Price, operating costs and reliability are key factors in any TCO calculation.
by Mark W. Harshman, Siemens

All industrial purchasers will consider TCO to some degree when buying a large capital item with an expected long service life, such as a medium-voltage VFD. Purchasers will calculate TCO in different ways with varying levels of precision, but the basic TCO concepts will hold true in all instances.

When calculating TCO, the initial price is the easiest variable to quantify. Therefore, it often gets the most attention. However, other variables can be just as important, albeit more difficult to estimate at purchase time because they are projected, future values.

For example, greater reliability leads to less downtime and lower maintenance costs, two critical factors in many medium-voltage VFD applications that can be difficult to put into exact numerical terms. Therefore, most purchasers only include estimated numbers for TCO factors other than price and then discount these numbers to the present based on an internal corporate financial metric.

Important factors that contribute directly and indirectly to TCO must be considered when calculating the TCO of competing medium-voltage VFDs. The advantages and disadvantages of different classes of medium-voltage VFDs should also be considered. The first factors to include are reliability, downtime and required maintenance—three closely related elements that work together to have a substantial effect on TCO.

Reliability, Downtime & Maintenance

Not by accident, the survey reported reliability as the No. 1 factor when selecting a drive supplier. Reliability is even more important after all the costs of a drive failure are considered.

For example, using a crude TCO calculation, the cost of a medium-voltage VFD replacement might be only the purchase cost of the replacement drive. However, this does not include the engineering that may be required to make a newer model fit physically or the rewiring necessary to reconnect the newer model. It also does not include the installation cost.

Most important, it does not include the cost of downtime. Downtime costs are usually much greater than even the fully burdened cost of replacing the drive. Unplanned downtime is especially devastating and costly.

If a refinery produces 60,000 barrels per day of refined products (gasoline, diesel or heating oil) and one of the dozen or so main pump drives stop operating unexpectedly, the refinery may lose from 20 to 100 percent of its capacity for as long as that drive is not working. If no shelf spare is available or if engineering must be performed to replace the drive, getting the drives running again may take days or weeks—all while losing hundreds of thousands of dollars per day in stalled production.

A sophisticated and more accurate TCO calculation would include downtime costs, giving much greater weight to drive reliability. One proprietary medium-voltage drive has a proven track record of two-, five- and seven-year campaigns with no unscheduled shutdowns. It is also the only VFD used in nuclear power plants.

Equipment from suppliers with a reputation for reliability are often priced higher than suppliers with newer products that have not been thoroughly tested by years or decades of operation. Many purchasers believe that selecting a well-known, highly reliable drive from a trusted supplier is good insurance against unplanned downtime and, therefore, are willing to pay a higher price upfront if reliability claims can be proven. What creates high reliability in a medium-voltage VFD is discussed in Part Two of this series.