Payback

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Location
NE (9.06 miles @5.9 Degrees from Winged Horses)
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EC - retired
This fall we installed some PFC capacitors for a customer with last months billing being the first full month to see results. Average PF for the customer has been about .75.

The month of December, for the load they had, we improved it to just above .90 which is the threshold for penalty. About 90 kvar installed of the "automated 300" suggested by a manufacturer of that equipment.

One month savings amounted to just a bit over $300 and at that rate a payback of about 1 year. Granted $300 is a pretty small part of $7,000 to $20,000 each month but my thoughts and the POCOs were :D& :thumbsup: respectively. POCO thought savings would amount to about $5000 per year as the load goes up during warmer months.

The owner didn't seem all that impressed. What payback level is impressive?
 

kwired

Electron manager
Location
NE Nebraska
This fall we installed some PFC capacitors for a customer with last months billing being the first full month to see results. Average PF for the customer has been about .75.

The month of December, for the load they had, we improved it to just above .90 which is the threshold for penalty. About 90 kvar installed of the "automated 300" suggested by a manufacturer of that equipment.

One month savings amounted to just a bit over $300 and at that rate a payback of about 1 year. Granted $300 is a pretty small part of $7,000 to $20,000 each month but my thoughts and the POCOs were :D& :thumbsup: respectively. POCO thought savings would amount to about $5000 per year as the load goes up during warmer months.

The owner didn't seem all that impressed. What payback level is impressive?
How much did they cost to install, that is what determines the payback. If it cost $36,000 to install then payback is 10 years, if it cost $300 to install payback is one month.
 
Location
NE (9.06 miles @5.9 Degrees from Winged Horses)
Occupation
EC - retired
So the penalty was "only" $300 bucks a month for a $20,000 electrical bill?

I would have to look back at that one to see what we could have saved them. Charge for poor PF depends on a lot of different things. Summer time rate is different than Winter. She also happens to get another rate because she can switch to generator when requested by the POCO. Miss even one time of that switch and the peak demand is set for the year. OUCH for that oops.

I don't think the PF will be in the 90s when her usage goes up. I was hoping we can talk her into some more but her lack of enthusiasm for a payback of less than a year was a bit disconcerting. I suspect the next steps will take a bit longer for payback.
 

gadfly56

Senior Member
Location
New Jersey
Occupation
Professional Engineer, Fire & Life Safety
I would have to look back at that one to see what we could have saved them. Charge for poor PF depends on a lot of different things. Summer time rate is different than Winter. She also happens to get another rate because she can switch to generator when requested by the POCO. Miss even one time of that switch and the peak demand is set for the year. OUCH for that oops.

I don't think the PF will be in the 90s when her usage goes up. I was hoping we can talk her into some more but her lack of enthusiasm for a payback of less than a year was a bit disconcerting. I suspect the next steps will take a bit longer for payback.

I have to wonder what is going on in the customer's mind. The way I learned it in engineering economics, ROI is used to determine where to allocate company resources, usually capital investment, but not always. A company has a certain pool of money, whether cash on hand, revenue streams, or available credit. You take all the possible projects you could dump your money into and rank them by ROI, highest value first. In simplistic terms, you then fund the projects in order of highest ROI to lowest until you run out of money to allocate. You don't often get a chance to pick items with an ROI up at 100%, and you're usually lucky to find many above 20%. Help me understand.
 
I have to wonder what is going on in the customer's mind. The way I learned it in engineering economics, ROI is used to determine where to allocate company resources, usually capital investment, but not always. A company has a certain pool of money, whether cash on hand, revenue streams, or available credit. You take all the possible projects you could dump your money into and rank them by ROI, highest value first. In simplistic terms, you then fund the projects in order of highest ROI to lowest until you run out of money to allocate. You don't often get a chance to pick items with an ROI up at 100%, and you're usually lucky to find many above 20%. Help me understand.

In this case, I think the owner was just hoping for higher savings rather than a very fast ROI. If just their electricity bill can be up to $20,000 they likely aren't as worried about the ROI on a $5000-$10000 dollar project as they are having the project save many future costs. So future projects of that nature rate lower as they view it as very small savings.

