Building the business case for managing your motors

Transcription

1 Building the business case for managing your motors Nicole Dyess Director of Client Solutions 1

2 INTRODUCTION Supplying clean drinking water and effectively treating wastewater are vital community services that sustain public health, protect the environment, and provide the foundation for local economic growth. However, these critical services incur significant energy costs: A 2014 Congressional Research Service report found that, on average, energy ranks second among water utilities operating expenses right behind personnel. 1 At some combined water and wastewater utilities, energy costs consume as much as 40% of your annual operating budget. 2,3 Despite ranking among your largest cost centers, many water utilities consider energy costs uncontrollable. In fact, nearly half of respondents to a 2016 survey by Focus on Energy categorized their energy expenses as a business cost that cannot be questioned or changed. 4 Yet, reducing your energy expenses is within your control and complementary to your responsibilities as a fiduciary of your organization and environmental steward. WATER UTILITY ENERGY STATISTICS 50% 90% 70% 30% of water utilities surveyed consider energy expenses a business cost that cannot be questioned or changed of all energy used producing and distributing clean drinking water goes into the motors driving your pumps of all energy used collecting and treating wastewater goes into motor-driven loads, such as pumps and aerators of your energy expenses could be saved through motor management best practices according to the US DOE This guide provides information to support water and wastewater utilities with identifying the value of motor management best practices and building a business case that aligns the entire organization around motor management. 2

3 WHY YOUR MOTORS MATTER Your primary business includes producing and distributing potable water and/or collecting, treating, discharging, and reclaiming wastewater. Here s five reasons why you should also care about your motors: 1. You can t deliver your water and wastewater services without motors Your staff may form the backbone of your utility operations, but motors are your workhorse. Electric motors drive your pumps, mixers, lifts, filters, fans, aerators, blowers, air compressors, dewatering equipment, sludge thickeners, and conveyors. That means your operation depends on reliable and efficient motor operation. 2. Motors are the largest cost center you aren t currently tracking in your budget Motor-related expenses hide in several places within both your operating and capital budgets, obscuring their value. For example, you track your motors value and depreciation as capital assets in your statement of net position, while your motors energy and maintenance expenses go in your operating budget. In the next section, we ll break down where to find your motor-related expenses in your budget. For now, consider that each new motor costs you several thousand dollars, and motors operating costs i.e., energy expenses comprise more than 95% of their total cost of ownership. 5 Then consider how many motors you have in your inventory. Once you add it up, motors are probably the most significant cost center that you don t currently track on its own line item. 3. You can t control your energy costs without minding your motors Over 90% of the energy consumed producing and distributing clean drinking water goes into pumps 6,7,8 a piece of motor-driven equipment. On the wastewater side, motor-driven loads pumps, filters, aerators, air compressors, and dewatering and thickening equipment consume 70% of your electricity. 9,10,11 3

4 You may not be able to control your electric utility provider s annual rate increases, but you can control your energy consumption. Since motors consume most of your energy, any energy management program must address your motors. 4. Motor management frees up your budget without increasing your rates US Department of Energy-funded studies show that motor management practices replacing inefficient motors, right-sizing your motors, using condition monitoring to right-size your motor maintenance, and optimizing your operation schedules have the potential to reduce your energy expenses by up to 30%. 12 Reducing your energy expenses frees up dollars in your operating budget without increasing your customers water rates. However you reallocate these dollars, both you and your customers will appreciate your financial flexibility created by managing your motors for energy savings. 5. Managing your motors helps you meet EUM standards Effective Utility Management (EUM) identifies the ten core attributes of sustainably operated and effectively managed water utilities. 13 Whether you re pursuing AWWA certification or you re just using the EUM framework to structure your strategic business goals and objectives, motor management 4

5 supports your EUM implementation on operational optimization, infrastructure stability, financial viability and community sustainability principles. For more insight on motor management s alignment with EUM, check out our blog. CALCULATING THE CURRENT VALUE OF YOUR MOTORS Now that you understand your motors importance, how do you convince your organization to pursue motor management? In my experience, a well-prepared business case works wonders for persuading leadership and staff throughout your organization that energy best practices should rank among your organization s top priorities. To determine your potential energy savings and generate your motor management business case, you ll first need to calculate your current motor-related expenses. Here s five questions to help you tally the value of your motors: 1. What is the value of your motor portfolio? A new motor easily costs several thousand dollars, depending on its size, and you likely have scores of motors at your facilities. In total, that adds up to a significant capital investment. To quantify this investment, ask your asset manager, capital budget officer, or facility maintenance supervisors - How many motors do you have at each of your facilities? - What is the total size (horsepower) of your motor portfolio? - What is the value of your motor portfolio as capital assets? These statistics will help you communicate motors importance to your organization. In addition, you may find it helpful to calculate what percentage of your capital assets your motors comprise. This value helps others in your organization to compare your motors value relative to your other capital assets, such as your treatment plants and distribution/collection infrastructure. 5

