You are on page 1of 11

Power Quality Application Guide

Background Notes
Section 2 - Costs

Business Model
for investing in Power Quality Solutions
Jonathan Manson

Abstract: This Background Note illustrates how non-financially technical personnel can use their experience
to help communicate to and convince other decision-making departments to invest in upgrading an electrical
installation’s resilience and reliability. It is based on some extensive research carried out among a wide
range of commercial and non-commercial industrial sectors in Spain. The conclusions drawn are not
considered to be nation specific and are intended to indicate both the importance for such qualification to
take place and an effective way to do it.

Introduction ........................................................................................................................................................ 1
Part 1 – Research findings ................................................................................................................................ 1
Description of current situation .......................................................................................................................... 1
Mechanical & electrical consequences of PQ problems experienced by organisations ................................... 2
Practical consequences of PQ issues ............................................................................................................... 3
Preventative actions and renovation solutions taken ........................................................................................ 4
The cost of future proofing installations is more expensive as retro-fit ............................................................. 5
Part 2 - General application of these findings ................................................................................................... 7
Quantification of lost productivity....................................................................................................................... 7
Conclusion ......................................................................................................................................................... 9

implications would be of some of the specific


Introduction findings. Data and conclusions based on this
study may reflect general rather than specific
This paper comprises two related parts. The first
conditions.
presents a summary of the results and
conclusions drawn from some primary research
The second part of this paper uses the findings to
into the cost-effectiveness of upgrading electrical
develop a generic system for evaluating the cost
installations in non-residential sites. It was carried
consequences to an organisation of electrical
out in 2001 in Spain among professionals working
system failure. These are expressed by the main
in 13 different industrial sectors ranging from
problem causing issues identified from the study.
academic to pharmaceuticals to food manufacture
From these have been developed a series of
and heavy industry.
original formulae, which enable these data to be
brought together and quantified.
The research sample comprised electrical
contractors, design engineers and maintenance
The practical aim of this quantification is to assess
managers, who had attended a seminar on the
the duration and cost consequences of
consequences of harmonic pollution on the safety,
productivity loss due to operational interruptions
reliability and efficiency of non-residential
caused by power system failure.
electrical power systems.

Some of the 99 interviews were carried out face- Part 1 – Research findings
to-face and some by telephone. Each telephone
interview lasted at least 45 minutes; each of the
face-to-face interviews lasted up to two hours. Description of current situation
The following details the issues, which occur after
Whilst the nature of the research structure does the point of common coupling directly related to
not lend itself to extrapolate the results nationally, the end user installation. For the purposes of this
within that caveat, some indications are drawn in paper, the quality of supply before the point of
the report, which suggest what the national common coupling (PCC) is not discussed. The

– www.lpqi.org pg. 1 / 11
focus therefore is placed on those power quality lists them in terms of the frequency of experience
issues which occur within a given installation, are by the respondents:
caused by either or both of the installation’s
design or the use it is being put to. They are: − Unexpected tripping of the differentials 71% eg
nuisance tripping from overheating caused by
− Harmonic pollution – harmonics especially the earthing devices’ over sensitivity reacting to
3rd, 5th and 11th, which unbalance the system harmonics.
and can cause cables to overheat. − Flicker 58%
− Voltage variations – the inability of the system − Unexpected power spikes 51% eg surges or
to cope with sudden surges of power demand over voltages because of poor power quality
from heavy machinery. resulting in unexpected charges stored in pfc
− Earth leakage – the mini-currents flowing from capacitors and switching which induce large
electronic equipment, which are individually current or voltages in other adjacent parts of
operating within the regulations, but the system.
accumulate into dangerous levels usually in − Sporadic problems with computers 45%
the Neutral (N) conductor.
− Unexpected machine or component failures
− Increasing lack of electro-magnetic 36%
compatibility – the interference from standard
− Stalling of motors at start-up 32%
power supplies with all other functions within
the system. − Permanent risk of electric shock or discharge
22% eg caused by component failure (cable
overheating, circuit breaker enclosure
Mechanical & electrical consequences breakdown, busbar vibration exposing metal
of PQ problems experienced by parts).
organisations − Interference with data communication
equipment 17%
The following illustrates the frequency spread of
PQ issues experienced by the research sample:
− Problems with electrogenous groups of
equipment 11% eg stand by generation eg
Chart 1 PQ Issues experienced diesel engine driving alternators.

