figure 1 Energy accounting in perspective

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serve to highlight important externalities not associated with monetary flows. Chemical engineers are familiar with the idea of mass and energy balances across a conversion process, the latter being a form of energy analysis or energy accounting or both. It could be argued that in this area the practice of energy analysis and accounting are well-established; and that the present interest in the subject involves little more than a rationalisation of these practices to include all the precursor processes that produce the plant and equipment, materials and energy services. The value of a comprehensive scheme analysis and energy accounting based on national and agreed principles is perhaps more clear-cut at government level since concern with overall energy policy implies concern as to how the available resources may best be used.

analysis has an important part to play here although this area is affected by the debate between energy analysts and economics and progress may be slower than with energy accounting. So far, this paper has considered the aims and limitations of energy accounting as it currently exists. However, it is appropriate to consider briefly the arguments which can be made against the energy accounting concept as a whole. The achievement of energy accounting appears simply to be that a new method of describing the development of a system based upon an invariable unit is available. However, even if all the inconsistencies and problems implied earlier are dealt with it is necessary to question the value of the extra information obtained at a not inconsiderable cost. It could quite reasonably be argued that since management decisions are made largely on financial criteria, the addition of energy figures does little to improve policy-making. Against this it can be said that consideration of all resources including energy can provide an insight into system behaviour not otherwise achieved and that it can

References 1. IFIAS Workshop on Energy Analysis. Sweden 1974.

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Measurement and planning for energy audit and energy accounting

Dr J.K.Jacques

The Chemical Society

In collaboration with J.C.R.Hewgill, MBE

M.Cadman

Institute of Cost and Management Accountants Society of Business Economists

THE WATT COMMITTEE ON ENERGY

Measurement and planning for energy audit and energy accounting Much of this discussion is based upon work recently undertaken at the University of Stirling and upon a preliminary feasibility study by Hewgill, Jacques, Lam and Swenson (TERU Discussion Paper No. 15). Other more recent papers appear to be moving towards similar developments and conclusions.

3) Energy transactions OUT of the systems to other plants or even factories external to the company. These (2) and 3)) classes of transaction force acknowledgement of the opportunity cost to be assigned to, e.g. process exotherm and the intrinsic ‘free energy’ value of ‘surplus’ steam (especially from cogeneration systems).

The approach adopted is to attempt to build detailed systems of energy management for firms and institutions within the UK economy, which will ultimately enable contrasts and comparisons between alternative manufacturing technologies within chosen industrial sectors. These should also enable the guidance of managerial decisions in the field of energy consumption, and at a higher level, provide information on which to base national energy pricing policies.

These cases exemplify areas where the energy account will be quite explicit about what is happening to fuel energy inputs, and also, what would be the penalty (in increased fuel inputs) of ‘ignoring’ or ‘throwing away’ unavoidable heat outputs of the process itself (chemical exotherm, frictional heating in metal working, energy from cooling metal ingots....). Using this approach, ‘savings’ by process improvement, good housekeeping, etc., are immediately identifiable in terms of their input fuel equivalents, irrespective of the ‘free energy’ or thermodynamic quality of the resource.

Clear distinctions are therefore made between: Energy costing, (evaluation of costs in energy units, for processes, products and services); Energy accounting, (assignment of money costs to energy inputs and internal energy transactions especiaily where these imply an ‘opportunity cost’ for resources); Energy budgetting, (the consequent development of management models for energy cost CONTROL).

There is one serious paradox in this methodology—‘high intensity energy stores’ such as high pressure steam or hydrocarbon fuel stocks are ‘scarce resources’ in essence, and we ought never to use them to boil the tea kettle directly! That is, good energy management should always seek to use the lowest intensity fuel form or energy carrier which is able to do the particular job.

The preliminary study involved the preparation of a set of accounts for a group of (Chemical Industry) process units, in BOTH money and energy terms. The choice of a Chemical Industry example was quite deliberate, since it was realised that by their very nature, modern chemical processes are WELL MONITORED, (material flows, temperatures, process steam flows) usually designed with a degree of waste heat (exotherm) utilisation (in ‘heat exchanger’ recovery schemes), and that the rationale of plant layout and design was likely to assist SYSTEM PARTITION for the purposes of boundary definition for energy transaction analysis.

The implication of this is that: “600 GJ worth” of high pressure steam is far more valuable than 600 GJ worth of warm water—because of the special things it can do, which warm water cannot. Thus each GJoule of high intensity energy store should have a higher money value than the low intensity form. This accords with practice, in the sense that every engineer can tell us that it “costs more” (in terms of raw fuel input and capital cost of boiler equipment) to make H.P. steam than L.P. steam or warm water, and this is in line with our earlier argument about “substitutable fuel values”.

This ‘dual entry’ (£ money and Gigajoules) method provided a wholly practicable bookkeeping structure with no serious amendment to existing accounting practice.

Accountants as well as engineers can understand it; but the money ‘price’ accorded to H.P. steam only tells us about the costs of achievement, and nothing about the exceptional value (i.e. opportunity costs) which is conferred by the energy intensity—now, it can ‘move mountains’ and not merely ‘boil tea kettles’.

It served to highlight some major differences in the handling of the two kinds of data: 1) Immediate recognition of the “breakdown” of all energy terms not directly ascribable to ‘process requirements’ including ‘inescapable’ thermodynamic losses and unexplained waste losses, as well as ascribable semivariable costs (heating and lighting circuits).

Energy costing for ‘accounting purposes’ has not come to terms with this problem so far, and it is not an easy matter to propose that accountants should learn how to use steam tables; it is an issue which will not go away in any organisation where TOTAL EFFICIENCY of energy use is recognised for what it is—a method of managing the energy needs of a concern (or group of processes) at absolute minimum cost.

2) *Energy transactions across sub-system boundaries (internal heat exchange and recovery systems). *There are many situations (chemicals, food, paper) where raw materials, or recycleable by-products have alternative uses as fuel or as process feedstock; this must raise questions about the money value to be ascribed to them. Of course, it is true that, e.g. one ton of petroleum has only one price in the marketplace, but the opportunity cost of that ton used as boiler fuel rather than as process feedstock may well differ, and this ought to be made clear in the material and energy accounts of the process. Any ‘scrap’ (such as partially polymerised hydrocarbon) which is ‘recycled’ for its fuel value must have allocated to it the whole energy cost of deriving it (i.e. processing it to its present state, from the initial raw material)—which will certainly emphasise that is not a ‘cheap’ fuel substitute! Alternatively, this scrap might be recoverable as a process raw material; there will be an energy penalty (input) associated with this specific activity also.

A tentative indexing system, suitable for internal decision making within the firm is proposed. This relies on a comparison of the total heat energy input and the work which is consequently made available; it is therefore soundly based on thermodynamic principles, although relying on practically available numerical data obtained in real-world operating systems. The aim is an empirical model using readily accessible and readily interpretable data. Table I illustrates the magnitude of the weighting indices for some common secondary energy carriers. 18

PART I–METHODS OF ENERGY EVALUATION

There are some points of detail:

economic requirement of the system), and to consider minimizing Si qi.Qi where qi is the useful-work index.

a) As in all energy costing schemes, enthalpy and heat input data must be firmly based on the primary fuel requirement (or what Slesser has termed the Energy Network Input)—so that 1 Kw hour at user must be costed into the system as the equivalent of approximately 3.3 Kw hours of fossil fuel, using current national grid average fuel requirements. (Substitution of more nuclear, hydro or ‘wave power’ inputs to the grid would, of course, alter the E.N.I, value, although charges will be slow, and possibly small, in view of the very large capital energy charges implied by the newer coal/oil substituting technologies). In any event, electricity will carry a very high index weighting relative to many other energy media.

Overall, we are therefore minimizing the quantity of useful work needed to achieve production objectives, but it is much more convenient in practice to display the accounts in enthalpy units, and simply to index these enthalpies in their decision model contexts. The preliminary study of chemical industry process has also shown that marginal cost concepts can be applied with no special difficulty to energy inputs, so that energy price variance, energy usage variance (substitutable fuels situation) and energy yield variance are all calculable indices of performance efficiency, especially in situations where production rates are changing substantially over time.

b) Implicitly, such an index based on ‘real world’ heat and work values embraces not only the losses of “practical system” (due to friction, inefficient lagging and heat exchange), but also those qualities of energy made inaccessible by the HIGH RATE OF WORKING. (We must recall that the ‘ideal’ Carnot engine only approaches its maximum efficiency, given by

c) Problems in other systems—methods of approach Serious objection can be raised to the whole approach outlined above. How many firms can afford the INSTRUMENTATION, the maintenance of the instrumentation, the possible down time for replacement, and not least, the regular effort of recording (or the cost of having a computerised data logging system) all the information for a systematic set of energy accounts? It is in this difficult area where most of our current efforts are being placed. In recent and ongoing studies of Hospital and University energy services, a foundry, a paper pulp mill, and a number of engineering and consumer goods manufacturing units, our first concern has been the definition of subsystem boundaries which would provide rational ‘zones’ for identification of energy inputs and outputs. Frequently there are no ‘metering systems’ installed, at least in the preliminary stages, and fuel allocations to departments are made on entirely arbitrary bases. This is typically the ‘raw material’ of our studies.

WHEN OPERATING “NEAR EQUILIBRIUM”—or very slowly”!). It would scarcely seem appropriate for a practicable management energy accounting system to lean upon the complexities of non-equilibrium thermodynamics, but it is nonetheless a commonly noted experience of practical systems that higher rates of working, while achieving more ‘product’, do so at the expense of large proportions of primary fuel input. (See for example “Green M” on the energy intensive nature of modern agriculture versus primitive slow agriculture and NASA Handbook by Bio Astronautics on the efficiency of human athletes at different work rates).

Successive stages in developing an energy audit and later an accounting system may be outlined as follows: (1) (2)

Table I Index weighting of some common energy carriers

(3)

(4) (5)

(6) (7) *These ‘high’ values take no account of work obtainable from waste heat recovery at power stations or in ‘refrigeration plant’. It is of course open to management who have these ‘waste heat’ factors at their own disposal to utilize them and thus to increase effective ‘W’; care must be taken not to double account such benefits however.

(8)

Sub-system delineation Description of operation of the sub-systems in terms of mass and energy transactions Development of simple operating models to link mass and energy flows in the sub-system, and the use of these models to make crude estimates of the size and quality (energy intensity) of the energy flows Setting up energy/money dual accounts in accordance with the results of (3) above Further progress depends on whether the ‘black box’ models indicate a need for relatively precise measurement of energy flows to or from certain specific subsystems, as a means of disentangling the allocation problem and pinpointing the size of energy losses Justifying particular levels of expenditure on measurement and conservation Meter installation or at least further detailed study of energy flows across identified sub-systems Development of an ongoing policy ‘model’ which can be used by accountants and engineers IN CONCERT to improve efficiency and rationalise energy resources under their control This may include detailed accounts and procedures for appraisal of investment opportunities in energy conservation schemes.

Objective of the index is to move away from the minimization of Si Qi in the system (subject of course to the necessary constraint that a specific production level is an 19

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as much as a 12 month lead time before phases 5), 6) and 7) can be activated.

d) Potentially serious problems encountered

(a) Human communication problems It is one thing to propose a sequence of ‘Plan, Measure and Control’, but quite another to convince both accountants and plant engineers that they ought to be seeking common objectives in energy rationalisation. Limited experience suggests that mutual distrust between operating ‘line’ staff and works accountants or O.R. groups can be overcome at grass roots level, by working with both on limited initial projects. It has however come as a surprise to younger colleagues to find a wide divergence of view as between “Head Office” directors (who are usually very keen indeed) and plant staff at the ‘rough end’ of diurnal problems.

4) Different organisations often have very different information procedures resulting from long established practice. Attempts to adapt these procedures for local energy auditing and accounting purposes may seem a wise method of approach, but frequently existing systems lack the requisite sub-system boundary definitions. This suggests the need for ‘total remodelling’ of the system—with consequent staff reactions! We have to remind ourselves here that one positive benefit of professional money accounting systems is their relative uniformity and ease of ‘translation’ by others; it is an aim of the current investigations to seek as much common ground as possible in the setting up of Energy management systems. Since we start from the idea that energy accounts should have similar format to money accounts, it is to be hoped that some uniformity in energy information procedures, and in definition of ‘cost centres’ and subsystem boundaries should be attainable.

This describes at least qualitatively the difference between the accountant’s view, which is to some extent distanced from daily plant problems, and the engineer’s view— particularly when he sees the accountant as some kind of ‘threat’ to his very limited boiler maintenance budget or indeed to his whole ‘empire’ in overt competition with other productive centres in the organisation. This is seen as a major obstacle to progress in some very large organisations with multiple layers of management.

This author at least believes that the setting up of an energy accounting convention at an early time should be a high priority for the management accounting profession, if it is to provide a positive service relating to an increasingly valuable resource.

We have encountered enthusiastic engineers, and enthusiastic accountants, but rarely both in one plant location.

(b) Management structure This relates to (a) above. The suppliers of information (plant personnel) are not necessarily the users, and the objectives of decision takers may thus not be identified with the objectives of daily plant operations.

This report has been deliberately discoursive about some of the factors currently being experienced in setting up energy accounting systems, in the hope that this will encourage a wider participation in the study and a better ultimate understanding of how management might wish to use the accounts.

We are therefore finding necessary AS A DIRECT PART OF THE ENERGY ANALYSIS and SETTING UP OF ACCOUNTING SYSTEMS, a full understanding of the MANAGEMENT STRUCTURE which operates, or might in future operate the energy optimising decision processes. Not merely the ‘chart of responsibilities’ which hangs in head office, but the actual live channels of communication which influence change at the grass roots of management.

One major issue—depreciation of capital assets—has been entirely avoided here, and while it seems conceptually useful to talk of depreciation of energy-intensive capital goods in energy terms (bearing in mind the replacement needs), in practical terms, the difficulties of knowing the capital energy value of complex machinery are at present beyond our means.

(c) Data processing (Time series and mass energy flow co-ordination of accounts)

It would hopefully be one long term product of the widespread adoption of product energy costing accounts that a very full picture of ‘capital’ energy investment could be constructed. However, we are some long way from that situation at present, and must therefore be content to concentrate most of our efforts on the ‘current’ rather than the ‘capital’ accounts of the firm.

In seeking (statistical) correlations between mass flow and energy variables at the system analysis stage, it is necessary to process fairly lengthy runs of daily, weekly or monthly data, and these are not always available. We have often encountered difficulties with preliminary data provided by management: 1) Data not in handleable form (e.g. “buckets of cement slurry” (no standard ‘bucket); ‘pieces of laundry’ (a sock or a sheet=one piece); ‘heaps’ of coal in the stock yard.

Energy accounting principles—recent references Beveridge, F.N. “Economics & Accounting of Energy”. Energy Use Management Proc. Int. Conf. Tucson, Arizona, Oct. 24– 28 1977. (Pergamon, 1977 Vol. I pp 35–46)

2) Data ‘out of phase’, different departments making measurements of energy, mass, product units on different time scales or at irregular intervals (e.g. fuel use may be recorded January-March, but product ‘X’ is recorded February-April (for some quite plausible internal reason), while product ‘Y’ is recorded daily…

Anon, (review of alternative single factor value theories). “Appraisal of Energy Analysis”. (Electrical Power Res. Inst. Repri EPRI EA No. 504, March 1978) Goggioli, R.A. “Proper Evaluation and Pricing of Energy”. Energy Use Management Proc. Inst. Conf., Tucson, Arizona, Oct. 24–28 1977. (Pergamon, 1977 Vol. 2 pp 31–43)

— This is a most common and serious problem in phases 1), 2) and 3) of our ‘method of approach’. 3) The time scale associated with organising an entirely ‘fresh’ data collection system. This can be acute if restricted finances mean prolonged delays in obtaining permission for personnel secondment or for ‘meter installation’ approvals. There is thus

Roberts, F. *“Aims, Methods and Uses of Energy Accounting”. (Appl. Energy Vol. 4 No. 3 July 1978 199–217) *lncludes recent examples of application of Input/Output analysis, statistical analysis and process analysis)

20

PART I–METHODS OF ENERGY EVALUATION Kruvant, W.J. “Economics and Net Energy Analysis: Is a New Analytical Technique Needed for Energy Decision Making?” (Proc. of the Annu. UMR-DNR Conf. on Energy (4th Univ. of Mo-Rolla)) (Ext. Dir. 1978 683–693)

Pilati, D.A. “Energy Analysis of Electricity’Supply and Energy Conservation Options”. Energy (Oxford) Vol. 2 No. 1 1977 pp 1–7

Critoph, R.E. and Waller, R.F. “Modelling Energy and Material Flows in the Iron and Steel Industries”. (J. Inst. Fuel, Vol. 50 No. 405 Dec. 1977 pp 208–213)

Maddox, K.P. (Colorado Ech. Mines, Miner). “Energy Analysis”. Ind. Bull. Vol. 18 No. 4 July 1975 (Example compares ? of beer containers)

Common, M. “Economics of Energy Analysis Reconsidered”. (Energy Policy, Vol. 4 No. 2 1976 pp 158–165)

Leach, G. †“Net Energy Analysis—Is It Any Use?” Energy Policy Vol. 3 No. 4 Dec. 1975 pp 332–344

Moon, P.W. and Tasker, G.J.M. “Continuous Monitoring of Energy Consumption in a Large Chemical Plant”. (Inst. Chem. Eng. Symp. Series No. 48—Proceedings of a conference ‘Energy in the 80s’, 1977)

Chapman, P.F. “Energy Analysis”. Coal Energy G. No. 8 Spring 1967 pp 10–17 Ellerbe, R.W. “Is Your Mill energy Information system really a Management Misinformation system?” (Paper trade Journal April 1st 1976 pp 36–39

Proops, J.L.R. “Input-Output Analysis and Energy Intensities: Comparison of Some Methodologies”. (Appl. Math. Modelling Vol. 1 No. 4 March 1977, pp 181–186)

e=energy † Suggests poor reliability for nett fuel energy of fuel resource estimates because it aggregated data employed
accounting has had value in showing that certain capital investments in energy harnessing (e.g. number) may have consumed more ? than was made available, and that better ? investment might have been made in small oil field exploitation —According to Scheller & Moler (1976) alcohol from corn waste is even better….

Hewgill, J.R., Jacques, J.K., Lam, S.S. and Swenson, F.R. “A Feasibility Study”. Technological Economic Research Unit, Discussion, University of Stirling 1978, Paper 15 Leech, G. and Slesser, M. “Energy Equivalents of Network Inputs to Food Processing Systems”. (Strathclyde University 1973)

RELATED SET OF ACCOUNTS FOR ENERGY TRANSACTIONS-Reference 1 (a) Example of system boundary and inter sub-system flow analysis and the related set of accounts for energy transactions

1 (a) The Main System and Subsystems

21

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General Overhead Account

1 (b) Material Store Account

1 (f) General Overhead Account

Department A: Coal Store Account

Depreciation Account (Equipment)

1 (c) Coal Store Account

Department B: Boiler & Generator (B&G) Account

1 (g) Depreciation Account

Main Account of the Plant (one month)

1 (d) Boiler & Generation Account

Department C: Process Account

1 (e) Process Account

1 (h) Principle Ledger of the Manufacturing Plant 22

PART I–METHODS OF ENERGY EVALUATION

EXTRACTS FROM DISCUSSION ENERGY ACCOUNTING—A written contribution by Mr. H.Brown 1 Introduction Energy Accounting is taken to mean the measurement of the energy input, or extraction, required during the production of a product. This short paper is intended as a guide only to the present position in respect of the facilities and skills existing in the present day energy field. 2 Economics of Instrumentation Instruments, with few exceptions, are expensive items and, therefore, their installation and use on a comprehensive basis in smaller industries is limited. On the other hand, larger energy intensive industries which depend upon close control of energy often, but not always, rely on energy measurement for costing and quality control. In addition to capital cost it is essential to provide a back-up maintenance service either by in-house staff or by outside contractor. Between the two types of industry lies the vast number of small, medium and even large industries where instrumentation is either non-existent, existing only in part or was originally installed but fallen out of use due to high cost of maintenance or lack of interest or appreciation. The following remarks apply to this area of activity. 3 Energy Measurement The following can be taken as a stage by stage generalisation of the position in the full knowledge that generalisation is dangerous. In this case, no excuse is offered for adopting this course.

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Many instrument panels are seen, particularly in boiler houses but on examination it is found that they are: 1) out of service entirely; 2) partly in service but inaccurate—in many cases half hour readings of useless data are made; 3) operational but charts not changed; 4) operational with good maintenance, charts changed regularly and filed but never consulted except in retrospect to check on production troubles. This applies particularly to boiler house instrumentation.

4 Material Measurement Many processes demand accurate measurement of materials either by weight, volume or quantity. Process scrap is rarely measured and where this is done, it is rarely related to the initial input. In one case a firm, whilst assessing energy consumption, found that only 5% of material input was actually sold. The remaining 95% had been heated, worked and cooled more than once. A reshaping of the billet at the start of the process resulted not only in material saving, but significant energy saving. 5 Credibility of Energy Accounting One of the most difficult items to determine in many firms is the fuel consumption of the factory. This is often combined with transport fuel (forklift trucks, lorries, etc.). Boiler house repairs and maintenance costs are often included in a bulk account with water treatment chemicals. In view of the inaccuracy of total fuel accounting and the general lack of instrumented process plant, it is anticipated that figures submitted will rarely be reliable. Before submitted data is accepted the following questions must be asked: 1. How was information obtained; 2. What instruments were used and where sited; 3. Were instruments regularly maintained and calibrated. Electrical inputs and machinery costs should not be overlooked. 24

PART I–METHODS OF ENERGY EVALUATION

Mr. C.Davies

energy accounts alone might be inadequate to enable full energy management; air changing and draughts are powerful vectors in the system model, and therefore require a ‘transfer account’ in the quantitative tabulations.

1. I was unconvinced that a case had been made out for the need for energy accounting. It appeared that where energy was a sufficiently high proportion of turnover, or where energy projects offer a sufficient (admittedly very high) return, management attention and capital investment do result. Where prices of inputs don’t reflect resource costs because of hidden subsidies it is surely correct for small companies to take advantage. Real problems that exist because of impending future shortages, lead times for new energy producing technologies, life time costs of long lasting assets (i.e. buildings) are problems for government not small business. 2. Energy use is often related to capital use and manpower use and there is a need to consider them simultaneously.

Mr. J.R.Monson 1) Allocation of losses—whether these should be allocated (as Dr Jacques suggests is implied in monetary accounting) or listed separately depends on purpose of analysis. External examination requires allocation so that products (which may be next man’s raw material) reflect true energy content. If the production losses in electricity generations are not taken into account, then electricity is easily the most attractive form of energy because it can be used with high level of efficiency. From an overall energy economy viewpoint, however, it is less attractive because of the high losses in generation.

3. Corporate planners should be emphasised as key personnel together with engineers and accountants, since it is in the future that energy options are likely to become important. Three types of company are particularly at risk:

2) Internal examination, on the other hand, particularly those aimed at increasing efficiency of individual processes, requires losses to be listed separately and broken down to show where savings can be made.

a) large users of energy—these will probably be the first group to take notice as their operating costs increase; b) producers of products which consume large amounts of energy; and c) producers who use in production inputs which are themselves energy intensive. They may be benefiting from large hidden subsidies which they may not be aware of, and which may disappear suddenly and totally outside of the control of the company.

3) Measurement—written paper suggests that measurement of material (and energy) flows between processes may be insufficient for energy accounting. But some problem arises with monetary accounting and is overcome by estimating quantities and values (e.g. internal transfer prices). This sometimes leads to nonsensical results but is generally reasonably satisfactory. There is no reason to suppose that the same approach of estimation will be any less satisfactory in energy accounting—although obviously accurate measurements would be more desirable.

Mr. W.B.Pascall

4) Capital—It must be taken into account when considering current energy consumption; however, he has suggested that we should use the lowest possible grade of energy for any given purpose. But use of low grade energy may well involve employing large amounts of capital energy to provide the necessary equipment. Use of a higher grade of energy may not only reduce quantity of current energy consumption but also the amount of capital energy required. A balance must be struck between all these factors.

With reference to your representation of energy flows in a production system, have you included for the provision of environmental conditions? In some sectors of industry, let alone commerce, this can account for 50–60% of supplied energy.

Dr J.K.Jacques One of the very important ‘savings’ that could be made in some circumstances, (such as industrial plant with nett exothermic processes), arises from the fact that space heating (or a large fraction of it) could and should be provided by utilising low-level waste heat from process, rather than by burning boiler fuel (or worse still, using electric radiant heaters). There would, of course, be some capital cost associated with heat exchange systems and forced circulation of warmed air, but this is usually the case anyway. Thermal wheels, even simple heat pumps, could be used to channel enormous amounts of otherwise “thrown away” energy into environmental control use. This comes back to my point about proper valuation of energy sources in terms of available work. (Table 1, page 19).

Dr J.K.Jacques Mr. Monson’s comments on allocation of losses, I wholly agree with. It is worth reiterating my point about the management objective, and the level at which the system decision is being evaluated—my diagram illustrates the point. In terms of the ‘larger system’, for example, National decision, ‘high intensity’ fuels such as electricity ought to be “taxed” in terms of their potential (using, perhaps, some ‘index’ of value). This would deter the use of electricity for ‘boiling the tea kettle’! In money terms, of course, electricity prices already reflect some of the inefficiency of prime fuel consumption, and to this extent, industrialists are likely to use it only for purposes where no technologically sensible alternative exists (telecommunication, electric rotors, electrochemical processes, lighting). The concept of pricing and costing of fuels according to their substitutability would be impossible to apply rigorously even if the detailed energy accounts were all available; it is, however, a concept which comes nearer to economic thinking about the relation of price to supply and demand than most people would currently feel comfortable with! This may be the only positive way to

Incidentally, I recently carried out some investigations (with students) of heat flows and heat leaks on my own University Campus, with quite horrifying results. Again, relatively small investments in heat exchange systems and local heating units (as opposed to centralised boiler plant) would enable massive energy savings to be made, and such a system reappraisal could produce far better returns than merely ‘lagging existing pipe-work’, or other cosmetic solutions. It is very interesting in this connection that (just as in a chemical process!) air mass flow must be linked closely in the system model to heat flow, and that in this respect 25

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W.O.Alexander. We had been thinking about the “allocation” of the original energy of manufacture of (e.g.) a steel or aluminium casting when the casting became obsolete and was melted down for re-use.

achieve concordat between the large system and the “subsystem” view of optimum fuel use.

