Total ownership cost - ABB Group
Patrick Rohan, Global Product Manager Distribution Transformers, Transformer Days 2011
Total ownership cost (TOC)
© ABB Group July 11, 2011 | Slide 1
Total ownership cost A Agenda d
© ABB Group July 11, 2011 | Slide 2
1.
Introduction – What is TOC
2 2.
Optimal design for TOC
3.
Capitalizing cost of losses
4.
Calculating A&B factors
5.
Web TOC calculator tools. Universal Renewable Payback
Total ownership cost H How much hd does a ttransformer f cost? t?
The real cost of a transformer for the owner is the sum of the initial purchase price (first cost) plus the cost of running it for its useful life 20-30 years
P Purchase h price i
Cost of Losses
N L No Load d Loss L
Load Loss
C Commissioning i i i cost
Maintenance cost
Emissions cost (depending on regulations)
Life Cycle Cost
Purchasing decisions requires the right balance between purchase cost and the cost of future losses.
© ABB 22/07/2009 | Slide 3
Total ownership cost T Transformer f losses l – a quick i k reminder i d !
© ABB 22/07/2009 | Slide 4
No Load Losses (NLL) are caused by the core when energized
Hysteresis y Losses - chemistry, y coating, g processing g
Eddy Current Losses – laminate thickness
Load Losses (LL) are caused by the windings when loaded
I2R Loss - material (CU vs. AL), size and length
Eddyy Loss - g geometry, y p proximity y to steel p parts
Proportional to the loading on the transformer
Total ownership cost C it li ti off llosses Capitalization Total Ownership Cost (TOC) method takes future operating cost of a unit over its lifetime brought back into net present value, and added to its purchase price. TOC = P Price i + [A ($/W) x N No-load l d Loss (W)] + [B ($/W) x Load d Loss (W)]
Optimising O ti i i a d design i using i A & B ffactors t results lt iin th the mostt cost-effective t ff ti design d i over the th transformer life cycle, based on customers’ cost of energy and load factors:
Cost of capital
Cost of energy
Cost of additional capacity – generation, transmission & distribution
Transformer Operating hours per year
Loading Characteristics – peak & load factor TOC provides True Economics Lower losses result in a cost avoidance derived from the elimination or deferral of generation and T&D capacity additions
© ABB 22/07/2009 | Slide 5
Total ownership cost Wh t are typical What t i l llosses ffor a given i power rating? ti ?
© ABB 22/07/2009 | Slide 6
To get guidance on this topic, we can use the IEC EN 50464-1 standard, which has five categories for no-load losses (Po) and four for load losses (Pk) in Europe
I China In Chi th they h have standard t d d series i off llosses S9 S9….S15 S15
Similar for both EU and China is that the losses change 15% between each class
In USA, the new DOE minimum efficiency standard is based on 50% load, load which limits the total losses rather than individual components of losses
Total ownership cost O ti l design Optimal d i 1
© ABB 22/07/2009 | Slide 7
A transformer can be designed to achieve a lowest possible manufacturing cost as the only target (first cost)
Such a transformer has relatively high losses, only limited by the cooling costs p the transformer involved to keep temperature within the permissible limits
Depending on the number of years the transformer operates, the sum of the running expenses may exceed the acquisition price
Total ownership cost O ti l d i 2 Optimal design 3,000
All in MU USD
2,500 2,000 Sales S l price i
1,500
Cost of Losses Total Ownership Cost
1,000
Minimum TOC 0,500 0,000 0,000 0 000
0,500 0 500
1,000 1 000
1,500 1 500
2,000 2 000
2,500 2 500
3,000 3 000
Sales Price MUSD
The task is to design a transformer that minimizes the Total Ownership Cost
Using more materials reduces the losses and the running costs, but on the other hand can increase the manufacturing costs
An optimizing software is used to find the lowest Total Ownership Cost
To enable the manufacturer to find the lowest Total Owning g Cost,, the customer must provide capitalized loss values; A and B
© ABB 22/07/2009 | Slide 8
Optimal transformer design D i options Design ti
Transformer designers can alter the design to provide a solution with reduced no-load, load losses or both.
