The State of Energy Management in the Australian Mining Industry

01 Jul 2006Archived News Energetics in the News

Recent introduced energy regulations require organizations to focus their management of energy. Regulations such as the Federal Energy Efficiency Opportunities legislation and the NSW Energy Savings Action Plans regulations place emphasis on ensuring that energy management is part of normal business operating processes. Additionally, today’s rising oil and energy prices serve as a strong business case for more efficient energy management. As such, many companies around the globe are applying continuous improvement mechanisms to their energy operations.

One tool that explores the way in which energy is managed within organisations is Energetics’ One-2-Five® Energy diagnostic tool. Developed to determine how well energy is managed as a core business function, the diagnostic tool assesses the maturity (or sustainability) of a company’s energy management practices across ten key areas: Leadership, Understanding, Planning, People, Financial Management, Supply Management, Operations and Maintenance, Plant and Equipment, Monitoring and Reporting and Achievement.

The diagnostic identifies barriers to improving energy management practices and helps the business to assess its strengths and weaknesses. Delivered in a facilitated workshop, the tool records a business’ responses to provide a reflection of its energy management system. The facilitator’s role is that of a “change agent”, allowing the business to own the outcomes. The tool provides a short-term implementation roadmap with five critical improvement areas prioritised for management focus, rather than grappling with a myriad of issues.

The outcomes of a diagnostic session are:
• An overall ‘one to five’ star-rating for the site;
• A benchmark report relative to other sites in the same country and industry;
• A list of five critical management actions which the site should undertake;
• Immediate responsibility and timings for implementation are agreed and recorded

It is not recommended that all sites strive for a five star energy management status. This is world’s best practice and is suited to a limited number of industry types and locations. A high three or four star performance is a recommended goal for the majority of large industries. One-2-Five®Energy is not designed to replace existing systems, rather to assess how best to augment existing systems to deliver sustainable improvement in energy management. For example, One-2-Five®Energy can form the energy chapter of a Six Sigma management system.

The following article provides an indication of the breadth of the database on both an industry and a country basis. Focus has been placed on the performance of the mining industry, specifically areas of good performance and areas for improvement.

A Summary of Energy Diagnostic’s by Country
Since the diagnostic’s launch in 2000, 1,731 diagnostic sessions have been benchmarked in the One-2-Five®Energy database. Figure 1 represents the global distribution of sites benchmarked. In this figure “Rest of Europe” includes France, Germany and Ireland and “Rest of Asia” includes China, Japan and the Philippines, with the majority of assessments conducted in the USA and 18% conducted in Australia, representing more than 300 company sites.

Figure 1: Energetics’ One-2-Five® Energy Benchmarking 2006 – Diagnostics by Country

Table 1 demonstrates the average total energy cost (in AUD) per year to sites in these countries, highlighting that overall, diagnostics are conducted on sites with high annual energy spend. The average cost of energy to Australian sites is the lowest, perhaps due to the low cost of energy in Australia, and that smaller enterprises in Australia have completed diagnostics.

Table 1: Energetics’ One-2-Five® Energy Benchmarking 2006 – Average energy cost by country

Figure 2 illustrates the average One-2-Five®Energy star-ratings for sessions in these countries, demonstrating that the average star-rating across countries is around two stars, with Asia rating more than two stars. This is a result of the types of industries represented by the sessions in each country, as well as how well energy is managed by various industries within these countries impact on these results.

Figure 2: Energetics’ One-2-Five® Energy Benchmarking 2006 – Average star-rating by country

A Summary of Energy Diagnostic’s by Industry
Figure 3 illustrates the breakdown of industries within the database, and is dominated by the manufacturing sector, which must therefore be further analysed to provide additional detail.

Figure 3: Energetics’ One-2-Five® Energy Benchmarking 2006 – Diagnostics by sector

Figure 4: Energetics’ One-2-Five® Energy Benchmarking 2006 – Diagnostics by manufacturing sector

The average total annual energy cost of these sectors is listed in the table below, demonstrating that sites with large annual energy costs fall within the mining, retail, hospitality and communication sectors.

Table 2: Energetics’ One-2-Five® Energy Benchmarking 2006 – Average energy cost by sector

Illustrated in Figure 5 are the average star-ratings for these sectors, demonstrating that average performance falls within of one to 1.5 stars with no single sector highlighted for outstanding performance.

