Cost Cutting through Energy Saving for SMEs

Sustainable agriculture
Ritu Poudyal08.06.2023
According to Climate Watch and the World Resources Institute, the Global Greenhouse Gas (GHG) emissions in 2016 were 49.4 billion tonnes of CO2 and the agriculture sector accounted for about 14.3% of it. A study carried out by the Food and Agriculture Organization (FAO) in 2010 estimates the global dairy sector is responsible for 2.7% of global greenhouse gas emissions. It is important to find ways to reduce GHG emissions to meet the goals of the Paris Agreement which aims to limit global warming to 1.5°C and requires countries like Nepal to report transparently on actions taken and progress in climate change adaptation and mitigation. 

Commercial Agriculture for Smallholders and Agribusiness (CASA) Programme works to facilitate technical assistance to Agri-SMEs in the dairy and vegetable sector to adapt and develop climate-resilient agri-food systems, increase smallholder incomes, and promote environmentally friendly practices with research-backed climate-friendly investments in agriculture.

CASA partnered with S.K. Dairy in Nepalgunj, one of the largest private dairy processing centers in Lumbini Province, to diversify its product line and strengthen its dairy supply chain. CASA facilitated technical assistance to the dairy to start producing mozzarella cheese and aged-hard cheese (chhurpi) and increase its milk collection volume to fully utilise its processing capacity. To diversify its product line, S.K. Dairy installed new equipment and infrastructure that would result in increased energy consumption. To maximise energy efficiency, minimize energy loss and reduce carbon emissions without compromising the productivity and quality of the dairy, CASA supported S.K. Dairy to conduct an energy audit through Rastriya Urja Dakshata Kendra Pvt. Ltd. (RUDK), a company that works in increasing energy efficiency and promotes the use of sustainable energy resources in Nepal.

RUDK conducted an energy audit at S.K. Dairy in May 2022 to measure consumption and carbon footprint with recommendations. Based on the findings, S.K. Dairy planned to reduce costs, train staff, and reduce environmental impact through greenhouse gas emissions (GHG), utilities, fuel, and electricity.

RUDK team carrying out the first energy audit in May 2022

RUDK assessed energy consumption, emissions, and practices in the dairy identifying losses and conservation opportunities and provided recommendations through an energy management action plan to increase energy efficiency and reduce GHG emissions.

Some of the recommendations made by RUDK that would provide S.K. Dairy with energy saving opportunities are as follows:

  • Installation of capacitor banks could improve the power factor of the dairy.
  • Better insulation of the pipes, flanges and equipment could ensure better heat conduction performance and reduce heat loss.
  • A steam heat recovery system could be developed to re-utilize the same steam/ condensation in the boiler.
  • The compressed air pressure in the dairy is adjusted for 10 kg/cm2 when the system requirement is not more than 6 kg/cm2. Therefore, the compressed air pressure can be optimized for reducing the energy consumption and costs.
  • Use automatic voltage regulator to boost the voltage level in the dairy.
  • The current energy stabilizer in the dairy consumes 10 percent of total load consumption but indicates low performance. Thus, it can be replaced with an energy efficient stabilizer.
  • The efficiency of wood fired boiler is measured to be around 19 % which is very low compared to the ideal wood fired boiler performance of 55%. The efficiency of the boiler can be increased by maintaining the existing one or replacing the entire boiler (e.g., pallet fired) for better efficiency.
  • Installation of variable frequency drive (VFD) will help to optimize the energy consumption as per load speed requirement as the motors are running on their full speed and using higher energy irrespective of low-speed requirement.

Following the recommendations, S.K. Dairy implemented these energy-saving measures:

  1. Changed their cooling system from water-cooled to an air-cooled.
  2. Maintained their voltage stabilizer to reduce energy waste.
  3. Added a lower capacity diesel generator (DG) for backup power during low demand.
  4. Improved insulation to minimize energy loss and increase efficiency.

These changes, along with staff awareness, helped reduce heat loss and improve wood usage in the boiler. A post-audit study in March 2023 assessed the impact of the changes.

The post-audit study showed that the dairy increased its capacity utilization from 52% to 65% resulting in cost savings of NRs. 25,000 (GBP 161) in energy bills every month. The structural and behavioural changes led to a reduction in energy intensity allowing the dairy to produce the same number of products with less energy, which is a significant achievement for a medium-scale enterprise.

The EEM (energy efficiency measure) implemented at the dairy has resulted in a significant decrease of around 47 tCO2 GHG emissions annually, reduced diesel and wood consumption, and improved operational efficiency of the overall system.

Despite financial limitations, S.K. Dairy implemented a few recommended changes from the audit, resulting in significant energy efficiency improvements and reduced operations costs. Mr. Santosh Pokharel, the managing director of S.K. Dairy says ‘With an investment of NRs. 1,200,000 (GBP 7,741), the dairy expects to recover the cost in less than a year.” The post-audit study shows that these energy-saving measures led to a 31% decrease in electrical energy consumption, a 24% reduction in the monthly electricity bill (NEA), and a 37% decrease in GHG emissions, making the dairy industry more sustainable and environmentally friendly.

RUDK team collecting data related to energy consumption during the post-audit study in March 2023

Motivated by the positive outcomes from the initial audit, S.K. Dairy aims to continue enhancing energy efficiency, reducing energy costs, and lowering its carbon footprint. CASA plans to share this success story with other dairy processors to inspire them to improve energy efficiency and reduce their carbon footprint. Through a collaborative effort with the Dairy Industries Association (DIA) and Nepal Dairy Association (NDA), CASA will organize an information dissemination programme to provide recommendations for reducing energy consumption and related costs to other dairy processors.

Nepal, Rwanda, Ethiopia
Sustainable agriculture
Commercial Agriculture for Smallholders and Agribusiness Programme
The project aims to involve smallholder farmer businesses sustainably in agricultural value chains, thereby improving their living conditions and economic situation. By building inclusive agricultural systems, smallholder farmers will have improved access to markets, information, and means of production. Additionally, the project emphasizes...