Ways to Reduce NL Losses Use better grade of core material
Use copper rather than aluminum
Use thinner core steel laminations
Use a conductor with a larger area
Use more turns in the coil
Use fewer turns in the coil
Use a core with larger leg area
© ABB Group July 11, 2011 | Slide 9
Ways to Reduce Load Losses
Amorphous core distribution transformers C t Customer values l Lower
Losses
Less
Energy
Green House Emissions
Energy savings and increased efficiency
N l d llosses 40 -70% No-load 70% lless th than with ith e-steel t l
Efficiency increase by 0.5% to 1% depending on rating
Less
~2% of all electrical power generated is lost due to distribution transformer inefficiency (~25 GW of power lost)
© ABB 22/07/2009 | Slide 10
Lower Total Ownership Cost (TOC) Environmental benefit accrue from less greenhouse gas emissions Amorphous material can be reused and recycled
Transformer ownership cost C it li i costt off ttransformer Capitalizing f llosses
TOC or Capitalized Cost = Purchase price + Cost of Losses
© ABB Group July 11, 2011 | Slide 11
Cost of Losses = (A x NLL) + (B x LL)
A ($/W) = Capitalized Cost of No-Load Losses
B ($/W) = Capitalized Cost of Load Losses
NLL (W) = No Load Losses
LL (W)
= Load Losses
Note: N t A&BF Factors t are unique i tto each h purchaser h off ttransformer f even to their respective industry as we will seen here in a minute
Cost of losses C it li ti method Capitalization th d
n p 8760 d 1 1 100 100 A n i p 1 100
© ABB Group July 11, 2011 | Slide 12
Present worth inflationary series
d = average energy costs ($/kWh) during first year including generation, transmission and distribution investments
n = number of years one is willing to wait until the accumulated savings equals invested amount or payback
Iequiv = transformer loading at time of i iti l energization initial i ti (%)
i = annual general inflation rate (%)
p = annual increase in energy cost (%)
z = annual increase in loading (%)
Reference: ABB Transformer Handbook 3rd edition. Pages 88 – 98: Leonardo-Energy A practical example of loss capitalization
Cost of losses C it li ti off llosses – example Capitalization l
© ABB Group July 11, 2011 | Slide 13
Energy cost
$0.12 per kWh ($1.051 /W/yr)
Payback
10 years
Trafo loading
35% initially
General inflation
2% annually
Energy gy cost inflation
3% annually y
Loading increase
2% annually
Cost of losses C it li ti off llosses – example Capitalization l
© ABB Group July 11, 2011 | Slide 14
Loss capitalization factors
Capitalized no load losses
$9.44 per watt
Capitalized load losses
$1.33 per watt
‘A/B’ ratio
7.08
Cost of losses C it li ti off llosses – example Capitalization l Alternative Alt ti calculations l l ti with ith n = 5 5, 10 and d 15 years, kkeeping i the same value of the other parameters give the following… n
Capitalized C it li d no load loss
Capitalized C it li d load loss
Ratio
Years
$/W
$/W
A/B
5
4.95
0.65
7.68
10
9.44
1.33
7.08
15
13.51
2.08
6.50
Economic value of the losses increase, the more years the investor is willing to wait before the additional investment in lower losses is earned in the form of saved energy © ABB Group July 11, 2011 | Slide 15
Cost of losses C Comparing i lloss capitalization it li ti ffactors t C0 No-Load Factor
Ck Load Factor
[$/W]
[$/W]
[$/kWh]
[TWh]
USA
3 – 17
0 7 – 5.6 0.7 56
0 08 - 0.17 0.08 0 17
3222
Germany
7 – 11
1.4 – 2.8
0.13 - 0.15
589
Brazil
3–9
07–4 0.7
0 150 0.150
419
Italy
4–7
1.4 – 2.8
0.14 – 0.16
293
Australia
4 - 10
0 7 – 1.4 0.7 14
0 150 0.150
266
Sweden
7 – 11
0.7 – 4.2
0.08 – 0.1
145
CH
14 – 20
4 2 – 11 4.2
-
-
UK
6-7
0.6 - 0.9
0.12 – 0.14
-
Country
© ABB Group July 11, 2011 | Slide 16
Energy Price Electricity Industrial Production
Cost of losses A and d B capitalization it li ti ffactors t b by country t
Average
B/A = 15%
A = 8.10 USD/W
B = 1.22 USD/W
Average transformer load = SQRT (B/A) = 39% © ABB Group July 11, 2011 | Slide 17
Transformers ownership cost W b calculators Web l l t
©
ABB Group
July