Measurement, I agree, must be whatever is practical. In answer to Mr. Pascall’s question, I have mentioned our internal study of a University Campus, and a research student, Mr. John Buglear, is also completing a study of a hospital energy system. In both of these examples, we have had to face an almost complete lack of precise measuring tools; in the latter (hospital) case, an initial study showed quite clearly that no meaningful energy accounts could be derived without some quantitative measures of (e.g.) steam flow to particular sub-units. The actual accuracy of the meters once installed is open to some speculation, but clearly, no further progress would have been possible without reasonably refined measurement aids at some crucial points in the system.

In this ‘recycle’ situation, it would surely be unfair to load all the “prime cost” (i.e. of the first manufacture) on to the second life cycle or ‘second use’. This is a case where ordinary life cycle money depreciation will not help us, (whether we choose linear or proportional declining balance methods). We could, however, conceive a rational system of apportionment which allocates PART of the capital energy in proportion to the expected energy saving being achieved by using re-cycled materials rather than the next ‘cheaper’ substitute. There would have to be some concept of ‘ultimate’ number of re-cycles built in to prevent double-counting over extended periods of time.

Estimation and ‘black box modelling’, (no pun intended, but estimating radiant losses from building structures can play a part in completing a sub-system energy balance!), are still going to be vital components of the analysis, and until energy money costs reach 50% of an organisation’s running expenses, there will not be many organisations willing to install intensive metering systems.

Dr P.J.Agius

But, before any of this life cycle costing becomes feasible, initial capital energy costs will be required with rather more certainty than is currently possible.

A. More attention should be given to the type of energy needed rather than energy resources being considered as equivalent.

This is an area where the system modellers’ art may save money and allow tentative progress with analysis and accountancy.

For instance, if needs are divided between: (i) Heat and/or process requirements (ii) Rotating shaft, static (iii) Rotating shaft, mobile

The question of capital energy assessment and the related, but even more contentious, issue of capital depreciation procedures were omitted more for reasons of clarity and focus, since I wished to hammer out aspects of the current account first. A short paper on Energy Capital is to be found in Part II of the Report as published.

(i) Can be met by many energy sources, including unconventional. (ii) Can ultimately be met by nuclear power using elec tricity as the vector. (iii) Can only practically be met by liquid fuels.

I fully acknowledge the importance of coming to grips with the quantitative ‘allocation’ of capital energy to machinery, buildings and complex (composite) materials of construction, and there is no doubt that we need these numbers in order to avoid silly excesses in ‘energy saving technology’. However, in any large productive enterprise, the allocation of capital energy per unit of product is going to be fairly small; I have general confirmation of this point from several sources (e.g. Mr. B.Buss, EBA), but will risk illustrating it from one of my own studies in a food processing factory.

B. In this view, the real shortage is not energy as such, but the capital investment to build plants using existing technology to: (a) extract coal, shale and tar sands (b) convert these to liquid fuels. This is the real crux of the matter; energy saving overall as distinct from wastage of liquid or potential liquid fuel would only put off the crisis point by a few years. It also seems to follow that the present system of evaluating projects on a DCF return is unsatisfactory for this purpose because it favours quick returns with low front end loading of expenditure.

In one, fairly capital intensive unit where direct fuel costs of 540 Giga joule units were consumed, the equivalent energy capital depreciation was estimated at 8.2 Giga joule (assumption included linear depreciation over a 10 year life of plant and 20 year life of buildings, and energy estimates based on £ capital value (c.f. Leech and Slessor’s method). Even if the “true” figure lies nearer 10 GJ (see my comments in the discussion paper on Capital Energy estimation), this is still a very small relative proportion of the total, and it is hard to see any danger in this example at any rate, of increasing capital energy by a factor of ten if by so doing, direct fuel costs could be halved (or even reduced to 400 G Joules!). Of course, there are real limitations on the capital stock for investment in new machinery, just as there are real limitations on our fossil fuel and nuclear raw material stocks, and someone will have to consider capital allocation priorities in terms of national and company level opportunity costs!

Dr J.K.Jacques The division into types of energy suggested by Dr Agius appeals to me very much, because it shows one way a manager ought to be thinking about the priority use of highintensity energy sources; this is a meeting point between the plant engineer and the systems cost accountant. As I indicated in part of my reply to Dr Monson, opportunity cost of capital, and capital energy investment in machinery with energy-efficient technology in mind must be the resource allocation questions for deep contemplation. I think the real problem is still to convince Senior Management that process (and space heating) energy is likely to become a much greater fraction of business cost in future, relative to other resources. In economic terms, this argument falls into two parts, about which economists, let alone technologists, do not seem to agree:

At the risk of being too discoursive, I would like to add a few remarks on the Depreciation aspect of capital energy, which stemmed from a discussion I have had with Professor

(a) Short term ‘jumps’ in energy prices—these will always 26

PART I–METHODS OF ENERGY EVALUATION

move ahead of increases in manufactured goods and wages with up to 2 years time-lag in the systems.

On the final point about DCF return and the ‘quick take’ view which it engenders, I think the answer may lie in the relatively unsophisticated use of the DCF argument (by some, but not all, entrepreneurs), and on the level at which ‘energy’ is supposed to be managed. Thus, a national view of energy investment may take a ‘social discount rate’ rather than an entrepreneurial discount rate as the basis of the calculation. Some energy resource developers may take a canny view of the effect of scarcity on future prices, and thus hold back resources in the hope of future profits, notwithstanding the debilitating effect of the discount factor on ‘distant’ earnings from ‘present’ investment.

(b) Longer term real increases in economic value associated with scarce energy resources—with energy absorbing a larger slice of real income and real wealth. These are likely to be offset (if not actually neutralised) by economic pressures to devise new energy systems which do not rely on fossil/ nuclear raw materials. I doubt if such novel technologies will be able to ‘offset’ rising prices for scarce resources unless demand were also to go on rising! Again, capital and opportunity value of investment in energy are in ‘balance’. None of this gainsays the argument that energy saving ‘overall’ (I quote) buys valuable time in which we can set about harnessing novel energy sources; my view is that we shall need every minute and every pound of the next twenty years that we can ‘buy’.

There is an extensive and developing debate on these issues, particularly in the pages of “Energy Policy”. Companies, and individuals can in this, as in other ‘market place’ issues make their own judgements about best and worst cases, and invest accordingly.

Nor does it remove the question of the cost of novel energy forms (possibly due to huge capital and construction energy charges). If, as I suggest in (b) above, long term real prices of energy must rise, then surely there will remain strong pressures to save energy ‘overall’, on a cost-efficiency argument.

My own preference would be for cautious pessimism and sensible, but not ‘panicky’, investment now, for long term gains and protection of business interests.

27

THE WATT COMMITTEE ON ENERGY

Part II Energy, materials and capital goods

TOTAL ENERGY CONTENT AND COSTS OF SOME SIGNIFICANT MATERIALS IN RELATION TO THEIR PROPERTIES AND AVAILABILITY Professor W.O.Alexander, Institution of Metallurgists CAPITAL GOODS AND THEIR TOTAL ENERGY COSTS Dr J.K.Jacques, The Chemical Society

MAIN CONTRIBUTORS TO DISCUSSION B.Buss

Royal Aeronautical Society

Dr W.C.Fergusson

Plastic and Rubber Institute

J.R.Monson

The Metals Society

THE WATT COMMITTEE ON ENERGY

Total energy content and costs of some significant materials in relation to their properties and availability

Professor W.O.Alexander Institution of Metallurgists

THE WATT COMMITTEE ON ENERGY

Total energy content and costs of some significant materials in relation to their properties and availability Since we can assume that about half the world’s energy utilised per annum is used in making metals and materials, I propose to outline some interrelating factors which will affect future materials strategy.

In the interim, i.e. the next twenty years, it seems that total energy content in a product will not be accurately reflected in its cost. This is partly because the total energy content of a raw material is not known or appreciated; partly because various energy sources are so vastly different in basic costs,4 and hidden by state subsidies, and partly because energy auditing as yet cannot fairly apportion the energy used on a works site to each product group. There is also considerable discrepancy amongst observers in the field as to whether process energy varies significantly with output or not. Evidence within the occupied capacity 55– 95% suggests that either connection may be valid.5,6

This view of tonnage materials for engineering and structural applications looks at metals, plastics, other nonmetals such as concrete and timber, and evaluates likely developments in the light of energy and material availability and their properties.

Assessment of total energy content of a material Publication of energy utilisation data in metallurgical and material processing operations has been widespread in recent years. However, such data is in rather an early stage of compilation. In some cases, there are discrepancies of ×2 to ×3 between values in different countries and between different firms. Recent work in the United Kingdom iron foundries,1 and aluminium industry,2 is also revealing that energy auditing in routine metallurgical establishments covering extended periods gives up to double the hitherto assumed values.

At a recent International Energy/Resources Conference in the United States of America, it was generally agreed that total selling prices of materials or products do not reflect their total energy contents.7

Difficulties have been experienced in assessing true works production data in total energy increments at each step, partly because metering of individual production units on a complex works site is not carried out. Other errors stem from various assumptions as to the overall energy uses on a site, e.g. space heating, furnace standby losses, etc.

Unresolved conventions for total energy assessment

All these observations therefore justify the need to accurately assess and discuss the relevance of the total energy content of the major tonnage materials of the world.

The conventions for assessing total or gross energy seem to be fairly well accepted in Europe,8,9 and I do not intend defining or elaborating them. There are, however, two other aspects of total energy auditing which will need general agreement and implementation. These are related to scrap recycling and the justification of manufacturing one life cycle only and/or dissipated materials.

The overall estimate of the total energy which has been already incurred by an ore as raw material or concentrate or virgin metal when it has arrived in the United Kingdom is also not readily calculated. Since so very little is now indigenous in the United Kingdom this factor is important.

The first is the value of energy which is to be assigned to recycled new and old scrap. This obviously consists of two components: (i) The inherent total energy originally used to make it the first time, and

Another factor which is not revealed in the United Kingdom Department of Energy Statistics is the quantity of bunker fuel that is shipped in foreign or British ports for bulk transportation of incoming raw materials.

(ii) the 5 to 10% additional energy required to recycle it to the place of remanufacture.

Considerably more detailed work and agreed conventions will be necessary on an International basis before Total Energy data on materials is truly comparable. The Energy Audit Series of investigations by the Departments of Energy and Industry are probably the most accurate detailed reviews of energy usage in industry in the United Kingdom, but so far have only covered iron castings, building bricks, dairy products, bulk refractories, pottery and paper.

Most firms would like to assess it at (ii) only, thereby gaining (i) for nothing. On the other hand, all scrap metals have an intrinsic financial worth which is fairly close to their raw metal values with the exception perhaps of iron and steel which is artificially low. This financial value of scrap metal contains the total energy content of its original extraction and manufacture. It would obviously then be anomalous to ignore its total energy content when it is recycled, since thereby lower total energy values would be obtained for the new processed product. This view is further supported by the argument that all the energy utilized in initial manufacture is a world energy asset and must not be destroyed. The two references8,9 suggest that energy credits are given for recycled material.

Energy and costs It cannot be denied that market forces will in the end predetermine the usage of energy and materials in whatever form, but this will only happen when the energy costs become a major proportion of the cost of any end product. In some cases energy is already 30% of the value but, since the energy expenditures on incoming raw materials earlier in the processes are not quantified in separate financial terms, most managers and directors believe that the energy contents in their part of the process only represent 10–15% of their total cost. Rigorous energy auditing would reveal a much higher value and indeed one author3 today will suggest that energy is one fundamental economic measure. One could argue that energy and labour are almost the total cost of any metal or material.

The contrary view that on second and subsequent reprocessing much less additional or process energy is used per unit of product is attractive for short term marketing but cannot be tenable on strict energy auditing standards. The second problem is the vexed question of composites. These I define for this particular problem as any geometric 32

PART II–ENERGY, MATERIALS AND CAPITAL GOODS

the energy per unit of property can be readily calculated, as in columns 6 to 8, Table 1.

arrangement of two or more materials which cannot easily be separated into their component materials without excessive expenditure of energy or with low yields. This wide definition would cover such products as steel-cored tyres, glass-reinforced plastics, bi-metals, motor car radiators, honeycomb structures, laminates, carbon filaments, ‘Hifill’, etc. In all such cases, their main reason for manufacture is that in service they contribute significantly to savings in operating energy or longer life.

As would be anticipated, total energy criteria throw a completely different light on the true values of some materials to mankind. For example, timber uses far less energy for a given strength 26–55 kWh. per meganewton unit of strength than any other material. Reinforced concrete is attractive at 145 to 250, followed by steels at 125 to 350, while cast irons can vary from 300 to 1825 in the United Kingdom, according to the energy efficiency of the manufacturer! The newer materials, aluminium, plastics and titanium, all use total energy contents ranging from 400 for duralumin to 700 for other aluminium alloys, and 500 to 2,000 for plastics depending on the type of polymer and whether energy content of the feedstock is included or not. Roughly the same order of merit obtains for modulus of rigidity and fatigue strength.

Since by their very nature and manufacture they are unlikely to be recycled and are therefore lost, the energy used in making them must be justified. This can only be done by equating the energy used in their manufacture against the operating energy likely to be saved over the lifetime of the product. At the very lowest these two values should be equated, i.e. total energy used in complete manufacture to finished product=process operating or recurring energy saved over the average life of the product in service.

Table 2 considers the same materials and considers their cost, which appears in column 5. By a similar set of calculations, one can evaluate the cost per unit of property. For many of the materials this results in a somewhat similar ranking, i.e. the reinforced concrete, the steels and cast irons, followed by a range of polymers with aluminium alloys competing with plastics. However, there are a few drastic shifts in the ranking table, timber falls from cheapest in energy to almost dearest in cost terms. Two other marked shifts downward in ranking occur for stainless steel and titanium, possibly because of the high costs of getting good surface finishes on sheet. With the fall of these three materials to a high cost per unit of property, most of the other materials move up but maintain the relative ranking order.

If the operating energy saved is greater than this so much the better. If it is less then the composite product must be justified for other valid reasons. Thus a composite or other single life cycle material might be justifiable: 1) if it gave the complete article a longer life; 2) the energy to make it was less than a single material, but this is very unlikely; 3) a unique technology was involved with no alternatives, e.g. micro-circuitry and solid state materials; 4) maintenance was significantly reduced.

This type of analysis can be extended to cover other properties of engineering and life performance. Furthermore, by a system of weighting and scaling, the significance of a property in the overall performance sense, it is possible to determine the cheapest material in total energy or in cost terms for any predetermined combination of properties. Such estimates can be readily carried out by computer.10

It should be noted that this rigorous analysis will also be required for other single life cycle materials such as metals which are dissipated and plastics which are not recycled. Again, present IFIAS convention would give no energy credit for waste and only enthalpy is included “if the material is recycled”.8,9 Consideration of the properties along with the total energy involved in manufacture give data which is absolute and likely to be fairly immutable, i.e. when the total energy contents have been more refined and generally accepted we have data on which future trends can be estimated with greater confidence than prognostications based on current costs, monetary values, subsidies, etc.

Future trends In this brief review I am more concerned with the total energy: metal/material interface and the repercussions of this consideration. As a general indication of present thought on the extraction side I can hardly do better than bring out some observations from Professor H.H.Kellogg in his Julius Wernher Memorial Lecture.11 This highlights the fact that true conservation saves energy and capital and the environment. He also illustrates the relative inefficiency of using electricity as compared with fossil fuel in many metallurgical processes with the possible exception of electrolytic processes. This is also true of the capital cost of the different energy sources in $/GJ/ year. Similarly, hydro-metallurgical processes do not look so attractive as pyro-metallurgical routes and particularly so where tonnage oxygen can accelerate the process, increase productivity and yield and conserve capital thereby saving 30– 40% of energy. Yet another important aspect which he touches on under the heading of industrial symbiosis is the cogeneration of steam and electric power, waste heat recovery and environmental dust and fume control. All of which have been achieved in the past in various isolated cases across the world but which from now on with the increasing costs of power will merit more profound examination particularly in the location of new industrial extraction processes.

This thought is possibly of greater significance in the United Kingdom than in many other countries because our reserves are higher in energy and lower in metal and material than most other countries. It is vital therefore that this resource is exploited for maximum long term benefit of the country and its inhabitants. Several countries already smelt aluminium with spare energy, some hydro-electric and some flare gas, and in this way export energy. Our energy is, however, far from cheap and would have either to make much more sophisticated products of low additional total energy or develop new routes which are much more efficient in energy utilisation.

Total energy per unit of property Though we can evaluate the total energy consumed per kg. of finished material, such information does not convey the inherent value of the product to prospective users. The determination of the value in total energy terms for the range of properties is of equal if not greater relevance. An outline of the properties of tensile strength, modulus of rigidity and fatigue strength for some common metals and materials is given in Table 1, together with their specific energy, i.e. total energy per kg. of material, from which data

Availability—Energy Another very serious factor to bear in mind is that as the 33

THE WATT COMMITTEE ON ENERGY Table 1 Energy consumption related to material properties

*Additional data after paper completed.

energy and another as exploitation and prices vary, e.g. Canada has already switched twice away from and back to natural gas in the last five years.

resource becomes more difficult to discover and win, so the total energy required per tonne of finished product rises. This is well exemplified in the case of lead, Figure 1,12 which indicates that below a certain lead content in an ore body, the energy cost becomes prohibitive and so lead supplies would decrease. One saving grace to this difficulty which could considerably counterbalance it, would be to recycle the lead already extracted. This can be done with the expenditure of one-tenth to one-twentieth of the energy required to produce it in the first place. But there is a snag to this also as I shall reveal later.

Availability—Metals/Plastics Unfortunately, probably nine to twelve of these metals which we use will decline in availability and become prohibitively expensive. These will probably be: antimony, cadmium, cobalt, copper, lead, mercury, platinum, silver, tin, tungsten and zinc.12 This list is generally agreed by most world authorities who have studied these metals. What is not so readily agreed and is certainly more difficult to estimate is the time span of the half life. Again, it could be another thirty to fifty years for some of them. Fortunately, the remaining metals and non-metallic materials are much more abundant and need not worry us so far as availability is concerned. What will be a very significant controlling factor will be the energy resource which we must assume will also have to be rationed or apportioned about the year 2000, and beyond. In many countries, this could well be earlier, but fortunately, in the United Kingdom we may be energy fat until beyond that date unless we have to export our oil and coal to trade for materials imports. The fact that oil is both the feedstock and main energy source for most plastics means that their prices and whole economics relative to many metals and other materials will undergo a radical change.

Although most estimates in strictly “reserves” terms show a levelling off in the world’s energy reserves and supplies and the outlook is not good, nevertheless, as prices rise, energy demands tend to fall and other resources come in of which there are very many options. One of the difficulties is that the world’s reserves and resources of energy are irregularly distributed and the potential for mismanagement by Governments is larger. Similarly, the indigenous raw materials in various countries are very irregularly distributed and many countries have no significant mineral resources or reserves at all. These facts have led to the conclusion that there must be a pluralism in solutions in the energy: raw material: resource exploitation in different countries. Furthermore, one can envisage a substantial movement of demand between one source of 34

PART II–ENERGY, MATERIALS AND CAPITAL GOODS

Longer life and better recycling is essential

Summary

One immediate and relatively easy way to conserve energy is to aim to double the life of all products and then double them again. There is no doubt that many current metals and materials will slowly level out in growth due to a variety of circumstances. The reasons are lower grades of ores only available and the increasing cost of energy to mine and extract these ores. The same problem will also confront plastics largely because oil is both the energy source and the feedstock.

In the short term, major savings in energy can be made by improving processing efficiency, concentrating on those materials which can be recycled from old scrap without deterioration in properties and also those of low total energy content such as timber, concrete and steels. In the longer term, however, the total energy content per unit of property coupled with the cost per unit of property should be used to point the way to efficient utilisation of our overall resources, i.e. energy and materials.

Other materials which are much more readily available will supplant many applications, a continuation of the competition for usage which has been intensifying over the past two hundred years. In such a steady state situation, i.e. no growth for many single materials, the availability and ease of recycling old scrap becomes vital and it is incumbent to design for ease of dismantling, identification and recycling.

There will be future shortfalls in certain key materials, and hence we should exploit every material to its optimum in total energy terms. In the light of such an overall review of the tonnage metals and materials of the world, and the development of specialist metals, materials and composites, Man could probably manage without some of the resources which are likely to be in short supply or demand excessive total energy. The reasons are that there is an abundance of some materials and many properties which are desirable overlap between them. Furthermore, the ingenuity of engineers and scientists ensures that there is always more than one way to achieve a desirable end whether it is to produce a structure or an instrument, even if at a relatively high cost.

Unfortunately, despite the relatively low additional energy required, the world’s performance in recycling old or used scrap as distinct from new or reprocessed scrap is poor.12 For many metals which are likely to be in short supply such as cadmium, cobalt, tungsten, the dissipation rate is very great, say 90%. But even for metals such as copper, the quantity of old scrap recycled is only about 20% of any current year’s production. The best performance is for lead and antimony at about 30%. For plastics it is virtually nil and recycling of such old or used scrap back to its original properties is extremely unlikely without pyrolysis, which is bound to be expensive and of low yield.

With foresight, and adequate facts available to the world community, we need not be too downcast by the forecasts of the prophets of doom.

Table 2 Cost related to material properties

COSTS at 1.6.1979

*Additional data after paper completed.

35

THE WATT COMMITTEE ON ENERGY

Figure 1

Availability and energy cost of lead vs ore grade 36

PART II–ENERGY, MATERIALS AND CAPITAL GOODS

International Materials Congress, Reston, Virginia, USA, 26th to 29th March, 1979. Verbal discussion

References 1. Energy Audit Series No. 1, Iron Castings Industry. Department of Energy and Department of Industry

8. International Federation of Institutions of Advanced Study. Sweden, 1974

2. B.N.F. Metals Technology Centre. Private communication

9. “The Energy Accounting of Materials, Products, Processes and Services”, 9th International T.N.O. Conference, Rotterdam, Netherlands. 25th to 27th February, 1976

3. J.C.Hewgill, Presentation I, Evaluation of Energy Use, Now and Tomorrow. Watt Committee on Energy, Consultative Council, 22nd May, 1979

10. “Material Selection: the Total Concept”. Design Engineering, November 1977. Page 59

4. S.S.W.Lom, Thesis: “A Feasibility Study on Energy Accounting”. University of Stirling, 1977. Pages 25 and 41

11. H.H.Kellogg, “Conservation and Metallurgical Process Design”. Institution of Mining and Metallurgy. 18th April, 1977

5. Ibid. Page 27 6. Noranda Metals Industries Ltd., Montreal, Canada. Private communication

12. The Rational Use of Potentially Scarce Metals. Report of NATO Science Committee Study Group. Page 16

7. “Materials Aspects of World Energy Needs”.

EXTRACTS FROM DISCUSSION Mr. J.R.Monson The value of 37% of total Japanese energy consumption for the iron and steel industry came as a surprise. My own figures suggest 17.5%.

design and factors of safety. The total energy requirement would take into account the energy necessary for the manufacture of the materials, the components and all other parts of the system which use energy including, for instance, transport of the finished goods, when appropriate.

I calculate fuel input for the UK iron and steel industry at 8.6 kWh/kg of finished product (6.8 kWh/kg crude steel) compared with the typical value of 16 kWh/kg given in the paper.

All material comparisons must be made on a volume basis before other relevant criteria are applied. Based on these suggestions, plastics will continue to play an extremely important role in providing raw materials for industry.

These differences remain unexplained even if transportation is included. Transport represents 14% of national energy consumption in Japan, and 22% of energy consumed by final users in UK transport per unit of product is lower than average for steel products.

About 70% of the plastics used by industry is thermoplastics and can be recycled. Industry already uses in-plant conversion scrap (new scrap) to a large extent. There is some use for old scrap, particularly that which is kept separate and clean. Composites, mixtures and heavily contaminated old scrap present problems in cost of recovery of useful compounds as is found with all materials, but there are technical solutions for thermoplastics waste.

In the UK industry “used scrap” re-cycling represents 35% of annual production of finished products. Total scrap (including internally re-cycled) constitutes over 50% of total crude steel production.

Thermosetting plastics cannot be recycled as processable material, but such waste can be considered, technically, as a source of chemicals or as an extender.

Professor W.O.Alexander The 37% of total energy used in Japan for the iron and steel industry is a percentage of that used for all industry and excludes domestic energy use.

Provided the production of a given component can be justified, it may well be found that, if the design minimises the use of material and energy and represents a minimum for the requirement, its recycling, when discarded, uses additional resources not compensated for by the material gained. The component can then be accepted as “one trip”.

Concerning the 8.6 kWh/kg evaluated by Mr. Monson for total energy in the UK steel industry, this would not seem to allow for the total energy content of the 50% of scrap used and the energy for mining and upgrading as well as transportation. With these included, the value of 16 kWh/kg is more correct.

It is agreed that much more work is required to develop data so that total energy content and costs of systems and the materials involved can be compared properly.