Figure 5: Energetics’ One-2-Five® Energy Benchmarking 2006 – Average star-rating by sector

Focus on the Mining and Metals Industry
Mining sites represent five percent of the total number of sites included in the benchmarking database, or a total of 95 sites. This information cannot therefore be used to draw quantitative conclusions. Also, metals refining activities are not represented within mining sites, but within the manufacturing sector. Figure 6 includes the distribution of these sites, totaling 353 sites, illustrating that both mining and refining are well-represented in the database.

Figure 6: Energetics’ One-2-Five® Energy Benchmarking 2006 – Diagnostics by mining sector

Table 3 shows the average annual energy costs to these sub-sectors. The low cost of energy to the aluminium sector is surprising and indicative of the fact that overall, only alumina production has been assessed to date.

Table 3: Energetics’ One-2-Five® Energy Benchmarking 2006 – Average energy cost by mining sector

Figure 7 shows the average star-ratings for these sub-sectors and while the trends are within a limited range, the high performance of the oil, gas and petroleum industries can be highlighted and the refining sector is also more advanced in energy management.

As previously stated, it is not necessary for these sectors to strive for five star ratings, however with current legislative focus on energy management these sub-sectors should strive for a three to four star rating.

Figure 7: Energetics’ One-2-Five® Energy Benchmarking 2006 – Average star-rating by mining sector

A Comparison of Mining Industry Best Practice to World’s Best Practice
A comparison of industry practices across the ten One-2-Five®Energy areas of energy management is also possible within the benchmarking database Figure 8 illustrates the mining industry’s performance in these areas, demonstrating that overall, the mining industry’s best practice in these elements is equivalent to world’s best practice for all except the following three elements:
• Awareness and training about energy management;
• The assessment of performance in energy costs (reviewing energy costs annually); and
• Innovation and new technology and a consideration of innovation as part of core business function.

As expected, average mining industry performance is relatively strong in the areas of financial management and supply management (elements 5 and 6). Performance in the areas of operations and maintenance, and plant and equipment are also adequate. However, performance of the mining industry in the areas of understanding of energy management, awareness and training, innovation and the adoption of new technologies and auditing of progress is inadequate. These areas need to be addressed across the industry.

Figure 8: Energetics’ One-2-Five® Energy Benchmarking 2006 – Average mining sector star-rating by diagnostic element

Addressing Critical Actions for Continuous Improvement
One of the most valuable outputs of the diagnostic is the list of critical actions. These actions are presented at the end of the diagnostic session and assigned responsibilities and timings are agreed within the meeting. These actions are the most sensible next steps for a company to take, and once completed, the company is ready to repeat the diagnostic, typically within 6-12 months. In this way, the company is on a pathway to continuous improvement in energy management.

Figure 9 shows the critical actions presented in diagnostic results for the mining sector. This figure illustrates the following three areas of energy management in which a significant number of mining sites are deficient:
• Demonstrated corporate commitment to energy efficiency at the site;
• Reporting, feedback and control systems for energy efficiency projects; and
• The allocations of accountabilities for the management of energy.

The following four areas of energy management are also of concern:
• Understanding of energy efficiency performance and opportunities;
• Plans for improving energy efficiency in the short to medium term;
• Targets, performance indicators (KPI) and motivation to improve energy efficiency; and
• Energy efficiency awareness and training.

The industry also needs to take action on how it meters and monitors its energy use and the manner in which it audits progress in energy management systems.

Figure 9: Energetics’ One-2-Five® Energy Benchmarking 2006 – Mining sector critical actions

A Pathway towards Continuous Improvement in the Mining Industry
The information provided in this article has been presented to guide the broader mining industry as it endeavours to meet regulatory responsibility in the area of energy management and efficiency. The recommended actions can be conducted in the context of existing energy or business management systems, giving an organisation no cause to add specific energy management systems. Rather focus should be given to the augmentation of existing systems to include due consideration of energy management. Addressing these short comings should not be onerous, and should place the industry on a pathway to meeting and exceeding regulatory requirements, resulting in reduced energy costs in the short term and continuous improvement in the long term.

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