11, 2011 | Slide 18
www.abb.com/transformers select transformer calculators under highlights
Transformers ownership cost W b calculators Web l l t – universal i l
© ABB Group July 11, 2011 | Slide 19
Transformers ownership cost W b calculators Web l l t
©
ABB Group
July
11, 2011 | Slide 20
www.abb.com/transformers select transformer calculators under highlights
Transformer ownership cost P b k method Payback th d Purchase premium per watt saved ($/Watt)
Compares purchase price ($) and losses (watts) of two transformers
Purchase transformer with shortest payback period (years)
Solve for number of years (n) of annual energy cost equals purchase premium per watt savings (PW - Present Worth)
Annual Cost of Energy ($) PW Time Non‐inflationary Series (i)
(1 i ) n 1 PW Energy i (1 i ) n
n
ln( Energy ) ln( Energy PW i ) ln((1 i )
© ABB Group July 11, 2011 | Slide 21
PW = (Price)extra / (Watts)saved
((Price))extra = ((Price))T1 – ((Price)) T2
(Watts)saved = (Watts)T2 – (Watts) T1
Energy ($/kWy) = $/kWh x 8760 hrs
i = interest rate (%)
Note: assumes T1 > T2 watts and T1 < T2 price
Transformer ownership cost P b k – example Payback l
Rating
1500 kVA
Average loading
60%
Interest rate
3.25%
Energy cost
$0.095 per kWh ($0.832 per W-yr)
T1 transformer
Price= $30,000 NL= 2200 W and LL= 14100 W TL = 2200 + 14100 x (60%)2 = 7276 W
T2 Transformer
Price= $34,500 NL 725 W and NL= d LL LL= 14600 W TL = 725 + 14600 x (60%)2 = 5981 W
© ABB Group July 11, 2011 | Slide 22
Transformer ownership cost P b k – example Payback l
T1 versus T2 evaluation
T1 Price Premium
$4,500
Total Watt Savings
1,297 W
Premium per watt saved
$3.475 / Watt
T1 Payback
4.56 years
Premium charged per watt saved $3.475
PW
Annual cost of energy $0.832
$0.832
$0.832
$0.832
Time
© ABB Group July 11, 2011 | Slide 23
Transformers ownership cost W b calculators Web l l t – payback b k
© ABB Group July 11, 2011 | Slide 24
Transformers ownership cost W b calculators Web l l t
©
ABB Group
July
11, 2011 | Slide 25
www.abb.com/transformers select transformer calculators under highlights
Cost of losses C it li ti method Capitalization th d – renewable bl energy
© ABB Group July 11, 2011 | Slide 26
Owner and operator of renewable sites can be either a regulated Utility (UT) or Independent Power Producer (IPP)
Owner and operators should be optimizing their collector network for the highest return on investment by having the lowest Total Ownership Cost
Total Ownership Cost (TOC) takes into consideration the negative financial impact losses have on operating the collector network as it reduces kWh sales
TOC should be enhanced to include tax considerations and d any renewable bl iincentives ti if applicable. li bl
Approach to calculating no-load and load loss capitalization differ depending if owner and operator is a UT or IPP IPP.
Cost of losses W b calculators Web l l t – renewable bl energy
Start by selecting if a Regulated g Utility y or Public Power Producer as treatment of financial metrics (e.g. fixed charge rate) and energy price metrics (e.g. demand and energy charge rate) differ
Option to enter annual generation profile (hours at % generation output) or just capacity factor (average annual %output)
© ABB Group July 11, 2011 | Slide 27
Cost of losses W b calculators Web l l t – renewable bl energy
TOC Enhanced accounts for the impact of renewable energy credits, production or investment tax credits, and depreciation on life cycle cash flow Tornado Chart displaying metrics most impacting Total Ownership Cost (TOC) and allows changes to metric sensitivity (default +/- 30%)
© ABB Group July 11, 2011 | Slide 28
TOC conclusion Di t ib ti ttransformers Distribution f ABB’s transformers are the ultimate solution in addressing total ownership cost (TOC) (TOC), environmental and safety issues and energy efficiency
© ABB 22/07/2009 | Slide 29
Total ownership cost (TOC)
© ABB Group July 11, 2011 | Slide 1
Total ownership cost A Agenda d
© ABB Group July 11, 2011 | Slide 2
1.