Dr W.C.Fergusson

Professor W.O.Alexander

It is appreciated that the data given is to illustrate some of the detail required in order to apportion the usage of energy for some materials in a limited area of application. However, for a complete survey, the data should take into account all the criteria required to develop systems of components to meet the full range of requirements specified on a much broader basis than that given in the presentation. Having made the policy decisions necessary, the materials can then be selected and used after proper consideration of

I agree with the principles of assessing the relative merits of materials, but am very doubtful if any significant quantity of any thermoplastic polymer is being recycled after use with the exception of some synthetic rubbers. The plastics industry must face up to the single cycle concept and justify it in total energy terms. My cost and total energy per unit of property data does of course allow for density and hence volume. 37

THE WATT COMMITTEE ON ENERGY

Capital goods and their total energy costs

Dr J.K.Jacques

The Chemical Society

THE WATT COMMITTEE ON ENERGY

Capital goods and their total energy costs For many short term decisions in energy management, it may be adequate to have energy accounts which describe the flows of materials and direct energy inputs to process stages. If we wish to stand back from short term energy control, and to relate capital investment decisions to energy conserving criteria, then it will be necessary to look much more deeply into the total energy costs—capital account as well as current account—of what is proposed.

The problem is that the evaluation of energy E cap. term depends on all the preceding process steps which have gone into the manufacture of the bricks, mortar, girders and machinery which compose our ‘model’ factory. (See Figure 1 and commentary). To break into this closed loop requires us to adopt an iterative procedure in which initial trial values of E cap for each contributory industry or factory plant are inserted in the model. Allocation of these energy costs, together with direct (directly measured) energy costs, enables a trial evaluation of the total energy (‘capital’ energy) of the final product. These values of E cap (iteration 1) can now be inserted in place of the original crude estimates and the whole cycle can be refined. While this is simple in principle, there are two difficulties in applying the model:

It cannot be rational to invest in energy conserving technology, for example, if either the financial cost OR THE GROSS ENERGY INVESTMENT IN PROVIDING THE ‘NOVEL’ TECHNOLOGY is too great in relation to the return or the quantity of resource irrevocably consumed. If we accept that harnessable energy resources are a potential constraint on development (let alone ‘growth’) in our society, then it becomes vital to assess how much energy we are consuming in providing our industries with the capital factors of production. We will call one of these ‘E cap’—the total energy required to erect and provision one green-field manufacturing plant.

1) Ready convergence will only be achieved if the first ‘informed’ estimates of capital energy are correct in order of magnitude. Adopting the approach of Leech and Slesser, (employing gross sector energy and gross cash value of the sector to create Energy Capital per sector gross product ratios,

Figure 1 Flow of materials, and direct energy inputs, to a simplified machinery producing matrix 40

PART II–ENERGY, MATERIALS AND CAPITAL GOODS

which can then be related directly to selling price of the machine or intermediate), has the merit of simplicity, and accessibility of data, but is likely to underestimate the true capital energy for any group of products (such as large machines) with a relatively small annual production. (Figure 2).

Handling the model The proposed model demands that we select values of yjq, ykr and yjp, the expected life spans of the capital equipment of the plant and equipment. While these life spans may be equivocal in the basic analysis—in view of the variety of life spans for individual pieces of equipment within one plant— this complicating factor will serve to remind us of the importance of whole life-cycle accounting for energy and could, for example, be used to test the effects on total energy consumption of various assumptions about machinery design and obsolescence.

2) The large number of intermediate processing steps—often in quite separate locations—the very wide range of intermediates (nuts, bolts, gear wheels, wire, castings, pressings, extrusions, polymeric sheeting, piping, etc.), makes the task of total energy analysis daunting, particularly in view of the incestuous nature of most engineering manufacture (to manufacture a lathe requires lathes…).

The process of iteration begins by inserting trial values of Ecap ip (raw material plants), (and if necessary of Ecap jq, and Ecap kr) estimated from £ capital cost factors, and proceeding through the calculation steps in the order (c)— (b)—(a), to achieve a modified set of values for Srl…Srk. These modified values can then be re-inserted in expression (d) to enable improved estimates of Ecapi…Ecapip.

It is suggested that a start could be made on this task by devoting effort to the engineering sectors with relatively small variety of outputs, and consistent requirement for steel and ferrous components, e.g. tool and machinery manufacture, and by concentrating on the 80% of inputs which are likely to form the ‘core’ of the production processes.

*‘Real’ years because, unlike the situation in money accounts where write-down times are related to tax off-setting procedures, we need to be able to evaluate true life-cycle costs for plant and machinery

41

THE WATT COMMITTEE ON ENERGY

It is envisaged that, providing a reasonably homogeneous group of industries (e.g. metallurgical/engineering) is chosen, and care is taken to normalise the inputs to successive stages of production, no more than 3–5 iterations should be necessary to achieve convergeance. It would be an easy matter to adapt a computer routine to the task, and this would be very beneficial if sensitivity testing of the effects of various inputs and time scales was to be undertaken with a view to studying sectoral energy capital.

Where

(b)

(c)

“Commentary” on the development Energy per unit product of the kth engineering works making ‘end products’

(d)

(a)

While it is admitted that current evaluation techniques even for direct energy inputs to process are not wholly reliable, it is envisaged that, (providing fairly rapid convergence can be achieved), evaluation of Ecap to within ±15% should be readily attainable. As a first step in improving existing ‘state of the art’ estimates, it is suggested that this proposal merits serious consideration and practical trial.

Figure 2* *after Leach. 42

PART II–ENERGY, MATERIALS AND CAPITAL GOODS

EXTRACTS FROM DISCUSSION Mr. B.Buss

Dr J.K.Jacques

While I do not disagree with your simplified model, you would need to go much further to make this into a practical model capable of producing significant findings.

Mr. Buss’s comments are very helpful, but as I hoped I had made clear, I was under no illusion about the problem of realising useful quantitative results from a formal ‘three step process’ model!

There has of course been a considerable amount of earlier work on this—see for example Professor R.Roberts1, who reviews the three basic methods used to date. At E.R.A., we have preferred the input-output analysis method, and, leaning on work carried out by Dr P.Harris, and by Casper, Chapman and Mortimer2, have derived an approximate method of estimating the gross energy requirements of commodities providing we know the price of the commodity. This is a crude but relatively simple method which does NOT depend on acquiring the actual energy content of many intermediate products. Experience has taught us how difficult this is, even when steel producers cannot agree on what energy values should be taken.

However, I am just as unhappy with the commodity price approach, ingenious as it is as a way of giving sector-bysector first approximation values. One would like to see validation of the uncertainties here, (created by nonequilibrium economic pricing, use of inefficient or obsolescent manufacturing processes and plant) using some more detailed independent measure. Clearly this would be a lot of work, but with more hope of success in 1979/80, now that we are learning how to model energy use in detail within manufacturing process steps, and (as other papers in this conference have indicated) to apply (critically) accounting procedures to the available energy data.

However, Dr Harris’s work was based on the now out-dated 1968 census of production, and I would agree that, as suggested by the paper, now is the time to review the earlier work and to try some new approaches to refining it.

1

2

43

The Aims, Methods and Uses of Energy Accounting: Applied Energy Vol. 4, (1978) pp. 199–217 Open University

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Part III Applications of energy evaluation

ELECTRONICS AND ENERGY P.J.Wiilan, Institute of Cost and Management Accountants SMALL COMBINED HEAT AND POWER SCHEMES AND HEAT RECOVERY: CASE HISTORIES J.Claret, Institute of Cost and Management Accountants ENERGY ANALYSIS FOR BUILDINGS D.McGeorge, Royal Institution of Chartered Surveyors ENERGY BALANCE STUDIES IN AGRICULTURE AND FOOD PROCESSING Dr. J.K.Jacques, The Chemical Society A STUDY OF ENERGY USAGE IN A UK COMMUNITY Professor N.Borg, Institution of Civil Engineers

MAIN CONTRIBUTORS TO DISCUSSION N.S.Billington OBE

T.A.Boley Professor I.Smith

Chartered Institution of Building Services Institution of Electrical Engineers Royal Aeronautical Society

THE WATT COMMITTEE ON ENERGY

Electronics and energy

P.J.Willan

Institute of Cost and Management Accountants

In collaboration with

C.W.Banyard

Institute of Cost and Management Accountants

THE WATT COMMITTEE ON ENERGY

Electronics and energy c) More complex decisions may be so improved by computer modelling as to be a restatement of the whole situation. Improved assessments and new decision capability have occurred in economic, financial, marketing, distribution and production activities. Particularly important is the use of computers in engineering design which improves the efficiency and effectiveness of plant, equipment and products. d) Not least is the impact that electronic computers are having on communication—ranging from inter-office to long-distance telecommunication. Efficient communication is essential in integrating the complex world of today.

The very rapid increase in the power, and decrease in price, of electronic computing devices is having a major impact in most parts of modern society. The pace of development made possible by new technology, (at present it is the era of the silicon chip), has accelerated particularly in the last couple of years and seems set to continue. The power is now sufficiently cheap and adaptable to be distributed widely which not only improves processing efficiency but directly involves a very much larger number of people than hitherto possible. In the past, the computer tended to be an expensive piece of equipment operated in isolation from most of us. Reliability (with reduction in mechanised parts), speed, storage capacity, and flexibility to match user demands is bringing the computer into every walk of life.

In these four areas of application, the computer is having a marked impact on the intelligent functions of man as opposed to the physical. While the computer will improve the efficiency of these types of functions thereby saving energy (for example, the replacement of travel to business meetings by tele-meetings), the most important energy aspect may well be the improvement in energy related decisions.

Information processing and communication so pervades modern society that electronics are indirectly effecting energy supply and conservation by altering the pattern of human behaviour, as well as having a direct impact in specific applications. On the one hand, the information processing and communication activity is being carried out more efficiently and has led to recently expressed fears of accelerating unemployment. On the other hand, society is creating better information in the sense that timely and useful information is becoming available for improved decision making. Not only can improved decisions be made in all parts of the economy with the aid of electronic computing but some of the hitherto intractable problems of great complexity can now be solved.

2. The other major area of impact of the computer on energy is through its ability to further the trend of mechanisation. When integrated with automation, the computer has a vast scope. The control of machinery and application of robots is likely to increase production efficiency and to the extent that capital replaces labour there will be an impact on energy. Whether the net effect is a benefit depends on the use of energy by capital and labour which is outside the scope of this paper. There are many examples of increased efficiency. More efficient use of fuels is being made possible by electronic computing, particularly in transportation, central-heating and air-conditioning. Fine tuning of machinery using all forms of fuel could save considerable quantities of energy.

Because of the pervasiveness of the developments it is not possible to accurately assess the overall impact of the electronic computer on energy supply and conservation. However, a number of developments can be identified which will in one way or another have an energy impact. 1. A large part of the workforce is engaged in indirect activities such as the service industries and Government. Manufacturing itself employs indirect labour such as clerical and supervisory staff. A notable development in recent years is the expansion of the indirect activities to what many believe are unjustified levels. Potentially much of this activity can be handled more efficiently and effectively by electronic computers. The scope is not unlike the impact that mechanisation had at the beginning of the century on the use of manual labour.

The specific applications of the computer are too numerous to detail. As an example, Appendix 1 demonstrates its potential in the home. Difficult as it is to quantify the relationship between computer applications and energy even in specific situations, it is more difficult to reliably predict the rate of change. Constraining factors are at work—particularly the awareness of people to the application of computers and also the shortage of skills in designing the software. The technology of the hardware is now probably ahead of application.

a) Large scale data processing—the collection, sifting and sorting of information—is well handled by computer with savings to industry and Government alike. b) Standard type decisions, particularly in operational planning, offer numerous opportunities for computerisation. Cases in point are stock re-ordering, scheduling and resource allocation. This type of application is spread throughout the economy.

It does seem from a qualitative assessment that the electronic computer is a benefit to the scarce energy situation. It should be able to improve the efficiency of supply and use; but to the extent that labour is replaced by capital there may actually be a detrimental impact on the situation. Fortunately, the computer hardware itself requires relatively little energy.

48

PART III–APPLICATIONS OF ENERGY EVALUATION

HOME INTEGRATED COMMUNICATIONS AND INFORMATION SYSTEM

Source: “Telecommunications For Metropolitan Areas: Opportunities For The 1980’s”.

APPENDIX 1

49

THE WATT COMMITTEE ON ENERGY

Small combined heat and power schemes and heat recovery: case histories

J.Claret

Institute of Cost and Management Accountants

In collaboration with

Dr N.Kendall Dr A.Melvin A.A.Wittenberg

Churchill College, Cambridge Institute of Physics Institute of Refrigeration

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Small combined heat and power schemes and heat recovery: case histories This paper deals with small combined heat and power schemes, with particular reference to their application in industrial and commercial premises. By small, is meant halfa-megawatt to several megawatts, possibly up to 10 Mw.

necessary for an understanding of the factors for and against individual installations.

The upper limit is, however, still defined to fall short of district heating requirements.

At present, there is very little interest in installing small combined heat and power systems because the economics, unless subsidised, are rarely sufficiently attractive. Even when there is an acceptable payback, the scheme is often considered to be not worth the capital risk or the management effort to put it into operation. The concept of acceptable payback is also somewhat variable. Most commercial and industrial operators require a minimum simple payback time of from 2 to 3 years on a non-essential capital investment such as a chp installation. Some demand an even shorter period; some will accept up to 5 years. In general, energy costs are regarded as only a small fraction of total operating costs and there is a generally-expressed view that more significant returns on capital and effort can be obtained by paying attention to more important cost factors. Even on energysaving activities, there are more profitable and simpler ways of spending money than on chp—such as, for example, repairs of steam leaks, insulation, heat recycling, improved plant efficiency and improved processes.

1. Economics

The relevance of this subject to the “Evaluation of Energy Use” lies in energy savings. The appended case studies include cases of heat recovery without power generation to remind us of this much wider field. However, it is important to be aware that interest in energy savings arises at two levels. First, energy savings on individual installations. These are of interest to the operator primarily because they bring with them a corresponding financial saving. Such a saving is considered by him in conjunction with the associated capital and operating costs. If he considers the overall economics are inadequate, he does not install combined heat and power. It is important to stress that the operator is never interested in energy savings as such: they never over-ride unfavourable economics. Secondly, total energy savings to the nation.

The economics of chp systems depend on the ability of an installation to match, or accommodate, the fluctuating heat/ load demand patterns. Many of the proposals for chp schemes have not been sufficiently detailed and have been misleadingly optimistic on the analysis of heat/electricity demand patterns and of fluctuating loads. On the other hand, when chp schemes which have been operating for some time are examined some of them contain a special factor which had been economicallybeneficial; for instance, the obtaining of a long term, unusually favourable, fuel contract which could not be repeated.

On the macro-level, government ministries are interested in conservation of primary energy from the point of view of extending energy reserves and the effect of energy transactions on the balance of payments. Government bodies are less interested in the economics, as such, of plant installation and operation. The Department of Industry has been offering grants in the chp area, planned for a two year period from June 1978. A number of schemes are reported to be at various stages of consideration, although, at the time of writing, the details are confidential and not available for scrutiny. Once such details do become available and the chp schemes have been operating for some time, it is expected that these schemes will provide useful information on the criteria used for establishing grant approval and on the actual economics of operation.

The most attractive circumstances economically for chp occur when there is a virtually constant heat/power demand pattern, 24 hours per day, all the year around at a 50% load factor. Such circumstances are unusual on the small chp scale, although they are likely to apply in the process and chemical industries on a larger scale. Similarly, combined heat and power schemes might be appropriate for large hospitals but here the payback time tends to be somewhat longer than that regarded as acceptable by industrial or commercial undertakings and clearly the economic criteria could be different.

An important question is: what would be the order of magnitude of national energy saving if small combined heat and power were to attain maximum penetration in the industrial and commercial sectors? Several estimates suggest that the order of magnitude could only be 1% of total energy use and that this level could only be achieved after 10–15 years. To put small combined heat and power into perspective, therefore, it could make a small, worthwhile, but not very important contribution to national energy saving and its viability in terms of benefit to cost should be viewed in relation to the circumstances of individual operators.

2. Energy conservation A properly planned and operated chp system saves energy in every case. The amount of energy saved depends on many factors including the ratio of heat to electricity of the output and the performance of the conventional methods of producing the same amounts of heat and electricity against which the system is compared. In the most favourable cases, the overall efficiency of primary energy conversion can be doubled. The maximum advantage in energy savings to be derived from chp occurs at a heat to electricity ratio of 1.63, when the overall efficiency rises to 79%.

This is the approach taken in the present study. The framework of the study took as its starting point a survey carried out by Dr Norman Kendall (Fellow of Churchill College, Cambridge) and was based on discussions with some 44 organisations with an interest or an involvement in small combined heat and power. Other cases have been added and the survey brought up to date on a number of points. This paper attempts to give an overview of the general conclusions arising from the study. The Appendix gives some specific examples to illustrate the general points made but does not present all the detail

3. Factors relating to electricity supply The comparative cheapness in capital terms and the reliability of the public electricity supply are important factors which 52

PART III–APPLICATIONS OF ENERGY EVALUATION

often confirm decisions to reject proposals for chp installation or on-site generation. It is not practicable to attempt to achieve the same degree of reliability as the public supply by the installation of on-site generation; the overcapacity that has to be provided even to approach the grid reliability is prohibitive and contributes to uneconomic operation. Obviously, stand-by power plant is being installed where it is essential to preserve economic operation by insulating the process from grid failures brought about by industrial action in the future. Views differ from firm to firm on the benefits of this approach, but it is perhaps significant that some firms which went in for largescale on-site generation some 20–25 years ago when the grid was less reliable are now considering turning to the grid for their main load, with only a small amount of stand-by generation for essential processes. Such trends would further militate against chp, the case for which often relies on the introduction of generating plant into the operation of the firm.

control systems to facilitate the matching of chp operating performance to varying loads.

6. Fuels The economic viability of small chp schemes may be partially affected in the future by the choice of fuel and both short- and long-term availabilities of fuels. For example, any significant increase in installed chp would imply an increased demand for distillate fuels, possibly at a time when the availability of distillates is becoming restricted and prices are rising. The ability of large centralised fossil fuel stations to use low grade coal and residual oils would then be likely, by comparison, to unfavourably affect the economics of generating electricity in a distillate-fuelled chp system. If this situation implied additional fuel processing to provide the small chp system with the required grade of fuel, this would tend to be to the detriment of national energy conservation. Under particular circumstances, it may not need too much of a change of this kind to substantially reduce the energy conservation advantages of small chp.

4. The operation of a chp installation The operation of a projected chp system is often not adequately taken into account when the case is made and if problems of maintenance, operation and supervision are thought through fully, many firms decide that they do not wish to take these on. In particular, many firms find it difficult to find enough suitable staff, or staff willing and able to be trained, to keep a chp system running for 24 hours a day on a three-shift basis.

Conclusions (i) General At present, it does not seem to be possible to make a general claim that small combined heat and power systems are likely to be economic in industry or commercial premises. A viable case cannot be made for an individual organisation on energy savings alone. The chp scheme must both integrate into the operations of the firm and, at the same time, provide financial benefits for the firm to justify spending capital on this project in preference to others. Some organisations have been able to justify the economics and a closer study of these, provided that detailed information could be made available, would help to identify the special factors leading to success in these cases. However, the general conclusion is that there would be a conflict over small chp between the commercial interests of individual firms and any national policy on energy conservation which looked forward to small chp systems to provide a contribution to energy savings of 1%.

The inflexibility of operation of a chp system is often overlooked. A chp plant has to be designed to meet fairly specific load demand patterns within a rather narrow range. The economics of the system depend on how closely it is operated to these design conditions. Some people consider that even 10 megawatt systems are too small to bear the overheads of the relatively complicated systems of control which are necessary. In commercial premises, special care has often to be taken to ensure that noise is not a problem. The need for noise suppression always creates considerable additional expense in provision of a suitable site and in insulating it. A chp system also usually requires more space than does the conventional arrangement relying on the grid for electricity and boilers for heat. Proposals for chp schemes often omit the opportunity cost of providing such extra space.

(ii) Evaluation methods There was an interesting regularity of response about the actual evaluation of chp:

5. The manufacturer of chp plant

1. Payback was the method invariably quoted.

Manufacturers of engines and equipment are not, in general, interested in developing chp systems. They feel that they are likely to get a better financial return on available capital by expanding their present business in electricity-generating sets, for which they already have a good market and in which prospects are good, particularly in the Middle East and the developing countries. Moreover, manufacturers and installers of chp systems have experienced the need to exert a large amount of engineering effort in the commissioning and servicing of installations. The same problem has been encountered in the USA and is the reason for many manufacturers having withdrawn from this field. There is a need to develop more satisfactory equipment especially designed and standardised for small chp systems if penetration of the potential market is envisaged. In particular, the suitability of currently-available thermostats, valves and heat exchangers for waste heat recovery needs to be assessed. There appears to be scope for the development of microprocessor-based

2. The payback criterion, for what is essentially a risk free investment for cost saving, is set lower than what is required for investment in the main activities of the business. 3. Because capital and revenue budgets are often controlled by different managers, those responsible for capital spending will not spend to save on a revenue manager’s budget—and the revenue manager does not have a capital budget. 4. Operating costs are often underestimated and at the same time, some schemes are successful because of favourable factors; for example, low fuel prices or the use of direct labour for installation. The chp field itself provides an interesting case history of the problems of energy evaluation in project appraisal. (iii) Cases An extensive appendix to this paper gives a number of actual cases by way of illustration. 53

THE WATT COMMITTEE ON ENERGY

APPENDIX

3. Lloyds Bank Computer Centre

This Appendix contains details of a number of cases-in the small chp area. These range from instances where actual chp has been installed to those where evaluations have concluded that there is no justification for such schemes. Such evaluations range from fairly objective to highly subjective assessments of the economic viability of chp installations. Two cases on heat recovery without power generation are also appended to remind us that this field is very much wider than that defined by the constraints imposed by power generation. The objective in presenting these studies is to provide illustrations of factors felt to be important in economic evaluation of small chp schemes rather than to provide comprehensive studies of the relatively small number of schemes for which there is adequate information.

An 8 Mw chp system has been installed in the Lloyds Bank computer centre by Haden Young Ltd. This is based on Ruston dual fuel engines for on-site generation with wasteheat recovery. The premises are also connected to the grid. Security of supply to the computer was the overwhelming reason for the installation and this factor dominates the economics to the extent that it is probably not possible to argue an economic case for savings on generation and space-heating in isolation from the consequences of a computer failure in a complex scheme of on-line banking transactions. It is important to note that the operation and maintenance of the system has been contracted out to Haden Young, who have a team of 35 men allocated fulltime to servicing this and other power-plant installations. It would be difficult and expensive for Lloyds to operate and maintain the system themselves.

Many of the cases used draw upon Dr Norman Kendall’s publication: “Report on a study carried out under a Science Research Council Grant GR/A/3505.1”, November 1977.

4. Free University, Amsterdam The chp system installed at the Free University of Amsterdam has an output of about 6 Mw electrical and is based on six Ruston dual fuel engines. Heat is recovered both from the jacket water and exhaust and is supplied as space-heating to the university complex. With heat recovery, the efficiency of energy conservation is 80% and on this basis a pay-back time of 3 years is expected.

1. Petbow Limited Petbow, which has as its main business the manufacture and sale of generator and welding sets, has installed a small chp system in a new building for the construction of alternators in the factory at Sandwich, Kent. The system provides electricity, space-heating and hot water. It consists of three 400 kW sets driven by Rolls-Royce turbo-charged diesels direct coupled to Petbow brushless alternators. Two of the sets are sufficient for the maximum demand of the building; the third set is a standby for emergency or maintenance. The rest of the site relies on the grid. The system is run during the seven winter months when there is a space-heating requirement. It is not economic to run the system when electricity only is required. The overall thermal efficiency of the system with heat recovery is 65%.

5. Fiat “Totem” system The Fiat “Totem” system is a small chp system for heating and supplying electricity to multiple units of apartments, with the Italian domestic market particularly in mind. The prime mover in the system is a standard Fiat 127 4-cylinder car engine converted to run on natural gas and driving a 15 kW three-phase alternator. Waste heat is recovered from the engine exhaust, the engine itself, the crankcase lubricant and the alternator cooling jackets. The alternator is connected permanently to the grid, from which the domestic premises take their electricity. The engine runs intermittently, being controlled thermostatically to meet the domestic hot water demand. The overall thermal efficiency of a Totem unit is claimed to be 92% and its maximum heat output 33,000 kcal/hour. In the Italian context, this is judged to be sufficient to heat four apartments each of 100 sq metres area.

This system is relatively small and confined to one part of a large factory complex. The economics of it appear to be governed to a large extent by the view taken of it by the South Eastern electricity board with regard to electricity tariffs for the whole site. In fact, any extension of the system to other parts of the site would be limited to the point beyond which the tariff obtainable would be adversely affected. Safety of operation was of paramount importance in discussions of the design with the electricity board. Petbow undertook never to operate in parallel with the mains.

The economics of such a system are difficult to evaluate and would be only likely to be assessable when Fiat have completed preliminary trials and revealed cost details. Nevertheless, we might expect a fairly high cost per kilowatt for such a system since (i) the running time of a system is only likely to be 1800 hours per year, thus extending the payback time, (ii) during the extended period of shut-down per year, provision must be made for an alternative means of supplying domestic hot water, (iii) maintenance costs would be high, and (iv) noise, vibration and safety are all problems with inherent cost factors which would need to be solved.

2. Roundhills Sewage Works, Birmingham Sewage plants are one likely output for small chp systems. The Roundhills system consists of four dual fuel engines powering a generating set with a total output of 1.2 MW. The engines were supplied by Mirrlees Blackstone Diesels Ltd. The particular advantages are that there is a supply of free fuel, sewage methane, and an outlet for waste heat from the generators in promoting bacterial activity in the digesters.

6. Gutehoffnüngshutte Sterkrade AG, West Germany

However, even with this particularly advantageous combination of factors, the system was only economic for a high power and heat load factor (not less than 46%). A particular problem was that the temperature of the digesters had to be controlled to ±2°F. For such control the thermostatic control valves normally used in diesel installations were inadequate and it was necessary to go to a relatively expensive electronic control system built specifically for the application.

