We remember the times where the cost of power and energy sources were not even considered as a key economic factor for the achievement of desired profit targets. With the ever increasing demand for power in both peak and off peak times, especially from the industrial sector and the households, the local power generators are working round the clock to meet such demand by either generating or buying power. The unit cost of electricity is higher than the unit price charged to the consumers in most power sources. State electricity authorities are always seeking upward price revisions to minimize the losses incurred. Increased prices can create havoc in business circles with the drastic effects on the industrial sector which will have the chain effect of many rounds of higher cost of living for the General public. Right now, the petroleum authorities are making substantial losses on domestic fuel supplies. So, it is up io all corporate entities, state instituitions, non corporate business sector, households and the other consumers of electricity to plan now on a very priority basis to prepare solid electricity consumption methods to minimize the impact on electricity price increases in time to come. The prolonged dry weather in catchment areas will add to the problem. During the last few years, the country had to face these dry conditions from time to time and this became a severe strain on the finances of state electricity authorities. Main sources of power generation are through Hydro sources, Thermal, coal, Solar, Dendro, Wind power.
Recently, the LNG (Liquefied Natural Gas) came into consideration on an enhanced scale. Major LNG producing countries in the world include Qatar, Australia and Malaysia. The setting up of LNG power plants in Sri Lanka on a larger scale is being considered to arrest the situation and also to meet the ever increasing power demand and of course with the view of reducing the losses of State electricity Authorities. We have to lower the unit cost of electricity supplies also to either match or lower the unit selling rate of other countries in the region and also in other parts of Asia. This will hold key to new Foreign Direct Investments to our country. With the predictions of global oil supplies available only for the next three decades, we have to introduce power from other sources. Already Qatar & Malaysia are into the production of energy from Gas in the run up to crude oil quotas and limitations of supplies in the future.
We have to seriously consider the Economic Growth Levels planned for the next decade in the light of our debt service requirements and local and foreign debt repayments. Energy availability and its prices will have a major bearing directly on the economic growth levels of our country. With this objective in mind, I have written this article for the benefit of all sectors, especially the corporate and state sectors. The corporate sector of course will employ sound measures for power saving while the problem lies with the state sector, where the employees holding a weak approach for savings in electricity costs as there are no compulsions on them in most state instituitions. The households will also keep a tab on their electricity consumptions. We have to wake up now to ensure continued and uninterrupted supplies of electricity at affordable and business friendly rates.
The state electricity Authorities are also talking to foreign investors in trying to set up power stations generated from sea-waves as we have to now serve power to new sea ports, airports, free trade zones, hotels and other foreign and local investors who wish to set up business in Sri Lanka. Further, we now have many TV broadcasting stations and channels, radio stations, cable and satellite TV channels, internet and other electronic and telecommunication equipment or communication and other purposes.
There is lot of opposition to power generation practices which are not green. Public protests in respective areas usually take place where the environment is affected due to power generation. Electricity tariff rates are designed in such a way that high end users are charged more on a progressive scale and a tariff structure.
Office layouts should be designed in such a way that an increased number of staff are accommodated in different departments by the provision of specially designed tables, chairs, filing cabinets and other equipment. These arrangements could be sourced out from either abroad or from local manufacturers. This will have an immediate impact on electricity consumption and will lower the costs. In the alternative, the staff will have to be located in two or more locations requiring additional power sources which results in higher electricity costs. In the near future energy will become a precious commodity for all corporate, business, state and domestic environments. Synergy effects could be made use of, for different departments in the use of office and other equipment, to cut down costs.
In the twentieth century, the major oil producing countries were from the Middle East and from Africa. The production levels have now come down in these areas, due to high cost of extraction and production costs. The total costs cannot be recovered due to lower selling prices. Total costs exceed us $ 100 in certain countries and it is not economically prudent to engage in large scale production.It has now become cheaper to import oil and gas. Oil prices went past US$ 100 in 2007 to 2008 due to heavy demand from China and India. China held the 2008 Olympics and India was in an economic boom. Both countries developed their infrastructure facilities in a big way during this period. World oil prices started dropping after 2009 to lower levels and is on the rise again from last year. This has placed world economies in turbulent situations. This cycle takes place periodically and the corporate and others should devise “afloat strategies” to tackle vagaries in energy prices.
For the benefit of especially the corporate sector, a number of power saving measures are enumerated below.
Carrying out of a monthly energy audit and making adjustments to usage patterns and times
Reduction of paper usage and print outs. As a result, the expected usage life of the printers, photo copiers and other equipment will also increase
Replace existing bulbs with CFL and LED bulbs. Capital costs may be higher but there will be savings in electricity costs over the years and there will be definite savings in the long term usage.
Use Hibernation feature of computers and laptops. This feature allows saving of the work load at the end of a working day and continue from the same point next day. Scheduling of all work stations to switch to Hibernate mode after working hours and during weekends and holidays
Establish energy efficient practices such as divisional meters, incentives and power saving contests among different divisions
Acquire programmable thermostats. Thermostats have the capacity to automatically adjust the temperature of the workplace when no one is working and present in office, or example during lunch and tea breaks and also during meeting times. This results in cost savings in air conditioner usage.
Switch off equipment when not in use. Common examples are printers, scanners, microwaves, photo copiers, air conditioners, tea or coffee vending machines, as these equipment continue to draw power even if they are plugged in.
Buy energy saving and efficient devices. A cost/benefit analysis be carried out comparing the capital costs with savings in electricity bills to arrive at effective decisions
Look out for small drafts that may leak air. Even a small draft can result in lower cooling levels. Proper air sealing will eliminate drafts.
Control over heating and cooling at desirable times. Keep the temperature 4 degrees down during winter and colder times. This measure will save electricity by a fair percentage.
