Diesel/gas static UPS systems for mission critical applications [Part 9/9: Total cost of ownership (TCO)]

After the detailed overview of diesel/gas static UPS systems in previous articles, this last article discusses the total cost of ownership of these devices.

Total cost of ownership (TCO for short) is a crucial tool that any decision-maker should use when evaluating what equipment best meets short and long term budgetary goals. A TCO analysis is required for return-on-investment (ROI for short) analysis and other business decision processes and is used to gauge the viability of any capital investment, giving a picture of the profitability over time. A TCO analysis has many components that must be understood and rigorously evaluated. An understanding of the cost drivers of a TCO analysis provides insight into opportunities to control costs.

TCO is an important metric when evaluating power protection systems, especially if they are going to be used for critical process industries or mission critical facilities, as they operate 24 hours a day and 365 days a year. Owners and operators are increasingly concerned with the excessive costs of operating different types of industries and facilities and continuously looking for implementing solutions with the lowest possible total cost of ownership. More and more end users, consultants and engineers are requesting TCO analyses for projects than ever before, thus proving the importance of choosing a solution that provides cost saving potential over its useful lifetime.

A well-crafted TCO analysis clearly presents all costs associated with owning and operating a diesel/gas static UPS system. A typical TCO analysis includes total cost of equipment acquisition, site preparation and installation costs, and operating costs, as well as costs related to replacement or upgrades at the end of the life cycle. These costs are often described as capital expenditure or capital expense (CapEx for short) and operating expenditure or operating expense (OpEx for short) from an accounting perspective.

There is a variety of strategies to control lifetime total cost of ownership of diesel/gas static UPS systems including efficiency improvement, improved planning, rightsizing the device for the application, negotiating costs, providing in-house service for the device, etc. It is always needed to examine the effect that various scenarios have on TCO in order to produce the best diesel/gas static UPS system design and investment plan.

Capital expenditure (CapEx)

Capital expenditure comprises typically the initial purchase, installation and commissioning costs of a diesel/gas static UPS system, as well as the costs of the necessary cooling equipment. The costs of the required room and floor space are usually also counted in here.

Diesel/gas static UPS system costs

The initial purchase price of a diesel/gas static UPS system is the first element to consider in a TCO analysis. Initial purchase costs usually vary depending on the size of the device, dictated by the equipment or facility that it needs to protect and the required level of redundancy in the system. The initial purchase costs for a diesel/gas static UPS system could easily account for between 25% to 35% of the TCO.

The evolution of diesel/gas static UPS system technology has brought significant improvements in performance, which have a direct impact on reducing initial purchase costs. The choice of energy storage media is also important in determining the overall initial purchase costs. Historically, the most common energy storage media deployed was rechargeable batteries. However, customers have now more control over their energy storage decision with the availability of alternatives. The energy storage technology and the amount of backup time chosen influence the overall initial costs, as energy storage costs scale with runtime.

Diesel/gas static UPS systems are typically expected to have an operational life of 15 to 20 years, so ensuring that the size of the device is correct at the time of purchase is particularly important. If the installed device proves to be undersized at some point in its operational life, then an expensive device upgrade or replacement may be required. If the installed device proves to be oversized then initial CapEx would be high, the electric power system will be running at less than optimum efficiency and maintenance costs will be higher. A way to ensure that costs are optimised, and hence total cost of ownership is minimised, is to make sure that the device is always right-sized. Scalable diesel/gas static UPS systems enable this, eliminating the high initial investment cost of purchasing power capacity that is not required.

Additional switchgear and site preparation costs

Depending on the project, additional switchgear might be necessary to complete the installation of a diesel/gas static UPS system. This is due to the need for example of having separated dedicated switchgear containing protections and circuit breakers feeding the diesel/gas static UPS system, for housing any additional components like measuring transformers or metering devices, or for cabling. Sometimes it is worth investing in additional switchgear early on in the project so that the diesel/gas static UPS system can be easily scaled up in the future if needed.

Site preparation costs should be also considered in the CapEx. Usually, the final installation site needs to be prepared mechanically and electrically for the installation of the diesel/gas static UPS system. In some cases, civil works are also necessary to accommodate the device.