GHH Sterkrade AG have built five chp plants based on closedcycle gas turbines which, up to mid-1977, have been in operation for more than 370,000 hours and were felt to be highly satisfactory in operation. The first plant (coal-fuelled) was built in Coburg in 1961 for the municipal authority and has an electrical output of 6.6 Mw and a heat output of 8 Mw, with an efficiency of 62% and a total operating time in excess of 100,000 hours. A second plant has been in operation since 1963 on a mine site at Oberaden for the generation of power, 54

PART III–APPLICATIONS OF ENERGY EVALUATION

heat and compressed air. Here the electrical output is 6.4 Mw and the heat output 7.8 Mw, with an overall efficiency of 65.5% and an operating time again in excess of 100,000 hours. The fuels here are natural gas and coal. The other three systems are larger scale, that at Oberhausen (14 MWe/18.5 MWth) being used for district power and heat, that at Gelsenkirchen (17 MWe/20MWth) being used in a steelworks and that for Energieversorgung Oberhausen AG (50 M We/53 MWth) operating on a helium turbine fuelled by coke-oven gas.

9. Marks and Spencer Ltd Marks and Spencer since 1973 have been keenly interested in energy conservation and have installed a number of practical energy saving schemes in their premises in the intervening period. They have been willing to consider what advantages would be offered to them by small chp in their large stores. One particular scheme they have considered involved the generation of electricity from a gas-engined set for driving a compressor for air-conditioning, the waste heat being recovered for water-heating. The size of unit envisaged, based on RollsRoyce automobile engines converted to gas, would give an electrical output of about 120 kVA. Dale Electric and Petbow Engineering did feasibility studies of such a scheme. The conclusion was that the base load was inadequate to justify such a scheme in economic terms. Marks and Spencer have no current involvement in small chp schemes.

Although much technical detail is available on these plants, there appears to be little specific information available on the economics. For natural gas-firing, an estimate of 1.7 pfennings/ kWh (approx. 0.4p/kWh) as the cost of power generation has been quoted, for a capital investment of 500 DM/kW (£125/kW). On the basis of electricity generation alone, it would seem likely that these plants are economically attractive. Moreover, the plants at Coburg and Oberaden have operated for more than two-thirds of the time between their commissioning in 1961 and 1963 to mid1977 and would thus seem to be of acceptable reliability.

10. British Leyland UK Ltd British Leyland has limited on-site generating capacity at Longbridge and Leyland, which is used for electricity peak lopping, and stand-by plant at some other works to protect essential processes. However, although they have investigated the possible viability of small chp, in no feasibility study has it shown itself to be economic. The payback time required is two years or less. BLMC looked at the Fiat “Totem” scheme but concluded the economics were not viable. A feasibility study was carried out by consultants for a proposed chp scheme in a new paint shop at the Browns Lane works. The conclusion was that the additional capital investment over conventional systems would exceed £1 million and would give fuel and electricity savings of £90,000–£120,000 per annum. Such a long payback time was unacceptable.

7. Courtaulds Engineering Ltd Courtaulds are an example of a large industrial group with considerable involvement in chp for over fifty years. In the beginning of this period, with rayon being the major product, there was a constant demand of 1 kW electricity to 30 lb steam and there was thus a comparatively simple justification for chp. Nowadays, however, with petrochemical feedstocks and polymer products, steam requirements are small and in general chp is not regarded to be economically viable. At the Courtauld weaving and processing factory which recently closed at Skelmersdale, a chp system based on two diesel of 3.4 MW output plus a waste heat boiler was only viable on heavy fuel oil and only became an economic proposition because favourable development area capital subsidy was available. In the 1950s the CEGB put up a power station at Spondon with three back pressure turbines, each of 10 MW capacity, which supplied British Celanese with process steam at an overall efficiency of 69%. Although Courtaulds felt this project had been a success, it appeared that the return on capital for the CEGB was somewhat disappointing. Courtaulds are currently putting a great deal of effort into energy conservation and methods of heat recovery but new on-site generation plays little or no part in the general thinking. A guaranteed payback period of 2–3 years would be required before a small chp proposal would be regarded as being viable.

11. Allied Breweries (Production) Ltd In contrast to small chp, heat recovery schemes find considerable favour in industry. To give an idea of the standard against which small chp is likely to be judged in the energy conservation field, two examples of practical heat recovery schemes will be presented in brief. The first involves the application of relatively novel technology, the heat pump, in a brewery. Allied Breweries, in conjunction with W.S.Atkins and Partners, investigated a scheme for recovering heat via a heat pump from the condensers of an existing refrigeration plant in a brewery. The capital costs of the modifications required were £66,000 and the total annual operating cost, taking into account the costs of electricity, water, maintenance and the gain from heat recovered was about £11,000. Since the operating cost of the unmodified system was £64,000 per annum, the payback time on the modifications is little more than one year. No small chp scheme appears to show such a short pay-back time.

8. Selfridges, Oxford Street, London Selfridges is an interesting example of a large department store which had a chp system in continuous use for 22 years but then chose to go to the grid for its total electricity requirement of 4 MW, with approximately 1.5 MW of diesel generating stand-by sets to meet part of the load in an emergency. The original chp installation consisted of four Mirrlees engines with a total capacity of 1 MW and heat recovery to provide hot water at 60–70°C. This was generating electricity at a lower price than the electricity tariff but was giving severe maintenance problems and spares were obsolescent. An evaluation of the possibility of including heat recovery on the new plant rejected it on the grounds that it was not justified in terms of both the capital investment and plant maintenance required. It seems that Selfridges, by implication, required a one-year payback in their investment appraisal.

12. B.O.C.-Linde Refrigeration Ltd Another example of heat recovery from refrigeration plant is provided by the experience of B.O.C.-Linde Refrigeration with three supermarkets and a cold store, where the refrigeration plant is installed for frozen food and for fresh food cabinets. Here use is made of the heat rejected at a temperature of about 40°C on the high pressure side of the vapour compression cycle. In most plants this heat is dissipated to the surroundings in an uncontrolled manner and is usually lost. By the installation of conventional heat recovery equipment, B.O.C.-Linde recover this heat for warm-air heating or water heating. Systems have been installed in supermarkets in Chelmsford, Ewell and Stoke 55

THE WATT COMMITTEE ON ENERGY

At the same time, in any dairy complex there is a need during a fair proportion of the year for comfort heating in spaces occupied by personnel and machinery.

and in a coldstore in Plymouth. The extra cost of plant conversion to include the heat recovery equipment was in each case: £2450, £4381, £4432 and £3369. The respective annual savings were £3393, £4323, £6549 and £6236. The payback time in all cases was therefore a year or less. A detailed case study of heat recovery at a dairy follows.

Superficially, it would appear ridiculous to employ power for the purposes mentioned above in connection with cooling and processing of milk products, extracting heat from the produce and from the spaces in which the cold rooms are installed, then rejecting this hard won heat to atmosphere, whilst purchasing energy in the form of gas, oil or electricity for the purpose of heating spaces and even replacing heat extracted from the heated spaces by the refrigeration.

DAIRY COMPLEX WITH HEAT RECLAIM Introduction Even though milk and milk products arrive at a dairy complex in a cooled state, say some 45° F, nevertheless they do need further cooling and certain dairy products require further processing resulting in considerable heat extraction being needed. Thus refrigeration is required for:

One of our customers requested B.O.C.-Linde to look into their particular set of circumstances and to quote a price for the necessary refrigeration equipment together with the price needed to make use of the heat normally rejected to atmosphere. The customer was preparing for a new extension and was in the position of needing to replace existing equipment. The prices quoted were attractive to them and the offer turned into an order. What follows is about the main considerations discussed during the investigation.

a) Holding at a specified temperature and a small degree of cooling, say from 45°–36°F. This duty is quite usual for holding cold rooms. b) Considerable cooling, say from 70°F to 34°F or perhaps 55°F to 34°F. This duty results from, for instance, the processing of cream.

Basic Proposal

Any form of refrigeration necessitates the employment of energy as the driving force and, in the case of mechanical refrigeration, energy is employed usually in the form of electrical power supplied to:

Sets out in a schematic form the basis of the project. The building comprises a blast cooling room and two holding cold rooms. On the one long face doors open to receive produce from a preparation room some 100 ft long by 70 ft deep. On the other long face of the stores, doors open on to a loading bay. There are two floors, most of the activity being on the ground floor with storage and plant room above. The proposed scheme of heat reclaim is shown in Figure 1 which is self explanatory.

a) compressors for the production of cold, b) fans for assisting heat transfer and distribution of air, c) fans for assisting heat rejection, d) defrosting power necessitated by the presence of moisture in our atmosphere.

Figure 1 Heat circulating scheme 56

PART III–APPLICATIONS OF ENERGY EVALUATION

Figure 2

General layout (ground floor) 57

THE WATT COMMITTEE ON ENERGY

Figure 2 shows the whole ground floor plan in more detail. For this installation comprising on the refrigeration side:

Recovery energy

— A blast cooling room for the quick cooling of cream and two chill rooms.

at 1p per unit this represents an amount of £3,557

= 196 3 74 3 24+4 3 80 3 224 = 355,766 kW hrs

The extra price for the heat reclaim gear itself needed to make the refrigeration plant suitable for heat reclaim duty but not including the additional aspects of steam heater and cooling coil for Summer operation; taking in the necessary controls amounts to:

— The heat extraction requirement for holding during, say, 16 hrs/day/overnight would be 79000 b.t.u.s/hr (23 kW) and for approximately 8 hours per day because of processing and handling, the heat extraction required would be some 280,000 b.t.u.s/hr (82 kW).

£8,000 This does not include distribution ducting in the space, since some form of heating system would have been used requiring such distribution with a capacity the equivalent of the heat reclaim and the additional steam coil. Hence, in straight, simple terms the break even point for the heat reclaim extra is of the order of 2½ years and is in line with many other applications we have provided and looked into.

Because the cold rooms abutt each other and only have one face and one end exposed to ambient, the variation between Winter and Summer brought about by ambient conditions appears to be marginal, bearing in mind that the working spaces are being maintained sensibly constant by the supply of heat available from the refrigeration duty. It was reckoned that there would be a peak load during the few days prior to Christmas and on the odd occasion during the year. The refrigerating machinery has been sized to cope with this. As can be seen from Figure 3 and Figure 4, the steady overnight total heat extraction falls to some 74,000 b.t.u.s per hour (21.7 kW) and the working day total rises to some 275,000 b.t.u.s per hour (80.06 kW) under ambients outside of 36° F.

General remarks So far as this report is concerned, there are a number of imponderables: a) This is a new construction, so there will be no previous experience for direct comparison after installation when the practical results are assessed.

The refrigeration requirements are covered by two of three compressors installed, floor mounted and ceiling mounted coolers as is most suitable for the application and a multicircuited vertical air flow condenser (Figure 5).

b) If the energy were being supplied electrically, then the price per unit would be considerably greater than the 1p per kW hr assumed. The assumption of 1p has been made in reference to the possibility of using gas or oil but even then 1p per unit could be an under-estimate within the pay off period these days.

It has been calculated that the heat rejection available normally (Winter) for the 16 hour period is some 46 kW and for the 8 hour working day some 129 kW, giving a mean of 74 kW. Whilst during peak operation on a cold day in Winter, these figures become 46 and 148, giving a mean of 80.

c) As the heating load of the building would be more or less constant over a heating season, the effectiveness does depend on the throughput of milk and cream products being maintained. In fact, if the throughput should seriously fall, then presumably the factory activity would be less— less people, less machinery, etc. The nett result would be a greater requirement for heating and the booster steam coil would be called into operation.

The space to be heated, some 100 ft by 70 ft by 12 ft high, contains the usual cream handling machinery and personnel. Warm air, conveying the rejected refrigeration heat comprising heat extraction from the cold rooms, power supplied to the compressors and fan power used for air circulation, is distributed at a temperature between 85° and 90°F along a ducting louvred for control purposes and is passed to vertical distribution ducts with adjustable air outlets. A return duct from the heated space feeds the used air back through filtering to the plant room condensers, where it is reheated for redistribution. Fresh air make up is allowed for and two additional features are incorporated into the whole scheme:

d) However, bearing in mind that where refrigeration is installed and operating, there is necessarily a heat rejection, so that even under such circumstances described under (c), matters would be worse if it were not made use of. e) Though not strictly a factor in making a decision about the use of heat reclaim, the power inputs of the machines and fans amount to 45 kW. From this it can be seen that the likely coefficient of performance will be of the order of 1.75, a figure which is more useful when considering pure heat reclaim pump applications, rather than heat reclaim in the sense of this report. A guiding principle employed here has been not to increase power to the refrigeration plant for the purposes of making the hot end more effective, since this would apply a penalty to the normal use. The refrigeration plant is conventional for the application fulfilled and the central idea has been to use rather than throw away the heat pumped. No special sophistication introducing additional price has been built in other than that mentioned.

— A steam coil for topping up the delivery air temperature should additional heat be required during extremely cold weather, or when refrigeration heat extraction is low for any reason. — A chilled water cooling coil with controls for use during hot Summer days.

Guide figures on the anticipated results It is anticipated that when heating is required, probably between 200 and 240 days in each year, all of the heat rejected from the refrigeration equipment will be used. Certainly the control system ensures that the refrigeration heat is used first.

Conclusion From the above there would appear to be a powerful argument especially in these days for— — Where refrigeration is to be provided making full use of the heat made available by it.

On this assumption, using the figures quoted above for 200 days, we have: 58

PART III–APPLICATIONS OF ENERGY EVALUATION

Figure 3

Heat extraction requirements

Figure 4

Heat rejection 59

THE WATT COMMITTEE ON ENERGY

Figure 5

Schematic piping diagram 60

THE WATT COMMITTEE ON ENERGY

Energy analysis for buildings

D.McGeorge

Royal Institution of Chartered

Surveyors In collaboration with

Dr P.Yaneske

Institute of Physics

*Sponsored by the Royal Institute of British Architects

THE WATT COMMITTEE ON ENERGY

Energy analysis for buildings Building resource allocation model Clearly, any product, be it a building, washing machine or motor car, involves the allocation or expenditure of resources throughout its life. It is also true that, unlike most other products, buildings are expected to outlive their purchasers. In the construction industry, the system boundaries of the allocation model could range from the erection of a completely new building on a green field site or, as is now becoming increasingly common, the refurbishment or rehabilitation of an existing building. It is normal practice when considering the allocation of resources in a building to group these resources into four main elements, viz: (i) Construction (ii) Maintenance (iii) Running (iv) Demolition

Figure 2 Measurement of resources

The percentage distribution of resources amongst the four elements will vary widely depending on the building type and patterns of usage.

Historically money, as a method of facilitating barter, has always been accepted as the ultimate measure of the availability of a resource. The use of money implies scarcity and, in turn, the fact of scarcity should result in the best use of limited resources. It has become increasingly obvious, however, that commercial and nationalised pricing strategies for energy are not necessarily proportional to the scarcity of energy resources.

The four elements are closely interdependent, for example, by expending a large amount of resources at the construction stage, it is possible to construct a robust building with a high quality durable finish with low maintenance characteristics requiring a small resource allocation throughout the life of the building. The converse of this example is also true, in that it is equally possible to construct a building to fulfill the same purpose as that of the first example with high maintenance demand characteristics coupled with a smaller construction resource allocation. Thus is can be said that maintenance allocation is simply a deferred form of construction allocation.

National market prices have difficulty in adjusting to rapid fuel prices changes on a world scale, and in addition, market prices can also disguise the full energy cost of conversion, e.g. from oil or coal to electricity. BRE’s paper “Energy conservation: a study of energy consumption in buildings and possible means of saving energy in housing”2 attempts to quantify the difference between the price paid by individual consumers for fuel and the price paid by the nation for the provision of that fuel. This technique is called national energy or prime energy accounting. Prime energy accounting, whilst still using money as a method of measuring energy resources, replaces the metered price of energy paid by the individual consumer with the estimated cost to the nation of providing the consumer with a given quantity of energy, expressed in terms of the prime energy resource used. The calculations involve estimates of the energy expended in producing power, in transportation and distribution; as well as the energy losses which occur upon conversion, particularly from fossil fuel to electricity.

The resources consumed in running a building are also closely related to the initial construction resource allocation. The energy required for heat, light and power during a building’s life is very largely governed by the initial resource allocation on the building’s envelope and environmental support system. The first step then in attempting to evaluate building related energy concepts is to view these concepts as part of a dynamic relationship within the building resource allocation model.

A more radical approach to energy evaluation is also available, called energy analysis. Based on the laws of thermodynamics, rather than economics, energy analysis does not rely on money as a unit of measurement but attempts to quantify the resultant reduction from the global stock of energy caused by the provision of a good or service at a chosen point in the economic system. Energy analysis is not an alternative theory of value to money but is based on the premise that energy, like time, can be used only once, i.e. energy is unique in that, unlike any other resources, it cannot be recycled. Thus the unit of measurement used in energy analysis is a unit of energy, normally the Joule. The use of the word ‘energy’ in the context of energy

Figure 1 62

PART III–APPLICATIONS OF ENERGY EVALUATION

analysis means not only the energy required to maintain and control the built environment, but also the energy required to produce the built environment.

2. National energy (prime energy accounting) As previously discussed in this paper, prime energy accounting attempts to quantify the cost incurred by the nation in the provision of a fuel to a consumer as opposed to the price paid by the consumer.

To summarise, the energy required to produce, control and maintain the internal environment of buildings can be measured at different levels in the economic system, viz: a) Individual consumer level, using market prices. b) National level, using prime energy accounting. c) Global level, using energy analysis.

Prime energy accounting also uses money as a method of measurement, and in terms of the four main elements, of the building resource allocation model, three of the elements, viz, construction, maintenance and demolition costs are dealt with identically in the market price and prime energy accounting methods. It is only in the element ‘running costs’ that there is a difference between market price and prime energy accounting techniques. Prime energy accounting also uses discounted cash flow in a similar fashion to the market price method.

All three methods of evaluation, irrespective of their methodology, should be prescribed by a single model with clearly defined system boundaries.

Methods of energy evaluation

A recent publication by the Department of Education and Science “Guidelines for Environmental Design and Fuel Conservation in Educational Buildings”1 recommends the use of Prime Energy Units based on BRE CP56/752 as a basis of comparison between alternative methods of heating and lighting. (DES add a ‘caveat’ to this recommendation that “values drawn from BRE CP56/75 need to be kept under review. Current figures may be slightly different but do not affect the basic approach”). It will be interesting to note if there are further developments in the use of P.E.U.s to evaluate building running costs, in particular if P.E.U.s become accepted by private practice as opposed to Government institutions.

1. Market price (public investment) As previously discussed, money is normally accepted as being a measure of scarcity, thus the price paid by a consumer for any item with an energy content should reflect the level of scarcity of energy resources expended in the production of that commodity, and in a perfect market situation without hidden subsidies, this in fact would be the case. In practice, however, market prices are notoriously unreliable as a measure of the energy content of a material. For example, two products A and B can be offered for sale at identical prices but product A can be labour intensive and product B energy intensive; if both labour and energy are in receipt of varying amounts of Government subsidy, then the evaluation of the energy flows to produce, maintain and run a building quickly become obscured. Moreover, if total reliance is placed on the market price system it often becomes difficult in terms of building design decision making to establish whether running cost savings are in fact being achieved by the expenditure of a disproportionate amount of energy during the construction of a building.

The conversion efficiencies used by BRE CP56/75 are as follows:

Fuel Primary

The use of discounted cash flow to reduce the flow of market prices to a single base in time also has attendant difficulties, since DCF (at normal interest rates) tends to favour only those measures which have a short pay back period in terms of energy reduction. In Figure 3, the capital cost of provision must be less than the discounted savings in running costs to make the provision worthwhile. However, market pricing will not assist the decision maker as to whether B or D is the better choice in terms of energy expenditure.

Energy Input per Unit of Delivered Energy

Electricity, normal tariff

3.73

Electricity, off peak

4.14

Manufactured fuels

1.89

Oil

1.44

Natural gas

1.43

Coal

1.46

Energy analysis The methodology currently used in the application of energy analysis is that agreed by an international workshop, organised by the International Federation of Institutes of Advanced Study, which reported in December 1974.3 A recent publication by Dr Malcolm Slesser ‘Energy Analysis: Its Utility and Limits4 attempts to quantify the relationship between energy, technical and economic factors, their limits, and their evolution in time.

Figure 3

Attempts have been made to test the comparability of market price, prime energy and energy analysis methods on identical building types.5 The results of this pilot study are by no means conclusive, however indications are that the energy analysis method is likely to produce a different rank order of results than analyses based on market price and prime energy accounting. An interesting feature of this pilot study is that the computed gross energy requirement of house type used as the basis of the study is possibly the most detailed ever made of a single house, being based on a detailed Bill of Quantities. The materials were grouped into 247 classes for which Gross Energy Requirement figures were computed. The final result of some 700 GJ for construction energy is considerably higher

Schematic illustration of the capital cost of certain types of insulation compared to reduced running costs 63

THE WATT COMMITTEE ON ENERGY

than figures often quoted for house construction because previous studies have tended to consider only primary physical inputs and not the entire system.4 BRE have also carried out studies of the energy content of various house types using both Gross Energy Requirements and Process Energy Requirements.6

This would allow direct comparisons to be made between the two methods on a similar basis to the well established market price elemental capital cost data bank of the Building Cost Information Service of the Royal Institution of Chartered Surveyors.

One of the problems of attempting to apply G.E.R. indicies within the micro-analytical context of a bill of quantities is the mismatch between the degree of exactitude of the bill of quantities measurement techniques and the crudity of G.E.R. indicies. Minor problems also occur in terms of units of measurement (most items in a Bill of Quantities are linear, superficial or volumetric and require conversion as input to G.E.R. calculations with resulting rounding errors). However, the main problem, particularly in terms of the detailed level of information required by the construction industry, is that energy analysis is a new discipline, and as such currently lacks the extensive data base which the industry would require to incorporate the technique of energy analysis into existing energy control methods. Dr Slesser4 states: “Accounting in energy terms does involve a loss of information over that of money accounting with respect to current activities, but may provide more precise statements about future costs”.

Maintenance and running The continuing energy crisis has highlighted the need to conserve and manage the use of energy resources in a responsible manner. However, the conventional market price technique of discounting cyclical maintenance and annual running costs to a single time base has the effect of reducing the impact of future savings achieved by present capital expenditure. The energy analysis approach allows the full impact of future energy savings on expenditure to be felt since energy analysis does not use discounting techniques3, and since it can only be affected by changes in process technology, it is much less susceptible to the short term fluctuations of the market price system.

Demolition Energy analysis can also provide an insight into demolition and architectural salvage practices, whereby the GER of any material or element in construction can be identified with a value that will not appreciably change with time. Hence the worth of a building material to the community at a future date could be assessed in terms of the energy saved in reusing it as opposed to replacing it with new materials. A constructional element could be described in terms of: 1) its GER;

Suggested developments for the use of energy analysis as a method of quantifying the energy flows in a building resource allocation model

Construction Figures 4 and 5 illustrate market price and energy analysis breakdowns of the same house type. Both histograms are informative from their own standpoints; however, the next stage in terms of the extension of the use of energy analysis would be to redistribute the GER breakdown given in Figure 5 so that it conformed to the existing market price conventions.

Figure 4

2) its contribution to reducing the energy required to service the building during its lifetime; and 3) its degree of reusability without further processing.

Market price (£) elemental breakdown of superstructure of 3-bed mid-terraced house (ref. 5) 64

PART III–APPLICATIONS OF ENERGY EVALUATION

measurement systems which have to solve complex multivariate energy resource problems. It is the opinion of the authors that, where appropriate, all three methods of energy evaluation should be applied collectively.

Such an approach could identify in energy terms those elements of construction most likely to be worth reusing and therefore influence future building design. If new buildings were to be designed with ease of demolition, salvage and reuse in mind, a greater use of prefabricated elements and standardisation of design would be needed.7

This paper is concerned with the evaluation of energy concepts and as such is concerned with principles rather than detailed applications. Whilst the authors acknowledge the fact that the energy consumed during the lifetime use of a building is greatly in excess of the energy required to construct the building,9 no particular emphasis has been given to this in the text. The view is repeatedly emphasised that energy expenditure should be assessed as a dynamic component of the building resource allocation model.

There is no comprehensive record of the number of buildings demolished in Britain each year; however, it has been estimated that since 1971 the equivalent of a town the size of Derby has on average been demolished each year in Britain.8 Apart from some metals, the bulk of material from a demolished building is either burnt, buried or crushed to form hardcore. Demolition and salvage prices reflect a complicated interaction of short term market conditions and there is no financial incentive to consider the worth of salvaged materials and elements which may be expected to be in use for several hundred years. The GER approach would allow a quantifiable value to be placed on, for example, the 7 to 11 million tonnes of concrete rubble arising annually from building demolition in Britain, most of which is simply tipped.7

The entire life cycle of a building element or component can be recorded from its fabrication, its integration in the building fabric, its contribution to maintaining the internal environment of a building through to demolition and subsequent re-use or disposal. It is suggested that the most consistent method of recording life cycle resource allocations is to use the energy analysis approach, thus offering the building designer a unique way of assessing the long term total energy implications of constructional and system choices. However, a refinement of GER data is required for the concept of energy analysis to operate successfully at the level of detail required by the construction industry.

Conclusions One of the prerequisites of any control or evaluation system is the ability to measure and monitor the various parts of the system and the interaction of these parts upon each other and upon the system as a whole. The methods of measurement detailed in this paper, viz. market price, prime energy accounting and energy analysis, have been viewed in the context of the system boundaries imposed by a building. These methods of measurement cover the major areas of energy resource measurement currently available to the construction industry. Although it was noted that market prices are poor, and often misleading, indicators of the construction energy content of a building, it was not intended to give the impression that other methods should necessarily be used in preference to the market price system. The construction industry uses very fine grained

References 1. ‘Guidelines for environmental design and fuel conservation in educational buildings’. Design Note 17, DES, 1979 2. ‘Energy conservation: a study of energy consumption in buildings and possible means of saving energy in Housing’. BRE CP56/75 3. ‘Methodology and conventions of energy analysis’.

