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Selection of energy conservation projects through Financial Pinch Analysis

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  • Roychaudhuri, Pritam Sankar
  • Kazantzi, Vasiliki
  • Foo, Dominic C.Y.
  • Tan, Raymond R.
  • Bandyopadhyay, Santanu

Abstract

Energy conservation measures are an important means of reducing operating costs and greenhouse emissions. However, one of the barriers to the implementation of such projects is the limited availability of financial resources. Pinch Analysis, which was initially developed to conserve thermal energy and improve energy efficiency in industrial processes, is extended in this paper to address the problem of energy conservation project selection. A new method is developed to include financial cash flows for appropriate selection among independent projects. This study applies Financial Pinch Analysis to select multiple independent projects from a large pool of candidate projects, subject to different funding constraints. To account for the time value of money, Net Present Value is used to determine the financial feasibility of the projects against various funding options. The applicability of the proposed method considers a pool of projects with equal and unequal lives, as well as the financial risk associated with individual projects. In this study, risk is estimated by calculating the certainty equivalent cash flows of the projects. A graphical approach to obtain optimal insightful solutions is presented and demonstrated through three illustrative examples of energy conservation projects in the pulp and paper and cement industries.

Suggested Citation

  • Roychaudhuri, Pritam Sankar & Kazantzi, Vasiliki & Foo, Dominic C.Y. & Tan, Raymond R. & Bandyopadhyay, Santanu, 2017. "Selection of energy conservation projects through Financial Pinch Analysis," Energy, Elsevier, vol. 138(C), pages 602-615.
    • Handle: RePEc:eee:energy:v:138:y:2017:i:c:p:602-615
    DOI: 10.1016/j.energy.2017.07.082
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    2. Tan, R.R. & Aviso, K.B. & Ng, D.K.S., 2019. "Optimization models for financing innovations in green energy technologies," Renewable and Sustainable Energy Reviews, Elsevier, vol. 113(C), pages 1-1.
    3. Jiří Jaromír Klemeš & Petar Sabev Varbanov & Paweł Ocłoń & Hon Huin Chin, 2019. "Towards Efficient and Clean Process Integration: Utilisation of Renewable Resources and Energy-Saving Technologies," Energies, MDPI, vol. 12(21), pages 1-32, October.
    4. Nel, A.J.H. & Vosloo, J.C. & Mathews, M.J., 2018. "Financial model for energy efficiency projects in the mining industry," Energy, Elsevier, vol. 163(C), pages 546-554.
    5. Sinha, Rakesh Kumar & Chaturvedi, Nitin Dutt, 2019. "A review on carbon emission reduction in industries and planning emission limits," Renewable and Sustainable Energy Reviews, Elsevier, vol. 114(C), pages 1-1.
    6. Keivan Nemati-Amirkolaii & Hedi Romdhana & Marie-Laure Lameloise, 2019. "Pinch Methods for Efficient Use of Water in Food Industry: A Survey Review," Sustainability, MDPI, vol. 11(16), pages 1-26, August.
    7. Klemeš, Jiří Jaromír & Varbanov, Petar Sabev & Walmsley, Timothy G. & Jia, Xuexiu, 2018. "New directions in the implementation of Pinch Methodology (PM)," Renewable and Sustainable Energy Reviews, Elsevier, vol. 98(C), pages 439-468.
    8. Miguel Castro Oliveira & Muriel Iten & Henrique A. Matos, 2022. "Review on Water and Energy Integration in Process Industry: Water-Heat Nexus," Sustainability, MDPI, vol. 14(13), pages 1-24, June.

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