6 2. How much of your motors value has been depreciated? Your motors depreciation ratio the amount already depreciated divided by your motors total value as capital assets indicates the average age of your motor portfolio. Utility management best practices recommend keeping your depreciation ratio below ,15 A ratio greater than 0.50 indicates that your utility has more older motor assets than newer ones. An older motor portfolio creates three challenges: First, you ll likely hit a period when you ll need to replace a high percentage of motors in your operations, inflating your capital costs through that period. Second, motors become more likely to fail as they age, making it more likely that you ll experience unscheduled downtime and potentially incur regulatory fines, noncompliance fees, and lost revenue. Third, since appliance standards have increased motor efficiency by 4% to 7% over the past 20 years, your older motors probably incur higher energy expenses than newer motors. The good news: older motor portfolios yield greater motor-management savings. 3. What are your annual energy expenses? And how does energy rank compared to your other major cost centers, such as personnel and consulting services? Many water utilities hide their energy expenses as operating costs within operational divisions. While allocating energy costs to your divisions makes it easier to calculate the cost of producing / reclaiming water, it obscures your energy expenses total impact on your bottom line. Adding up your total energy expenses will make it easier to rank against other cost centers. Interested in putting together a business case, but can t answer these questions? Let Motors@Work help. Our online calculator will help you size your potential motor management savings. We use industry averages published by the US Department of Energy to estimate your motor portfolio and to calculate your estimated motor management energy savings. Simply answer five questions about your total energy spend and current motor management philosophy to receive your personalized report (sample shown on next page) with your estimated motor management savings. 6

7 MAYBERRY PUBLIC UTILITIES YOUR MOTOR MANAGEMENT BUSINESS CASE 4. How much of your energy expenses do your motors consume? You can t deliver your water & wastewater services without motors 5,250 horsepower Total size of your motor portfolio Motor management frees up funding for other capital /operating expenses REPLACEMENT THE VALUE OF YOUR MOTORS of your motors/motor-driven assets have been depreciated 37% Motors as a percentage of the value of your capital assets Identify and prioritize motor replacements by payback period to reduce your energy expenses immediately 56% Managing your motors helps you achieve EUM standards YOUR MOTOR MANAGEMENT SAVINGS CONDITION MONITORING Your motors are the largest cost center you don t currently track in your budget Motor-related energy expenses as % of your total annual energy expenses $918K 89.6% Present value of your motors/motor-driven assets Detect situations that stress your motors & correct the issue before it damages your equipment to extend your assets life & protect your motors efficiency You can t control your energy costs without minding your motors $1,596K Total annual energy expenses $102K Your annual motor-related maintenance expenses The best motor management programs incorporate elements of both risk management and energy management to save you sufficient funds in the short- and long-term to justify continuing the program. At a minimum, motor management should include the following elements and save you: INTELLIGENT SCHEDULING Shift your operations off-peak as much as practicable & employ intelligent sequencing to reduce your demand & time-of-use charges YOUR ANNUAL ENERGY SAVINGS YOUR ANNUAL ENERGY SAVINGS YOUR ANNUAL ENERGY SAVINGS $110,152 $196,875 $165,227 On average, motor-driven loads consume more than 90% of the energy required to produce and distribute drinking water and nearly 70% of the energy required to collect and reclaim wastewater. 16,17,18 What s the percentage at your facilities? Your energy bills typically include three types of charges: service fees, demand charges, and energy charges. Service fees cover the costs of metering your facility and would be the same with or without motors, so exclude these fees when calculating your motors energy costs. Conversely, your motors likely incur 100% of your demand charges unless you have other high-demand equipment, such as electric boilers or ultraviolet light banks, at your plants. Your motors energy charges are a complex function of motor size (Hp), load (%), and operating schedule (run-hours plus date and time of operation), particularly if your facility uses a time-of-use rate. 7

