Energy Efficiency: A Tool for the Energy Transition

Electricity is one of the great pillars of humanity and progress. Throughout time, the technological discoveries to improve this vital tool have been a turning point for development. These modern times are no exception. We are experiencing an energy revolution that calls us to reinvent the way we use our resources, and energy is one of our most important assets.

Humanity has embarked on a process of reviewing its production processes, seeking to do more with less. The call for energy efficiency entails a paradigm shift that promotes the reduction of energy losses, maximizing its use and generating attractive savings for consumers.

The Federal Electricity Commission (CFE) power supply rates are calculated according to a methodology designed by the Energy Regulatory Commission (CRE). These electricity tariffs and the tariff scheme have great relevance for industrial and commercial consumers. CFE charges the energy consumed in kWh using a fixed price and establishes a maximum consumption rate for electricity in Kw (the cost of energy varies according to the range in consumption: the more energy consumed, the higher the price for kWh). A good analogy to understand this difference is the dashboard of a car: a kW is the speed measured by the speedometer. A kWh is the distance measured by the odometer. [1]

CFE keeps the electrical system running, depending on supply and demand. Electricity consumption throughout the day and month is variable. For this reason, electricity also has a variable price depending on the hours within which it is consumed. For these price variations to be reflected in the electricity bill, different hourly rates are established, depending on the region of the country and its temperature characteristics. These schedules are divided into a base hour, an intermediate hour and a peak hour.

Peak times in the central, northeast, north and south regions, for example, are established in winter from Monday to Friday between 6 p.m. and 10 p.m. and from 7 p.m. to 9 p.m. on Saturdays. In summer, they are also considered from 8 p.m. to 10 p.m. on weekdays. These schedules reflect the differences in demand during these periods, and therefore, the prices of electricity vary.

Likewise, when a maximum consumption is exceeded within peak hours, penalties are applied. The sum of these factors makes it attractive to evaluate strategies that adjust energy consumption to achieve reductions in electricity rates.

One of the first steps for a commercial or industrial client to evaluate his/her savings opportunities is to know their Energy Index, which is calculated by dividing the total amount of energy consumed, obtained from CFE receipts, by the production capacity during the same period:

𝐸I = Total Energy Consumption / Production Capacity (product or service)

The Energy Index makes it possible to understand the company's consumption profile, monitor energy consumption associated with a process or equipment, and establish consumption limits. If this Index overpasses the values ​​established as reference, it indicates that there may be an opportunity for energy adjustments and savings. The Index is also helpful to assess energy saving goals. [2]

Likewise, to detect the possibilities of optimizing energy consumption, the installed electrical loads must be analyzed individually with the following information: the type of load, its capacity, an estimation of the percentage of load at which it works (percent of its maximum capacity) and the operating hours of each process.

With this data, the following energy savings and bill reduction opportunities can be explored[3]:

1. Control of consumption

2. Demand control

3. Power factor control

4. Rate change

1. Consumption control.Consumption control can be achieved through the drop of energy consumption by directly reducing the amount of energy purchased through optimization of hours of operation; changes of loads working at the same time; implementation of night schedules or operations after regular schedules; and optimization of engines and systems (lighting, refrigeration, air conditioning). These measures (except for the optimization of engines and systems) consist mainly in the reorganization of consumption habits that do not involve big investments.

Consumption can also be controlled through the recovery of energy that is wasted (generally in the form of heat) to reuse it in another system and indirectly reduce the purchase of energy for the operation of that system.

2. Demand control. Usually, peak rates represent between 20 percent and 40 percent of electricity bills. "Peak shaving" or "reduction of peaks” help reduce charges for maximum demand or "premium rates," producing instant savings on the electricity bill.

Its implementation consists of generating the necessary energy during a certain period, through a source other than the CFE grid. On-site alternative energy generation systems, which can use an internal combustion engine or photovoltaic system, can be used. The power of the grid can be adjusted to a maximum limit, relying on the power of the batteries and the photovoltaic system to satisfy the rest of the electricity that is demanded.