It also depends on what the owner was told to expect prior to the project taking place.
 

gadfly56

Senior Member
Location
New Jersey
Occupation
Professional Engineer, Fire & Life Safety
In this case, I think the owner was just hoping for higher savings rather than a very fast ROI. If just their electricity bill can be up to $20,000 they likely aren't as worried about the ROI on a $5000-$10000 dollar project as they are having the project save many future costs. So future projects of that nature rate lower as they view it as very small savings.

It also depends on what the owner was told to expect prior to the project taking place.

OK, maybe somewhere along the line someone failed to manage the customer's expectations. It happens. But if they are really thinking like this, they're not thinking rationally. Even if it's small savings in dollars, the high ROI projects get funded first. Almost always. The only time they wouldn't, would be if you were running so close on cash availability that a $10,000 project with an ROI of 100% was going to keep you from doing a $1,000,000 project with an ROI of 50% (for example). Even though it's worse on ROI, most anyone will take $500,000 over $10,000 any day of the week.
 

kwired

Electron manager
Location
NE Nebraska
Client is not seeing the big picture and was expecting something other then what did happen. ROI is still a fairly short term no matter how you look at it though.

Same client possibly steps over dollars to pick up nickels, I have some of those clients myself.
 

Article 90.1

Senior Member
I'm not sure if I'm correct here, but isn't there the added benefit of the load running more efficiently or with less heat or stress or whatever because of the improved PF? If I'm correct wouldn't this translate into reduced maintenance and replacement costs of the same equipment?
 

GoldDigger

Moderator
Staff member
Location
Placerville, CA, USA
Occupation
Retired PV System Designer
I'm not sure if I'm correct here, but isn't there the added benefit of the load running more efficiently or with less heat or stress or whatever because of the improved PF? If I'm correct wouldn't this translate into reduced maintenance and replacement costs of the same equipment?
Improved PF by itself will have at best a second order effect from reduced I2R losses in the wiring.
But reduced power consumption can reduce A/C costs.
Maintenance is an open question since there is insufficient real world experience.
 

Electric-Light

Senior Member
Most efficiency sales companies don't project real world expectations. See my realistic projection in my lol LED thread here:
http://forums.mikeholt.com/showthread.php?t=166847

You have to consider the expected useful life, PBP, risk, ROI and actual relative savings. If you agree to lock-in money in the bank for 3 years, the yield is about 1.5% today, so A $1 widget that knocks $3 off a $1,500/year bill and lasts 15 years will look impressive in all of the above, except the relative saving. The customer won't be impressed with something like that.


I'm not sure if I'm correct here, but isn't there the added benefit of the load running more efficiently or with less heat or stress or whatever because of the improved PF? If I'm correct wouldn't this translate into reduced maintenance and replacement costs of the same equipment?

This all depends on where the correction is applied. If you have a 100kVA transformer, it can deliver 75kW at 0.75PF or 100kW at 1.0 PF, both at 100% load yet the watt loss at the transformer will be similar. If the customer doesn't have a customer owned transformer and the transformer is ahead of the meter, the burden gets pushed over to the utility which they compensate with a fee.

Improved PF by itself will have at best a second order effect from reduced I2R losses in the wiring.
But reduced power consumption can reduce A/C costs.

It works out in theory, but the loss is not significant in practice. Maximum permissible is 5% drop at full circuit load. Motors have their best power factor when they're heavily loaded. Poor power factor is at low load when the current is lower anyways.
 
Location
NE (9.06 miles @5.9 Degrees from Winged Horses)
Occupation
EC - retired
Improved PF by itself will have at best a second order effect from reduced I2R losses in the wiring.
But reduced power consumption can reduce A/C costs.
Maintenance is an open question since there is insufficient real world experience.

I attended a short class yesterday that touched on the reduced I2R losses, his thoughts were a 25-30 year payback. He did not go into details as it was only a 4 hour class and he covered several topics.
 
I'm not sure if I'm correct here, but isn't there the added benefit of the load running more efficiently or with less heat or stress or whatever because of the improved PF? If I'm correct wouldn't this translate into reduced maintenance and replacement costs of the same equipment?

My brain is a little fuzzy this monday, but PF correction doesn't do anything for loads downstream of the Cap bank. It's a corrective factor upstream only. It changes what the utility sees but not what the downstream equipment sees.
 
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