Oscar Maan
1 July 2007 Report No. 2007.TEL.7165
Summary
Companies that handle and store large quantities of fossil fuels, for example coal-fired power plants, should care about environmental issues. More pressure is put on these companies by employees, communities and governments, all affected by the pollution of the work and local environment. The companies are expected and sometimes forced by law, to look for new and cost-efficient ways to manage and minimize environmental impacts.
Coal can be stored on traditional open storage yards or inside a closed storage system. When stored inside a closed system numerous environmental advantages are present, i.e. no material losses due to wind erosion, no losses in calorific value due to weather influences. A disadvantage may be that at a first glance the closed system will be much more expensive.
Therefore, the main question is whether the closed storage system is more expensive than the traditional method when all physical information is charted and translated into monetary information, using Environmental Management Accounting (EMA). By application of EMA all involved costs will be exposed and EMA enables the computation of a realistic payback period. The two storage systems to be compared are the traditional closed storage system and the Eurosilo concept designed by the Dutch company ESI/Eurosilo B.V.
Investment decisions which should elicit environmental impacts are often made on the basis of incomplete environmental-related information. Many companies face this problem: the lack on information and a standard definition of environmental costs. All kind of different costs, i.e. disposal and air cleaning costs, can be defined as environmental costs depending on the preference of the organization. Most of all these costs are not traced systematically and attributed to the responsible processes and products, but are all summed up in overhead costs. Because of this it is very difficult to clearly see where improvement is possible. Environmental protection projects, which are trying to prevent wastes and emissions, better utilize materials and energy resources, are not recognized and implemented. Due to this unrecognizing the economical and ecological benefits of these protection projects are missed.
In order for companies to make investment decisions based on relevant and useful information, an environmental tool has been developed called Environmental Management Accounting (EMA). The purpose of EMA is to provide relevant and useful information to the
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1 July 2007 Report No. 2007.TEL.7165
company’s management to support the various responsibilities of the management, like planning, conventional and environmental decision-making, controlling etc.
EMA focuses on both physical and monetary information, and is able to convert all financial accounting cost data into useful information in order to increase material efficiency, energy efficiency etcetera, and to reduce environmental impacts and costs. If a company is successful in achieving cost-effective compliance following environmental regulations and self-imposed environmental policies, long-term competitiveness increases.
Other environmental tools like ISO 14000 standard and Environmental Impact Assessment (EIA) are interchangeable connected to EMA. Each method completes and follows each other up. In theory when a new development starts, an EIA is used to assess the positive and negative environmental impacts of a proposed project and its alternative options. The EMA tool must be applied to consider all the relevant aspects of different alternatives and decide which alternative is most excellent for the situation. The environmental management system to create and support the framework, in which the project can be developed and operated, should be formed according to the ISO 14000 standards. This should, in theory, ensure a stable and environmental management system that can ensure how sustainable development will be achieved.
In order to make a good comparison between the traditional open storage system and the closed silo system a case study has been developed. This case study is based on information presented by different companies. The considered open storage system is mainly based on information presented by the power plant EPZ in Borssele. This power plant was willing to present information about their coal storage yard. The considered closed storage system is the Eurosilo concept. The company ESI/Eurosilo B.V provided all facts about this silo system.
Based on all information provided by the companies, the EMA method is applied. By application of EMA a total overview of all different costs groups, which are present at the different storage systems, are presented in a schematic table. All the physical terms are translated into monetary terms and are also put into the schematic table. Finally it is determined with the help of the schedule, which storage system is economically the best.
Considering the case scenario the final conclusion is that through the use of EMA the silo system is the best and economical justified solution for the storing of coal. Although the investment costs will be higher than those of the traditional open storage yard, the time in which the total costs of the closed system outrun the open system is only 14 years. This means
Oscar Maan
1 July 2007 Report No. 2007.TEL.7165
that after 14 years the total operating costs of the silo will become lower than the total operating costs of the open storage yard. Considering a life time of 30 years for both the systems, this will be an economical justified investment. Important to understand is that not all costs and figures of the total cost scheme are known and thus are not filled in the EMA model. When all the costs are in fact known in detail, the return on investment period of the silo system probably becomes even shorter because of all the extra costs for the open storage system, which are now still unknown.