Falling costs for lithium-ion batteries have made Battery Energy Storage Systems (BESS) increasingly attractive as an alternative method of reducing peak loads. These batteries are charged during hours of cheaper rates or with free solar power. The batteries are then discharged to avoid paying peak prices during the most expensive hours of the day.

Recent studies by the China Three Gorges University show that when a strategy of peak reduction and frequency regulation is implemented in industrial parks together with energy storage systems, the cost of electricity is reduced by 10.96 percent.[4]

Due to the reduction in consumption during peak hours, in addition to the benefits for customers, peak shaving also has important beneficial effects for the grid, improving the national electricity system. In a study published in the Journal of Energy Storage in 2020, a 20kV distribution network in Kabul with 22 buses was analyzed. The authors concluded that the installation of a BESS for peak shaving could reduce energy losses by up to 20.62 percent, substantially improving network performance. [5] 

An extremely interesting factor in terms of operation is that these energy storage systems are considered "behind the meter," for which they do not require interconnection permits or bureaucratic procedures; this allows an easier implementation and operation.

It is becoming common for these alternatives to be integrated into intelligent Energy Management Systems (EMS). These generate maximum efficiency in electricity consumption, allowing the BESS to bring down the maximum peak load as low as possible, at the same time ensuring that the BESS is not discharged too quickly (resulting in an undesired power peak). [6] This moderation of charges also protects the batteries and extends their useful life.

3. Power factor control. The Power Factor is an indicator of the correct use of energy in a range from one to zero. A value greater than 0.9 indicates that the energy is used correctly; a range below implies a waste.

The presence of reactive energy in a facility generates energy and voltage losses in the grid, increases the losses of the electric equipment and creates a deficiency in voltage regulation.

A simple solution is the placement of capacitor banks (condensers) that provide the reactive KVA's (kilo Volts Amperes) necessary for the power factor to be above that stipulated in the supply contract. Another way to compensate for the power factor, in the case of industrial plants, is to use synchronous and/or high-efficiency motors instead of standard induction motors.

4. Rate change. This is the last resort once the consumption and demand profile have been optimized. Savings are generated by lowering the tariffs to a new consumption profile. Within the return on investment, the investment required to adapt the installations and change from one type of voltage to another must be contemplated. To make a rate shift, CFE must first be consulted and a new contract must be signed.

The accelerated technological development in terms of energy efficiency makes available to consumers a wide range of tools that allow them to generate savings on their electricity bills. In addition to these economic savings, there are plenty of environmental benefits generated by the reduction of energy consumption. Thus, energy efficiency is an economically and environmentally attractive alternative through which companies can be part of the energy transition.

China Three Gorges University, Liu, D.; Jin, Z.; Chen, H.; Cao, H.; Yuan, Y.; Fan, Y.; Song, Y.  Peak shaving and frequency regulation coordinated output optimization based on improving economy of energy storage. China, 2022. Retrieved from: https://www.mdpi.com/2079-9292/11/1/29

Corporate Research Center, Västerås, Sweden. Peak Shaving Control Method For Energy Storage.  Georgios Karmiris and Tomas Tengnér. Sueden, 2022. Retrieved from: https://www.sandia.gov/ess-ssl/EESAT/2013_papers/Peak_Shaving_Control_Method_for_Energy_Storage.pdf

Economic Commission for Latin America and the Caribbean (CELAC). National monitoring report on energy efficiency in Mexico. México, 2018. Retrieved from:  https://repositorio.cepal.org/bitstream/handle/11362/43612/1/S1800496_es.pdf

Federal Electricity Comission. Tariffs. México, 2022. Retrieved from: https://app.cfe.mx/Aplicaciones/CCFE/Tarifas/Tarifas/tarifas_negocio.asp?Tarifa=HM 

National Committee for Productivity and Technological Innovation, A.C. (COMPITE), Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ). Electricity rates – tutorial for field work. Mexico, 2015. Retrieved from: https://energypedia.info/images/f/fb/GIZ_Tutorial_Tarifas_El%C3%A9ctricas_2015.pdf