Figure 5 Construction energy (GER) breakdown of superstructure of 3-bed mid-terraced house (ref. 5) 65

THE WATT COMMITTEE ON ENERGY

same weighting as resistance heating, which ought to be penalised.

Reports, International Federation of Institutes of Advanced Study, Stockholm, December 1974 4. ‘Energy analysis: its utility and limits’. Research Memorandum, International Institute for Applied Systems Analysis, September 1978

Mr. D. McGeorge The presentation was concerned with the evaluation of energy concepts and as such dealt with the principal methods of energy evaluation rather than detailed applications. The view was repeatedly emphasised that energy expenditure should be assessed as a dynamic component of the building resource allocation model, the main components of this model being construction, maintenance, running and demolition expenditure. Construction and demolition energy costs were dealt with at length because building materials and components have widely varying energy contents which are more difficult to assess in terms of energy expenditure than running costs which are concerned almost entirely with the consumption of fuel. Notwithstanding, the significance of the expenditure of fuel to control the internal environment of buildings was not omitted from the presentation.

5. ‘Housing Energy Economics’. Building and Environment, Vol. 13, pp. 11–19, Pergamon Press 1978 6. ‘Energy costs of house construction’. BRE CP47/76 7. ‘The use of materials from demolition in construction’. P.J.Nixon, pp. 276–283, Resources Policy, December 1976 8. ‘Architectural Salvage’. The Architects’ Journal, p. 148, 26th January, 1977 9. BRE News 46, 1978

EXTRACTS FROM DISCUSSION

The ‘weighting factors’ to which Mr. Billington refers are the overheads given in BRE CP56/75 used to obtain conversion efficiencies for electricity, manufactured fuels, oil, natural gas and coal. It should be pointed out firstly that the national or prime energy accounting technique described in the presentation is not a matter of personal opinion on the part of the authors of this paper but is a technique formulated by the Building Research Establishment, and secondly, that the ‘weighting factors’ used in this technique are not meant to reflect demand but to reflect the overheads required to deliver coal, electricity, gas, etc. to individual consumers. There is no suggestion in the prime energy method that arbitrary weightings should be applied to attempt to influence consumer preference, indeed the value of the prime energy approach is its attempt to establish the ‘true cost’ to the nation of the supply of energy without attempting to place value judgments on methods of consumption.

Mr. N.S.Billington Mr. McGeorge’s presentation seems to be concerned mainly with the energy cost of constructing and demolishing buildings. These are one-off operations, whereas the building has to be heated and serviced throughout its life. I wonder what is the relative significance of the ‘capital’ energy and the energy used over the life of the building. A rough calculation using Professor Alexander’s data suggests to me that for houses, the latter is several times the former. Attention could better be concentrated on reducing energy demands for the services. Reference has also been made to weighting factors, to reflect the demand on primary resources. While I agree in principle, there are difficulties which must not be overlooked. Electricity is indispensable for lighting and for small power, and it is unfair, and wrong, to give this use the

66

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Energy balance studies in agriculture and food processing

Dr J.K.Jacques

The Chemical Society

THE WATT COMMITTEE ON ENERGY

Energy balance studies in agriculture and food processing* Pioneering work in the study of agricultural sector energy consumption by Leach,1 Leach and Slesser,2 Steinhart and Steinhart,3 and Gifford and Millington,4 was based largely on whole-sector methods of analysis, and depended on the analyst’s ability to identify and separate direct fuel and material inputs (with their aggregate energy inputs in turn) to specific ‘segments’ of the industry. This was often done by interpreting ‘money values’ back into “energy equivalents”.

far more significant is the way in which these detailed studies have shown to process management inconsistencies within their previous assumptions about plant behaviour.

Identification of major energy inputs to intensive fodder crop production such as ammoniacal fertilisers, pesticides and herbicides, tractor fuel, has been made by Green5 in a review of the subject, and illustrates again the ‘holistic’ nature of the data employed. For a sector with one unique output (e.g. ‘hay’ or ‘oats’) this approach yields fairly convincing evidence about the relatively small absolute quantities of energy deployed in UK agriculture, compared with all other major sectors, and possibly provides a shred of comfort for planners at the National level who should be interested in the balance between, and the absolute totals of, energy usages in the economy as a whole (but see page 69).

1) In integrated slaughter-house and butchering operations, boiler fuels required to supply steam and hot water for ‘hose down’ and hygiene control accounts for more than one third of all direct energy inputs and— 2) A further large energy requirement is associated with effluent disposal techniques—which could well lead (as in case (1)) to early changes in technology and daily practice associated with these operations. 3) A comparison of the detailed study of bread making cited, with earlier ‘aggregate’ estimates by Leach (and by Chapman) clearly highlights the dangers of assuming linear relationships between ‘energy subsidy’ and money ‘value’ of the product. In other words, money accounts and energy accounts while they may be parallel in form are not at ‘equilibrium’ and Management needs to consider carefully the implications of this fact.

Whilst this is not the place for the minutae of the food processing industries, it is necessary to witness to the value of the detailed studies to line management; three ‘simple’ examples will suffice:

The problem becomes more involved when, for example, attempts are made to look at the energy requirements of mixed arable/livestock farms with a range of possible multiproduct outcomes. Thus, the farm manager wishing to achieve some ‘optimum’ balance between the inputs and recycled ‘wastes’ (manures, skimmed milk for pigs, etc.) will certainly be aware of the cost of direct energy (tractor fuels) to his system, but may not have an adequately detailed picture of the multiplicity of energy transactions within the sub-systems of arable, dairy herd, beef cattle, sheep and pigs, which form one important set of components of his operations.

(Questions of price elasticity of supply or demand and consumer ‘subsidy’ will only help to emphasise the distinction between a detailed in-house energy analysis and a ‘holistic’ ‘total production/total cost’ model).

Problems of the detailed analyses The recent work gives us reasonable confidence about the relative magnitudes of the energy transactions occurring within a set of ‘factory operations’.

6

Blaxter (1975) has addressed certain aspects of this problem—emphasising again, however, the ‘aggregated’ nature of the data available to the decision maker, and hinting at the role which a more detailed pre-farm gate analysis could play in relation to local and national efforts to obtain a ‘balanced mix’ of food outputs for minimum energy cost.

It would be entirely misleading to suggest that there are no analytical difficulties or crudities of approximation. However, the main objective has been to provide Management with decision guidelines, rather than to choose numerical accuracy for mere academic satisfaction.

Since 1976, more detailed methods have been used to investigate energy inputs in ex-farm gate operations. Thus, Jacques,7 Jacques and Blaxter8 (1978) have discussed support-energy in meat processing, and Beech9 (1979) has recently completed a detailed study of energy in bread baking. These two studies exemplify attempts to isolate individual inputs to factory food processing, both by allocating fuel energy to clearly defined processing stages and, in an alternative breakdown of the data, to identifiable units of raw material processed or end product produced. In principal, these more detailed approaches are attempting a full input/output matrix approach to plant energy analysis, although it has to be admitted that a number of the required co-efficients are based on broad statistical assessments and not on specific one-plant measurements. It is also interesting that both of these studies have attempted to compare the energetics of large scale (factory) and small scale (butcher’s shop and domestic oven) food preparation and that both report significant (and surprising) variations.

1. Energy overheads and semi-variable energy are notoriously difficult to distribute ‘fairly’ in a multi-product step. Usually, allocation is performed on the basis of weight, volume or ‘number of objects’ being processed; the choice must be realistic in terms of the operations performed. Thus energy used in brine ‘pickling’ baths for meat is readily distributed in terms of weight and processing times; it does not matter whether the ultimate product is a pie or a rasher of bacon; however, the heat sterilisation of bone meal and ‘dried’ blood involves significant differences in the quantities of water being evaporated per unit of product; therefore these factors must be allocated on an entirely separable basis. (A vital part of an energy study thus includes detailed mass/volume flow information as well, often in a more satisfactory form than is required for detailed accounting purposes). *I am indebted to Dr G.A. Beech for information on bread making from a paper in press, and to Professor I.Hawthorne for positive encouragement in the preparation of this paper.

These differences may well interest the planner at large company or National level of decision making, but what is 68

PART III–APPLICATIONS OF ENERGY EVALUATION Table 1 Energy inputs to the bread loaf

2. Allocation methods outlined include heat losses (through bad pipe or building insulation, for example), and thus fall into the same trap as ‘money’ accounts for energy which merely ‘distribute’ the losses without pin-pointing them. Even so, a ‘surprising’ (high) energy allocation may well be the trigger for closer management study and the later identification (by detailed instrumental measurement) of avoidable wastage. 3. No distinction has been made between enthalpy and free energy in any food processing study. Theoretically, this is a source of grave doubts, but in systems where, for example, steam is used at a low ‘intensity’, and where much of the necessary factory heating is supplied ‘indirectly’ through process loss, serious errors in section-by-section allocations are unlikely to occur, by using an ‘enthalpy’ approach. 4. Even where the principal balance of management effort is directed towards costs and to variance analysis, there remains much interest in the capital intensiveness and the labour intensiveness of processes. a) Capital intensiveness: At the moment this problem is intractable, in the absence of any sufficiently detailed (iterative) model for engineering inputs and their true energy costs. Recent authors have therefore resorted to the use of GNP/ Gross National Energy and Sector (£ Turnover)÷Sector (Direct fuel input) ratios, in order to offer some semiquantitative comparison of ‘energy capital’ in a process or machine, which can be contrasted with direct energy consumption. This method of course falls into the very same trap as the early agricultural energy surveys (i.e. the assumptions of energy/price equilibrium) and can lead to contentious debate about the relative ‘energy efficiencies’ of various types of process machinery, based on very insecure numerical estimates. It remains true, however, that the farmer, or food processor will view the £ capital cost of machinery as a vital ‘planning’ element in any energy Saving scheme (where again the money cost rather than the absolute energy usage will be his main concern).

Table 2 Energy inputs from fuel and power use in standard bread production at 3 bakeries

b) Labour intensiveness: Again, the Manager’s concern will be with £ labour cost relative to direct energy cost and to £ capital cost, rather than with the “energy value of a man” (cf. Steinhart3 and a number of American authors). That labour is an energy input to process cannot be denied, and that the substitution of capital machinery and energy intensive agricultural chemicals to western farming has been one of the notable latter-day ‘industrial’ revolutions is obvious, and responsible for the dramatic increase in energy subsidy per unit of food produced. (However, the total supply RATE of food is one of the really critical factors, as Green has pointed out, and thus forces us to employ higher energy intensity). Our belief is that, for the moment, we must record labour use alongside energy uses, but that it would not be profitable in our present state of knowledge to put effort into suballocation of human ‘energy’ into ‘labour’ and ‘non productive’ categories. A 40-hour week man is a man for all that…! What would be valuable would be more studies which highlighted the relationship between man hours energy consumption, capital (as £ or as energy) inputs; but these must also take a view of overall productive RATE. We are aware of some ongoing work at Strathclyde University in this field.

†Ce , Co , Cb etc=conversion factor for particular fuel taking efficiency of use into account

Finally, reference should be made to a number of other 69

THE WATT COMMITTEE ON ENERGY Table 5 Allocation problems (II): Total process

important detailed studies, mainly in the United States, which have recently been published;12,13,14,15,16 these provide more detailed insights into very specific food handling processes with particular reference to packaging and distribution costs. Two other studies—one of livestock production systems10 and one of brewery operations11 have as their principal objective comparative analysis of energy use in alternative or technology-variant systems. This approach provides guidelines for the energy manager contemplating modification to existing plant, or entirely new ‘installation’; the extension of the comparative approach will also benefit the formulation of larger planning models by extending the range of criteria involving energy consumption patterns. Table 3 Primary energy inputs to standard bread production at 3 bakeries

Table 6 The allocation problem (one step process)

Table 4 Allocation problems (I): Cost centre approach  i,  i, ji are not consumptions in each fuel category associated with UNIT OUTPUT Oi

Table 7 Allocation problem (continued)

70

PART III–APPLICATIONS OF ENERGY EVALUATION Table 8 Energy inputs to operations in meat factories processing cattle and pigs

From Jacques & Baxter, 1978

References 1.

2.

3.

Leach, G. Energy and Food Production (London and Washington) International Institute for Environment and Development 1975

Leach, G. and Slesser, M. Energy Equivalents of Network Inputs to Food Producing Systems (Strathclyde University (1973) Steinhart, J.S. and Steinhart, C.E. Science 1974 184, 307

71

4.

Gifford, R.M. and Millington, R.J. Energetics of Agriculture and Food Production with special emphasis on the Australian situation; Adelaide, UNESCO Symposium “Energy and How We Live” 1973

5.

Green, M. in “Chemicals for Crop Protection and Pest Control”, Chapter 3 (Pergamon 1977)

6.

Blaxter, K.L.J. Sci. Fd. Agric. 1975 26 1055

7.

Jacques, J.K. Technological Economics Research Unit Discussion Paper No. 2

THE WATT COMMITTEE ON ENERGY 8. Jacques, J.K. and Blaxter, K.L.J. Sci. Fd. Agri. 1978, 29, 172

“Energy Use in Citrus Packing Plants”. ASAE Winter meeting Dec. 13–16, 1977

9. Beech, G.A.J. Sci. Fd. Agric. 1979 in publication (P. comm.)

13. Int. T N O. “Energy Accounting of Materials, Products, Processes and Services”. Int. T N O Rotterdam, Feb. 26–27, 1976, pg. 171 (food products, transport systems, packaging are included, along with materials of construction)

Recent References—Food and Farming 10. Holtman, J.B. and Connor, L.J. “Analysis of Energy and Material Requirements and Production Costs of Alternative Livestock Production Systems”. (Energy Use Management—Proceedings of the International Conference in Tucson, Arizona Oct. 24–28; Pergamon 1977 Vol. I, pp 789–798)

14. Avlani, P.K. and Chancellor, W.J. “Energy Requirements for Wheat Production and Use”. Annual ASAE, Chicago Dec. 15–18, 1975 (paper 75–1557) 15. Scheller, W.A. and Mohr, B.J. “Nett Energy Analysis of Ethanol Production”. American Chem. Soc. Dir. Fuel Chem. Prepr. Vol. 21 No. 2 1976 pp 29–35 Scheller, W.A. and Mohr, B.J. “Ethanol by Fermentation”. A detailed input analysis is used to show that there is a nett 27405 BTU per gallon of ethanol produced from corn stalk/husk

11. Bierenbaum, H.S., Looney, Q. and Rohrer, W.M. “Comparative Study of Energy Use in Two US Breweries”. (Energy Use Management—Proceedings of the International Conference in Tucson, Arizona, Oct. 24–28 1977; Pergamon 1977, pp 47–56 Vol. I)

16. Casey, M.G. “Energy Requirements of the UK Dairy Industry”. (PhD Thesis submitted, University of Strathclyde 1979—private communication)

12. Naughton, M., Singh, R., Hardt, P. and Runtsey, T.R.

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A study of energy usage in a UK community

Professor N.Borg

Institution of Civil Engineers

THE WATT COMMITTEE ON ENERGY

A study of energy usage in a UK community as applied by different countries, and there is no doubt that there have been some changes since the date that these figures were available in a UN publication. There are certain obvious anomalies; conditions in some of the Middle East oil-producing small countries are recent and do not necessarily reflect overall internal conditions but rather the prime importance in the international market of their indigenous fuel resources. At the present time, Mexico is moving into another category.

Introduction The information summarised in this paper and the estimations and approximations made, arise from a detailed study of energy usage by various consumer groups in the West Midlands Standard Planning Region of the UK. Figure 1 shows that Region (which is identical in area with the Economic Planning Region). It adjoins the North-West Region: both are on the wetter side of England. The West Midlands has only one large Conurbation, whereas the North-West Region has two.

At present, comparisons between Regions within the UK are capable of being made much more easily than internationally. There is a wealth of statistical information at both national and Regional level, although not at present at sub-Regional level—or at least not evidently tabulated as such. Tables 1, 2 and 3 give some statistical comparisons between a small sample of UK Regions. They set out characteristics relating to financial and economic “status” and of energy consumption related to employment and GDP. (All these are collated from Department of Energy publications.) Table 4 is an artificial and rather crude “ranking” order achieved by giving certain of the tabulated characteristics an index value.

The objects of the research project are: (i) to indicate whether there are relationships between urban activities and energy consumption of significant consistency (although probably not unchanging) so as to provide an additional resource-planning tool for use in Regional or sub-Regional planning decisions including energy supply and the establishment of conservation targets and long-term principles. (ii)

to compare conditions not only in the Region itself and the Conurbation but in the two New Towns that were established within the Region: these are Telford and Redditch.

Schedule

Since about 1950, the Conurbation—and particularly Birmingham within it—have been subject to very substantial schemes of slum clearance and redevelopment. The relocation of employment and families arising from this process was one of the elements in the operation of national policy by which “overspill” contributed to the reduction of net population densities in certain parts of the Conurbation and simultaneously to the positively sponsored migration to the New Towns.

A Energy Consumption/ Urban Activity

kg (C.E.) Examples of national situations—1970 Urban % of popn <50 Energy consumption per head <1500 kg Greece Egypt Spain Algeria Iran Dominica Turkey Jamaica Portugal Costa Rica Bolivia Ghana Congo Saudi Arabia Sri Lanka Rhodesia India Zaire Thailand Angola Kenya Pakistan Afghanistan Ethiopia Malawi Mozambique

The years for which statistics have been collected are 1951, 1961, 1966, 1971 and 1974. All of these, except 1974, were years when population and other information was collected by the national census. In March 1974, substantial changes were made in the structure of local government and the former Conurbation (which was an identified unit for statistical purposes) was joined with some other areas to become a formal unit of local government, namely, the West Midlands Metropolitan County. 1974 was also the year when, as it happened, the post-war boom in development and activity (both publicly and privately funded) dipped into a lower level. The degree of urbanization of the population of an industrialized country has some significance as an indicator of energy consumption per head. Clearly, it is by no means the only factor; in some communities populations may have been compressed into the relatively small hospitable areas of a particular terrain, rather than having grown there by migration because of the attractions of a high level of industrial or commercial activity. Nevertheless, the information shown in Schedule A is interesting; in the Schedule different numbers of countries fall into categories defined by percentage of population urbanized and energy consumption per head. Examples are given of national economies which in 1970 were in each of the different categories. This is not an exact picture; the definition of “degree of urbanization” used was certainly not constant nor uniform 74

Urban % of popn >50 Energy consumption per head <1500kg Chile Paraguay Brazil Mexico Cuba Urban % of popn >50 Energy consumption per head 1500 to 6000 kg Argentina Israel Italy Switzerland France Japan Austria West Germany UK Belgium Urban % of popn >50 Energy consumption per head 6000 to 11000 kg Sweden Canada Bahrain Kuwait USA

PART III–APPLICATIONS OF ENERGY EVALUATION

Figure 1 (22.5.79.) households with central heating combined with the factors of personal income might also be a very significant influence, but here again a question arises. Why should Wales, with a lower personal income per head, have a higher proportion than the North-West of households with central heating?

However, it can be seen at once that there are some obvious difficulties in the way of simple comparisons; the South-East, with the highest personal income per head, is only half-way up the Table in terms of domestic energy consumption per head. Evidently, climate has something to do with it, but it is not at all clear why the North-West, which has by no means the most rigorous climate of the UK Regions, should have the highest domestic energy consumption per head, if climate were the dominant factor. Perhaps a consideration of Table 4 and the proportions of

Study of the Tables and allowance for the effects of energy consumption in employment goes some way to producing an understanding of the regional picture within the UK 75

THE WATT COMMITTEE ON ENERGY Table 1 (Possible) functions of energy consumption—UK Standard Regions Income and housing factors by Region—1973/4

Source: Regional Statistics

Table 2 UK Standard Regions G.D.P. and total energy consumption

Table 3 UK Standard Regions Industrial consumers—final energy consumption by Region 1974

Source: Regional Statistics 1975

Table 4 (Possible) functions of energy consumption UK Standard Regions—Ranking order

Note: The Region with the highest value in each of the factors is ranked (1).

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these markets and to tabulate them by groups of Standard Employment Order, defined within the national system of Standard Industrial Classification. Table 7 shows totals of all fuels assembled by certain groupings of Standard Employment Order, plus Domestic consumption.

frame, and it was towards a greater ability to understand this picture and to analyse those parts of it which might be helpful in planning, that the present study began with a single Region. Table 5 gives population totals and percentage changes at intervals between 1951 and 1976 for the Region, the Conurbation, Telford and Redditch. It will be seen that whereas the population of the Region increased by about 16%, the Conurbation increase was about 5%. Figures for employment given in Table 6 show changes in proportions of employment in various occupations in the Conurbation and in the New Towns, relative to those in the Region as a whole. As would be expected, the New Towns had a relatively high rate of increase.

The groupings of S.E.O. were: S.E.O. I

to

Fuels supplied to consumers in the Region are coal (including smokeless fuels), oil, electricity and gas. The respective suppliers are the National Coal Board; a number of commercial oil firms; the West Midlands Electricity Board and East Midlands Electricity Board; and West Midlands Gas. The markets supplied are described fairly uniformly by the different suppliers but not exactly so. The descriptions include: domestic; agriculture; industry; commercial; “mixed”; “quasi-domestic”; electricity generation; gas production; British Railways; “Others”; and “Miscellaneous”. With considerable help of suppliers, it has been possible (but not with absolute accuracy) to analyse the supplies to

POPULATION

— Agriculture; — Manufacturing; Construction; Quarrying; Mining; XXI — Gas, Electricity, Water (production and distribution); XXII and — Transportation and Communication; XXVII Public Administration and Defence; XXIII — Distributive Trades; Banking and XXVI Insurance; Professional and Scientific; Miscellaneous Services; II-XX

The choice of grouping separates domestic usage and service employment from Orders which are “productive” in the physical sense. Gas, Electricity and Water have been separated from the major production group because they include both production in the physical sense and distribution and maintenance which are, in part, service employment and, in part, a charge on the costs of most other employment. Transportation and Communications can be grouped for some purposes of analysis with Public

Table 5 West Midlands Region; W.M.Conurbation; Telford and Redditch New Towns

Estimated figures based on Censuses and planning studies.

Table 6 Employment WEST MIDLANDS Factors for comparison and estimation of consumption by S.E.O.’s in Conurbation Telford New Town, and Redditch New Town

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THE WATT COMMITTEE ON ENERGY

Administration and Defence because of its service nature and because of its requirement for supporting public services. Group XXIII to XXVI comprises parts of what is defined in planning standard nomenclature as “service employment”, i.e. not manufacturing or agriculture or mining, etc. (The term is not to be confused with other everyday expressions such as “public services” or the Armed Forces when referred to as “the Services”).

consumption which (since 1966 at any rate) is largely linear in function in the West Midlands whereas the other phenomena that we are considering are typically spatial, referring as they do to fixed areas, aggregations of population and activity, land-use and so on. Figure 2 shows the Birmingham Division of British Railways’ London and Midland Operating Region, in relation to the boundaries of the Standard Planning Region and of the Conurbation, Because of the position of fuelling points and the considerations mentioned earlier, it has been difficult to extract figures of tractive fuel consumption that could be related, with complete accuracy, to the activities of the West Midlands. Nevertheless, with considerable help from the Divisional Manager’s staff, a reasonable approximation has

There are some difficult and interesting questions in allocating energy usage under the various heads of activity. Some of these relate to difficulties of extraction: for instance, how to allocate British Railways activity and fuel

Figure 2 (22.5.79.) 78

Consumption by grouped Standard Employment Order

West Midlands Standard Planning Region

Table 7 (22.5.79) Energy Consumption/Urban Activity

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79

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be assembled of improved standards in specific quantitative terms but a reference in an article in one of the Sunday illustrated supplements about the decline of misery from chilblains in the young is probably the convincing reference that comes readily to mind. Without being too pessimistic, the combination of statistics and present conditions seems to confirm that conservation of energy consumption, domestically, must rely on standards of insulation and construction in house building and that sharply reduced consumption would evidently restore widely some of the acute discomforts typical of earlier years, that are now felt by only some people.

been achieved. (From this, incidentally, it is clear how the operating performance of British Railways has improved in terms of fuel consumption over the quarter-century considered). Another kind of difficulty was encountered in dealing with the Group XXI—Gas, Electricity and Water. This group of employment has been defined as partly physically productive and partly service: moreover, it consumes some primary fuel in order to produce secondary fuel. This is the kind of situation offering some risks of double-counting (which the Department of Energy has eliminated by its methods of tabulation over the years). However, by adopting any other form of handling, the risks arise and, for the purposes of attribution of energy-usage to various activities in dealing with coal, for instance, this has been regarded as a raw material in the productive component of Group XXI. In the detailed analysis, the so-called “conversion losses” have been regarded as a consumption of part of the raw material supplied: the fuel produced and passed on for use in other Employment Orders has been identified.

The relatively small increase in domestic consumption is all the more remarkable, when considered against the total increase of population and the increase in the number of occupied dwellings of various kinds reflecting the smaller average size of households. Gross Domestic Product per head is commonly used as an indicator of economic condition. One of three bases may be used; either gross national expenditure, or national income, or output by industry. The total values of these for any year often fall within a narrow bracket but may sometimes be significantly different. Output referred to a standard base value is obviously attractive for comparative assessments, and the fact that the components of G.D.P. by the output (or activity) basis are normally analysed by relation to the same categories as are used for the Standard Employment Orders (but with some added sections—Health, Education, etc.—(Table 9), seems to point to the possibility of a helpful function between energy consumption and components of G.D.P.