Installation, commissioning and training costs

After the purchase price of the equipment (including the diesel/gas static UPS system and additional switchgear) is calculated, the various cost elements of turning it into an operational system need to be considered. Typically, these costs will include:

• Mechanical and electrical installation of the diesel/gas static UPS system and additional switchgear (if needed) at customer’s site.
• Performing internal, upstream, and downstream electrical connections.
• Connecting the diesel/gas static UPS system to end user’s SCADA system or supplier’s remote monitoring system.
• Start-up and commissioning tests.
• Training operators and maintenance personnel.

Cooling equipment costs

Even if the generated heat losses of modern diesel/gas static UPS systems have been reduced, they still generate heat and require some degree of air flow and/or conditioned air to operate. For example, energy storage media usually requires operating under 30°C to maximize its lifetime and avoid degradation of performance This introduces the need of cooling equipment in installations and its associated costs.

Energy savings and low TCO can be realized by choosing a diesel/gas static UPS system that can operate in higher ambient temperature or has lower heat dissipation.

A wide ambient temperature operating range offers flexibility in deployment that enables the installation of diesel/gas static UPS systems where existing cooling cannot be expanded or is unavailable such as right on a manufacturing floor.

Room and floor space costs

Nowadays in many facilities and industries space is a valuable fixed asset; thus, it is important to consider the footprint of the diesel/gas static UPS system when planning for electrical installations as it can become a major consideration for calculating overall TCO. While some facilities like data centers are specifically designed to house power protection systems, most facilities are not. These other facilities typically must use existing rooms or floor space to install the power protection system, which means that any footprint savings are beneficial for owners or operators of these facilities.

In recent years, the power density of diesel/gas static UPS systems has improved greatly, meaning that they can be built to smaller footprints to reduce space requirements. Choosing a diesel/gas static UPS system with a smaller footprint means:

• More space for other equipment which ultimately increases processing capacity and earns revenue like servers in data centers, MRI machines in hospitals, or robotic assemblers in production lines.
• Reduced need to build or lease more space.
• Ability to fit the diesel/gas static UPS system in an already existing area.
• Ability to house the diesel/gas static UPS system in a modular container if needed.

Operating expenditure (OpEx)

Lifetime costs of a diesel/gas static UPS systems can quickly exceed initial investments. When budgeting for a diesel/gas static UPS system, it is crucial to account for the operating expenses on power and cooling, maintenance and servicing, upgrades and more.

Diesel/gas static UPS system power consumption costs

The operating efficiency of a diesel/gas static UPS system is one of the determining factors in operating expenses over the lifetime of the device and, in many cases, more likely to affect TCO than the initial purchase price. A difference in one or two points of efficiency can have a dramatic impact on TCO, making high efficiency devices necessary for today’s budget and environmentally conscious owners and operators. A two percent efficiency improvement might not sound like much, but when factored into multiple megawatts of critical loads over a 15 to 20 years period, it can provide huge savings.

The efficiency of a diesel/gas static UPS system is determined through a combination of fixed losses (e.g., fans, control power, energy storage charging, etc.) and variable losses driven by the load and the design of the diesel/gas static UPS system. Efficiency is highly load dependent and most diesel/gas static UPS system vendors publish an efficiency curve showing expected efficiency across a variety of rated loads. Care should be taken to ensure that the diesel/gas static UPS system is sized to ensure it operates on the optimum point on the efficiency curve.

As an example of costs of power consumption, if the diesel/gas static UPS system has to protect a critical load of 100 kW, for every 1% reduction in operating efficiency of the device there will be an additional 1 kWh of wasted energy. Because the diesel/gas static UPS system is in operation 24 hours a day and 365 days a year there will be 24 kWh wasted each day or 8,760 kWh wasted each year or 175,200 kWh wasted over the estimated 20 years operational lifetime.