Elum Energy, Amanda Amara. Peak Shaving solar energy storage methods to reduce peak loads. Retrieved from: https://elum-energy.com/es/2021/08/25/que-es-el-peak-shaving/

Energy Management Magazine, Diego Martín Sánchez. Peak Shaving. Mexico, 2014. Retrieved from: https://e-management.mx/2014/01/14/peak-shaving/

Energy Storage Journal, Danish, S.M.S.; Ahmadi, M. A coherent strategy for peak load shaving using energy storage systems. Denmark, 2020. Retrieved from: https://www.sciencedirect.com/science/article/abs/pii/S2352152X20316601

National Polytechnic School of Ecuador, Juan Carlos Castro Cuasapaz. Study of the Methods of Reduction of Electricity Demand in Peak Hours "Peak Shaving" and its Feasibility in Ecuador. Ecuador, 2017. Retrieved from:  https://bibdigital.epn.edu.ec/handle/15000/18788

ESTA International, LLC. Regulatory framework of the smart grid (REI) in Mexico for the Energy Regulatory Commission. Mexico, 2014. Retrieved from: https://www.cre.gob.mx/documento/3978.pdf

Trust for the saving of Electric Energy (FIDE) of Mexico and National Commission of Electric Energy, Guatemala (CNEE) of Guatemala. Demand management and power factor optimization. Guatemala, 2010. Retrieved from: https://www.cnee.gob.gt/EficienciaEnergetica/FIDE/003%20M%C3%B3dulo%20III%20(Demanda%20-%20Optimizaci%C3%B3n%20Factor%20Potencia).pdf

Nature Climate Change Journal, Nykvist, B.; Nilsson. Rapidly falling costs of battery packs for electric vehicles. Sueden, 2015. Retrieved from: https://mediamanager.sei.org/documents/Publications/SEI-Nature-pre-pub-2015-falling-costs-battery-packs-BEVs.pdf

PwC. Electricity Supply in Mexico. México, 2019.  Retrieved from: https://www.pwc.com/mx/es/industrias/archivo/2019/20190228-el-suministro-electrico-en-mexico.pdf?utm_source=Website&utm_medium=SiteSuministro&utm_content=DescargaPDF

Ministry of Energy. Energy Program 2020-2024. México, 2020. Retrieved from: https://www.gob.mx/cms/uploads/attachment/file/562631/PS_SENER_CACEC-DOF_08-07-2020.pdf

Tecnológico de Monterrey, Orozco Cuevas, Humberto. Decrease in demand during peak hours (peak shaving) through the use of an on-site generator, using diesel and biodiesel b20. México, 2005. Retrieved from: https://repositorio.tec.mx/handle/11285/572388?locale-attribute=en

[1] National Committee for Productivity and Technological Innovation, A.C. (COMPITE), Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ). Electricity rates – tutorial for field work. Mexico City, 2015. Retrieved from: https://energypedia.info/images/f/fb/GIZ_Tutorial_Tarifas_El%C3%A9ctricas_2015.pdf

[2] IDEM.

[3] IDEM.

[4] China Three Gorges University, Liu, D.; Jin, Z.; Chen, H.; Cao, H.; Yuan, Y.; Fan, Y.; Song, Y.  Peak shaving and frequency regulation coordinated output optimization based on improving economy of energy storage, China, 2022. Retrieved from:  https://www.mdpi.com/2079-9292/11/1/29

[5] A coherent strategy for peak load shaving using energy storage systems Danish, S.M.S.; Ahmadi, M.; Danish, M.S.S.; Energy Storage Journal. 2020. Retrieved from:  https://www.sciencedirect.com/science/article/abs/pii/S2352152X20316601

[6] Corporate Research Center, Västerås, Sweden. Peak Shaving Control Method For Energy Storage.  Georgios Karmiris and Tomas Tengnér, Sueden, 2022. Retrieved from: https://www.sandia.gov/ess-ssl/EESAT/2013_papers/Peak_Shaving_Control_Method_for_Energy_Storage.pdf