The question arises, in relation to Transportation, whether it would be helpful to have more information about usage of traction fuels, in support of or as essential to some Employment Orders and this can be done, to some extent, by identifying proportions of journey by specific purpose and type of vehicle. In turn, this raises a question about “private transport”: would it be accurate and helpful to separate some fuel consumption in this group as being “domestic” in purpose? It seems to this writer that in an analysis of the kind that is being attempted, it would be very reasonable and enlightening to do this by defining domestic consumption as conducing to, or supporting comfort and amenity in, social and family life. Certain types of journey by car or rail would clearly fall under this head but would exclude journeys to or at work or connected with formal education. It is possible to argue reasonably that a trip by car for shopping or for various forms of recreation is a contribution to “domestic” life.

Indeed, the Department of Energy has produced and published important analyses of relationships between total values (but with considerable reserve about predictive reliability). The Energy Coefficient is defined as: Average rate of increase in primary energy consumption

With regard to air travel, a somewhat similar approach to the study of usage of aircraft fuels from the main airport in the West Midlands shows a great change in the relative proportions of fuel consumed in journeys for business and for holidays. The respective proportions in 1951 were approximately 1 to 0.7 and, in 1974, 1 to 2.3.

Average rate of increase in G.D.P. at factor cost and constant (it is a “unit cost”, million therms/£ of G.D.P. in the same form as e.g. £/ton of steel). The Energy Ratio is the average ratio of energy consumption to G.D.P.

At the moment, these comments are only a postulation of a possibly helpful development in energy-budgetting; extracts from a preliminary analysis, given by the author in a paper to the P.R.T.C. Conference in 1978, are attached to this paper as an Appendix.

Perhaps there can be no simple statement of “fuel policy” nor (except as a short term emergency measure) a mandatory requirement for a flat rate of reduction in fuel consumption over all fields of activity: when one considers the Regional characteristics already set out, it is clear that there can be no broad operational policy that is both simple and practicable. It seems highly probable, however, that close attention to the possibilities of increased efficiency within different groups of users could produce a set of working principles; these would be based on the “best” performances in different Regions and their extension to other similar groups elsewhere, after analysis of the reasons for the differences.

Table 7 gives summarised totals of usage of All Fuels (not separated by type) by therms (heat supplied) under the heads Domestic and grouped S.E.O. Table 8 gives similar information for the West Midlands Conurbation. The differing increases of energy usage by main consumer groups is interesting: Groups S.E.O. XXII and XXVII (Transportation and Communications, Public Administration and Defence) has increased by 75%. Groups XXIII to XXVI (i.e. a large part of service employment, as already defined) has increased by nearly 136%. Increase in Groups I to XX (i.e. most physical production) has been 12.3% in the period of 23 years.

Further work on the allocation of Transportation energy usage, by mode and by certain purposes of journey, will enable us to present a picture of the related energy-costs reallocated from that Consumer group to the primary activities that it supports. (Pending completion of further analysis, all consumption of motor spirit and derv is included in the totals for transport and communication [Group XXII]).

On the face of it, the increase in domestic consumption (6%) appears low when considered against one’s impression of the increase in standards of heating comfort in the home through the last quarter-century. Statistics can 80

Consumption by grouped Standard Employment Order

West Midlands Conurbation

Table 8 (22.5.79)

Energy Consumption/Urban Activity

PART III–APPLICATIONS OF ENERGY EVALUATION

81

THE WATT COMMITTEE ON ENERGY Table 9 Components of gross domestic product 1976 (Output or Activity based)

APPENDIX I TRANSPORT Some information and estimates of energy usage in trips by journey-purpose West Midlands Standard Region Main Consumer Groups and Types of Oil Used

*Transportation usage 82

PART III–APPLICATIONS OF ENERGY EVALUATION

APPENDIX II CONSUMPTION OF MOTOR SPIRIT West Midlands Region

Consumer Groups

CONSUMPTION OF DERV IN ROAD JOURNEYS West Midlands Region

APPENDIX III AIR TRAVEL TO AND FROM BIRMINGHAM AIRPORT (situated just outside the Conurbation boundary) It is estimated that an additional 5% in the quantities would cover transit passengers and flights from elsewhere in the Region. (Fuels for ground purposes are not included in this Table).

83

THE WATT COMMITTEE ON ENERGY APPENDIX IV BRITISH RAILWAYS IN THE WEST MIDLANDS ECONOMIC REGION

BRITISH RAILWAYS IN THE WEST MIDLANDS ECONOMIC REGION (PERFORMANCE)

*This figure is a “mule” but is a useful preliminary indicator: Pending the collation of more data , it can be justified by the approximate equality of the quantities involved and the somewhat similar rate of change since 1961

EXTRACTS FROM DISCUSSION Professor I.Smith

consumption without inflicting on those occupants of old and inefficiently-heated housing a return to discomforts which were almost universal thirty years ago. This was part of the reasoning that produced the conclusion, stated at the end of my paper, about the need for differential standards of conservation between different consumer groups in different regions. The absolute importance of domestic consumption is great, as Professor Smith says. Between 1951 and 1974, in the West Midlands Region it has varied between 25.7% and 19.0% of total consumption of all fuels for all purposes. In the Conurbation, it has varied between 26.3% and 20.5% over the same period.

Professor Borg stated that because the consumption of energy in the domestic environment has only increased by 6% in the past 25 years (cf. far larger increases in other fields) this was not an area that merited conservation measures. That the consumption had hardly increased (in spite of a vast improvement in comfort standards) was due to the demise of the inefficient open coal fire (brought about largely by legislation) and its replacement by far more efficient boilers. However, in absolute terms, domestically consumed energy is 30% of our Gross National Consumption (cf. 1% for agriculture) and as such merits strong attention.

I agree with the comment on the need to watch over the rate of increase in agricultural usage, and as a personal comment, would like to see priority given to an assured source of oil fuel for agricultural tractors, which have done so much for production in the marginal agricultural and forestry areas in the UK.

Energy consumed in agriculture is increasing, and must therefore be carefully watched so that action can be taken when it reaches a significant proportion of the whole.

Professor N.Borg I did not mean to say that conservation in the usage of domestic energy was not worthwhile; what I meant was that, taking into account the population growth and the large size of the post-war programmes of the new housing and of housing “improvement”, it did not seem possible to think of imposing a general reduction in domestic

Mr. T.A.Boley Could Professor Borg remind us of the units of measurement for fuel consumption his study has used? If they relate to delivered energy his comments about the low increase in domestic use despite noticeable changes in 84

PART III–APPLICATIONS OF ENERGY EVALUATION

housing conditions are, of course, explained by the changing fuel mix with differing efficiencies in use.

the same. However, going a little further into discussion on the points implied by Mr. Boley, it is fair to say that the pace at which efficient house-heating is achievable overall is governed by the speed at which big programmes of new housing construction and “improvement” can be carried out. In the big transportation studies of the 1960s, we came to the conclusion that 15 years work on redevelopment or improvement would be necessary before highway capacity demand would be so significantly affected as to justify significant design differences in networks serving large aggregations of zones. Whether the same sort of degree of restraint applies in relation to energy demands and its distribution systems, I do not yet know; I guess that a shorter period would be significant; perhaps someone else knows the answer. Of course, we know the general reasons for the improved domestic conditions, but whether we are talking about new, improved, or old housing, I am saying that a simple flat rate cut in consumption over the whole domestic field could well produce reductions in domestic standards of comfort that would be quite significant over quite a large part of existing housing.

Professor N.Borg The units of measurement in which the results of my study are expressed are tons of coal equivalent; tonnes of oil equivalent; and therms. These are used to express “input” and are converted, in some cases, from units given by the various suppliers. The conversion factors that have been used are those published by the Department of Energy from time to time in the Statistical Bulletin, with the exception that certain small changes in equivalent values that have been published fairly recently have not been applied to the mass of old statistics on which a fair amount of work had already been done. At some stage of the work, a simple arithmetical change will be applied to summarised totals so as to use the most recent base. Mr. Boley’s comment about changes in housing standards and the differing fuel mixes goes to the same question as was put by Professor Smith and my answer is, in general,

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Part IV The past, present and future of energy evaluation

ECONOMIC MEASURES AND THE USE OF ENERGY J.C.R.Hewgill, MBE, Institute of Cost and Management Accountants ENERGY EVALUATION IN PROJECT APPRAISAL M.H.Cadman, Society of Business Economists EVALUATION OF FUTURE ENERGY USE Professor J.E.Allen, Royal Aeronautical Society

THE WATT COMMITTEE ON ENERGY

Economic measures and the use of energy

J.C.R.Hewgill, MBE

Institute of Cost and Management Accountants

THE WATT COMMITTEE ON ENERGY

Economic measures and the use of energy studied so extensively that there is little point in trying to establish any relationship which is limited solely to the definition of money values. The question arising is whether there could be some more directly physical way of expressing the worth of micro-economic processes and resources.

Introduction This paper originated with the coming together of a series of studies and activities carried out by me in the Institute of Cost and Management Accountants over the last seven years, and from experience of practical economic analysis over some seven years before that.

During the debate on these subjects, a project was carried out to study energy management within the firm, tying together the inputs and outputs of a production process in both energy and money.1 It proved a hypothesis that, when looking at the pure operating processes, it was possible to manipulate energy measures with all the same conventions as money—energy accounting in energy units could be used to measure the inputs and outputs of a process. However, at the same time something can be achieved which is not possible with money—the physical efficiency of the process could be measured and assessed.

I am indebted to a number of people for stimulating ideas, correcting misapprehensions, criticising technical matter, and general encouragement. Notable amongst these are Dr F.R. Swenson of Worcester Polytechnic Institute and Dr K.Jacques of Stirling University, together with Professor F.A.Holland of Salford University and Professor J.Swithenbank of Sheffield University who have been especially helpful with this paper.

Background

When the money measure was placed alongside the energy values, considerably different patterns appeared—the price per energy unit used varied materially. These results led to a more critical evaluation of economic activities to see whether energy could be used as an economic measure.

The accountant is concerned with micro-economic activities, usually of individual enterprises or organisations. Whatever the productive output, the accounting records are kept primarily in terms of money—input and output—past, present and future. The unit of measure is therefore currency, which is supposed to reflect the cost, value, or price of the underlying resources being bought, sold or managed.

In order to keep this study reasonably simple, it therefore seemed appropriate to look back at economic history at a time when the systems were less complex and which have been sufficiently studied to be able to draw conclusions from the observations and studies of past economists. Re-reading Adam Smith’s The Wealth of Nations2 after many years and from a new viewpoint leads to some interesting and somewhat different conclusions. His description of the development of labour productivity and the eventual arrival at the theory of the division of labour is quite clear. His logic shows that in his society and from time immemorial it is the physical labour of the individual which provides the main motive power for the production which takes place. His ‘improved productivity’ arises from a combination of the continuous application of effort by the individual, combined with the development of particular expertise in limited areas. It is particularly so in his description of the manufacture of pins.3

At the macro-economic level the economic analyst is faced with an identical series of processes measuring economic activities. The economist operates on total economic performance, measured as Gross National Product (GNP), Gross Domestic Product or other criteria over relatively long time periods. These are all expressed in terms of the national currency, and to understand whether performance has improved or activity decreased, it is necessary to try to arrive at a standard statement, usually achieved by adjusting prices or figures by indices or other averaging methods. For example, to obtain a measure of comparability of national government expenditure and income, one process advocated is to use a standard performance based on full employment. (T.S.Ward and R.R.Nield 1978). With the substantial rates of inflation since 1975, the accounting profession has been faced with the need to adjust money figures for the difference in purchasing power over the relatively short accounting periods used for business planning and reporting. Various methods have been propounded—Current Purchasing Power (CPP)— Current Cost Accounting (CCA) and other processes for particular purposes, such as LIFO for stocks and replacement cost for assets. Mostly these rely on the application of macro-economic measures—price indices— which are satisfactory at that level, but are relatively crude when used at the level of the individual firm.

The original theories propounded by Adam Smith make it quite clear that the development of more efficient production arising from the division of labour is only possible when the substantial amount of product made which exceeds the needs of the local populace can be distributed. Another dimension is added, transport, which enables the product to get to market, and he explains the advantages which can be gained by the use of seaborne goods as opposed to horse-drawn waggons.4 The effect of this logic is to add together a number of different forms of work which enable a greater production to be achieved and distributed by the use of the resource available, and to make more effective use of the work at each stage.

One of the basic faults lies in the fact that the money measure is itself defective. A part-used asset may be the same whether at 1st January or 27th September but the ‘price’ will be difference depending on the way in which it is viewed—at historic cost when purchased, at what it would cost to buy at that date, at what it would itself bring if sold, or even the currency in which expressed. Since the development of money and the accompanying effect of inflation seem to have gone together since the very earliest days, this subject has been

He is, within his reasonably simple model of the economy, bounded by the effects of the natural energy sources generally available at the time, i.e. manpower, horses, sailing ships, and within the manufacturing economy, windmills and watermills. He is aware of the development of the fire-engine (steam engine), since he gives an example of the small boy improving the performance of the engine by connecting the damper flap to the machine so that it operates automatically and thereby gives himself time to go 90

PART IV–THE PAST, PRESENT AND FUTURE OF ENERGY EVALUATION

away and play,5 and of machinery.6 The cycle of work needed for the full cycle of production is graphically described.7

recognised that the application of coal in their steam engines was effecting a direct replacement in physical terms for the work done by the human or the horse.

Taking his ‘Progress of improvement upon three different sorts of rude produce’ where he is analysing the effect of agricultural and other production on the rent of land, he refers in effect to the limited amount of that land available and the agricultural process which has to be gone through in order to enable food to be produced, that is, tillage, manuring, sowing and harvesting. All of these are implicitly using the same natural sources of energy to do the work, i.e. men and animals, together with the added advantage taken from the efficient use of solar power, rain, etc., which enables the plants to grow.

Young went further to lay out a table of equivalent work measured by various processes, including gunpowder. His lecture on hydraulic forces includes broad calculations of the relative efficiency of watermills and windmills, in the latter case reckoning that 25 sq ft of sail was equivalent to one man/day of work. For the whole of the 18th and 19th century, there was a continual increase in the effectiveness of the steam engine. Table 2 shows the increase in millions of ft lbs of power delivered per bushel of coal consumed, between 1718 and 1900, together with an assessment of the thermal efficiency. Despite the profligate way in which fossil fuel energy was being used, there was continuous pressure to increase the level of performance so that the quantity of energy used to achieve a particular quantity of output was reduced.

It is interesting if we compare the operations he describes with the operation of a modern dairy farm. In an area of 180 acres, 160 milch cows together with all the barley feed, hay, silage and the milking are all carried out using the labour of only two men for something approximating 48 hours a week, plus some limited contract labour and machinery in the shape of a combine harvester at the right season. The productivity of the land is enormously increased by the application of modern fertilizers and by modern motorised cultivation, with the result that the utilisation of solar power, rain, etc., is very much enhanced and larger crops of barley and grass are leading to better herd productivity. The feeding of silage, the movement and control of the cows, and the milking is all done in an automated milking plant where the only action required from the man is to attach the milking machine to the udders, check the condition of the cows and make sure that the correct amount of feed supplement is delivered, and maintain the equipment.

Probably one of the ultimate achievements in efficiency of the steam engine was the Cornish Beam Engine installed at East Poole in Cornwall in 1924, which commenced to pump in 1925 and continued for 24 hours a day for nearly thirty years. It would raise water from a depth of 1,700 ft at the rate of 27 thousand gallons per hour (lifting 85 tons of water at a time) for the daily expenditure of around 9 cwt of coal.9 It would be interesting to speculate upon the overall energy efficiency of the very early steam engines, where the coal itself

Table 1 Horse-power according to various authorities

All this is achieved by the application of continuous increments of energy products—from the tractors, the combine harvesters, the fertilizer, the electricity and the machinery and processes of the milking parlour. Where the only power to be applied in the old days was the raw muscle of the man and the horse, this has all been replaced by application of fossil fuel driven machinery and energy investment in the machinery itself. The scientists and engineers of the early 19th century recognised this amplification and replacement of human and horse muscle only too well. Thomas Young8 in his vast series of lectures on scientific development covered the controversy on what is a ‘horse-power’ by quoting from correspondence with Bolton:

Source: Power in the Industrial Revolution. R.L. Hills, Manchester University Press.

“The daily work of a horse=5/6 men, and of a mule=3/4 men…”

Table 2 Efficiency of reciprocating steam engines

On the authority of Mr Bolton a bushel (84 lbs) of coal is equal to the daily labour of 8½ men or perhaps more. The value of this quantity of coal is seldom more than the work of a single labourer for a day, but the expensive machinery generally renders a steam engine somewhat more than half as expensive as the number of horses for which it is substituted, (Young). After much controversy at the time, the work value of a horse power was eventually settled at 33,000 ft lbs (Table 1). On Thomas Young’s calculation, if this equals the physical work of 5 or 6 men, therefore one man’s work in terms of ft lbs delivered is assumed to be somewhere in the region of 5 to 6,000 ft lbs. Young’s calculations go into much more detail in terms of the length of time per day worked and so on, but effectively he is saying that this is the anticipated output of one man whose basic energy consumption in kilocalories is of the order of 1,700 per day (increasing for the work of a heavy labourer to perhaps 4 or 4,500 per day). These people

Source: History of Technology, Vol. IV—The Industrial Revolution, Clarendon Press, 1958

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were primarily due to the shortage of wood and the need, particularly in London and the cities, for some form of space heating. This led to demand for the production and movement of sea-coal, which was the prime fuel of the poor. With the shortage of wood, industries requiring process heat progressively moved over to the use of coal, starting with those where there was no technological problem in making the switch. For example, salt production in the 1600s was using 2 to 6 tons of coal per ton of salt produced, whereas approximately double that amount of wood was required for the same output. The coal used had a higher thermal output by weight and this was progressively recognised as other industries, such as starch, candles, sugar, soap, switched to coal some time before 1700, with bread, pottery, tiles and bricks, and beer switching over progressively between 1700 and 1800 as technology permitted.12 For example, in 1695 it is quoted that 30% of British shipping was engaged in the coal trade. Yet at the end of the 17th Century there was no town in Europe using coal as a prime fuel except one or two of the Belgian provinces. This means that coal was generally accepted throughout Great Britain as being a prime fuel, with a high free energy value and the use of it for both space heating and the smaller process industries stimulated the mining process and also the exploration to produce mines in new areas.

was recovered by human labour and was lifted out of the shaft from a depth of 300 ft by women carrying baskets on their backs; the coal then being tipped into horse waggons for delivery to the port for shipping out; the ship taking it to the port of destination; horse waggon to the point where the coal was required for industrial purposes and its use at a very low efficiency in the steam engines of the day. It would seem that the actual thermal efficiency of the system including the work put in by all the men and horses (and excluding the capital equipment involved) could actually be negative. The History of Technology quotes the development of application of power in the mines10 17th Century

Human porters

Wheelbarrows Horses and trams on tracks

18th Century Steam power, ‘man engines’ (steam-operated lifts) Hoists 19th Century Conveyors Steam turbines As supplementary support to the manpower by machinery extended, it enabled mining to be carried out at depths which would otherwise have been impossible and therefore enabled the deployment of the human ‘work-engine’ in a more effective role where the machine was not yet able to operate. In other terms, the net revenue or direct energy cost of producing energy sources from underground to the furnace door reduced.

The climate was therefore right by the middle of the 17th Century. With coal output increasing, the business magnates of the day made use of its energy to fuel their production shops, to produce the goods which were being demanded both at home and overseas. The incipient industrial revolution was being built on a foundation of a readily available fuel source.

The ultimate example today is probably the modern thermal power station where 1,000 megawatts of electrical output are produced, fuelled by North Sea gas, which is untouched by any form of human from the time it leaves the hole in the North Sea until it arrives at the furnace in the power station. Steam is delivered to the turbines and electricity generated automatically. All direct human activities have effectively become control, indirect or overhead functions. All the other human input is what has been called ‘crystallised labour’ in the capital equipment consuming the energy and transforming it into electricity, which itself calls for a long chain of energy inputs.11

Comparing general price levels with the cost of the wood it is possible to derive from the records at King’s College, Cambridge (quoted in Nef) the average price movements of coal over the same period. It can be seen from Table 4 that the relative price of coal stayed well below the cost of firewood over the period to 1700 and only achieved a relatively modest increase in price over the general cost of living. Bearing in mind that coal was a much more effective fuel—the amount of energy available for the price was very much higher than would have been available in the rest of Europe, which was still largely relying on wood from the forests.

Throughout the industrial revolution the main energy source in Great Britain was coal. The effect of this can be seen by analysing the development in the use of coal for all purposes from the 17th Century, when the excessive rate of use of firewood was recognised and there came about a dire shortage to the extent that Government controls were put on its use.

Hartwell makes some very interesting comments in his essay “Lessons From History”13 about growth models: “History can show us only that although economic growth has always been accompanied by population growth, population growth has not always been accompanied by economic growth. Indeed the relation of population growth to economic growth remains elusive.”

In 1700 the quantity of coal mined in the United Kingdom was approximately 3 million tons. By about 1790 this had risen to 9,900,000 tons and then by 1901 to 219 million tons per annum (Table 3). The developments in the 17th Century

If population pressure was the power source, then China, India and Russia would have been the first industrialised countries, instead of England, Europe and the United States.

Table 3 Coal production in the United Kingdom

Table 4 Price levels of coal and firewood 1500–16931

1

The indices tend to fluctuate in intermediate years but show a steady upward trend over each 20 year period. 2 Based on records of King’s College. Cambridge, quoted in Nef.

Source: Abstract of British Historical Statistics, Mitchell and Deane.

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Figure 1 Comparison of rates of increase in coal production and steam engine efficiency 1775 to 1911 manufactories of all kinds, as well as providing feedstock for town gas and chemical industries. The increase in steam engine performance resulting from technological development moved at a rate similar to the rate of coal production, illustrated in Figure 1.

Hartwell considers that the economists are now certain that the population growth arises and follows on the availability of foodstuffs and goods and a better environment. S.Fabricant14 has estimated that well over 80% of the increase in capital output in the United States over the first half of the 20th Century can be attributed to technical progress. Taking this example back to the Industrial Revolution, Table 2 shows the steady increase in output of steam engines. By 1790, there were approximately 1,000 steam engines in use in the United Kingdom, mostly pumping engines. They consumed a relatively small amount of the coal produced, most going for process heating. By 1900, the coal-fired steam engine was providing motive power in steamships, railways, road transport, farm engines, and

The application of greater quantities of energy together with steady improvements in thermal efficiency of machines, powered the manufacturing sector by multiplying the output of the human worker by very large factors. If the power available from a unit of coal is taken to indicate the potential energy output from the quantities of coal it produces a rough index of the input to the economic system. The increase over the period 1790 to 1911 is colossal, rising from 400 (index 100) to 48,700 (index 12175) per year, illustrated in Figure 2. 93

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Figure 2 Index of energy output into the UK economy 1792 to 1906 of capital goods (crystallised energy) plus the energy used to drive them. The net energy cost of individual products may have decreased or increased, the physical data is still elusive, but the general well-being of society gradually improved in direct proportion to the total consumption of energy.

This leads to short consideration of the extent to which labour was a major factor of production. As long as machines are limited in their automatic behaviour the human is essential as a manipulator of complex operations, as a machine operator, as a controller and governor. This is not physical work in the sense that it applied before the Industrial Revolution; the daily consumption of ‘energy products’ (food) of the human remained the same. The numbers employed fluctuated, but increased with the general increase in population. The total input energy cost of a population at (say) 2,000 kilocalories per worker is negligible compared with the thermal value of the coal consumed. A million people generate 2,000 million kilocalories of heat energy per day (79,365 Therms), which equal 320 tons of coal.

Looking at Hartwell’s essay on what he calls the “Heavy Variables of Economics”15—capital, population and technology, it would seem possible to make a case that capital was not the driving force pushing the Industrial Revolution. It seems just as probable the result of the engineers and entrepreneurs who wished to use capital equipment to apply the energy—intensive technologies which were becoming available. This is something which could well be the subject of a lot more research.

The output of goods increased based on the accumulation 94

PART IV–THE PAST, PRESENT AND FUTURE OF ENERGY EVALUATION Table 6 Comparison of GDP and energy consumption—1976 (based on Table 5)

If we bring our examination up to date and look at Table 5, which lays out the energy consumption in 10 countries compared with total gross domestic product, it can be seen that they tend to move in step. The point which needs to be established is how the relationships fit together. Undoubtedly, the fact that large quantities of fuel are used in Western civilisation for space heating and comfort of the population must mean that there is a relationship between demand on energy from that source and the actual energy consumption. UK Statistics16 show domestic direct consumption of energy from 1968–76 at between 25.4 and 26.4% of the total, the balance going to industry, transport and others. However, looking at the ratio of GDP to energy consumption there must be a direct relationship here in terms of the quantity of output (the added value), the efficiency with which it is produced and the prosperity of the country concerned. It has always been a tenet that productivity is related to having an output of goods with the minimum quantity of input. The measure of input and output has always been carried out in money terms even though capital has been accumulated in capital assets to replace human beings regardless of whether the human beings were gainfully employed after being replaced. The overall state of the country is therefore a balance between the extent to which the capital is effectively used, whether the energy (human or fossil fuel) is effectively deployed.

was recognised very early on during the 19th Century. In 1824 Sadi Carnot said that “to rob Britain of her steam engines would rob her of coal and iron, deprive her of sources of wealth and ruin her prosperity”. This was undoubtedly true. It is obvious that if a country wished to save energy in overall terms, it would be far more appropriate to import ready-made steel rather than the iron ore and the fuel to process it. Professor Alexander in his paper makes the point quite clearly that it is a completely uneconomic use of energy to export metal scrap where the majority part of the conversion energy required to turn it into usable material has already been expended and only another 20% or so would be required to reprocess it back into usable form. In the one case it would be possible for a country to reduce its overall energy consumption by effectively exporting the energy consumption to another country by buying in, and at the same time reprocessing scrap with a minimal use of energy so that highly expensive energy resources do not have to be bought in in order to carry out the processing. Professor Alexander’s point that energy prices do not reflect their total energy content, either potential or realisable, is important.17

Going back to the beginning of the 19th Century, the replacement of men by horses, and horses by horse-power is indicative of the fact that the relationship is one which should be capable of being measured in energy terms in parallel with money terms. The country which produces the greatest amount of economic goods with the minimum quantity of labour or other energy input must surely be the most prosperous, always providing that the goods produced are saleable. An interesting fact which came out of my investigations is that Switzerland has the highest added-value per unit of energy in any country in the world (Table 6). Professor Holland has done some underlying analyses which indicate that this is because Switzerland imports most of its high energy consuming materials, such as steel and plastic, and processes them to produce high added-value goods on a low energy value input.