8 If, rather than going down the rabbit hole to get the data required to exactly calculate your motors energy charges, you d rather apply a reasonably accurate back-of-the-envelope calculation, use this equation: 5. What does motor reliability cost you each year? Over a motor s approximately twenty-year life, its maintenance costs will rival its initial purchase price. In addition to considering direct motor maintenance costs, such as what you re spending at motor repair shops, include your maintenance-related labor costs and supplies, such as grease. Add to these direct maintenance costs any lost revenue (e.g., spillage) or regulatory fees incurred by motor failures in the past year. Unscheduled downtime and related costs are key performance indicators for any maintenance program. Like depreciation ratio, including these metrics in your business case justify the need for - and later prove - the success of your motor management program. ESTIMATING YOUR SAVINGS & IMPLEMENTATION COSTS The best motor management programs incorporate elements of both risk management and energy management to save you funds in both the short- and long-term, justifying the program s continuation. At a minimum, motor management will include managing your inventory and on-going condition monitoring of your motor-related assets. If your facilities use time-of-use rates, you may also benefit from optimizing the schedules of certain motor-driven processes. Now that we ve calculated your current motor costs, let s estimate your implementation costs and potential savings from better motor management. Here s three more questions to help you determine your savings and finish your motor management business case: 8

9 1. Which of your motors are not NEMA Premium? Appliance standards have increased the efficiency of commercially available motors by up to 7% over the past 20 years. Today, all new motors sold must meet NEMA Premium efficiency levels. Therefore, you may be able to save a significant amount on your energy expenses just by replacing those motors whose payback period meets your internal threshold. If your motor inventory contains your motors nameplate efficiencies, use the equation below to calculate the annual energy cost savings by replacing your existing motors with an equivalent premium-efficiency motor. To get your payback period (in years), divide the cost of the replacement motor - from a vendor quote, or assume $100 per horsepower for a back-of-the-envelope estimate - by your annual energy savings. If your depreciation ratio was greater than 0.50, a substantial number of your motors may qualify for replacement. Prioritizing motors by their payback period (shortest to longest) creates a revolving fund for replacements, with the energy savings from short-payback replacements funding later ones. This methodology allows you to grow a relatively small capital investment into a utility-wide replacement campaign. This strategy also prevents you from having a bulge of replacements in future years, keeping your capital replacement expenses level year-to-year. 2. How much will condition monitoring save you? Many motor maintenance programs have prescriptive schedules that govern motor maintenance; for example, NEMA recommends inspecting, cleaning, and lubricating your motors every three months or 1,500 run-hours. 19 In reality, maintenance intervals vary based on the type of load, ambient conditions and frequency of operation. Your prescriptive maintenance program may be, at best, unnecessary or, at worst, harmful to your motors after all, just as many motors fail from over-lubrication as under-lubrication. 20,21 With on-going condition monitoring whether automated through SCADA or tracked manually you can detect situations that stress your motors and correct the issue before it damages your equipment. For example, imagine sending out a technician only when the motor notifies you that it 9

10 needs lubrication. This right-time, right-place, condition-driven maintenance methodology allows your staff to focus on motors only when they need attention and focus on other maintenance tasks when they don t. Hence, condition monitoring expands your maintenance staff s reach, improves their effectiveness, and reduces your overtime expenses. Condition monitoring also helps you avoid prematurely replacing motors with years of efficient and reliable operations left. By knowing the health of your motors, you extend your capital replacement dollars potentially even eliminating one motor replacement over the course of 30 years. Most notably, condition monitoring helps you schedule downtime eliminating unplanned downtime and helping you minimize lost revenue and avoid incurring regulatory fees. Documented savings from condition monitoring range from 2% up to 30% of your current motor energy expenses. 22,23 3. Which of your facilities are on time-of-use rates? Time-of-use rates may provide you with an opportunity to drop your energy expenses by 10% to 15%, if you re willing and able to optimize your pumping schedules. When you re on a time-of-use rate, your utility charges different demand and energy charges based on when you consume your energy. On-peak charges typically weekdays during normal business hours, although definitions vary by utility may be up to three times higher than off-peak rates. Shifting your operations off-peak to the extent practicable makes you use more energy during cheaper, off-peak periods. While this strategy doesn t reduce your overall energy consumption, it can significantly decrease your energy expenses. Depending on your current staffing patterns and whether you provide premiums to staff working off-peak shifts (typically, second or third shift), shifting your operations off-peak can be a low- or zero-cost measure to implement. Shifting your pumping operations off-peak will not be practicable for all water utilities. To take full advantage of off-peak rates, a water utility must have sufficient finished water storage and equalization basins to hold nearly an average day s demand/inflow. Additionally, this off-peak production strategy will increase the age of your potable water, which may not be desirable or 10

