Energy Sufficiency Kaizen Achieving Zero Energy Cost and Variance with Sufficiency-inclu- sive Private Energy Portfolios
DOI:
https://doi.org/10.13052/dgaej2156-3306.2643Keywords:
Energy Index, Energy Portfolio, Efficiency, Deming Cycle, Discounted Cash Flow, Distributed Generation, Kaizen, PDCA, Real Op- tions, Reliability, Sufficiency, Variance Analysis, Zero Cost, Zero Vari- anceAbstract
Mid-sized industrial and commercial firms consume between 300
to 30,000 MWh of electrical and thermal energy per month. Energy man-
agers in these firms seek to minimize costs, both in terms of absolute
expense and the indirect costs of variances from expected quality.
While many business managers negotiate direct utility costs, few
firms have a continuous improvement process that structure cost con-
trol, efficiency improvement, and risk reduction. A complete manage-
ment process requires planning, quantifying and exercising options, and
variance analysis of efficiency and risk measures. The methods to ac-
complish this are not well understood.
We describe how an Energy Index is used in the context of the
Deming cycle with sufficiency-inclusive private energy portfolios, usu-
ally implemented as a microgrid. We discuss valuation, planning tech-
niques, and show how business can institute a process that can be used
to drive both energy cost and variance to zero over time.
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References
We will refer to Energy Sufficiency as an index term and DG (Distributed Generation)
in terms of technological installation. In some cases they are synonymous.
O can be defined as net or gross receivables value shipped, or standard value earned
units.
Operations theory considers the term ‘demand’ that which is required to produce an
output. In Power Engineering this is called Consumption (kWh); Demand (kW) is the
sum of connected load capacity averaged over a sample period.
It was thought that setup costs would make small batches prohibitively expensive.
Few people considered that setup times could be brought from hours to seconds, ef-
fectively zero, allowing lotsize = 1.
m1, m2 are arbitrary contracts for grid energy (e.g., electricity, district steam); m3 is
a resource contract that fires s1; s1 is a sufficiency system (e.g. Natural gas cogenera-
tion).
Endx is discontinuous, it can be 0 or undefined for Ψ = 0.
E.g., Cuyahoga River, 1969; fish died instantly when exposed to the water of the Hud-
son and lower Rhine River in the 1970s.
See [3] chapter 3.2; a more complex model that adds mean reversion and price jump
models can be reviewed under [4].
