Boosting Your Bottom Line: Eliminating Penny-Wise and Pound-Foolish Purchasing

By Ted Jones, Principal Program Manager, Consortium for Energy Efficiency (CEE)

A recent article in Appliance magazine reminded readers that manufacturers still pay massive amounts for energy inefficiency over the lifetime of their plants. Despite years of awareness-raising campaigns regarding the importance of life-cycle-costing principles, individuals with responsibility for making capital expenditure decisions rarely, if ever, consider the long-term, operational costs associated with new equipment or facilities. That’s an expensive oversight.

It’s been estimated that energy-efficiency improvements could shave as much as 18% off industrial- energy costs forecast for 2020. In other words, energy inefficiency is putting a $47 billion hole in the pockets of manufacturers. Alas, for those in charge of procurement, obtaining the lowest purchase price is still a priority—energy efficiency and total cost-of-ownership (TCO) are not. Those in operations and maintenance, unfortunately, end up paying the price.

For many companies, energy efficiency represents a passing shot for management—a classic split incentive between procurement and operations. “There is a significant disconnect between those who make decisions regarding industrial capital expenditures, and those who are tasked with managing the costs of manufacturing operations,” says Alex Chausovsky, Manager and Principal Analyst, Motor-Driven Systems and Industrial Automation, at IHS. So what’s the solution?

Chausovsky points to the need for improved communication between those in charge of procurement, operations and maintenance, and routine consideration of total cost of ownership when new equipment is purchased. We at the Motor Decisions Matters (MDM) campaign agree. This is one of the reasons MDM was created by electric utilities, the motor industry and motor repair and service centers: to help increase the visibility and awareness of total motor-driven equipment costs and demonstrate the long-term cost reductions available through motor efficiency. When it comes to electric motors, it is too easy to be penny-wise and pound-foolish.

According to industry case studies, approximately 2% of a motor’s TCO is its purchase price and another 2% is for repair and maintenance. A whopping 96% of the TCO over the motor’s lifetime is for electricity. While these aggregate numbers sound impressive, they become much more meaningful when you collect a few pieces of data from your facility and run some calculations to determine what your motor operating costs really are. Two tools from the MDM campaign—a simple savings chart and a motor slide calculator—can help you do just that. Enter information about operating hours, enclosure type, motor speed, motor size and electricity price and you can easily compare motor operating costs. Most people are surprised by the results.

For instance, the annual cost to operate a fully loaded 100 HP, 1800 rpm TEFC motor running 8000 hours per year is $51,755. More efficient models could save $1700 annually. That’s just the tip of the cost-reduction iceberg, though. Even lower costs are possible through proper sizing and selection of new equipment to match load requirements. Adding speed control, like a variable speed drive, for example, enhances efficiency. Making these considerations a routine part of your plant’s purchasing-decision-process can dramatically cut operating costs and improve your site’s bottom line.

Still, understanding motor-system operating costs is just the first step. Once these costs are known and understood, purchasing policies are needed to make TCO a standard business practice for all motor-driven equipment. The Motor Decisions Matter campaign can help. Visit www.motorsmatter.org to access the Simple Savings Chart and other decision tools, case studies and more. Then contact your local energy-efficiency program to learn what support it provides for motor-system efficiency. You don’t have to let massive energy inefficiency get the best of your bottom line.  MT

tjones@cee1.org