Cooling equipment power consumption costs

The losses of diesel/gas static UPS systems generate heat into the surrounding devices and areas, and that heat must be dissipated in order to keep the diesel/gas static UPS system and the facility within their operating parameters. Even diesel/gas static UPS systems that are highly energy efficient still need cooling equipment to keep their main components, especially the energy storage inverters and energy storage media, operating within optimal temperature limits.

The power consumption costs of the cooling equipment used in the installations must be taken into account in the operating expenses. Selecting the right cooling equipment adapted to the requirements of the diesel/gas static UPS system is a key step in these projects.

Diesel/gas static UPS systems using components that can safely operate at higher ambient temperatures without degrading or that are transformerless in design can significantly reduce the power consumption costs of cooling equipment.

Maintenance costs

The costs related to maintenance are common metrics for measuring TCO. All diesel/gas static UPS systems contain electrical and mechanical components that have a finite useful working life and will require routine maintenance and/or replacement if the device is to achieve the required reliability and availability levels for its 15 to 20 years’ operational life. Diesel/gas static UPS systems are usually covered by maintenance contracts that include periodic scheduled maintenance and replacement of certain components such as energy storage media.

Scheduled energy storage media replacement is one of the major operating expenses of a diesel/gas static UPS system, representing a significant part of a maintenance budget. If TCO analysis is a critical evaluation factor, then understanding which energy storage technologies can extend the life cycle of a diesel/gas static UPS system becomes important. The same is true for remote monitoring systems that improve energy storage media life, maintenance and upgrade strategies.

Effective preventive maintenance saves time and money by minimising the yearly maintenance costs, the risk of business interruption and the costs of downtime, as well as extending the lifespan of diesel/gas static UPS systems. It is also important to understand that maintenance costs escalate over time. An older diesel/gas static UPS system costs more to maintain as it requires more service, adding to the operating expenditure and ultimately to the TCO.

Repairs and spare parts costs

In the unlikely event a diesel/gas static UPS system failure occurs, quick repairs are necessary. Depending on the complexity of the system and the repairs needed, they can be done in-house by trained personnel, they can be done by an external provider of these services or by the original manufacturer of the device. The necessary spare parts for repairs should be available immediately. As diesel/gas static UPS systems are critical devices in their installations, common components are typically held as spare parts onsite or at a nearby local service depot.

The costs of repairing the diesel/gas static UPS system when needed , as well as the availability of spare parts and their logistics and handling must always be considered in the operating expenses.

Downtime, outage and failure costs

It should always be considered in the TCO analysis the costs derived from downtimes, outages and failures of diesel/gas static UPS systems. These costs have the potential to far exceed any of the other TCO costs.

Downtime and outages can result in a variety of long-term recurring costs, which include direct costs associated with identifying and addressing root causes, as well as indirect costs associated with disrupting business-critical operations. While minimizing the risk of downtime events and outages and their overall financial impact may necessitate a significant up-front capital expenditure, when considering the gains in direct and indirect downtime and outage costs as well as savings obtained from increases in efficiency that reduce operating expenditure, selecting a reliable diesel/gas static UPS system for the application can reduce the total cost of ownership over time.

Failures do not necessarily have to be absolute in order to become costly. A miss on the diesel/gas static UPS system uptime specification by just a few percentage points can cost huge sums of money for example in lost contribution margin on the production lost to unexpected downtime.

Effective asset management ensures having the right diesel/gas static UPS system and maintenance processes in place to limit downtime and keep the device running smoothly in a way that is also cost-effective. Diesel/gas static UPS systems require a certain amount of maintenance in order to ensure high reliability and availability. That said, maintenance events are a frequent cause of downtime due to procedural or human errors. Devices with lower maintenance requirements can generally lower operational expenses and reduce the risk of downtime.

This was the last article of this series.

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About the author:

Pedro Esteban is a versatile, multicultural and highly accomplished marketing, communications, sales and business development leader who holds since 2002 a broad global experience in sustainable energy transition including renewable energy, energy efficiency and energy storage. Author of over a hundred technical publications, he delivers numerous presentations each year at major international trade shows and conferences. He has been a leading expert at several management positions at General Electric, Alstom Grid and Areva T&D, and he is currently working at Merus Power Plc.