100 (Source: Gorham & Partners “Business Model” study – 2001)


90

80 An important qualification of these data is the


88%
70
frequency of experience. Further it is worth noting
60
79% that the apparently lower response areas
(“Electrogenous group issues”; “Data Comms.
50

40

Interference”) reflect the lower numbers of sites in


44%
30

20 which either very heavy demand equipment exist


10 (eg heavy industry) or the nature of the operation
0 (media, web hosting for example) means that the
High Harmonic Voltage Earth target universe is by definition numerically fewer.
Content in N & variations leakage This is reflected by the figures on the right of the
phase conductors
following chart, which define the levels of
(Source: Gorham & Partners Business Model study – 2001) responses to these individual questions. The three
bars on the left indicate the frequency the PQ
What this means is that: issues were experienced annually by the
respondents.
− (High) current levels in the earthing system
was the most frequently reported PQ issue The following conclusions can be drawn from the
experienced (88%). findings from this original research project:
− High harmonic content in N and Phase
conductors was the second most prevalent PQ − PQ related power system problems are
issue experienced (79%). experienced frequently. Aggregating the above
− Voltage variations was the third most reported data, any kind of PQ issue is experienced at
issue and still at a very high level in least once per month.
installations which should be more stable to − The risks and vulnerability of the systems
ensure reliable operations (44%). involved is further emphasised by the very high
incidence of “risk of electric shock” (earth
The consequences from these PQ problems cover leakage), 80% and differential tripping, 56%.
a number of practical events. The following table

– www.lpqi.org pg. 2 / 11
Chart 2 – Frequency of PQ operational consequences
experienced Frequency distribution and time lost

1000 900 800 700 600 500 400


% responding
300 200
100
100
0
0
Based on all respondents’ replies (75% of the total
Tripping differentials 34 56 10 71 sample), the following table profiles the down time
Risk of electric shock 10 80 10 22 and consequential costs caused by operational
Electrogenous group issues 8 84 8 11
failures caused by poor Power Quality:
66 31 3 51
Unexpected power spikes
Flicker 52 39 9 58 Table 1 - Cost of down time
Stalling motors at start 27 59 14 32

Unexpected machine/ component failure 52 36 12 36 Sample profile


Data. comms. interference 24 58 18 17 Sample profile of the effect s on the of the duration Sample profile of the costs to the
organisation’s activities of reported organisation
Sporadic computer issues 40 40 20 45
“down time”
0 20 40 60 80 100 120
% % %
% experiencing PQ issues
Computer failure 24 Hours 40 <€ 1.500 15
> 50 times pa 12-50 times pa 1-12 times pa % responding Data loss 21 Days 29 €1.500 -€3.000 19
Data having to be re -inputted 14 Weeks 26 €3.000 -€6.000 31
Interference with production
23 Months 5 €6.000 -€12.000 15
processes
(Source: Gorham & Partners Business Model study – 2001) Machines stalling at start -up 5 €12.000 -€30.000 0
Overheating cables 9 €30.000 -€60.000 8
Fire 3 >€60.000 12
− Reinforcing the point about the important
minority of larger/ heavier demand
(Source: Gorham & Partners “Business Model” study – 2001)
installations, the experience of PQ problems’
frequency distribution for the 11% of The above table presents the profiles of the total
respondents relating to the “electrogenous sample experiences in terms of:
group issues” lies between weekly and
monthly. − The effects that PQ issues have had on their
− A significant minority (20%) experience them activities.
infrequently ie annually. − The overall profiles of the time wasted (“down
time”) by these interruptions.
Practical consequences of PQ issues − The profile of financial wastage caused by
them.
Key to assessing the effects of these technical
issues on a given organisations’ productivity and The conclusions drawn are as follows:
efficiency will be an understanding in practical
terms of the organisations’ operational Poor power quality affects industrial efficiency
consequences related to specific PQ issues.
To date it is unlikely that organisations go through − The reduction in productivity levels generated
the process of measuring the costs and by the effects of inadequate electrical
consequential wastage caused by PQ issues. This installations and consequentially poor power
study has shown that the financial or productivity quality is significant among this sample.
consequences are serious, need to be addressed
and generate substantial losses for industry and − A high proportion is related to unstable
inefficiencies for non-commercial entities. computer networks and to the consequences
of computers crashing.
The main areas to qualify the consequences of − 28% relates to production processes being
poor power quality are: disabled, the consequences of which will
include down time, raw materials wastage and
− Down-time due to mechanical failure and to potential loss of customer franchise, market
the time taken to repair/ restore the system. share and negative impact on brand equity.
− Cost of recovering/ re-inputting lost data. The down time costs are not trivial
− Cost of prematurely disabled equipment – the
shortened effective life span of a given piece of − Over 30% affect the operations for more than
equipment. one-week.
The following tables detail: − Whilst it is not easy to agree with respondents
what the wastage to their organisations was,
− - How frequently the sample experienced between 20% and 35% of the losses stated
the problem are larger than their definition of “tolerable
− The average time it wasted/ took to resolve the levels” ie €6.000+. It is considered fair to
problem assume, for reasons of some of the
− The cost, where applicable, of replacing the respondents’ understandable reluctance that
equipment. the stated losses err on the conservative side.