In energy terms (and almost certainly in terms of addedvalue) some of today’s economic decisions seem dubious. Importing coal to the UK from Australia, or finished steel from Japan, when both iron ore and coal had to be imported to Japan, all in oil-fired ships with their own high level of crystallised energy, would not appear to show a high degree of economic sense if the cost in total resource terms were truly reflected in the price, unless some special factors applied, e.g. chemical content.

It is surely a strong indication that three of the strongest currencies in 1976 appear in the first four in ratio of addedvalue per tonne of oil equivalent consumed. Again this situation of high energy use being equivalent to productivity Table 5 Comparison of GDP and energy consumption—1976

When one considers that the engineers of today are talking about the automated factory, where materials will arrive at the gate and will be processed right the way through the system to the point of packaging at the far end of the factory for delivery as finished goods, completely untouched by human hand and completely under the control of micro-computers, then there is no doubt that we are talking about an energy-driven situation which has developed steadily since the 18th Century to the point where ‘man-energy’ is purely concerned with the control and machine servicing functions. The power station instanced earlier is probably controlled by two men in a control room and a dozen or so engineers available for inspecting and maintenance in the turbine generator room. The electricity generated arrives at the consumer’s power point through the grid system and is used to do ‘work’ without any direct intervention by man, horse or other natural energy source.

Sources: Energy—million tonnes oil equivalent (mte)—BP Statistical Review 1976 GDP—million US 8—Business International

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However, the crystallised energy of capital equipment is again a vital element. The economic activity is built on a pyramid of successive levels of energy application.

1. Dam built by local labour (coolies)—no unemployment.

2. Dam built by machinery— energy and capital equipment produced and driven by local labour—some unemployment.

Professor F.A.Holland and Mr F.A.Watson at Salford University are developing a pedal-powered heat pump to turn low level heat into higher level heat. With four people pedalling, it is possible to raise one gallon of water from ambient temperature to boiling point in a few minutes. My electric kettle takes approximately the same length of time for one quarter the quantity. Here is a case where four human beings with an energy consumption in the region of 8,000 kilocalories per day apply their efforts over a relatively short period of time and produce an identical result to a highly sophisticated electrical power and transmission system. Human heat energy is being translated into another form. However, the use of electricity for this purpose has a very low end-to-end efficiency when comparing the quantity of prime energy employed to produce the electricity (with itself a high energy potential) in the first place.

3. Dam built by machinery— imported contractors—local labour (unemployed) sits and watches. Leaving aside questions of speed, if the good, produced— the dam—is identical, which is economically the most effective use of the total energy of the system, human plus machinery? Which will produce the greatest net addedvalue for the economy? Yet direct comparison in wages versus mechanical costs could well indicate that the more energy-intensive result is cheaper. The Stirling University study18 produced a simple table of cost and energy balances in the classic double-entry accounting form (Table 7). The straight comparison of different types of energy input and cost of each was most informative. It also produced an absorption cost for the product—being the net energy input after deducting the useful steam output, with cost of product calculated pro rata.

This interchangeability of labour and other energy needs more study also. It is possible to postulate an earth dam built in China using coolies with shovels and baskets over a period of time and comparing it with the identical dam produced by modern machinery—diggers, bulldozers, etc. There are several possible scenarios:

The extended account (Table 8), showing where the

Table 7 Energy Input Account for an industrial process—Energy Absorption Output

Note: 1. Production for the month is 1 ,440 t, which is the output for a throughput of 20 days at high feed-rate yielding 60 t per day, 8 days at low feed-rate yielding 30 t per day, with one start-up period of 6 hours duration. 2. Capital costs, overhead, etc. are not included in this energy account.

Table 8 Energy Input and Output for an industrial process—Total Energy Balance

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absorbed energy was finally dispersed, was even more informative, since it indicated not only where effort had to be expended to get rid of it, e.g. cooling towers, but also the total energy balance in and out of the process. Because of the nature of the process, there is some minimum below which it is not possible to produce the chemical, dictated by a variety of factors. The energy account can be used to show both how near the actual cost was to this minimum, and how much any inefficiency cost. It provided the base data to establish the energy cost and cash cost efficiency of the activity. There seems no insuperable difficulty in producing similar tables for factories, industries or total economies enabling models to be built for use in economic management.

References 1. Hewgill, Jacques, Lam and Swenson. Stirling University 1977 (pending publication) 2. The Wealth of Nations. Adam Smith, Pelican, 1978. (Ed.) Andrew Skinner 3. Ibid, page 113 4. Ibid, page 122 5. Ibid, page 115 6. Ibid, page 354 7. Ibid, page 115

There still remains the problem of capital assets and the crystallised energy tied up in them. However, this is itself the subject of study by other people and should also be resolved in due time.

8. Lectures on Natural Philosophy, Vol. 1. Thomas Young, London, 1807, page 164 9. Cornish Engines and Engine Houses. Peter Laws, The National Trust, 1974

The conclusions are inescapable: the Industrial Revolution was really an Energy Revolution. The application of raw energy sources amplified or replaced the natural energy sources, man, animal or wind. Agricultural output increased because this enabled more effective use of climatic energy with an additional unit energy cost of input leading to greater output.

10. History of Technology, Vol. IV—The Industrial Revolution. Clarendon Press, 1958

This was made possible by technological advances leading to more efficient use of energy. The capital employed is itself the product of manufacture, using energy plus human effort to product ‘crystallised energy’.

11. Economic History of England in the 18th Century. T.S.Ashton, London, 1955. “After 1782 almost every statistical series of production shows a sharp upward trend. More than half the growth in shipments in coal and the mining of copper…were concentrated in the last 18 years of the century”

Conclusions

12. Rise of the British Coal Industry. J.W.Nef (George Routledge), 1932

From this brief study, it is apparent that energy is the thread holding together the technological economic processes of the industrial world. The effective and efficient use of energy is a prime indicator of economic performance. This is clear from an analysis of many economic historians’ writings and the statistics available from the Industrial Revolution.

13. The Industrial Revolution and Economic Growth. R.M.Hartwell, Methuen & Co., 1971 14. Quoted in Ibid, page 46 15. Ibid, pp 262–310 16. Digest of UK Energy Statistics, 1977. HMSO, 1977, Table 14, pp 26–27

Similarly, the oil crisis has brought home to every government the brutal fact that the limiting factor for all economic activity is energy. If energy sources are removed, the world goes back to near subsistence economies as they existed before the Industrial Revolution, regardless of population size.

17. “Total Energy Contents of Some Significant Materials in Relation to their Properties and Availability”. Professor W.O.Alexander in Watt Committee Papers (pending publication)

This process can only be developed if there is a means of establishing an energy balance in a manner similar to that used in chemical industry. It seems reasonable that something on these lines could be developed based on data already available.

18. Hewgill et al. Op cit.

COMMENT BY DR JACQUES This paper comes perilously close to suggesting some new kind of money unit, which would presumably be inflation proof. I do not agree that this is at all necessary. The examples discussed lead rather to an alternative (and constructive) conclusion, which accords well with what is discussed elsewhere—that there is a dire need for a drastic re-valuation in £ money terms of the various energy transmission media (petrol, electricity, steam). This valuation ought to be based very closely on the opportunity value of the resource as presented to the user, and that would suggest the ‘Free Energy’ or ‘Available Work’ basis rather than the enthalpy basis which might be the tempting choice of an un-regenerate accountant. Hewgill’s plea, coming from within the Accountancy profession, clearly exposes the need for revaluation, the fallacy of using direct enthalpy units, and indicates a proper awakening to the hidden wastage implied by classical accounting procedure.

The use of a standard physical energy unit is essential for any such process. Conversion tables used in UK energy statistics show that there are likely to be difficulties. The kilowatt hour is possibly the best candidate since it has the potential for use at the highest level of efficiency and intensity, i.e. to be used 100% and at very high energy levels. The use of input energy cost per kilowatt hour of electricity produced compared with potential energy content is itself a useful economic indicator. After an extensive re-examination of economic theory and economic history in the light of energy use and application, there is a strong case for further study to establish whether there is a physical energy process which can be used as an analogue for economic activity. If the performance of economies could be evaluated in these terms in parallel with the present monetary measures, then there could develop a better understanding of economic relationships, better measures of efficiency of performance, and possible solutions to comparisons of the value of money. 97

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Energy evaluation in project appraisal

M.H.Cadman

Society of Business Economists

In collaboration with

P.A.Chester

Institution of Gas Engineers

P.A.Thompson

Institution of Civil Engineers

B.Wood

Institute of Cost and Management Accountants

THE WATT COMMITTEE ON ENERGY

Energy evaluation in project appraisal Introduction Economics is about exchanges of all sorts, about the use and movement of resources in a process in which the object is to create wealth—or at the very least not permanently to destroy the means of creating wealth. Energy is a key resource: and the principal sources of energy for industrial societies are fossil fuels. These are being consumed far faster than they are being replaced, so that to all intents and purposes, in the process of creating wealth now, society is indeed permanently destroying the means of creating wealth in the future. Fossil fuels are a scarce resource; and the energy ‘crisis’ came about because OPEC perceived an impending scarcity of oil in the economic sense of the word, that is to say, the lack of a commodity in relation to demand for it. Economists distinguish between free goods such as sunshine, air and water which are normally so abundant that they have no price, and economic goods which bear a price because they are scarce in relation to demand. Every society has therefore to decide how best to allocate scarce productive resources: and when all productive resources are fully employed, an increase in the output of one commodity or service can be achieved only by reducing the output of another. The classical corrective action for actual or impending scarcity is to increase the price to the point where demand will not exceed supply so that at that price all demands are satisfied without recourse to administrative rationing. At the same time the search is intensified for additional sources of supply, and users seek to increase the yield from the scarce resource. This is precisely what is happening now with energy, and the questions that are addressed in this paper on economic evaluation in project appraisal are how to achieve a proper allocation of fuels, and how to increase the yields of useful goods and services from a given quantity of fuel. There is however no a priori assumption that energy-efficient processes are in some sense meritorious simply because they are energy-efficient. The situation may arise later in which mankind will have to adapt to consuming not goods and services that are freely chosen but only those that can be produced in the most energy-efficient way. For the present, market economics means that prices are the mechanism for balancing supply and demand of particular commodities and services; and if one person chooses to drive a large gasguzzling car at high speeds at considerable expense to himself it may be assumed that that person values fast and comfortable travel more highly than another who prefers to sit at home burning coal in an open fire while wearing an overcoat with the windows wide open in the middle of winter. This implies that the best allocation of resources in a free market economy is achieved when all individuals act independently and treat each transaction on its merits as perceived by themselves. Yet even in a free market economy unlimited supplies of a commodity are not available at all times in all places at one price, as any motorist knows.

leads to unseemly horse-trading and at worst to cash flow problems in times of recession. The creed of the corporate planner is that no project should be treated solely on its merits but only in relation to a corporate objective, corporate policies and a corporate strategy. Corporate planning is concerned with the allocation of corporate resources because these resources cannot be expanded or reduced at the drop of a hat. Money is the key resource because it represents a claim on all resources; accordingly, before going on to consider the particular place of energy evaluation in investment planning, we first describe briefly current methods of financial appraisal of projects and plans.

Financial appraisal of individual projects The widely adopted discounted cash flow method of financial appraisal reflects the logic of Irving Fisher’s ‘rate of return over cost’ (1930) and Keynes’s ‘marginal efficiency of capital’ (1936). Irving Fisher defined the rate of return over cost as the rate of discount which, employed in computing the present worth of all the costs and the present worth of all the returns, will make the two equal. To induce new investment the rate of return over cost must exceed the rate of interest. Accordingly, the financial appraisal of an individual project requires estimates to be made of all the cash outflows—on capital equipment, raw materials, labour, etc.—and of all the cash inflows, ascribable to the project over its expected life. The simplifying assumption is usually made that only those expenditures and receipts that are immediately related to the project may be attributed to it. Although a financial appraisal is made in terms of cash flows, these are in reality counter-flows of expenditures in return for items of capital equipment, raw materials, labour and so on: it is what money buys, not money itself, that is used to create wealth. If the project is for a chemical product, alternative processes are likely to be examined in great detail, with theoretical calculations and experimental work, in order to optimise the mass and energy conversion efficiencies. Nevertheless, because it is financial efficiency that counts in the end, it is possible that the chosen process may not be the most energy-efficient if, at the margin, additional income generated by operating below the highest energy efficiency more than compensates for the additional expense thus incurred. Uncertainty in the estimates, particularly of prices both of products and of inputs, is typically taken into account by sensitivity analysis, that is to say, by analysing the effect on the profitability of changes in values of key variables. Discounted cash flow appraisals were and remain a significant advance on the cruder methods of appraisal used previously. The method is not only stronger in logic but also a more rigorous discipline because it requires careful thought to be given to changes that may occur during the life of an investment as the prices of inputs and of products reflect changing demand, availability and quality.

Investment planning Since the early 1960s there has been a growing interest in the application of corporate planning in companies, nationalised industries and other bodies. This interest is born of an awareness that to allow each part of a company to plan its own future without regard to the rest of the business at best

Financial appraisal of investment programmes Although the financial appraisal of individual projects remains an important and necessary part of business planning, a certain disenchantment set in when it was realised that treating each project on its merits in this way was not enough. 100

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Discounted cash flow appraisal of individual projects is essentially a marginal analysis—only the incremental cash flows are involved, earlier investment expenditures being ignored as water under the bridge; hence the danger is always present of ‘throwing good money after bad’. Marginal expenditure may produce very impressive marginal income, but when existing investment and income generated by it are brought into the reckoning, the whole venture may be unprofitable and better shut down. Perhaps more serious because more widespread in its effects is the neglect of interactions between projects undertaken by one part of a business with new projects and existing activities of other parts. The ideal method of assessing a new capital investment project in a going concern would involve finding out how the fortunes of the company would fare with and without the new investment. This method of assessment means taking into account any gains and losses which other parts of the company would enjoy or suffer as a result. It is difficult enough to identify, let alone quantify, all the possible interactions between a single project and the rest of a company’s activities, existing and projected. In practice, therefore, such analyses tend to be limited to the more obvious interactions and side-effects, such as the ability of suppliers of plant and raw materials to meet additional demands for goods and services already required in other parts of the business, and the effects of introducing a new product that competes directly with an existing one.

constraint on the freedom to pursue the financial objective. The allocation of these resources to where they will make the most profit with the greatest certainty is a key consideration in planning. For money represents a claim on resources of all kinds. However, as pointed out earlier, even in a free market economy, unlimited supplies of all resources are not available at all times in all places. The simple objective of making profit in order to provide continuing benefits to shareholders can seldom be pursued with complete freedom of choice. The objective is subject to constraints. Some of these are exogenous, such as market size, competition, availability and price of labour and raw materials, and legal requirements: others are policy constraints expressing, for example, preferences for the sort of business a company chooses to be in. Constraints limit freedom to plan and impose costs: they emphasise the importance of attempting to optimise the allocation of resources. Where a particular resource, such as space, manpower, pollution limits or availability of fuels, is severely constrained, optimising its use may assume an overriding importance to the extent that it overshadows the financial objective. The next section of this paper accordingly examines the hypothetical situation in which energy is so scarce that the optimal use of energy may be regarded as an end in itself—a surrogate objective, in effect—rather than merely as a means of achieving the financial objective.

An energy policy objective for a company?

The next step then in financial appraisal of investment programmes was to consolidate the cash flow estimates of all the projects comprising the current year’s investment plan, and to appraise the whole portfolio as well as its individual parts. This comprehensive appraisal embraces assessing the robustness of the portfolio to adverse circumstances. It allows planners to experiment with alternative combinations of projects, with the object of coming up with the portfolio that offers the best chance of achieving the company’s financial objective within an acceptable limit of risk of running out of money, while at the same time complying with corporate policies and corporate strategy. The shape of the business, in the sense of combinations of markets, products, processes and raw material sources, assumes a key role in planning, together with the company’s ability to respond effectively and efficiently to contingencies that may arise. It is then but a small step in logic but a large one in practice to extend the portfolio approach to include all the ongoing activities as well as the current year’s investment plan. This extension of the planning process to the whole business enlarges the scope for options and flexibility to the point where the practicality of conventional planning approaches is challenged by advocates of strategic management as at least an adjunct and at most an end to corporate planning as a centralised activity. The wheel comes full circle. From appraising projects individually on their merits it turns to corporate planning of whole investment programmes; but this becomes so unwieldy that it turns again to strategic management where the centre makes broad indicative capital allocations and provides policy guidance but leaves strategic and operational decisions to line managers.

The role of constraints in investment planning The apparent emphasis on financial matters in investment planning and project appraisal is simple enough to explain, at least for companies. A company is a continuing association that has as its main purpose making profit. It is therefore sensible—and elementary—that a company should want to undertake only projects that are likely to add to its profits. At the same time, a company’s financial resources available for investment at any particular time are limited, and therefore a

The objective of national energy policy as perceived by the British Department of Energy is to enable the energy needs of the nation to be met at the lowest cost in real resources over time, while having due regard to safety, security of supply and protection of the environment. The practical application of this objective requires quantification of energy needs and energy resource costs, and the setting of (preferably quantitative) standards of safety, security and environmental protection, as the constraints. To give proper meaning to energy evaluation in project appraisal it is necessary to define and quantify the energy objective of a company in sufficiently precise terms to enable the expected outcomes of projects to be rated against this objective—just as the expected profitability of projects is rated against the financial objective. The minimum financial objective for survival is to meet the company’s contractual financial obligations. Many companies set their sights higher than this and aim to earn sufficient profit to provide continuing benefits to the shareholders through dividends and growth. There is nothing ambiguous and little that is arbitrary in an objective of this kind. Is it, then, possible to conceive an equally precise and realistic energy objective, and, no less important, one that is equally imperative? For failure to meet the minimum financial objective spells disaster for a company. An energy objective of such a general nature as to minimise the energy consumption per unit of output, whether in value or volume terms, is not in the same class of objective because there is no logical basis for setting a standard for a company as a whole or for any of its parts. To set an arbitrary standard such as one based on past performance could be damaging to a company if its competitors pursued less energy-conservative processes which were more profitable because of lower costs of raw materials and labour, for example. The situation would be different if energy were physically rationed. But an objective of maximising the total profit for a given quantity of energy would make more sense from a corporate planner’s standpoint than one of minimising energy consumption for a given amount of profit: and in the energy evaluation of

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projects a minimum figure of profit per unit of energy consumed would assume great importance. Naturally there would be a strong temptation in these circumstances of energy rationing for a company to minimise its own energy consumption per unit of output at the expense of suppliers of raw materials and capital equipment by purchasing beneficiated raw materials in which some of the more energy-intensive conversion had already been done by the suppliers, and more sophisticated capital equipment which required more energy for its manufacture. However, we have not reached the point where energy is physically rationed: and so long as money and not energy continues to be the medium of exchange and its possession to represent a claim on resources one is bound to conclude that it is unrealistic to attempt to substitute an artificial energy objective in place of a financial one.

as being too limited in that it ignores the amounts of energy used by suppliers of raw materials, etc. and, no less importantly, by customers. But it is at least arguable that if suppliers and customers adopt similar energy policies, that is to say, of opting for less energy-intensive processes where there is a choice, the global energy economy would be better than if some central authority attempted to prescribe an overall optimisation if only because each individual supplier and customer may be expected to have better information of the economics of his own processes.

Energy-conscious investment Although it may be unrealistic to think of using an energy objective in place of a financial objective in project appraisal, it does not follow that more careful attention to energy conservation in the planning and execution of projects is not worth while. In many ways the financial appraisal of a project is the last stage, not the first, of an appraisal process that needs to take account of company policies and strategy. For example, when in the late 1940s it seemed that labour was going to be scarce and highpriced, efforts were made to offset the consequences in two principal ways. One was by work and method study to make better use of available labour with existing plant; the other, longer term way was by substituting machines—and energy to drive them—for labour. Such investment decisions were justifiable on policy grounds in the first instance; detailed financial calculations could come later. But money remained the dominant consideration. If now it seems clear that energy rather than labour is going to become scarce the simplest way of doing something about it would be by a policy decision to opt for the least energy-intensive process where there was a choice, provided that this did not seriously reduce the expected profitability. There is nothing particularly new about this. Indeed, as stated earlier, it has long been normal practice in chemical industry to pay very careful attention in the planning stage to the mass and energy balances of processes, and the methodology, which is set out in elementary textbooks on chemistry and chemical engineering, is well established. The minimum theoretical energy requirements are calculable for endothermic reactions, and similarly the heat produced in exothermic reactions. Industrial plants cannot achieve these theoretical results for various reasons which include variations in process conditions and side-reactions attributable to impurities, as well as heat losses in the plant itself. It is normal good practice to record and analyse the quantity of heat supplied, for example as low-pressure steam, per unit of output, to establish standard or bogey ratios based on best historical performance, and to attempt to improve on these by good housekeeping in the plant, by selection and beneficiation of raw materials, and ultimately by research directed towards finding new products that match or exceed the performance of existing products but cost less—or, if it is important, require less energy to produce—and towards finding new processes, for making existing products, that have similar advantages. These considerations apply only to the conversion process itself within plant limits, and so suffer from the same defect as financial appraisal when applied to individual projects each treated on its merits. The approach may be criticised

It is one thing for a company to adopt a policy of preferring less energy-intensive processes from among those known to it, and another for the company to be sure that the best is good enough. Just as comparisons of labour productivity in terms of profit, added value or output per person employed or per £ of wages and salaries are important for companies facing competition, so also comparisons of added value or output per unit of heat supplied are likely to assume increasing importance. With or without some central authority attempting an overall optimisation, companies whose ratios compared badly with their competitors would need to ask themselves very searching questions about their ability to survive. The possibility of central prescription of an overall optimum strategy has been mentioned. The economic theory is simple enough to state, as in Pareto’s Principle of Optimality, but the practical problems of applying it are very great. Yet comprehensive energy accounting, which attempts to identify all the energy consumed in producing a product, including that consumed in producing the capital equipment and raw materials, is aimed at something that goes far beyond what is normally attempted in the most comprehensive financial appraisal. The methodology of input-output analysis is certainly capable of performing evaluations that take into account not only the direct inputs and outputs of a particular process but also the indirect inputs, that is to say, the inputs of the inputs of the particular process. Major problems arise in identifying the flows, obtaining and validating historic data and in forecasting changes, particularly in respect of the technological coefficients. To get it right requires omniscience—and to deny the view that in formulating a national energy strategy the uncertainties are too big and the penalties of failure too great for any one blue-print for the energy sector to survive the realities of a complex and developing situation. The real test of any approach to energy evaluation in project appraisal is whether it would lead to different investment decisions. In the present state of the art, its acceptance as part of the discipline of investment planning is more likely to come about by simple procedures, even though they may lead to sub-optimisation, such as those applied in calculating mass and energy balances for chemical processes, and in good house-keeping practice; and, above all, by simply promoting the concept of energyconscious investment.

Conclusions Energy being only one of many inputs, the use of energy can be only one of many factors assessed in the appraisal of a project. Other material resources and services may be equally important, and money will remain the dominant consideration. Energy use will, therefore, inevitably be taken into account in financial appraisals in respect of both costs to the producer and prices to the consumer, even if these do not reflect the true value to the consumer. This latter is a wider question of economics and accounting, and is not peculiar to energy. 102

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Evaluation of future energy use

Professor J.E.Allen

Royal Aeronautical Society

In collaboration with

Dr B.C.Lindley

Institution of Electrical Engineers

THE WATT COMMITTEE ON ENERGY

Evaluation of future energy use 1. Introduction This very broad subject is treated within a restricted framework, i.e. that of the future plans of The Watt Committee. In deciding its future policy. The Watt Committee must be aware of many future needs and several potential solutions which could become available. Clearly the methods of energy accounting already described establish a professional baseline from which future choices can be made. The problem is one of choice; to decide which issues do not need special attention from the Committee, but also to identify which topics require further action for initiation or exploitation. It is within this framework that criteria for evaluation are needed. To answer this question leads to the consideration of six items:— New concepts of energy supply and use; Possible national energy policies; International links; Future Consultative Councils; Draft plan for future programmes; and Revision of the Questionnaire Report.

Rhizobia sequester a sizeable amount of the photosynthate produced by their host, perhaps 30%, without, however, overdrawing it presumably via regulatory feedback process. They obviously possess all other feedbacks necessary for a harmonious symbiosis. Presumably because of the open nodule structure needed for nitrogen to diffuse into it, the nodules leak hydrogen into the atmosphere. The fundamental issue is whether an artificial gall could modify a tree cell structure locally to induce this chemical alteration.

A Working Party to develop these ideas further has been set up. This report is based on its preliminary findings.

2. New concepts of energy supply and use One important aspect of Watt future plans must be to keep abreast of new concepts for energy supply and use since unexpected advances in a field hitherto irrelevant may offer significant advantages, e.g. in lower cost R & D to reach the exploitation stage. Some concepts may make large demands on capital and only become possible with international collaboration; others may be promoted with only local resources. A few examples are given.

