A new report from Siemens Financial Services illustrates the enormous cost saving potential in industrial sector through the use of energy-efficient technologies

Industrial enterprises could save crores of rupees on their electricity bills by implementing variable speed drives (VSDs) on motors in their production environment. A new report from Siemens Financial Services (SFS) has calculated that up to Rs 36,600 crore of energy cost savings could be gained by industry with the full implementation of VSDs over the next five years. The SFS report, which quantifies potential energy-efficiency gains from VSD implementation, highlights just one of several energy-efficiency initiatives that could lead to substantial cost savings in the industrial sector.

VSDs optimise the voltage and frequency supply to an industrial motor to change its speed of operation, rather than the traditional method of "choking" constant speed motors, thus greatly reducing consumption of electricity. Electric motor systems use approximately 40% of total global electricity (according to Electric Motor Systems Motor Policy Guide published in January 2011) and account for 69% of total industrial electricity consumption as per the report titled "Energy Efficiency Policy Opportunities for Electric Motor-Driven Systems published by International Energy Agency in 2011.

The Consortium for Energy Efficiency reports that over 95% of the lifetime costs of an industrial motor is the cost of the electricity it consumes. In light of this, the case for implementing VSDs becomes all the more compelling. Even though not all motors are applied to variable speed processes, it is estimated that between 50-70% of industrial processes would benefit from this technology.

Currently, the global penetration of VSDs (as a proportion of installed motors) is still low, there is thus a long way to go in realising its full energy and cost-saving potential. Sunil Kapoor, CEO, Siemens Financial Services Pvt Ltd, comments: "In light of the steady upward trajectory of electricity prices, greater energy efficiency is becoming an urgent concern for industrial organizations as escalating energy costs will erode profit margins and damage competitiveness.

The magnitude of the estimated potential savings enabled by VSDs presents an extremely compelling business case for industrial companies to invest in this power-saving technology. More importantly, keeping in mind that VSD is just one of the many possible energy efficiency initiatives that industrial companies can adopt, the true potential for energy and costs savings in industry is very large indeed."

Smaller businesses, in particular, are confronted with capital shortages. However, companies can easily overcome this financial barrier by using alternative methods to fund energy-efficient equipment upgrades. Asset financing techniques such as leasing and renting aim to offset the monthly cost of the new equipment against the energy savings it delivers across the financing term, effectively making the investment zero net cost or even cash positive. Even when a project cannot completely offset the equipment upgrade with energy-efficiency cost savings, the financing arrangement can nevertheless subsidize the larger part of the upgrade cost. As up-to-date equipment may not only reduce energy costs but also boost productivity and extend manufacturing capability, leading to improved revenues and margin, manufacturers should leverage such alternative financing solutions to capture the significant potential cost savings hidden in the industrial processes.