– www.lpqi.org pg. 3 / 11
Cost of equipment damage − How much time was wasted
Second, the study analysed the profile of − What the costs to the organisations tended to
equipment that was damaged by the issues be.
described above in that one of the major cost to
business elements is expensive equipment, which The data is as follows:
is either ruined or has its effective life drastically
%
and quite unnecessarily shortened. Data loss
%
Experienced
Duration
%
Experienced
Costs to the
organisation
Experienced

Company

The equipment covered was: operational


files
58 <1 hour 11 <€ 1.500 9

Company
24 1-4 hours 36 €1.500-€3.000 26
financial files


Computer
Batteries programmes
18 4-8 hours 19 €3.000-€6.000 26
1-1½ days 7 €6.000-

9
Motors 1½ - 3
€12.000
€12.000-
4 9
− Transformers
days
3-7 days 4
€30.000
€30.000-
9
€60.000
− Climate control/ air conditioning 1-2 weeks
2-4 weeks
4
4
>€60.000 13


Respondent base: 33
Protection > 1 month 11

Table 3 - Cost of data loss & re-inputting


This second table indicates the profile of
(Source: Gorham & Partners “Business Model” study – 2001)
equipment that was identified as being wasted
among the respondents’ experiences:
The conclusions from these data are:
Equipment % Respondents identifying − 34% of the sample admitted to experiencing
Type equipment damaged by PQ such data losses.
issues
− Of these a third (11% of the total sample) of
Batteries 20
these interruptions lasted more than a day and
up to one month.
Motors 53 − The costs involved might have seemed trivial
but it is interesting to note that 31% of these
Transformers 54 interruptions wasted over €12.000 per incident.
− Were these findings to be extrapolated to a
Climate
control/ air 13 national level, they would suggest an order of
conditioning magnitude of +/- 10% of Spain’s non-
residential organisations waste at least
Protection N/a €12,000 pa quite unnecessarily, just in this
area alone. It should be assumed that Spain is
not unique in regard to this.
Table 2 - Cost of damaged equipment
(Source: Gorham & Partners “Business Model” study – 2001)
Injury to personnel

“Protections” were not identified as being The responses relating to personal injury were
damaged. As a commentary on this finding, had limited and any conclusions based on a small a
they been working effectively, the damage to the sample as this need to be treated cautiously.
other equipment might have been mitigated or What is clear is that:
avoided. − There should be real awareness of the danger
as well as the financial waste incurred by
Damaged expensive equipment significantly reduces inadequate electrical installations.
productivity and profitability
− As there should be of the consequential
As this equipment is not inexpensive, when any increases in operating costs (eg insurance
one item is damaged or has its active life premiums, damages).
shortened, that automatically generates a high,
unexpected additional cost to the operation
(further) reducing the productivity of the Preventative actions and renovation
organisation involved. solutions taken
Cost of data loss and computer programming This section addresses the activities and costs
inefficiencies involved in eliminating PQ problems from a
system and the cost of implementing these
Finally, the following table details the responses
solutions as either preventative or remedial
relating to data loss in terms of:
actions.
− The proportion of the sample that admitted to
such losses

– www.lpqi.org pg. 4 / 11
These are founded in correct diagnosis and − 45% respondents answering the “reinforced
measurement, which enable designers, installers earthing” question had reinforced their earthing
and end users to specify the optimal way of either systems.
designing (new build) or renovating (existing
− Fewer than 30% of the total sample used
buildings) their installations to cope with current
active filters.
and future use demands. The areas studied by
this project were: − Over 80% claimed to have segregated circuits
to key demand equipment.
- Measurement − 48% of the total sample said they had
• thd – total harmonic distortion measured the harmonic profiles correctly.
• tRMS – true root mean square
- Cable sizing It should be remembered that, as the respondents
• Up-sizing phase conductors had all attended an LPQI PQ Harmonics’ Seminar
• Equal sizing N to Phase over the past 18 months, the picture, whilst
• Reinforcing the earthing system encouraging, can not be reliably extrapolated to
- Use of filters be nationally representative.
• Passive
• Active The cost of future proofing
• Circuit separation installations is more expensive as
- Correct analysis of harmonics.
retro-fit
Use of The final section of the study attempted to
Measurement
Filters
ascertain the variation in costs of having an
Measurement
Sizing N = to