2.1 Rapid growth trees The idea is to plant rapid growing trees (of the birch family) in areas not usable for agriculture, industry or housing and harvest the crop after 8–10 years. This would not be capital intensive and could utilize otherwise unemployed people and would be distributed largely in proportion to labour availability. A quantitative study is needed to assess potential land availability, total output, the planning of a pilot scheme and a timetable for full implementation. It is on record that in the Phillipines there is a 150 MW power station fuelled exclusively with wood.

2.2 Genetic engineering and the hydrogen tree Dr. C.Marchetti of IIASA, Austria,1 has proposed a solution to the increasingly high capital cost of conventional solar power systems. Although highly speculative, it is imaginative and is based on adaptations of known tree characteristics utilising principles of genetic engineering. Arguing that biomass is costly in production, collection and distribution, he has investigated ways in which a tree could be modified to produce hydrogen gas for collection by pipe and fed to the gas mains. The essence of the idea is an artificial gall that actuates a reverse of photosynthesis and makes hydrogen, or methane available in an enclosed cavity created by the gall in the trunk of the tree. The idea is illustrated in Figure 1.

Systems already exist and operate on the grand scale in nature. Rhizobium root nodules in leguminous plants, which fix nitrogen from the atmosphere, are not far from our specification except with respect to size. These nodules are complex structures in which atmospheric nitrogen can flow through the walls of the nodule and combine with the hydrogen generated by the splitting of sugars through a set of enzymes. Oxygen is trapped by a form of haemoglobin, leg-haemoglobin, which then releases it to the bacterium, which is an obligate aerobi. The reason for this side-loop is that the central enzymes for nitrogen fixation, hydrogenase and nitrogenase, are very sensitive to oxygen poisoning.

This may appear as a tall order, but in nature numerous brilliant, if sometimes extravagant, sets of solutions have already been found to this kind of problem and operate right before our eyes. Many insects are capable of inducing the formation of bodies in plants—the galls—that may be related to tumours but are profoundly different in that they grow according to a precise functional architecture, as does any other organ or a plant. These galls are engineered to provide protection and food for the larvae of the insect, and are perfectly adjusted to their needs and timed to their state of development. Not only insects but also bacteria and fungi have found their way to induce gall formation. They number in tens of thousands of different kinds. Oaks host a few hundred types of galls. Their structural and functional variety is astonishing: they range in size from a pinhead to a rugby ball, and appear as spongy nests or complex structures with precisely machined doors opening at the proper time for the mature insect to come out. How information is transferred between parasite or symboint and host for the generation of galls and nodules has been the subject of extensive speculation for many years, but the obvious suspicion—that a transfer of DNA is at work—has been proven, at least in some cases, only recently. Without DNA or RNA, however, the extreme structural and functional sophistication of the galls would be unthinkable. Marchetti notes that a tree has a metabolic power of the order of 1 KW. World forests produce an amount of carbohydrates of the order of 100TW. Man uses about 8TW mostly in the form of fossil fuels. He also observes that in nature plants give off hydrogen and cites the case of the US Soybean crop leaking 30 billion m3 of hydrogen per annum. Marchetti concludes that this new way of looking at solar energy is proposed in the context of various energy systems, some of which seem to have energy to throw away and some

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of which seem to be in need of it. By focusing on the system’s central problem a solution is suggested which appears to fit the low capital availability of developing countries, and their preference for unsophisticated technologies. This is done by creating a proper interface between a vast solar collection system, the forests, and an efficient energy transportation and distribution system, the natural gas pipeline net. Development of the biological fix, however, will be a tough challenge even for the advanced nations, and probably at the limit of their scientific and technical competence.

projected to be in the region of 5–10 GW,5 hence the power contribution to UK could be substantial. A working party has been formed with the following terms of reference: Satellite Solar Power Stations THE SSPS ENGINEERING ASSESSMENTS SUB-COMMITTEE

To give an example, the extraordinarily complex regulatory systems at the genetic, cellular, and organismic level, are only dimly understood, and it would be necessary to manipulate nithem in order to synthesize a vital parasite. The fact, however, that tens of thousands of different kinds of galls have been evolved by a broad variety of organisms, lends a high probability of success to the enterprise, if in the long run.

2.3 Satellite solar power stations The R Ae S notified this project in its response to the questionnaire. A major Anglo-American conference was mounted on the subject in December 19782 when UK engineers had the opportunity to hear of US plans and contribute proposals. Since then HMG sponsored studies3 have been started to appraise the possible contribution to UK electric power supply from 2010 onwards, together with the impact of such work on industry and the IEE has staged a colloquium on the subject.4 The SSPS would involve international activity via the European Space Agency. Siting of ground receiving antennae might also require offshore installations. The power of individual SSPS in orbit are

TERMS OF REFERENCE — To assess the specialist engineering aspects and implications of SSPS including the ground segment. — To assess the possible role of the SSPS in meeting future UK energy needs. — To examine and advise on possible UK engineering contributions to the SSPS in both space and ground segments. — To provide specialist engineering advice on the SSPS and support to the main Watt Committee on Energy in all engineering matters relating to the SSPS. — To review and assess current SSPS activities and to recommend areas for further study. — To consider safety aspects—international standards and scientific evidence of performance of intended systems.

2.4 Offshore projects It is expected that there will be other offshore enterprises following oil and gas platforms such as undersea coal mines, offshore nuclear power stations, petrochemical plant and wave and wind energy systems. Many of the basic concepts have been defined and much essential research has been commissioned. The Watt Committee is assisting in the

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development of the study of Energy Island Cities6 as part of a CEI/CSTI initiative in holding a major conference on the subject in November 1981. Clearly, energy accounting of such projects is vital but the methodology is not altogether clear and costing shared infrastructures is a complex analysis. The Conference is seeking ways of inspiring and encouraging University participation7 from several disciplines as well as providing several papers from professional engineers and scientists.

placed to describe deleterious effects on the population from an energy disaster and have written down issues to be faced. The outcome of the report of this working party is to draw attention to some vulnerable areas in energy planning, once again to emphasize the merits of major efforts of conservation and introduction of alternative energy sources and to recommend those actions which appear to be less sensitive to disasters.

These four examples merely indicate the very wide range of novelties which are at present receiving attention from professionals. It is recommended that The Watt Committee should maintain a list of major new energy concepts and indicate in which organisations major action is being taken. Such a list, regularly updated, would help to focus activity especially where new interdisciplinary links need to be forged. Clearly, any priority task would best be handled by creating a special working party to examine and report.

3. Possible national energy policies 3.1 Surprise scenarios The major national exercise for the future of energy is balancing supply and needs. In the last few years good progress has been made in measuring and projecting needs and resources (e.g. HMG paper on Energy Policy8) and the effects of alternative energy strategies. Although the latter are fairly wide ranging, e.g. the seven strategies of the Marshall Report,9 they are essentially surprise-free. The Watt Report No. 2 in assessing future potential supplies of energy until 2025 AD10 concluded that UK had sufficient quantities of raw energy and capital resources to be able to meet anticipated needs by several possible strategies. It is considered that the conclusions of the important studies already published should be reviewed to assess sensitivity to serious setbacks in availability of overseas supplies, the rate of transition to new sources in UK or to shortfalls in capital. This activity has been called ‘Surprise Scenarios’—to distinguish it from previous work to which it forms a natural complement. A working party has been formed to prepare a method for dealing with this matter and it is intended to prepare a preliminary report for circulation to institutions to attract support and comment. The method will firstly involve three parts: (a) Assembly of typical surprise-free scenario data of supply and demand to 2025 AD. (b) Definition of two or three possible disasters essentially quantified by date, type of energy, magnitude of loss. (c) Listing of practical steps which can be taken over the short and medium term to ameliorate the effect of sudden shortages. In (b) three examples could be: (i) a major loss of North Sea oil platforms in 1985 by a very severe storm (alternatively terrorist action); (ii) severe cut back in Saudi Arabian oil in 1995 AD by major political upheaval (as recently occurred in Iran); (iii) total ban on nuclear development from 1985 resulting from international agitation. Already the Municipal Engineers have submitted a draft11 identifying items under (c). As an institution they are well

3.2 Energy centre Europe Since the previous topic may be considered negative in approach another concept is offered of a more hopeful nature. It would seem wise firstly to hold the future against disaster, but thereafter take stock of the potentially favourable situation resulting from the large UK indigenous supply of energy. Since we are well blessed with many forms of energy, and with science and industry well alerted to energy initiatives, we should look to energy as one of the main drivers of UK industrial wealth in future. With this as the target we should look for enterprise in the following areas: (a) Export of energy expertise; (b) Export of energy systems; (c) Export of energy to EEC. In (c), once plans are set for well conserved use of energy coupled with means for safeguarding against disasters, then surplus energy supplies could be exported, provided the energy is in an exportable form, e.g. electricity via under Channel cable or coal and collier ships and EEC is able to accept coal as an import.

3.3 Third World Professor Sir Hermann Bondi12 has clearly shown the need to consider the growing energy expectations of the Third World as a main buttress of future peace and trade. To implement this attitude requires a sympathetic understanding of the different needs of the Third World and finding how to share energy, expertise and equipment. 3.4 The foregoing three policy prospects are offered for discussion since they appear to be relevant to future issues beyond present day conclusions and publications. It is, of course, too early to know whether they are viable but are believed to give sensible long range targets against which to compare other work. At least they appear to cover a very wide range of macro possibilities in a very compact form. Hence other sub-studies could conveniently be interleaved with them.

4. International links There are many exchanges of documents, i.e. with organisations in Australia, ESCOE in the USA and STU in Sweden.13 IEA met The Watt Committee on a recent visit to the UK to assess the efficacy of energy R & D programmes. Since many energy issues have international connotations, it is recommended there should be a working party on international affairs charged with two functions. (a) To promote and encourage document exchange with overseas organisations, visits and personnel transfer on projects; (b) To make available reports defining international restraints which would affect UK energy decisions, e.g. market price trends, international cartel controls, decisions in EEC, UN, etc. 106

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In a stimulating paper “Responsibility of Industry Towards the Environment”18 given by Dr M.D.Royston at the 1979 Conoco Lecture, it was shown that by taking initiatives in environmental protection and energy saving industrial enterprises can serve both the community and help their own goals of profit and growth.

5. Future consultative councils 5.1 Transport The seventh Council will deal largely with transport. All modes will be treated, dealing with (a) evolutionary trends, (b) revolutionary developments to meet energy changes, (c) changes of life style, and (d) growth of non-vehicular transport (TV, etc.). It is intended to review ongoing programmes and assess whether these alone will be sufficient to avoid major setbacks in public, personal and industrial transport capability in the next 25 years. Recommendations for additional effort in some critical areas will be advocated.

6. Draft plan for future programme The Watt Committee can exert an influence quite independent of political and other constraints and especially taking a longer term view, drawing on the assembly of inter-institutional professional skills and disciplines in a manner which is possibly unique anywhere. It is regarded as essential for The Watt Committee to avoid duplication of effort and to accept or undertake tasks that can be properly and efficiently handled.

The Watt Committee has been invited to submit a report on future transport to the Technological Innovation SubCommittee of the Select Committee on Science and Technology of the House of Commons. It is hoped to present a review of this activity.

Relations with SSRC Through the initiative of M.V.Posner, Chairman of the SSRC, The Watt Committee has been invited to participate in discussions on energy and transport with other bodies active in this field. They are: SRC/SSRC — Transport ACEC CENE SSRC — Energy TRRL DOE/DTp IEA EEC Various preliminary topics have been reviewed towards establishing principles of collaboration. At first sight The Watt Committee seems likely to be able to provide a useful project framework for long term engineering developments, scenario and energy accounting methods which would assist the objectives of this SSRC initiative. It is expected that a definite report on this work should be available by the November Council. In collaboration with industrial and HMG’s interests a review is being made of the steps needed to define the private motor car of the future in the face of changes in fuel availability. 5.2 Other prospective topics for future consultative councils New topics requiring review are first notified to The Watt Executive Board who, if the subject is agreed to be important, would normally set up working parties. The appropriate reports from working parties form the basis of papers presented to the Consultative Council.14,10,15,16,17 This process is very flexible and has proved to provide a rapid means of focusing attention, sorting evidence and mounting informed debate. The following items appear likely to become important in the future and might therefore well form the subject of future consultative councils. These are held twice yearly and hence, care is needed in setting the right pace for this work. Review of Demonstrator Projects Ways of working with HMG Energy education The International Energy Scene Prospects for export of energy, expertise and equipment Offshore energy futures The Municipal Engineers’ contributions to the energy balance Assessment of the first three years of Watt Committee Interplay of Energy and Environment

The scope of the activities and future programme will depend inherently on the scale of resources that can actually be devoted to the work of the Committee, its Consultative. Council, and its Working Parties and other mechanics. The approach is fundamentally a new one, linked very much to developing UK leads in energy matters by optimising the servicing of home needs and creating export opportunities for new concepts and products. Although much of what The Watt Committee itself undertakes is produced as reports and papers, the intention is to stimulate practical action rather than only assessment, review and comment. The resources available to The Watt Committee will be finite, if only through limitation of available funding. The overall spectrum of energy-related matters which affect the UK is very diverse indeed, so that the Committee needs an overall planning structure in which to judge the relevance and likely impact of the task it undertakes, so as to gauge priorities and the scale of resources to be applied. A major input was provided through member institutions by response to The Watt Committee questionnaire, and it is planned to continue an interaction in this form between The Watt Committee and its constituent members so as to keep the material up-to-date. A 50-year future is being considered on the basis of the short-term (up to 5 years), medium term (5 to 20 years), and the long term (20 to 50 years) and there is an extremely diverse sequence of tasks, developments, actions and commitments which will be necessary to achieve the best overall effect in satisfying the nation’s energy needs. Many decisions have to be taken in the short-term but will affect the medium and long term future of energy. In doing so, a suitably structured approach is needed for forecasting, planning and taking action, constantly adapting this to take into account changing circumstances and requirements. Such structuring needs to be evolutionary rather than revolutionary. Topic areas to which The Watt Committee gives its attention fall into certain categories: — energy policy guidelines and the rational use of energy — energy management and technology — techno-economic feasibility and design studies and demonstration projects — response and input to UK Government — energy education and information centre In supporting a work programme a new round of funding requests to suitable organisations is to be launched,

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assisted by granting of charitable status. The Annual Report and Accounts will form an important document in this exercise, and it is hoped to provide a gradual extension of the central administrative and support secretariat. The Committee will, of course, influence all its own constituent professional bodies through its activities in a manner otherwise inaccessible through other routes, forming a very powerful chain of communication both to members of the professions and from them. It is also intended to establish links with trade unions and with education and training institutions at university, polytechnic and technical college level as well as at other levels in terms of schools and providing post-experience education and training. In terms of impact with UK Government the main areas of contact are the Treasury and the Departments of Energy, Industry, Environment, Transport and Education and Science, together with their various executive and advisory bodies.

7. Revision of the questionnaire In September 1977 a questionnaire was circulated to each member institution (63) of The Watt Committee to assist the decision of its future programme of work. 42 replies were received and an analysis was presented by Dr G.M.Stafford19 at the Consultative Council in June 1978. This showed the diversity of interests and method of approach adopted in the different institutes, but also a consensus for several areas of importance and some unexpected proposals. There seemed to be much potential in the biological field and the RAeS drew attention to the potential of SSPS which had been omitted for consideration in The Watt Report No. 1.14

(b) Who is concerned about the subject or seeking advice, and who is likely to use the information when it becomes available? (c) Has any other organisation tried to do something about the subject before? If so, what was the outcome and what does the present study aim to achieve beyond that which has already been done? (d) What is the objective of the project and the expected response to an initial report? (e) What follow-up action can be anticipated, and how should The Watt Committee pursue and measure success in the longer term? In many cases, work undertaken by The Watt Committee has been requested and paid for by HMG. In other examples, proposals made by The Watt Committee have been subsequently funded. Such actions suggest automatic responses to criteria, a, b, and c. As The Watt Committee continues to deal with different topics of many kinds, so more attention to final criteria as listed above will be needed. The nature of the relationships between The Watt Committee and its constituent members is so complex that continued review of practices and procedures is essential.

8. Conclusions Many future energy issues have been discussed for the future programme of The Watt Committee. They fall into three areas of different scale, e.g.

(i) Macro “watt” —Surprise Scenarios and Energy Centre Europe (ii) Meso “watt” —creating opportunities for innovative systems

It was recommended that to make more decisive progress, it might be worthwhile linking several institutions which had allied interests so that there could be an economy of study and actions. This proposal arose from the convenience of grouping needed to analyse the replies, etc.

(iii) Mini “watt” —improving understanding over a wide area in many important items. Principles of energy accounting will be essential to help decisions of choice in many areas since effort is finite and must be directed only to essential tasks. Methods of energy accounting can be used on (ii) and (iii) with success, but must not be taken as the sole criteria, and continuing efforts to improve accuracy and relevance should be encouraged. Energy accounting at level (i) is probably not possible and judgement here must be largely a matter of creative anticipation evolving from better understanding of the possibilities of (ii) and (iii) and yet providing a focus and drive to stimulate the UK effort on energy.

(i) Primary energy producers and distributors, e.g. Inst. of Energy, IEE, I.Nuc.Eng., Solar Energy Soc., etc. (ii) Academic and methodology, e.g. Geological Society, RIC, Met. Soc., etc. (iii) Transport, e.g. Inst. Mar E, RAeS, CIT, etc. (iv) Domestic and building, e.g. RIBA, Inst. Mun.E., CIBS, etc. (v) Industry and commerce, e.g. I.Plant.E., RSA, ICE, I.Mech.E. Adequate servicing of questionnaire material creates a major data handling problem. No mechanisation was used for the first analysis and clearly lessons learnt could improve the precision of the questions asked and in any future revision. It has been pointed out that the cost of data handling equipment has fallen in recent years to a level where its incorporation appears a practical proposition. Accordingly, an investigation has been started to look into ways of doing this; how more detailed and immediate links could be made with institutions and how the present and future progress could be updated by member inputs.

Whatever choices are decided upon three pieces of infrastructure will be needed:

It is one thing to list topics worthy of inclusion in the Watt Programme; it is another to decide which to adopt and which to reject. Mr A.Pexton (IMechE) has made the following proposal for a list of criteria to assist such choice. (a) Why is it judged the subject is not being adequately covered elsewhere?

References

(a) Close organic links between The Watt Committee and its constituent institutions. (b) Infrastructure plan and funding for at least three years ahead. (c) Continuing vigorous consultative councils to air new issues and debate the future in a truly professional way.

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1. Genetic Engineering and the Energy System: How To Make Ends Meet. C.Marchetti, Research Memorandum RM-78–62, II ASA, 2361 Laxenburg, Austria, Dec. 1978 2. Energy and Aerospace, RAeS, London, Dec. 1978

PART IV–THE PAST, PRESENT AND FUTURE OF ENERGY EVALUATION

3. Space Power Systems, General Technology Systems Ltd., Report GT 78008/B-1, Feb. 1979

11. Disaster Planning etc. Private Communication from the Institute of Municipal Engineers, 10th April 1979

4. Solar Power Satellite Systems, Colloquium at IEE London, 27th April 1979

12. Energy Research and Development—A UK View. Professor Sir Hermann Bondi, Part of Ref. 2.

5. Satellite Power System—Concept Development and Evaluation Programme—Reference System Report, US DOE and NASA, DOE/ER-0023, October 1978

13. International Energy Co-operation, Energy Technology No. 1 1979, STU Sweden

6. Energy Island City? John E.Allen, Paper to IMechE, etc. at Newcastle, February 1978

14. Watt Committee Report No. 1—Energy R & D 15. Watt Committee Report No. 3—Rational Use

7. Minutes of meeting of the Preliminary Planning Panel of the Industrial Inland Conference, IMechE, April 1979

16. Watt Committee Report No. 4—Land Use

8. Energy Policy, HMG Green Paper HMSO Cmd 7101 1978 9. Energy Research and Development in the United Kingdom; Acord Discussion Document, September 1976

18. Responsibility of Industry Towards the Environment, Dr Michael Royston, The Conoco Lecture, Royal Society, 21 May 1979

10. Deployment of National Resources in the Provision of Energy in the United Kingdom 1975–2025, Watt Committee on Energy Ltd., Report No. 2, August 1977

19. The Future Progress for The Watt Committee on Energy, Dr G.M.Stafford, 4th Consultative Council, 28th June 1978

17. Watt Committee Report No. 5—Biomass

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WORKING GROUP FOR “EVALUATION OF ENERGY USE” The Executive of The Watt Committee on Energy thanks the many people who have been involved in the various stages of producing “Evaluation of Energy Use”, commencing with a meeting held on 4th January 1979. Their names are tabled below.

Name

Institution

Company

L.F.Aldridge

Chartered Institute of Transport

Professor J.E.Allen

Royal Aeronautical Society

British Aerospace

Professor W.O.Alexander

Institution of Metallurgists

Aston University, Birmingham

C.W.Banyard

Institute of Cost & Management Accountants

BOC Limited

—

Professor N.Borg

The Institution of Civil Engineers

University of Birmingham

L.G.Brookes

UK Atomic Energy Authority

H.Brown

International Association of Energy Economists Institution of Plant Engineers

Dr J.W.Bryant

Operational Research Society

University of Sussex

R.Burton

Royal Institute of British Architects

Ahrends Burton & Koralek

M.H.Cadman

Society of Business Economists

Atkins Planning

P.A.Chester

Institution of Gas Engineers

British Gas Corporation

J.Claret

Institute of Cost & Management Accountants

Knight Management Services, BOC Limited

J.B.Collins C.Davies

The Chartered Institution of Building Services Operational Research Society

Building Research Station, Garston National Coal Board

A.E.Eagles

Plastics & Rubber Institute

Rubber and Plastics Research Association

N.M.Evans

The Institution of Electrical Engineers

P.H.W.Everitt

Institution of Production Engineers

Hawker Siddeley Group Ltd

J.Ferguson

Institution of Public Health Engineers

Greater London Council

K.Harvey

Institute of Solid Wastes Management

West Midlands County Council

P.A.Hazzard

Institute of Cost & Management Accountants

Slough College of Higher Technology

J.C.R.Hewgill, MBE

Institute of Cost & Management Accountants

Consultant

Dr J.K.Jacques

The Chemical Society

University of Stirling

Dr N.Kendall

—

Consultant

—

Consultant

Dr B.C.Lindley

The Institution of Electrical Engineers

Dunlop Limited

C.W.M.McDowell

Institution of Public Health Engineers

M.McDowell Co. Partnership

D.McGeorge

Royal Institute of Chartered Surveyors

University of Strathclyde

Dr A.Melvin

Institute of Physics

British Gas Corporation

J.R.Monson

The Metals Society

British Steel Corporation

W.M.Montgomery

The Metals Society

Round Oak Steelworks Ltd

E.D.Radband

Institution of Electronic & Radio Engineers

Professor J.Swithenbank

Institute of Energy

Sheffield University

P.A.Thompson

The Institution of Civil Engineers

University of Manchester

T.Tidd

Institute of Purchasing & Supply

Colt International Ltd

E.L.Walker

Institute of Purchasing & Supply

P.J.Willan

Institute of Cost & Management Accountants

Charterhouse Petroleum Development Ltd

A.A.Wittenberg

Institute of Refrigeration

BOC-Linde Refrigeration Ltd

B.Wood

Institute of Cost & Management Accountants

BOC Limited

Dr P.Yaneske

Institute of Physics

University of Strathclyde

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THE WATT COMMITTEE ON ENERGY

Watt Committee Aims and Executive POLICY The Watt Committee combines early reaction to energy-related matters with general initiating in education and communication based on considered professional objective views. It becomes involved in depth where possible since its strength lies in the competence and variety of its people resources. Through its 62 member institutions, it can call upon voluntary effort from a resource of half a million professionals. GENERAL OBJECTIVES The Watt Committee on Energy, being a Committee representing professional people interested in energy topics through their various institutions, has the following general objectives:— 1. To make the maximum practical use of the skills and knowledge available in the member institutions to assist in the solution of both present and future energy problems, concentrating on the UK aspects of winning, conversion, transmission and utilisation of energy and recognising also overseas implications. 2. To contribute by all possible means to the formulation of national energy policies. 3. To prepare statements from time to time on the energy situation for publication as an official view of The Watt Committee on Energy in the journals of all the participating institutions. These statements would also form the basis for representation to the general public, commerce, industry and local and central government. 4. To identify those areas in the field of energy in which co-operation between the various professional institutions could be really useful. To tackle particular problems as they arise and publish the results of investigations carried out if suitable. There would also, wherever possible, be a follow-up. 5. To review existing research into energy problems and recommend, in collaboration with others, areas needing further investigation, research and development. 6. To co-ordinate future conferences, courses and the like being organised by the participating institutions both to avoid overlapping and to maximise co-operation and impact on the general public.

EXECUTIVE COMMITTEE–Chaired by Dr J.H.Chesters, OBE, FRS Dr B.C.Lindley, Deputy Chairman, Institution of Electrical Engineers Mr C.W.Banyard, Treasurer, Institute of Cost & Management Accountants Professor J.E.Allen, Royal Aeronautical Society Mr H.Brown, Institution of Plant Engineers Professor I.C.Cheeseman, Chartered Institutute of Transport Mr A.Cluer, Institute of Petroleum Mr R.S.Hackett, Institution of Gas Engineers Mr J.R.Harrison, British Nuclear Energy Society Mr C.Izzard, Chartered Institution of Building Services

Miss W.Matthews, Association of Home Economists Mr W.B.Pascall, Royal Institute of British Architects Mr H.D.Peake, Institution of Municipal Engineers Dr A.F.Pexton, Institution of Mechanical Engineers Mr J.Rhys, Society of Business Economists Dr P.A.A.Scott, Royal Institute of Chemistry Mr J.M.Solbett, Institution of Chemical Engineers Professor J.Swithenbank, Institute of Energy Dr F.Walley, CB, Institution of Civil Engineers Professor F.J.Weinberg, Institute of Physics Mrs G.Banyard, Secretary

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