"First cost" purchasing leads to subpar equipment

March 2, 2009
Emphasis on “first cost” often leads to the use of equipment that is not energy efficient or is less robust.

In many companies, the maintenance department is told to keep the plant operating while spending the least amount of money possible. At the same time, many purchasing people are still rewarded for saving money on the items they purchase. This emphasis on “first cost” often leads to the use of equipment that is not energy efficient or is less robust. Other equipment that might cost slightly more might cost much less over its life. Buying based only on “first cost” is the paradigm that needs to be changed. Management needs to understand that life cycle cost is what should be measured to reduce the electric costs in the plant and to reduce downtime. Purchasing and maintenance should be empowered to make the right decisions.

We all have seen the oil filter commercials where the theme is, "Pay a little more now or pay a lot more later." Electric motors are similar because their purchase price is only 2% of their life cycle cost. More than 97% of the cost is the electricity used to operate the motor. In the United States we are mandated to purchase motors with efficiencies that comply with the Energy Policy Act of 1992, often called EPAct motors. These motors comply with efficiency levels defined by the National Electrical Manufacturers Association (NEMA). Motors with higher NEMA Premium efficiencies are available that will save electricity over their lifetime.

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At current electric rates of $0.10-018/kWh in many parts of the country, it is feasible to remove functional motors from service and replace them with premium efficient motors. Most people do not understand that the cost of electricity to operate a motor continuously for a year is more than 10 times its purchase price. A typical 200-hp compressor motor’s operating costs are illustrated in the following chart:

A typical 200-hp compressor motor’s operating costs
based on continuous operation at $0.10/kWh

200 hp 4 pole operating costs  DOE average
installed efficiency
EPAct high-efficiency
NEMA Premium
Efficiency 93.5 95.0 96.2
Electrical cost/year $139,785  $137,578  $135,862
Annual savings     $2,207  $3,923 x 20 years

Most companies are reluctant to take an operational motor out of service, but they should do so if the savings show that it should be replaced. Most decisions are made when the motor fails. Should the motor be rewound or replaced by a new EPAct or NEMA Premium efficient motor? Many companies use a 50/50 rule for this decision: If the motor is smaller than 50 hp of if the repair is above 50% of a new motor, it is replaced. But this is not always so clear because of additional factors, including tax and utility rebates.

Accelerated depreciation is available where 50% of the motor cost can be depreciated in the first year. Plus, many utilities will offer an incentive rebate to reduce the extra cost of the NEMA Premium motor. Usually the maintenance department has a budget to pay for rewinds of motors and can proceed without outside approval required when they need to purchase a new motor. We need to make it easier for the maintenance department to procure the NEMA Premium motors that will save money for the company for years to come.

Electricity costs can be managed if you take the time to make an analysis of what items are causing the costs and decide if there is a more efficient process. Companies need to empower all employees to help save energy because these savings go to the bottom line, which is particularly important during a slow economy. 

John Malinowski is product manager of AC & DC motors for Baldor Electric Co., Fort Smith, Ark., Contact him at (479) 648-5909 and [email protected].

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