Segregation

adequate electrical installation installed as new,


Reinforcing
Oversizing

Harmonic

% as opposed to the costs of renovating an existing


Systems
Earthing

Passive

Correct

thd TRMS
Cables

Circuit
Active
Phase

installation to bring it up to date and render it


longer term resilient and reliable.
Yes 59 57 71 51 45 45 29 83 48
No 41 43 29 49 55 55 71 17 52 The following table summarises the data relating
to investments made in installation up-grades and
Avg. Cable

Avg. Cable

compares those costs with the respondents’ views


increase

increase

on what additional investment at the outset would


have been to guarantee the same levels of
installation resilience.
+25% n/a
Nos. of responses Æ 27 Æ 25 Nos. of respondents falling into each category
Investment band Cost of upgrading the
Cost of original Cost of upgrading
€ 000 original through
investment through new build
retro-fit
< 1.55 0 0 0
Table 4 - PQ solutions adopted 1.55 – 3.1 0 0 0
3.1 – 6.2 0 1 0
(Source: Gorham & Partners Business Model study – 2001) 6.2 – 12.4 0 1 1
12.4 – 31.0 1 1 4
31.0 – 62.0 0 3 3

The findings were quite encouraging in that they 62.0 – 310.0


310.0 – 620.0
6
4
2
3
8
0
indicated greater application of the basic 620.0 – 930.0
> 930.0
5
3
0
3
1
0
measurement and diagnostic activities than were Avg costs per
category 557.0 402.0 148.0
encountered anecdotally some five years ago. € million

The findings are as follows: Table 5 - Comparison of preventative v remedial installation


upgrade
(Source: Gorham & Partners Business Model study – 2001)
− 70% of the sample responded to these
questions.
From this data, the cost of “retro-fit” ends up being
− 59% claimed they carried out accurate some 2.7 times more expensive than carrying out
measurement. the same work at the outset.
− 71% of the 27 respondents answering the
“over-sizing” question said they had The section that follows describes 8 case studies
introduced/ had installed oversized conductors selected from the 31 respondents who were more
(on average +25% over the prevailing national open about their companies. The remaining 23
wiring regulations norm). yielded some useful but partial information, which
− 51% of the total sample had increased the N has been incorporated into the tables and
size to be equal to the Phase. conclusions preceding this section. Case studies
have to respect the confidentiality of the
organisations involved, as such each one is

– www.lpqi.org pg. 5 / 11
presented respecting the organisation’s − Permanent risk of electric shock, continuous
anonymity. The following summarise them in computer crashing, interference with
terms of: communications systems and irritating flicker
− Valuable research data loss, re-inputting & re-
i. Power quality issues affecting their operations.
programming and reduced effective equipment
ii. The consequences these have had on the
lifespan
organisations’ activities.
iii. The nature and extent of the problem − 30 staff 1 day every 2 weeks; 2 days per
(numbers of staff involved, the frequency and person per month
extent of the problem occurring, wastage − €290.000 gross pa (Costs exclude any
incurred in terms of staff down time, equipment damage to/ replacement of equipment
damage/destruction).
iv. The remedial action that has been taken and − Total renovation and new build – the additional
its cost. costs of installing a reliably resilient, future
v. The time it took for that investment to be proofed system €850.000 or <10% of the total
amortised either by increased productivity and/ building cost (<20% of the power installation
or elimination of waste. cost)
− Elimination of the annual wastage & increased
The following cases relate to: productivity meant this incremental cost was
− Government buildings amortised in <3 years.
− A Science Museum
Case 3 - Mid sized hotel in N Spain – replacement of
− a medium sized hotel manual systems with a centrally computerised one.
− an airport power management centre − High harmonic pollution, overheating
− a Hospital conductors and system crashing
− two medium-sized industrial factories − Hotel administration, security & client service
− and a chemicals factory. non-functioning, loss of invoicing, booking
records and customer loss
In each case the following are summarised: − 2 staff ½ day per 2 weeks or 24 employee
days pa
− the PQ issue − Cost of down time, foregone income (phone,
− the Consequences to the organisation bars, room service etc) - €16.200pa
− the Cost caused by PQ issue − Circuit separation and upsize N conductors
− Remedial action taken − €8.500
− The Cost of resolving the issue(s) − 6 months
− Time for cost to be amortised.
Case 4 - Airport power management centre –
installation of variable speed drive power control
Case 1 - Governmental building – increasing use of
system
PCs.
− Earth leakage and high harmonic content in N − Intensive harmonics throughout the centrally
conductor sited power control centre seriously
overheating conductors
− RCD tripping causing extensive, unproductive
down time and data loss and consequential − Terminal systems and runway lighting failure,
data re-inputting battery, filter and distance control cards
irreparably damaged
− 5 staff 5 times per day and therefore the cost
of down time & lack of productivity - €60.000pa − 10 staff 5 times per month = 150 days per
month
− Reinforce Earthing system and double size N
conductors − Cost of down time & lack of productivity
€90.000pa
− €35.000
− Oversizing N + 50% greater than the Phase
− 7 months of problem free operations and active filters tuned to & installed at the
variable speed drives
Case2 - Science museum & research centre –
intensive use of PCs, medium power demand − €100.000
equipment. − 13½ months.
− High harmonic pollution, power surges &
voltage variations
Case 5 - Large district general hospital –

