Did you know that the overall efficiency of a typical compressed air system is sometimes only 10-15%?
Considering the fact that compressed air costs can consist of up to 50% of a company’s total electric expenditures, improving your compressed air system’s efficiency can greatly reduce your energy costs.
Everyone likes the idea of cutting energy costs by improving compressed air system efficiency, but the challenge is often finding the money to fund the air system improvements.
So, how do you pay for compressed air system upgrades when capital may not be available for this kind of project?
The answer is…
Energy Savings and Project Financing.
Curious to know more?
There are five steps you can follow to pay for compressed air upgrades using energy savings by working with an energy management partner.
Let’s go more in depth below.
First, you need to diagnose if there are any problems to begin with. You want to get an idea of how your compressed air system is running.
For example: What is the average pressure of your system? How much power does your system use when it runs unloaded? What does your compressed air demand profile look like? Are there any leaks or inappropriate uses of compressed air?
Work with your energy management partner to conduct this assessment and then analyze the information.
Then, you and your energy management partner can use this information to establish a baseline for three things:
Once you have an accurate baseline of how your system is actually running, you energy management partner can help you calculate (with relative certainty) the potential for energy-saving improvements and the cost effectiveness of each savings measure.
For instance, you may find that scheduling and networking your compressors via a controls upgrade is cost effective but a full-facility leak study is not.
Regardless of what savings opportunities are identified, this phase of the project is critical to establish the potential savings of the project and thus determine the available “dollars” that can be used to finance the project.
The key to making projects work without upfront costs is aligning the projected energy savings with the project financing. Put another way, the most successful financed compressed air projects are built on reliable monthly/annual energy savings where the reduction in energy costs is large enough to “pay” for the project without increasing monthly annual energy costs for the customer.
To illustrate this point, let’s look at a hypothetical project for compressed air upgrades that is paid for with project financing (a performance contract in this case) provided by an energy management company:
If you look at the numbers above, you can see that this manufacturing facility was spending $10,000 per month on energy before the project began.
Using the data collected during Step 1, the energy management company determined that the proposed compressed air improvements would save an average of $2,000 per month. This $2,000 becomes the amount of money available to pay for the project each month. Since this hypothetical project cost $72,000 to implement, the project financing would have a term of three years.
After the project financing terms ends, the company would own the equipment and continue to reap $2,000 in monthly savings.
In summary, this manufacturer’s monthly energy bills would not go up at all because their energy management partner reduced their energy costs so much that there was then “extra” money left over to pay for the performance contract payment.
As you see, then, this is definitely possible with the right energy management partner, the right plan, and the right financing.
(A quick note: In many cases, you and your energy management partner can reduce your monthly costs right off the bat at the cost of a longer contract term (than, say, three years, as the example was). It depends on what you and your team are specifically looking for.)
Now that you’ve identified which measures you want to implement, it’s time to make your plan of action in conjunction with (or led by) your energy management partner.
Together, you will decide what steps to follow first, which constituents will be involved (and when), and what implementation methods to use.
Additionally, you will need to create the project scope and make projected timelines for your plan of action.
Also, make sure to include plans for what will happen after you implement these measures. You’ll want to continue to track your compressed air system afterward to make sure the upgrades have worked…and identify any other needs or opportunities in the future.
So, now you have a plan of action. You and your energy management partner have teams in place to make the changes.
It’s time to implement your project!
But wait! The last thing you’ll need to do is analyze your data after the implementation, as you originally designed in your plan of action.
You and your energy management partner will:
Want to see an example of this approach to compressed air upgrades? Check out this case study and learn how Bay Controls helped Ford Motor Company upgrade their compressed air system with no out-of-pocket costs.