Towards effective energy spends

The fallout of higher power bills, plus a growing knowledge of the environment and related concerns, has been an inclination for employing efficient, sustainable and greener energy, apart from looking at the more traditional energy saving strategies both in homes and businesses. Thus opines Pradhyumna T. Venkat, CEO of the Energy and Utility business in the Chennai-based Gemini Communication Ltd (http://bit.ly/F4TVenkatP). “Organisations and CFOs are increasingly becoming conscious about using greener forms of energy, primarily for reduction in operational expenditure and better energy reliability,” he adds, during the course of a recent interaction with Business Line. We continue our conversation over the email.

Excerpts from the interview.

What are the areas within energy spends, where CFOs can look for expenditure reduction?

The key concern for every CFO is to cap the operational expenditure year-on-year and explore ways to reduce the same. One of the major components of opex (operating expenditure) is the cost of energy, something that is always on the increase, due to the increase in consumption and tariff.

The energy requirements for any organisation can be segmented into those of:

* Business sustenance : Desktops/notebooks, and plant and machinery consume about 35-40 per cent and are extremely vital for the functioning of the business.

* Business critical : Fans, light-bulbs etc. that consume not more than 10-15 per cent of the total energy but are important for the employees to work/operate.

* Business essential : Printers, photocopiers, air-conditioners, and heating systems that consume about 50-60 per cent of the total energy are clearly the biggest drain for any enterprise.The other key issue faced by every organisation is that of energy reliability from the electricity board grid. There is no sustained and guaranteed source of energy that can power all the above-mentioned requirements 24x7. As we all know, an increased use of diesel generators to ensure continuous power results in higher operational costs.

It is possible to use greener and renewable energy sources to address these issues and also provide a sustainable and lower cost of ownership to companies while ensuring an energy uptime and availability of 99.95 per cent.

Using a combination of solar photo-voltaic and solar thermal technologies, it is possible to implement a solar energy system (SES) that can reduce an organisation's operational expenditure by 30-50 per cent annually.

A mix of roof-top and ground-mount systems can be in place, providing alternative power that will be greener and more reliable than the current options.

On the effective methods to manage energy. Examples.

A successful example of how solar energy makes a positive impact on organisations is in the telecom sector. There are about 1,25,000 sites in the country which do not have grid-connected power supply and have to rely on a diesel generator 24x7.

Telecom operators and tower infrastructure companies incur about Rs 80,000-Rs 1 lakh a month as operational expenditure, and a major chunk of this is for diesel consumption.

And, the power availability is only about 95 per cent. In the alternative, a solar-powered energy system can reduce the monthly operational expenditure by 50 per cent by reducing the operation of the diesel generator to less than 2 hours a day, and more importantly increase the power availability to 99.95 per cent.

Clearly, the total cost of ownership of a renewable energy system (not just solar) over a 3-5 year period is lower than the traditional form of energy. However, the initial capex (capital expenditure) for a solar energy system is on the higher side and at least about 2-3 times higher than that of a conventional energy option.

CFOs need to, therefore, look at the long-term cost reductions that are possible and arrive at a trade-off: initial higher capex vs long-term lower opex. Thankfully, there is a capital subsidy for individuals and organisations looking to invest in a solar off-grid system.

It is possible to get up to 30 per cent capital subsidy from the Government, thus ensuring a faster return on the investment and making it economically viable to invest in a solar energy system.

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