– www.lpqi.org pg. 6 / 11
ad hoc renovations/ extensions unbalancing the interruptions and premature equipment burn
power system out
− 300 staff & 10% idle for 8 days pa – 240 man
− Network very high harmonic pollution, voltage days lost - cost of down time €50.000 pa
variation from the heavy demand equipment
(air-conditioning, variable speed drives for the
− Lack of productivity €60.000pa or 1-2% of the
annual turnover
lifts, theatre generators etc) and overheating
cables − Upsize Phase and N conductors, circuit
segregation, installed equipment (active and
− Motors stalling at start up, computer crashing,
passive filters)
protective devices prematurely burning out and
increased insurance premiums − €90.000 for retro-fitting resilience
− 7 man days per month − 9½ months of problem free operations
− Increased costs of personnel and running the Case 8 - Chemicals factory using highly toxic raw
hospital (equipment replacement, hi8gher materials
insurance premiums etc.)
− High harmonic content in N conductor, voltage
− €45.000pa variations, earth leakage
− Correct measurement (tRMS – thd), upsize all − Increased equipment costs – premature
conductors (Phase + 50% - N = Phase v ½ damage, increasingly hazardous working
size as before), potentially polluting/ disturbing conditions, increased insurance premiums and
equipment segregated circuits, reinforcing reduction of productivity, profitability and
earthing system and installation of passive quality assurance
filters and UPS
− 10 staff (of total 75) affected by the installation
− €260.000 as retro-fit or 25-30% of that as failure - voltage variations occurred weekly –
new build production interruption monthly - 30 man days
− 5 years as retrofit and < 2 years as new lost pa
build. − Operational wastage and lost production -
€80.000pa
Case 6 - Medium sized plastics manufacturer – − Correct measurement, upsizing all conductors,
installation of sophisticated electronic equipment circuit segregation and installation of active
and passive filters & UPS
− Surges and peaks in voltage, high and
increased harmonic pollution − €400.000 as a retro-fit - €240.000 as new
build
− Loss of reliance on computerised, automated
production, unexpected stoppages to − 5 years as retro-fit - 3 years as new build.
production and raw materials wastage Case study assumptions:
− Recovery time, work-place environmental − Net annual working days are 220 (excl. public/
health issues and higher insurance premiums private holidays and allowing for sickness).
− Of the 150 staff, 10 lost ½ day per week for − Working hours per day are averaged at 7.
computer issues and voltage variations
experienced daily (Source: Gorham & Partners Business Model study – 2001)
− 1.760 man hours lost pa and increased
operating costs - €77.000pa
− Designing in resilience into the system, correct Part 2 - General application of
measurement, upsizing all conductors, N = to these findings
Phase, Circuit segregation to the printing
presses and installation of active & passive filters Quantification of lost productivity
and UPS
− €80.000 as a retro-fit - €40.000 as new build Were these findings to be extrapolated to assess
a national equivalent of the wastage incurred by
− 1 ¼ years as retro-fit - 7 months of problem industry, they would conservatively yield a figure
free operations as new build.
in the order of €54 million annually. As previously
Case 7 - Metal security fencing manufacturer reliant stated, the basis of this data is not that robust to
on automated continuous production and be able to do this reliably; however independent
communications EU regional assessments have been carried out
− High harmonic pollution and distortion and (see references) and their findings are not
voltage variations inconsistent with such an order of magnitude of
the losses incurred.
− Computer failure, flicker, interference with data Consequently the final section of this paper, using
communications, unexpected process the information and processes applied to the