Introduction – What is TOC
2 2.
Optimal design for TOC
3.
Capitalizing cost of losses
4.
Calculating A&B factors
5.
Web TOC calculator tools. Universal Renewable Payback
Total ownership cost H How much hd does a ttransformer f cost? t?
The real cost of a transformer for the owner is the sum of the initial purchase price (first cost) plus the cost of running it for its useful life 20-30 years
P Purchase h price i
Cost of Losses
N L No Load d Loss L
Load Loss
C Commissioning i i i cost
Maintenance cost
Emissions cost (depending on regulations)
Life Cycle Cost
Purchasing decisions requires the right balance between purchase cost and the cost of future losses.
© ABB 22/07/2009 | Slide 3
Total ownership cost T Transformer f losses l – a quick i k reminder i d !
© ABB 22/07/2009 | Slide 4
No Load Losses (NLL) are caused by the core when energized
Hysteresis y Losses - chemistry, y coating, g processing g
Eddy Current Losses – laminate thickness
Load Losses (LL) are caused by the windings when loaded
I2R Loss - material (CU vs. AL), size and length
Eddyy Loss - g geometry, y p proximity y to steel p parts
Proportional to the loading on the transformer
Total ownership cost C it li ti off llosses Capitalization Total Ownership Cost (TOC) method takes future operating cost of a unit over its lifetime brought back into net present value, and added to its purchase price. TOC = P Price i + [A ($/W) x N No-load l d Loss (W)] + [B ($/W) x Load d Loss (W)]
Optimising O ti i i a d design i using i A & B ffactors t results lt iin th the mostt cost-effective t ff ti design d i over the th transformer life cycle, based on customers’ cost of energy and load factors:
Cost of capital
Cost of energy
Cost of additional capacity – generation, transmission & distribution
Transformer Operating hours per year
Loading Characteristics – peak & load factor TOC provides True Economics Lower losses result in a cost avoidance derived from the elimination or deferral of generation and T&D capacity additions
© ABB 22/07/2009 | Slide 5
Total ownership cost Wh t are typical What t i l llosses ffor a given i power rating? ti ?
© ABB 22/07/2009 | Slide 6
To get guidance on this topic, we can use the IEC EN 50464-1 standard, which has five categories for no-load losses (Po) and four for load losses (Pk) in Europe
I China In Chi th they h have standard t d d series i off llosses S9 S9….S15 S15
Similar for both EU and China is that the losses change 15% between each class
In USA, the new DOE minimum efficiency standard is based on 50% load, load which limits the total losses rather than individual components of losses
Total ownership cost O ti l design Optimal d i 1
© ABB 22/07/2009 | Slide 7
A transformer can be designed to achieve a lowest possible manufacturing cost as the only target (first cost)
Such a transformer has relatively high losses, only limited by the cooling costs p the transformer involved to keep temperature within the permissible limits
Depending on the number of years the transformer operates, the sum of the running expenses may exceed the acquisition price
Total ownership cost O ti l d i 2 Optimal design 3,000
All in MU USD
2,500 2,000 Sales S l price i
1,500
Cost of Losses Total Ownership Cost
1,000
Minimum TOC 0,500 0,000 0,000 0 000
0,500 0 500
1,000 1 000
1,500 1 500
2,000 2 000
2,500 2 500
3,000 3 000
Sales Price MUSD
The task is to design a transformer that minimizes the Total Ownership Cost
Using more materials reduces the losses and the running costs, but on the other hand can increase the manufacturing costs
An optimizing software is used to find the lowest Total Ownership Cost
To enable the manufacturer to find the lowest Total Owning g Cost,, the customer must provide capitalized loss values; A and B
© ABB 22/07/2009 | Slide 8
Optimal transformer design D i options Design ti
Transformer designers can alter the design to provide a solution with reduced no-load, load losses or both.