Minimize usage of skylights. Artificial lights conserve power while skylights are free. Use maximum day light and use artificial lights in dark areas. Use daylight for stairs, corridors, reception, lobby and other areas if possible, which are not so important to the working of the organization and corporate entity.
Employ energy saving features for entire office and factory - educate staff on energy saving methods
Replace out dated equipment with new appliances. The equipment which are not in maximum working order and efficiency could draw unnecessary and non productive power.
Installation of solar panels as solar energy is a free, cleaner and renewable source of energy. Although the capital costs are higher, lower maintenance and savings in costs will more than compensate for the initial costs.
Where the office and factory buildings are located in a large area, planting of trees will ensure a regular blowing. This will become effective during power cuts/failures and will save generator usage costs also
Taking of suggestions of the employees to cut down power costs
Procure tax benefits in the form of capital allowances and buy energy saving equipment after consulting the finance division when liquid funds or cheaper sources of funds are available.
Usage of latest technology to hold meetings. Technologies in the form of Webex, Skype, Tele-conferencing, can make a sizable contribution towards fuel and energy savings. This include travelling, air conditioning and the opportunity costs of travel time and lengthy meeting and conference times.
Permit employees to work from their residences. An employee can connect to office network
Using safe security measures by using the VPN technology. However, it is recommended to restrict this practice to selected employees.
Do away with the practice of providing cooked meals from the company kitchen as daily electricity.
Consumption is higher in using kitchen equipment and utensils. Costs will come in the form of gas, electricity, salaries, food and beverages, water, food wastage, pilferages and of course the cost of capital equipment. As an alternative measure, meal vouchers could be provided to order meals from a nearby external caterer or the provision of a meal allowance which is added to the monthly salary of the employees, so that they can bring their own home cooked meals.
Avoid working during weekends, holidays and after hours unless permitted by divisional managers with the approval of the directors
Eliminate the internet facility from the computers of staff members other than the senior executives and directors as most staff members in offices resort to the practice of surfing internet for purposes not connected with their work and even during working hours.
The above are only some of the points for a typical office environment and additional measures may come into light and practice in other types of organizations based on type of industry they are in. In a manufacturing environment, cost of power and energy will be higher and needs prime attention as there is every possibility of unit cost of final product going up due to electricity and other energy costs going up. The increased product cost may not be passed on to the ultimate customer due to a variety of sensitive factors such as prices of competitors, customer willingness to accept the upward price revisions, effect on niche markets, export sales and other factors. In this type of scenarios it is advisable to cut down on the variable component of the electricity cost by well planned strategies. Fixed portion of the electricity cost could not be brought down due to its inherent nature. So it is the variable part which needs continuous attention both in the factory and at office. Higher electricity and energy costs may be passed on to the customer, if the manufacturer has a monopolistic situation over the sale of the product due to higher quality or the absence of substitute products. However, there will be a point to which the price could be increased as it may become cheaper to import the product rather than manufacturing. This will have drastic results on the economy by way of:
Loss of employment to workers/staff
Loss of tax revenue to the government
Loss of income avenues to suppliers of all categories
Non availability of product in all domestic markets periodically due to late shipments from overseas
Loss of foreign exchange from exports and the need for additional forex for imports.
Further enhancement of our trade deficit. Our trade deficit has been affected recently due to higher costs on fuel imports
Possibility of lower quality imports at cheaper prices. If the products are of a consumer nature, lower quality may well result in health hazards for the consumers forcing additional health bills also
Possible brain drain of skilled workers and staff
Dependence on imported products rather than the locally produced products
10.Overseas suppliers may increase prices at short notice citing sundry reasons.
The above factors show the gravity of the problems involved in raising selling prices of locally manufactured products. The energy price factor is of paramount importance in stabilizing the overall costs and to avoid upward price revisions. Manufacturing concerns should always be engaged in a continuous search for avoiding price increases. The united states of America has now developed improved technology to extract and produce fuel at lower costs. This has given them great advantage over the other global oil producers. Technology can assist lowering of unit cost of any product or service in the long term. It is much advisable to acquire latest technology now and improve the quality and lower the unit cost of any product or service rather than facing competition in years to come. The initial capital cost could be obtained by way of a syndicated long term loan at a lower rate of interest favourable to the borrower. Certain loans of banks and financial institutions are re-financed by state financial authorities and banks. The manufacturers should always be on the lookout for value addition to their businesses with a long term view in mind. The technology to be acquired be energy efficient with higher productivity levels and with a good warranty period and a reliable after sales service. It is prudent and advisable for the manufacturing concerns to utilize a pre-prepared matrix showing the impact of electricity on overall costs at different levels of productivity and at different electricity tariff levels. By this way a manufacturing entity can look forward to the future with confidence at a higher level.
The span of control at both factory and office will also have a direct bearing on the cost of energy. The span of control should complement and support the productivity levels and also in keeping the energy prices under control at different stages of the financial year to achieve the profit targets budgeted. As far as possible, workers and staff should always be employed in checking on energy usage as a matter of daily routine.
This measure will increase their direct interest in the profits and will also improve attendance and avoid all types of conflicts within an organization. Let us not forget the difficult times we had in 1996,where even the clock had to be put forward by half an hour to control the electricity consumption of the country. Energy costs have already ruined the economies of many countries. In summing up it should be stated that “Power savings will hold the key for profit targets and continued corporate success.”
We should immediately draw up an energy production, procurement, usage and conservation forecasts and prepare a National Energy Plan for the next 5 years at least, until we come out of the current national debt problem.
The writer is a finance professional and a corporate analyst and has vivid memories of power cuts enforced in the past.
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