Power quality is a serious issue when it comes to the detrimental effect of power disturbances on sensitive and expensive equipment and systems. However, the real problem is in accurately calculating figures that demonstrate the financial downside of dealing with bad power. Rob Morris, POWERVAR’s UK country manager, explains.
Many businesses adopt an ethos of ‘out of sight, out of mind’ when it comes to addressing power quality problems. While the frequency of spikes, surges and other phenomena in power distribution is generally understood and accepted, many fail to make the connection between these irregularities and the impact to the bottom line.
POWERVAR has worked closely with its customers in recent years to establish a technique to help quantify and educate the industry about calculating real return on investment (ROI). A focus of this was to understand the so-called ‘service burden rate’ – this is the proportion of the price of a product allocated to cover ongoing maintenance and repairs during the warranty period.
Research from POWERVAR found that the typical service burden rate ranged somewhere between four and eight percent of the price of the equipment or solution. However, results gathered from more than a thousand pieces of power conditioning equipment installed by POWERVAR customers showed a reduction of between 43-88% in warranty service costs. Even taking into account the cost of buying the power protection equipment, the ROI in these applications varied between 154% and a staggering 1,148%.
What’s more, benefits were not just financial. There is a ‘softer ROI’ to consider, such as a reduction in the number of service calls, as well as competitive advantage – important in any business that is largely driven by price.
Power quality is always a challenge for modern electronic equipment, regardless of whether it comes from a public utility or is produced on-site by a generator. The power from utility companies, even in developed countries, still largely meets standards set in the very earliest days of electricity. While this was fine for many years, the advent of hi-tech equipment incorporating sensitive components such as integrated circuits, meant that providing reliable, quality power was more of a challenge.
The power supply in the US and other developed nations experiences an average of 8.8 hours of outages a year. However, less visible is the annual average of 79 hours in which the quality of power is not satisfactory. Over the course of a year, these incidents frequently cause costly damage or failures.
Such power irregularities are usually not immediately fatal to equipment, but can produce cumulative damage that will eventually cause sudden system failure or lock-up without warning. This can be critical in the case of life saving equipment or very costly in terms of lost production. As soon as one component is replaced, the cycle begins again and it is only a matter of time before the failure is repeated.
Easing the burden
The key to ensuring a higher ROI is a direct and fast reduction in the service burden. POWERVAR focus on increasing equipment reliability and up-time on the one hand, and reducing operational and service costs on the other. A notable proportion of service problems result in ‘no trouble found’ service calls, most likely caused by power quality problems. The ability to reduce these calls has a positive impact on warranty costs and customer satisfaction.
By reducing service costs by up to 88%, or even 43%, as reported in POWERVAR’s study, customers are saving several millions in some cases. In addition, the average number of help desk calls dropped by 60%. These are savings that every organisation wants to achieve. Harder to measure is the impact on reputation and competitiveness, although these are very real benefits too.
Although very important, power quality is not the only factor impacting the service burden rate. There are all sorts of software, training, hardware and personnel issues that can also play a role, but addressing and eliminating the ‘hidden’ and often hard to trace problems caused by power fluctuations, frees up time and resources to sort out these other important areas.
It makes financial sense
Over the years, the power quality market and associated UPS business, which is highly competitive and largely driven by price, has been unable to demonstrate to industrial customers how much power disturbances are costing them and how power conditioning technology can deliver cost savings.
The market is now entering a new era, where investment is made on the grounds of measurable ROI and demonstrable cost savings. It is vital for our industry to work harder to show the kind of savings achievable. This can be done by working in partnership and by increasing information sharing.
POWERVAR’s ‘The Business Case for Power Conditioning: An ROI Study of Unburdening Service Costs from the Bottom Line’, is available to download from the company’s website – details below.
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