Ways to Reduce NL Losses Use better grade of core material
Use copper rather than aluminum
Use thinner core steel laminations
Use a conductor with a larger area
Use more turns in the coil
Use fewer turns in the coil
Use a core with larger leg area
© ABB Group July 11, 2011 | Slide 9
Ways to Reduce Load Losses
Amorphous core distribution transformers C t Customer values l Lower
Losses
Less
Energy
Green House Emissions
Energy savings and increased efficiency
N l d llosses 40 -70% No-load 70% lless th than with ith e-steel t l
Efficiency increase by 0.5% to 1% depending on rating
Less
~2% of all electrical power generated is lost due to distribution transformer inefficiency (~25 GW of power lost)
© ABB 22/07/2009 | Slide 10
Lower Total Ownership Cost (TOC) Environmental benefit accrue from less greenhouse gas emissions Amorphous material can be reused and recycled
Transformer ownership cost C it li i costt off ttransformer Capitalizing f llosses
TOC or Capitalized Cost = Purchase price + Cost of Losses
© ABB Group July 11, 2011 | Slide 11
Cost of Losses = (A x NLL) + (B x LL)
A ($/W) = Capitalized Cost of No-Load Losses
B ($/W) = Capitalized Cost of Load Losses
NLL (W) = No Load Losses
LL (W)
= Load Losses
Note: N t A&BF Factors t are unique i tto each h purchaser h off ttransformer f even to their respective industry as we will seen here in a minute
Cost of losses C it li ti method Capitalization th d
n p 8760 d 1 1 100 100 A n i p 1 100
© ABB Group July 11, 2011 | Slide 12
Present worth inflationary series
d = average energy costs ($/kWh) during first year including generation, transmission and distribution investments
n = number of years one is willing to wait until the accumulated savings equals invested amount or payback
Iequiv = transformer loading at time of i iti l energization initial i ti (%)
i = annual general inflation rate (%)
p = annual increase in energy cost (%)
z = annual increase in loading (%)
Reference: ABB Transformer Handbook 3rd edition. Pages 88 – 98: Leonardo-Energy A practical example of loss capitalization
Cost of losses C it li ti off llosses – example Capitalization l
© ABB Group July 11, 2011 | Slide 13
Energy cost
$0.12 per kWh ($1.051 /W/yr)
Payback
10 years
Trafo loading
35% initially
General inflation
2% annually
Energy gy cost inflation
3% annually y
Loading increase
2% annually
Cost of losses C it li ti off llosses – example Capitalization l
© ABB Group July 11, 2011 | Slide 14
Loss capitalization factors
Capitalized no load losses
$9.44 per watt
Capitalized load losses
$1.33 per watt
‘A/B’ ratio
7.08
Cost of losses C it li ti off llosses – example Capitalization l Alternative Alt ti calculations l l ti with ith n = 5 5, 10 and d 15 years, kkeeping i the same value of the other parameters give the following… n
Capitalized C it li d no load loss
Capitalized C it li d load loss
Ratio
Years
$/W
$/W
A/B
5
4.95
0.65
7.68
10
9.44
1.33
7.08
15
13.51
2.08
6.50
Economic value of the losses increase, the more years the investor is willing to wait before the additional investment in lower losses is earned in the form of saved energy © ABB Group July 11, 2011 | Slide 15
Cost of losses C Comparing i lloss capitalization it li ti ffactors t C0 No-Load Factor
Ck Load Factor
[$/W]
[$/W]
[$/kWh]
[TWh]
USA
3 – 17
0 7 – 5.6 0.7 56
0 08 - 0.17 0.08 0 17
3222
Germany
7 – 11
1.4 – 2.8
0.13 - 0.15
589
Brazil
3–9
07–4 0.7
0 150 0.150
419
Italy
4–7
1.4 – 2.8
0.14 – 0.16
293
Australia
4 - 10
0 7 – 1.4 0.7 14
0 150 0.150
266
Sweden
7 – 11
0.7 – 4.2
0.08 – 0.1
145
CH
14 – 20
4 2 – 11 4.2
-
-
UK
6-7
0.6 - 0.9
0.12 – 0.14
-
Country
© ABB Group July 11, 2011 | Slide 16
Energy Price Electricity Industrial Production
Cost of losses A and d B capitalization it li ti ffactors t b by country t
Average
B/A = 15%
A = 8.10 USD/W
B = 1.22 USD/W
Average transformer load = SQRT (B/A) = 39% © ABB Group July 11, 2011 | Slide 17