– www.lpqi.org pg. 7 / 11
analysis of this specific piece of research, prematurely replaced piece of equipment. The
presents a general method, which can be used to types addressed – but not exclusively – are:
qualify the total cost to an organisation of poor PQ − Transformers
and unreliable electrical installations.
− UPS
It is understood that some organisations can − Motors
tolerate power outages and equipment failure, in − Switchgear
that the remedy after the event will not yield the − Filters/capacitors
operational benefits to justify such investment.
Though from a pure safety at work viewpoint, the Using the following elements. The weightings are
specific examples of this will be scarce. generic and can be tailored to suit specific
As has been demonstrated, the reduction in equipment profiles.
productivity and profitability stem from two
principal sources: Topic Formula Example raw data
− Cost inefficient use of equipment symbol
− Time wasted. Equipment En 50 batteries
To quantify either the time or the cost and time of Unit cost Cn $100
lower productivity, the following criteria have been Expected life
selected. In each case, individual organisations span - years Ln 5
would be basing their own assessments on their Level of tolerance αn
own operating data and any figures quoted here Robust αr
are for illustrative purposes only: Average αa .5
Sensitive αs
− Cost of the unit of equipment Actuarial costs pa* €n ($100/5)*50
− Actuarial expectations of the equipment = $1000 pa
effective life span (eg 5 years) Real annual cost R€ n ($100/(5/.5))*50
− Level of vulnerability of the unit concerned (ie = $2000 pa
robust, average or sensitive)
− Total staff numbers * ie the unit equipment cost divided by the
actuarial life span say, 5 years
− Staff numbers affected by equipment failure
− Average hourly rate (total staff and specific to As far as “Level of tolerance” is concerned, the
the core group affected) comprising: guide for placing a value on the three levels is
ƒ Annual salary. based on the fact that the greater the electronic
ƒ Cost to the company of any benefits (eg component the greater the sensitivity. So the
health insurance, company car, other three levels could be:
specific allowances).
ƒ Social/ employment costs/taxes. Robust αr = 1.0
ƒ Company overhead attracted by employees Average αa = 0.5
(variable and fixed operating costs). Sensitive αs = 0.25
ƒ Annual hours vary by country but are based Once again, each case should be agreed and
on either a 7 or 8 hour day and 220 working based on its own facts and merits.
days per year (extracting holidays, public
and private, and allowances for sickness). The unit cost/wastage can be calculated using the
− Down time due to the mechanical failure. following formula, first in percentage terms:
− Down time due to the time taken to repair the
system. €n n

− Where applicable the time taken to re-input lost (Cn / (Ln* αn)) = % loss of efficiency.
data/programmes.
Annual equipment wastage AE n = R€n - €n.
− (Raw) materials wasted.
− Revenue irretrievably lost. The following illustrates the process and how it
− -The costs to an organisation of revenue/ works:
income postponed.
− The financial cost of loss of market share. $1,000 $1,000
($5,000 / (5*.5)) = $2,000
− The cost of restoring brand equity. = 50% loss of efficiency.
Equipment cost-efficiency: Second, in gross financial terms:
The objective in this instance is to quantify the
percentage loss of financial efficiency of a

– www.lpqi.org pg. 8 / 11
Annual wastage AE n = R€n - €n, where R€n = Total employee time wasted – time, cost, % of
Real annual cost (total cost divided by actual total available time, % of total employee cost.
productive years) less €n = Actuarial annual cost.
Total gross annual wastage comprises therefore:
ie:
€n : $100 over 5 years = $20 pa − Annual equipment wastage
R€n : $100 over 2.5 years = $40 pa
− Total downtime wastage
Wastage AE n or (R€n - €n) = $20 pa
− Lost revenue
Quantification of the down time: is calculated − Cost of lost revenue
assessing: − (If applicable) investment required to regain
− First the amount of time lost before any repair market share/ financial penalties incurred
has been started.
− Second the time of the repair to restore the - Y€n = AE n + DT3 + I€n + P€n + MS€n
mechanical fault.
− Third the time for re-inputting any data lost. Conclusion
− Fourth revenue irretrievably lost.
The PQ issues which increasingly affect non-
− Fifth the cost to an organisation of revenue residential power systems coincide with
postponed.
the increased use of electronic equipment, high
− Sixth, quantified cost of regaining market power demand equipment and harmonics
share. generating equipment.

