Energy Efficiency for Small and Medium Enterprises (Energy & environment technology source books)

Excerpt. © Reprinted by permission. All rights reserved. Energy Efficiency for Small and Medium Scale Enterprises Energy and Environment Technology Source Books By Elizabeth Muguti, Saskia Everts, Bob Schulte, Linda Smallegange Practical Action Publishing LtdCopyright © 1999 The United Nations Development Fund for Women (UNIFEM) All rights reserved. ISBN: 978-1-85339-446-1 Contents INTRODUCTION, xi, Who can implement an energy crisis programme?, xii, How can the energy efficiency of an enterprise be improved?, xiii, 1 The importance of energy efficiency programmes, 1, 2 Analysis of the existing situation (Step 1), 7, 3 Identifying immediate energy saving potentials (Step 2), 19, 4 Technology options for energy saving, 28, 5 Choosing the best option (Step 3), 62, 6 Implementation, monitoring and evaluation Implementation (Step 4), 70, BIBLIOGRAPHY, 76, SOURCES OF FURTHER INFORMATION, 76, GLOSSARY, 81, CHAPTER 1 The importance of energy efficiency programmes Advantages of energy efficiency Small-scale enterprises are a major source of income and employment in developing countries, and women entrepreneurs run many of them. Running a small business can be difficult because of: * High costs of inputs (raw materials, energy); * Scarcity of materials, power cuts; * Low productivity; * Labour intensive production processes; * Low product quality; * Need to find and keep clients for the products in a competitive market; * Low availability of relevant information; * Poor access to finance, etc. This could result in very little profit or even losses. A need arises therefore to find ways of improving operations from which the entrepreneur can benefit fully. Although energy efficiency (EE) programmes will not solve all the problems, they will at least eliminate an important one: high energy costs. The entrepreneur should bear in mind that the SME is not isolated from the rest of the industrial sector, but has to compete with large enterprises on the consumer market. Moreover, the fact that there are so many SMEs means that there is fierce competition for a limited market. This in itself calls for a very high degree of efficiency. Energy efficiency in any enterprise is desirable for financial, social and environmental reasons. Financial reasons focus on the profitability and potential growth of the enterprise, while the social and environmental reasons focus on the benefits that the enterprise, its workers and the society get from an EE programme. Financial reasons for energy efficiency In any industrial production system, energy is an essential and usually expensive input. In small-scale industries, energy costs usually range from 5 to 10 per cent of the total input cost, although in some industrial sectors it can be much higher (see Table 1). In general, energy consumption per unit of production in small enterprises in developing countries is known to be high, especially when compared to larger industries and to similar industries in the more industrialized countries. The reasons for these high energy consumption figures per product are basically: * The use of old and energy inefficient technology; * Low awareness of the energy consumption and the possibilities of energy savings (very few people keep track of their energy costs). It may also be that the energy is low-cost, subsidized or free, in which case enterprises are not very energy efficient because energy is not the main cost item. In these circumstances entrepreneurs should consider social and environmental reasons for energy efficiency, which can be strong marketing tools (see Niche market). To make profits there must be a good balance between the inputs required by the business and its output. In order to get this balance right, the costs of inputs must be controlled. When energy is one of the most important costs, good energy control will determine the viability of the business. SMEs are particularly vulnerable to any rises in production costs as they work with very s