Transformers ownership cost W b calculators Web l l t
©
ABB Group
July
11, 2011 | Slide 18
www.abb.com/transformers select transformer calculators under highlights
Transformers ownership cost W b calculators Web l l t – universal i l
© ABB Group July 11, 2011 | Slide 19
Transformers ownership cost W b calculators Web l l t
©
ABB Group
July
11, 2011 | Slide 20
www.abb.com/transformers select transformer calculators under highlights
Transformer ownership cost P b k method Payback th d Purchase premium per watt saved ($/Watt)
Compares purchase price ($) and losses (watts) of two transformers
Purchase transformer with shortest payback period (years)
Solve for number of years (n) of annual energy cost equals purchase premium per watt savings (PW - Present Worth)
Annual Cost of Energy ($) PW Time Non‐inflationary Series (i)
(1 i ) n 1 PW Energy i (1 i ) n
n
ln( Energy ) ln( Energy PW i ) ln((1 i )
© ABB Group July 11, 2011 | Slide 21
PW = (Price)extra / (Watts)saved
((Price))extra = ((Price))T1 – ((Price)) T2
(Watts)saved = (Watts)T2 – (Watts) T1
Energy ($/kWy) = $/kWh x 8760 hrs
i = interest rate (%)
Note: assumes T1 > T2 watts and T1 < T2 price
Transformer ownership cost P b k – example Payback l
Rating
1500 kVA
Average loading
60%
Interest rate
3.25%
Energy cost
$0.095 per kWh ($0.832 per W-yr)
T1 transformer
Price= $30,000 NL= 2200 W and LL= 14100 W TL = 2200 + 14100 x (60%)2 = 7276 W
T2 Transformer
Price= $34,500 NL 725 W and NL= d LL LL= 14600 W TL = 725 + 14600 x (60%)2 = 5981 W
© ABB Group July 11, 2011 | Slide 22
Transformer ownership cost P b k – example Payback l
T1 versus T2 evaluation
T1 Price Premium
$4,500
Total Watt Savings
1,297 W
Premium per watt saved
$3.475 / Watt
T1 Payback
4.56 years
Premium charged per watt saved $3.475
PW
Annual cost of energy $0.832
$0.832
$0.832
$0.832
Time
© ABB Group July 11, 2011 | Slide 23
Transformers ownership cost W b calculators Web l l t – payback b k
© ABB Group July 11, 2011 | Slide 24
Transformers ownership cost W b calculators Web l l t
©
ABB Group
July
11, 2011 | Slide 25
www.abb.com/transformers select transformer calculators under highlights
Cost of losses C it li ti method Capitalization th d – renewable bl energy
© ABB Group July 11, 2011 | Slide 26
Owner and operator of renewable sites can be either a regulated Utility (UT) or Independent Power Producer (IPP)
Owner and operators should be optimizing their collector network for the highest return on investment by having the lowest Total Ownership Cost
Total Ownership Cost (TOC) takes into consideration the negative financial impact losses have on operating the collector network as it reduces kWh sales
TOC should be enhanced to include tax considerations and d any renewable bl iincentives ti if applicable. li bl
Approach to calculating no-load and load loss capitalization differ depending if owner and operator is a UT or IPP IPP.
Cost of losses W b calculators Web l l t – renewable bl energy
Start by selecting if a Regulated g Utility y or Public Power Producer as treatment of financial metrics (e.g. fixed charge rate) and energy price metrics (e.g. demand and energy charge rate) differ
Option to enter annual generation profile (hours at % generation output) or just capacity factor (average annual %output)
© ABB Group July 11, 2011 | Slide 27
Cost of losses W b calculators Web l l t – renewable bl energy
TOC Enhanced accounts for the impact of renewable energy credits, production or investment tax credits, and depreciation on life cycle cash flow Tornado Chart displaying metrics most impacting Total Ownership Cost (TOC) and allows changes to metric sensitivity (default +/- 30%)
© ABB Group July 11, 2011 | Slide 28
TOC conclusion Di t ib ti ttransformers Distribution f ABB’s transformers are the ultimate solution in addressing total ownership cost (TOC) (TOC), environmental and safety issues and energy efficiency
© ABB 22/07/2009 | Slide 29