The following criteria are used: In many cases, the power installations were not
designed for this profile of use and consequently
Total number of staff – En are unreliable.
Nos. of staff affected/ inoperative due to the
interruption – Sn The consequences for these organisations are
Nos. of staff affected/ inoperative due to the repair that they experience significant loss of productivity
time (inc. data/programme re-inputting) – SRn and, where relevant, profitability.
Average € ph of the staff affected – S€n
Time inoperative – Hn To date there is little or no recognition of these
Revenue irretrievably lost (if relevant) – I€n avoidable losses and therefore no quantification of
Cost of revenue postponed (if relevant) – P€n them.
Cost of regaining market share/ financial penalties
(if relevant*) – MSn Resolving the PQ problems is more expensive to
Total case cost-inefficiency - € pa - Y€n carry out on existing installations as opposed to
*
anticipating them in the design of new
Where aggressive promotion is required installations. In the majority of cases identified by
this national research project, it was even so
In cases where the actual cost is not an issue but worth upgrading the power installations with the
the proportion of time wasted is, then the data cost of renovation being amortised in a
required is limited to staff numbers and time lost. commercially acceptable time scale.
In the majority of cases there are budget
restraints, hence the importance of being able to From the analysis of this study, a series of
cost account the wastage. formulae have been created to enable managers
The formulae to do this are as follows: to qualify the wastage, both in time and financial
terms, to their organisations and to assist in
Down time (DT)1 - Inoperative due to break down assessing the value of upgrading the power
of machinery or systems system to eradicate unnecessary drains on
resource and productivity.
- DT1 = (SIn*S€n)*Hn

Down time (DT) 2 - inoperative due to repair/ re-


inputting etc
- DT2 = (SR n *S€ n)*H n

Down time (DT) 3 - total time cost

- DT3 = DT1 + DT2

– www.lpqi.org pg. 9 / 11
Further reading about this topic: [3] Thomas S. Kelly, Jih-Sheng Lai “Costs and
benefits of harmonic current reduction for
[1] R. Billington (Canada), H. Abildgaard switch-mode power supplies in a commercial
(Denmark), A.M. Alabbas (Saudi Arabia), office building.” IEEE Transactions on Power
R.N. Allan (United Kingdom), S. Arnborg Delivery, Vol. 32, No. 5 September/October
(Sweden), C. Bogoi (Romania), Z. Božić 1996.
(Australia), L.F.M. Gonçalves (Portugal), E [4] EPRI – www.epri.com Power and delivery
Dialynas (Greece), E.A.T. Holen (Norway), D. markets – searchable areas.
Logan (USA), T. Manning (United Kingdom), [5] Other Leonardo Power Quality Initiative
Evanise Neves de Mesquita (Brazil), O. Application Guides, which complement this
Schmitt (Germany), A.R. Shirani (Iran), B. one:
Simpson (New Zealand), Shu Yinbiao Section 2 “Costs”
(China) "Methods to consider interruption 2.1 Cost of poor power quality - published
costs in power system analysis” – CIGRE – 2.3 Cost of sags and dips - due end 2003
Task Force 38.06.01, August 2001. 2.4 Power Quality – risk assessment - due
[2] G. Carpinelli, P. Caramia, E. Di Vito, A. Losi, end 2003
P. Verde “Probabilistic evaluation of the 2.5 Cost of solutions - due end 2003
economical damage due to harmonic losses Section 3 “Harmonics”
in industrial energy systems.” IEEE 3.1 Causes and effects - published
Transactions on Power Delivery, Vol. 11, No. Section 5 “Voltage disturbances”
2 April 1996. 5.5.1 Voltage sag case study in the textile
manufacturing sector - published.

Date 30-Oct-03

* Jonathan Manson is a Director of the management consultancy Gorham & Partners Limited, a UK based firm. He and the consultancy
have been working with the European Copper Institute for a decade both at EU and national levels. He is also a member of the LPQI
Editorial Board and Management Committee.

Copyright © European Copper Institute, Gorham & Partners Limited


Reproduction is authorised providing the material is unabridged and the source is acknowledged.

