Key points
- Simplot has introduced policies, procedures and checklists to ensure that energy efficiency is considered for all projects.
- Compliance with these business requirements is reviewed by the Project Manager Energy Efficiency & Compliance. This is designed to ensure that energy efficiency opportunities are not missed.
- There is some flexibility within Simplot to support projects with a payback over 3 years because of the recognition that energy prices will continue to increase faster than the consumer price index.
In this section
Simplot Australia: Approach to energy efficiency
About the company
Simplot Australia is a wholly owned subsidiary of the J R Simplot Company, a privately held food and agribusiness corporation based in the United States. In Australia the company employs around 2,500 people and manufactures many well known brands including Birds Eye, Leggo’s, Edgell and John West.
Energy use at Simplot
In 2009-10 Simplot Australia used around 1,301,436 GJ of energy. The major energy using processes were refrigeration (20%) and heating (12%).
Energy policy and targets
Simplot’s US parent company JR Simplot has a commitment to reduce energy intensity at each of its sites by 25% over a 10 year period commencing in 2008. Simplot’s manufacturing plants in Australia have also adopted this target for each site.
In Australia, energy efficiency is driven by a number of factors, including the application of technologies and practices that provide energy and cost savings, compliance with the Energy Efficiency Opportunities (EEO) program and state-based programs. Rising energy costs are a concern and any reductions in energy use also help to reduce carbon emissions.
Simplot has an Energy Policy that supports its energy efficiency program. Site based energy efficiency teams have played a key role in helping the business continue to reduce the energy intensity of its operations.
Getting support for energy efficiency projects
Simplot has changed its systems and processes to ensure that energy is considered at the early stage for all projects, whether they relate to continuous improvement, maintenance or capital expenditure. Project guidelines have been developed that prompt project leaders to ensure they have considered energy efficiency across the spectrum of the project. Guidelines include questions such as ‘Have you considered more energy efficient lighting?’, or ‘Can you use a more efficient motor?’.
The business case is usually put together by a project engineer. Each site has an Energy Committee, which meets monthly, and reviews and comments on all project proposals before they get submitted. This means that many of the key decision makers, including plant engineers, production managers, accountants and others, are aware of the project and have had a chance to raise any issues before the proposal is finalised. The role of these committees is to oversee implementation of the EEO program and ensure that cultural change is progressing.
There is also a national Energy Steering Committee, which meets monthly. Members of the committee include the National Manufacturing Manager, Supply Chain Development Manager, National Project Engineering Manager and Simplot’s energy consultant (Energetics). The committee monitors performance and works to ensure that they have a proactive energy efficiency program in place across the business.
Individual managers are also very conscious of energy consumption and energy costs. Simplot has negotiated a national metering contract that provides web based access to data, albeit with a one day delay. Every Monday they receive a ‘national energy report’ that includes Simplot’s energy use and energy costs for the previous week (see Figure 1). This keeps energy ‘at the front of people’s minds’. Daily plant meetings also look at all Key Performance Indicators (KPIs), including energy costs.
Figure 1: Letting people know how much energy costs weekly gets their attention
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Simplot Electricity Usage Report Week ending 2/07/2011 (PDF 2Mb Opens in a new Window)
All of these processes mean that key decision makers understand energy use and energy costs, and are generally well informed about energy efficiency projects before they are finally submitted for approval.
Any project that is submitted through the capital approvals process has to include a completed checklist on energy efficiency. The Project Manager, who has overall responsibility for energy efficiency for Simplot Australia, reviews all funding proposals. He works with the sites to ensure that energy efficiency is given due consideration at the beginning, and is not treated as an afterthought.
Energy efficiency projects must be commercially viable, but there is some flexibility on the minimum 3 year payback. This is because the payback is based on the assumption that energy prices will increase in line with the Consumer Price Index (CPI), when in actual fact energy prices are expected to increase at a faster rate. Sensitivity analysis on several factors such as energy price increases, equipment cost changes, variations in production, etc., are included for major projects.
Tips for success
- Involve key decision makers as early as possible. At Simplot this is achieved through site-based Energy Committees and the national Energy Steering Committee.
- To do energy efficiency well it helps to understand the energy market, including predicted trends in energy prices. Simplot joined the Energy Users Association of Australia to gain knowledge and also to provide an avenue of advocacy. The Energy Users Association of Australia runs an introductory course which is a useful lead in to understand the complexity of the Australian energy market (www.euaa.com.au).
Refer to the section on regularly briefing management on energy risks and opportunities for further information.
Simplot Australia: Refrigeration at the Bathurst plant
Genesis of the project
Simplot became involved in the NSW Government’s Energy Savings Action Plan (ESAP) program in 2005. A consultant was engaged to assist Simplot to identify opportunities in a range of areas, including heating, refrigeration and lighting. Because refrigeration is one of the largest energy consuming processes at the Bathurst plant (approximately 73% of energy use), the decision was made to focus on opportunities in this area.
Investment challenge
All capital investment projects at Simplot need to be cost effective, which means achieving an internal payback of around 3 years. One of the challenges with evaluating refrigeration projects was the ability to accurately forecast energy savings and establish the financial return.
The solution
Meters were installed to monitor energy use and improve the company’s ability to calculate the energy savings that could be achieved. Prior to this there was only ‘front of gate’ metering. The project was submitted for approval at a good time, because of management interest in energy efficiency driven by the company’s focus on cost reduction and rising energy prices.
A specialist refrigeration consultant was also engaged to identify and investigate opportunities in more detail. The consultant carried out a number of tests and estimated energy savings for a number of cost effective opportunities to improve efficiency. Without his input it would have been more difficult to justify the investment.
The result was an ‘energy utilisation’ capital plan that involved installation of variable speed drives (VSDs) on the compressors, which achieve energy savings by allowing the compressors to better match their operation with the required load. An economizer and an additional heat exchanger that improves the overall refrigeration cycle efficiency were also installed on a condenser.
The business case – costs and benefits
The estimated cost of the project was $330,000, and it was expected to save around $112,000 each year in reduced energy costs. This meant that the project had a simple payback of less than 3 years. Without the installation of metering, the business case proposal could not have been developed and, as a result, the project would not have progressed.
The business case that was submitted through the normal capital approval process included the consultant’s report, estimated costs of the equipment and installation, energy savings and associated financial costs and return on investment.
After the project was approved Simplot applied for Energy Savings Certificates from the NSW Government based on the level of energy savings achieved. The value of these certificates had a significant impact on the payback ($10,000 a year for 5 years), although they weren’t considered when the initial business case proposal was developed because the company wasn’t aware that they were available. Based on their experience with applying for certificates, Simplot now has the confidence to factor them into the business case for all energy efficiency projects.
Outcomes
The project was completed in January 2010 and is saving approximately 1,400 MW per year, or 8% of refrigeration operating costs. The success of this project gave impetus to the energy efficiency program at Simplot because it clearly demonstrated the benefits that energy efficiency projects can deliver to the business.
Refer to the sections on involving the right people and considering a range of funding options for further information.