Power Reliability: Understanding the Costs

Source: http://www.sxc.hu/

In today’s data driven, 24-hour marketplace, power reliability is more important than ever. While your electric service is generally very dependable, power reliability issues, such as a voltage surge or an outage, can happen. Backup power and surge suppression equipment can help to protect your facility, but they may require a substantial investment. Understanding the costs associated with power reliability can help you determine which protection strategy is most appropriate for your needs.

Power Reliability Cost Factors

The direct costs of power reliability problems are driven by both event and individual facility factors, according to the U.S. Department of Energy. Event factors that shape the financial impact of power reliability issues include the following:

• The magnitude and the duration of events
• The frequency of occurrence
• Timing (of when events occur)
• The amount of advance notice that a facility receives

Frequency of occurrence plays a key role in encouraging facilities to invest in power protection. Studies have shown that even long-duration events that occur infrequently will not prompt the rethinking of power reliability contingencies unless they happen again within a relatively short period. The costs of power reliability events vary by facility, but some of the major issues that cut across a variety of industry segments include the following:

• Reduced revenue from production losses
• Costs due to facility or equipment damage
• Additional costs to operate backup power equipment
• Restart costs to get the facility up and running

Savings can also accrue as a result of a power reliability event, including the following:

• Raw materials not used during the event and the startup phase
• Any unpaid wages that occurred
• Scrap value of damaged materials

Estimating the Cost of Power Reliability

There are a number of ways to estimate the cost of power reliability, including conducting a detailed assessment (adding up the facility costs and savings mentioned above for the number of hours affected). This is known as the direct cost method and it can be the most reliable gauge of total cost if the circumstances are not too complex. However, the direct cost method also requires a significant amount of work to obtain an estimate.

An alternative (and easier) method is to estimate the cost of lost revenue during downtime, which can often be a major component of overall costs. Costs can be estimated on a revenue-per-hour basis or by employee to make figuring incremental labor costs easier. The following table contains average cost estimates for selected industries:

Multiply these figures by the duration of the event or the duration of the event and number of employees affected, for an approximate cost of production downtime resulting from a power reliability event. Other direct cost factors can then be included to obtain a more accurate estimate.

These cost estimates can be helpful when making investment decisions regarding power reliability strategies and equipment. For more information about developing a power protection strategy for your facility, see Power Quality Problems: Protecting Your Critical Equipment. Explore the eLibrary to find additional resources regarding power reliability or other issues affecting your operations.