Acknowledgements

The project has been carried out with the support of the European Community and International Copper Association.

– www.lpqi.org pg. 10 / 11
LPQI Reference & Founding Partners

Akademia Gorniczo-Hutnicza (AGH) Istituto Italiano del Rame (IIR) Deutsches Kupferinstitut (DKI)
Web: www.agh.edu.pl Web: www.iir.it Web: www.kupferinstitut.de
European Copper Institute (ECI) Università di Bergamo Katholieke Universiteit Leuven (KU Leuven)
Web: www.eurocopper.org Web: www.unibg.it Web: www.kuleuven.ac.be
Polish Copper Promotion Centre (PCPC) Copper Benelux Wroclaw University of Technology
Web: www.miedz.org.pl Web: www.copperbenelux.org Web: www.pwr.wroc.pl
Centre d'Innovació Tecnològica en International Union of Electrotechnology (UIE) Engineering Consulting & Design (ECD)
Convertidors Estàtics i Accionaments (CITCEA) Web: www.uie.org Web: www.ecd.it
Web: www-citcea.upc.es University of Bath La Escuela Técnica Superior de
Hochschule für Technik und Wirtschaft (HTW) Web: www.bath.ac.uk Ingenieros Industriales (ETSII)
Web: www.htw-saarland.de Copper Development Association (CDA UK) Web: www.etsii.upv.es
Provinciale Industriele Hogeschool (PIH) Web: www.cda.org.uk ISR - Universidade de Coimbra
Web: www.pih.be University of Manchester Institute of Science and Web: www.uc.pt
Comitato Elettrotecnico Italiano (CEI) Technology (UMIST)
Web: www.ceiuni.it Web: www.umist.ac.uk

LPQI Editorial Board

David Chapman (Chief Editor) CDA UK david.chapman@copperdev.co.uk


Dr Angelo Baggini TU Bergamo angelo.baggini@unibg.it
Araceli Hernández Bayo ETSII ahernandez@etsii.upm.es
Prof Ronnie Belmans UIE ronnie.belmans@esat.kuleuven.ac.be
Franco Bua ECD franco@ecd.it
Prof Anibal de Almeida ISR - Universidade de Coimbra adealmeida@isr.uc.pt
Hans De Keulenaer ECI hdk@eurocopper.org
Gregory Delaere Lemkco gregory.delaere@howest.be
Prof Jan Desmet Hogeschool West-Vlaanderen jan.desmet@howest.be
Dipl-Ing Marcel Didden KU Leuven marcel.didden@mech.kuleuven.ac.be
Dr Johan Driesen KU Leuven johan.driesen@esat.kuleuven.ac.be
Stefan Fassbinder DKI sfassbinder@kupferinstitut.de
Prof Zbigniew Hanzelka Akademia Gorniczo-Hutnicza hanzel@uci.agh.edu.pl
Dr Antoni Klajn TU Wroclaw antoni.klajn@pwr.wroc.pl
Prof Reiner Kreutzer HTW rkreutzer@htw-saarland.de
Prof Wolfgang Langguth HTW wlang@htw-saarland.de
Jonathan Manson Gorham & Partners Ltd jonathanm@gorham.org
Prof Henryk Markiewicz Wroclaw University of Technology henryk.markiewicz@pwr.wroc.pl
Carlo Masetti CEI masetti@ceiuni.it
Dr Jovica Milanovic UMIST jovica.milanovic@umist.ac.uk
Dr Miles Redfern University of Bath eesmar@bath.ac.uk
Andreas Sumper CITCEA sumper@citcea.upc.es
Roman Targosz PCPC cem@miedz.org.pl

European Copper Institute (ECI)

The European Copper Institute is a joint venture between ICA (International Copper Association) and IWCC (International Wrought Copper Council) contributing
members. Through its membership, ECI acts on behalf of the world’s largest copper producers and Europe’s leading fabricators in promoting copper in Europe.
Formed in January 1996, ECI is supported by a network of ten Copper Development Associations (‘CDAs’) in Benelux, France, Germany, Greece, Hungary, Italy,
Poland, Scandinavia, Spain and the UK. It furthers the efforts initially undertaken by the Copper Products Development Association, formed in 1959, and INCRA
(International Copper Research Association) formed in 1961.

Disclaimer

European Copper Institute disclaim liability for any direct, indirect, consequential or incidental damages that may result from the use of the information, or from the
inability to use the information or data contained within this publication.

– www.lpqi.org pg. 11 / 11