Wednesday, September 21. Technological and Business Innovation in Industrial Refrigeration Maged Kafafy and Andrew Knox

Transcription

1 Wednesday, September 21 Technological and Business Innovation in Industrial Refrigeration Maged Kafafy and Andrew Knox

2 Refrigeration System Optimization Project The project Industrial-scale food freezers VFDs and next-generation controls systems The business case Sold the project as much as the technology did Simple payback wasn t good for some measures Used IRR, ROI, NPV, and contextual comparisons 2

3 The Refrigeration System Multiple tunnel freezers Multiple spiral freezers Food product freezing 3

4 Safety improvements were a project goal Intelligent monitoring system includes new shutdown protocols and failsafes Safety was also part of the project business case 4

5 Refrigeration System Optimization Project VFDs on compressors 5

6 Refrigeration System Optimization Project VFDs on compressors VFDs on condenser fans 6

7 Refrigeration System Optimization Project VFDs on compressors VFDs on condenser fans VFDs on freezer fans 7

8 Refrigeration System Optimization Project VFDs on compressors VFDs on condenser fans VFDs on freezer fans VFDs on glycol pumps 8

9 Refrigeration Optimization Controls Floating head and floating suction 9

10 Refrigeration Optimization Controls PID and Self-Optimizing Controls 10

11 Refrigeration Optimization Controls System Modelling Capability Optimize setpoints Optimize production order System start-up lead time optimized based on product 11

12 Refrigeration Optimization Controls System Training Up to 2 years of data to train system model Data included production, energy use, and weather variables, maintenance logs, set points, etc. 12

13 Refrigeration Optimization Controls System-level optimization Optimizing not for a single compressor, but for the entire suite of machinery Multi-variable optimization 13

14 Defrost Management Temperature controlled vs. scheduled Hot gas defrost only used when needed, to the extent needed ~$2,000/year predicted savings 15+ year payback Was implemented 14

15 Refrigeration System Optimization Project VFDs to allow for system optimization Innovation in intelligent controls to affect optimization 15

16 How the Project was Sold? Safety Simple payback was considered NPV, IRR, ROI combination Putting these statistics in a context using comparison Operational and Materials Savings 16

17 Simple Payback Other projects had more competitive paybacks Did not sell the project, especially not innovative measures Does not account for the time value of money 17

18 Net Present Value and Return on Investment Net Present Value (NPV) Value of all cash flows, discounted over time I m going to write you a cheque for $500,000. Return On Investment (ROI) Net gain (Gains Investment) over Investment Make 25% on your money 18

19 Internal Rate of Return (IRR) The discount rate at which the NPV of all cash flows sum to zero 19

20 Internal Rate of Return (IRR) The discount rate at which the NPV of all cash flows sum to zero IRR is in fact a favorite metric of many CFOs, Controllers, and other financial specialists. -Solutions Matrix Ltd. 20

21 Absolute Cash Flows 21

22 Discounted Cash Flows 22

23 Discounted Cash Flows $700,000 -$700,000 23

24 Internal Rate of Return (IRR) The discount rate at which the NPV of all cash flows sum to zero 24

25 Internal Rate of Return, Risk, and New Technology Unlike NPV, etc. IRR addresses risk Difference between IRR and hurdle rate is potential profit That difference also serves as a margin of error If technology is innovative, there s more risk Showing a high IRR on new technology is essential 25

26 Mark Jewell s One-Page Proposal Contains Simple payback Net Present Value (twice) Return On Investment Savings-to-Investment Ratio Internal Rate of Return Modified Internal Rate of Return 26

27 Comparisons to Real Life NPV: I m going to write you a cheque for $500,000 20% off your annual electricity bill 2 free months of electricity IRR: The bank of Energy Efficiency 27

28 Comparisons to Real Life Equate to units of product sold 28

29 LDCs and Business Cases You may be fuzzy on IRR Talk to your LDC They want you to conserve electricity They can help you sell your project Bring them in early as a partner They have incentives The incentive structure brought this project to Ontario 29

30 15+-year payback defrost measure Poor financial statistics, possible liability Turned into an asset by offering it for free Measures were offered menu style Customer was told if the selected 6 of 7 measures, the 7 th would be free Measure is performing better than expected 30

31 Safety as a sales point Controls improved safety Safety is the number one concern Safety saves money 31

32 Project Being Replicated 6 at a Time Thousands of MWh saved Major world-wide competitive advantage Savings in Arizona and California will be even greater If your business is freezing, it s time to adopt a new generation of efficient systems 32

33 Refrigeration System Optimization Project Implemented a mix of conventional and innovative measures Innovation was mostly on the controls side Financial data and good sales techniques sold the project Project was not an easy approval Risk of innovation needed mitigation Customer was extremely happy 33

34 Thank You 34