11 allowable, depending on your water treatment process and local regulations. However as Des Moines found even if you lack sufficient storage to shift all operations off-peak, you will still benefit from shifting as much of your operation off-peak as is practicable. DES MOINES MOTOR MANAGEMENT SAVINGS Des Moines Water Works, a municipal combined water and wastewater utility serving 500,000 in Iowa s capital city, uses Motors@Work s pump optimization feature to predict its daily potable water demand and produce as much water as its storage will hold during morning and late night off-peak hours. Des Moines reduced their demand charges by 11% and their energy charges by 15% using this strategy saving them more than $500,000 on their energy expenses in their first year. But Des Moines didn t stop there: Since implementing Motors@Work in 2014, Des Moines operators have kept a daily log recording how much it would have cost to produce water if they d had sufficient storage to produce 100% off-peak. In 2016, staff compared this log to their actual energy use and used the expected energy savings in their business case for additional above-ground, finished-water storage. Once built, this storage will allow Des Moines to shift more operations off-peak, further reducing their energy expenses. 11

12 NICOLE DYESS Director of Client Solutions Nicole (Kaufman) Dyess has 20 years experience optimizing the performance of motor-driven systems. She began her career at Advanced Energy testing thousands of motors, consulting with motor & appliance manufacturers on their designs, and documenting motor management best practices for the US Department of Energy. Subsequently, she managed statewide energy efficiency programs at the NC Department of Commerce and facilitated sustainability projects for the City of Raleigh. Nicole holds master s degrees in mechanical engineering and public administration. 1. C. Copeland & N. Carter, Energy-Water Nexus: The Water Sector s Energy Use, US Congressional Research Service (January 2017). 2. C. Copeland & N. Carter, Energy-Water Nexus: The Water Sector s Energy Use, US Congressional Research Service (January 2017). 3. The World Bank, A Primer on Energy Efficiency for Municipal Water & Wastewater Utilities (2012). 4. Focus on Energy, Energy Best Practices: Water & Wastewater Industry, (2016). 5. Motor Decisions Matter, Motor Planning Kit, (2012). 6. C. Copeland & N. Carter, Energy-Water Nexus: The Water Sector s Energy Use, US Congressional Research Service (January 2017). 7. R. Young, A Survey of Energy Use in Water Utilities, American Council for an Energy Efficient Economy (June 2015). 8. Focus on Energy, Energy Best Practices: Water & Wastewater Industry, (2016). 9. C. Copeland & N. Carter, Energy-Water Nexus: The Water Sector s Energy Use, US Congressional Research Service (January 2017). 10. R. Young, A Survey of Energy Use in Water Utilities, American Council for an Energy Efficient Economy (June 2015). 11. Focus on Energy, Energy Best Practices: Water & Wastewater Industry, (2016). 12. Motor Decisions Matter, Motor Planning Kit, (2012). 13. American Water Works Association, Effective Utility Management: A Primer for Water Utilities, (2017). 14. Caveat: This indicator is only as good as your depreciation schedule and historic pricing. 15. Environmental Finance Center at the University of North Carolina, NC Water & Wastewater Dashboard: Financial Benchmarks: Asset Depreciation. 16. C. Copeland & N. Carter, Energy-Water Nexus: The Water Sector s Energy Use, US Congressional Research Service (January 2017). 17. R. Young, A Survey of Energy Use in Water Utilities, American Council for an Energy Efficient Economy (June 2015). 18. Focus on Energy, Energy Best Practices: Water & Wastewater Industry, (2016). 19. Electrical Apparatus Service Association, How to get the most from your electric motors, (2001). 20 Electrical Apparatus Service Association, How to get the most from your electric motors, (2001). 21. C. Radu, The Most Common Causes of Bearing Failure and the Importance of Bearing Lubrication, RKB Technical Review (February 2010). 22. T. Barnish, M. Muller, D. Kasten, Motor Maintenance: A Survey of Techniques & Results, Proceedings of the 1997 ACEEE Summer Study on Energy Efficiency in Industry (1997). 23. US Environmental Protection Agency, Energy Efficiency Improvement and Cost Saving Opportunities for Petroleum Refineries: An ENERGY STAR Guide for Energy & Plant Managers, Document # 430-R (February 2015):

13 is a scalable, cloud-based, software-as-a-service solution that provides continuous monitoring of your motor-driven equipment s energy performance. Our analytics augment your asset management processes with energy management best practices. Our solution leverages your existing technology investment whether you collect motor inventory data with handheld devices, capture data in your ERP or CMMS, or gather data from your SCADA, sensors, and sub-meters. Motors@Work presents full life-cycle cost analyses, combining your motor readings with external data including weather forecasts, utility rates, and our extensive motor catalog. 13