The Business Case For Energy Efficiency Viridian Glass Australia

Transcription

1 The Business Case For Energy Efficiency Viridian Glass Australia Presented to: #### Issued: #### Version: #### Presented by: Bruce Lee Telephone

2 Executive Summary In today's business environment managing and controlling energy costs has become a critical financial requirement. Increased competition, lower margins, sharply rising energy prices, carbon foot printing, corporate social responsibility and key stakeholder demands have put energy efficiency, waste and resources, firmly on the business agenda. Managing lighting effectively reduces costs and waste, retains customers and raises profits. Historically, lighting has been bundled into infrastructure and operational costs in an unidentifiable way, allowing highly inefficient systems to be installed. The costs of an inefficient lighting system are borne month on month, needlessly wasting energy and pushing up organisational costs. The ongoing development of energy saving technologies and cloud based energy monitoring enable today s organisations to easily and quickly quantify and manage their energy usage, meeting operational and Health & Safety needs whilst precisely controlling costs. Improving and monitoring operating efficiencies delivers significant monetary value, and quick paybacks whilst sending a positive and highly visible message. This proposal presents the business case for investing in reducing energy usage. It summarises the financial, operational and environmental costs and benefits and gives management the ability to make cost effective improvements that will enhance the organisation s environment and reduce costs. Full details of the assumptions used are in Appendix 1. Financial Benefits Country / Region Australia & Dependants Currency Australian Dollar Customer Internal Rate of Return IRR (or cost of capital) Year 1 Savings 6.% AUD 23,329 ROI in Months Project Internal Rate of Return (IRR) Project Net Present Value (NPV) % AUD 593,571 Solution Cost AUD 416,397 Cost to the Client for a Project Delay of 3 Months AUD 51,15 Cost to do Nothing (Over the 5 Year Calculation) AUD 1,23,6 Increase Monthly CashFlow LowRisk/High Reward Investment Offset Rising Electricity Costs Environmental Benefits Annual Carbon Savings (Tonnes) Annual Energy Savings (kwh) ,7,152 Average annual Australian domestic electricity consumption is; Source Bill Rebublic 5817 kwh Clear demonstration of Corporate Social Responsibility Easily Measured Results Visible Green Marketing Message PR Opportunity Reduced Carbon Output Operational Benefits The energy saved is equivalent to the annual consumption of the following number of houses: Estimated Maintenance Savings due to Equipment Efficiencies (Not shown in Calculation) 85% Annual Reduction in Power Demand kw/% % Automated Operation Precise Measurement of Energy Usage Improved Working Environment Lower Maintenance Costs Reduced Health & Safety Risks Meet Legal Obligations Reduce Maximum Demand 184 NPV Discounted Cash Flow Graph AUD 8, AUD 6, AUD 4, AUD 2, AUD AUD 2, AUD 4, AUD 6, Income Review Period Months

3 Appendix 1 Project Summary Financial, Power and Carbon Project Cost AUD 416,397 Minimum IRR or Cost of Capital 6.% Project IRR 59.13% Project NPV AUD 593,571 ROI in Months Eniscope Behavioural Savings Percentage of New Power Cost 8.5% Eniscope Behavioural Savings AUD 4,822 Existing Annual Lighting Power Costs AUD 255,236 Existing Monthly Lighting Power Costs AUD 21,27 New Annual Lighting Power Costs AUD 56,729 New Monthly Lighting Power Costs AUD 4,727 Percentage Reduction in Lighting Power Costs 77.77% Annual Lighting Cost Savings AUD 198,57 Existing Annual Lighting Carbon Costs AUD Existing Monthly Lighting Carbon Costs AUD New Annual Lighting Carbon Cost AUD New Monthly Lighting Carbon Cost AUD Percentage Reduction in Lighting Carbon Costs.% Annual Lighting Carbon Savings AUD Existing Lighting Power Usage per Year (kwh) 1,343,347 Existing Lighting Power Usage per Month (kwh) 111,946 New Lighting Power Usage per Year (kwh) 273,195 New Lighting Power Usage per Month (kwh) 22,766 Percentage Annual Power Saving 79.66% Existing Lighting Power Demand (kw) New Lighting Power Demand (kw) Reduction in Lighting Power Demand (kw) Percentage Reduction in Lighting Power Demand (kw) 53.7% Existing Lighting Annual C2 Output (Tonnes) Existing Lighting Monthly C2 Output (Tonnes) 6.45 New Annual Lighting C2 Output (Tonnes) New Monthly Lighting C2 Output (Tonnes) Annual Lighting Carbon Savings (Tonnes) Monthly Lighting Carbon Savings (Tonnes) Percentage Lighting C2 Reduction 79.66% Loan Amount AUD 416,397 Loan APR% 6.% Loan Term (Months) 6 Monthly Loan Cost AUD 8,19 Monthly Savings AUD 17,5 Monthly Positive Cash Flow AUD 9,31 Total Cost of Credit AUD 64,766 Total Payable AUD 481,163 Annual kwh Usage Annual kwh Usage 1,6, 1,4, 1,2, 1,, 8, 6, 4, 2, Existing kwh Usage New kwh Usage Annual Carbon Output Tonnes Annual Carbon Output Existing Carbon Output New Carbon Output

4 Quotation for Energy Saving Lighting Solution for; Viridian Glass Australia Fully Installed Solution; QUOTATION DETAILS Facility Area Production Stores and Distribution Quantity of New Fittings Product Code Unit Price Each Provisional Installation Cost (Each) 1 Total Cost Eluma LED 24K $1,71. $13. $24,2. Eluma LED 24K $1,71. $13. $165,738. $. $. $. $. $. $. $. $. $. $. $. $. $. $. $. $. $. $. $. $. $. $. $. $. $. $. $. $. $. $. $. $. $. $. $. $. $. $. $. $. $. $. $. $. $. $. $. $. $. $. $. $. $. $. WEEE Costs for removal & disposal of existing Fittings Delivery Charges Suresense Lighting Programmer Callibration Commissioning Charge $2,873 $9 $98 $3, PAYMENT TERMS TOTAL COST 5% With Order $248,214.6 Net Total $413, % On Delivery $124,17.3 2% $82, % 3 Days after Install $124,17.3 Total $496, Final Installation costs subject to technical survey

5 FINANCIAL DEFINITIONS ROI ROI is simply the time taken, in months or years, to generate a return equal to the amount spent on the investment. IRR Internal rate of return (IRR) is a discount rate frequently used in capital budgeting. Typically, the higher internal rate of return of a project, the higher it would be considered, and the more willing the company would be to undertake it. If a project's internal rate of return is higher than the companies normal rate of return or simply the interest it could generate from capital may indicate that the organization deems it as having overall positive value. Measurements of internal rate of return refer to the efficiency of the projects in question. They may be taken along with measurements of net present value (NPV) which indicate the magnitude of such projects. For one example, given two projects, one may have a higher IRR and lower NPV, while the other correspondingly has a lower IRR and higher NPV. NPV This is the difference between the present value (PV) of the future cash flows from an investment and the amount of actual return. Present value of the expected cash flows is computed by discounting them at the customers existing IRR rate (also called minimum rate of return). For example, an investment of $1, today at 1 percent will yield $1,1 at the end of the year; therefore, the net present value is $1,1 at the desired rate of return (1 percent). A zero NPV means the project repays minimum investment return equal to 1%. A positive NPV means a better return than the 1% minimum, and a negative NPV means a worse return than the 1% minimum.