Economic impact of voltage sags and short interruptions

1. School of Electrical & Electronic Engineering Economic impact of voltage sags and short interruptions Prof. Jovica V. Milanović Dipl.Ing., MSc, PhD, DSc, CEng, F(f)SAEngS, FIET, FIEEE Manchester, M139PL, United Kingdom J.V.Milanovic–UK–Round table: Session 2

2. Content • Quality of Electricity Supply / Power Quality (PQ) • Consequences (financial) of inadequate PQ • Assessment of financial losses incurred to industry by inadequate PQ

3. Quality of Electricity Supply / Power Quality definitions

4. Quality of Electricity Supply • Quality of Electricity Supply can be broadly subdivided into three categories: • Reliability • measure of the ability of the network to meet continuously changes in customer demand • Commercial quality • relates to individual agreements between the utility and end-use customers • Power Quality(often referred to as Voltage quality)

5. Power Quality • Collection of various subjects which utilities have traditionally dealt with individually: Interruptions Harmonics Dips (Sags) Capacitor switching Flicker Lightning Surges Voltage Regulation (Reliability) • Covers all areas from the generation plant to the last customer in the chain of electricity supply • Deals with complex physical interaction between electricity supply a end-user’s equipment • Principally deals with the quality of supply voltage waveform

6. Consequences (financial) of inadequate Power Quality

7. Business interruption costs Revenue loss/ Hour £0.2M - £1.6M Revenue loss/ Employee/ Hour £22 - £613 Source: META Group (www.metagroup.com), 2003; Converted to £, 2005

8. Annual outages and PQ costs - 2 Italy (2002)- normalized costs due to voltage sags based on 200 small industrial customers (0.2 - 3.2 Euro/kW) 10-month study carried out by a major generator in Europe on 12 sites of low technology manufacturing operation

9. Annual outages and PQ costs - 4 Average annual per-establishment cost of outages by sectors (on average 3.9 outages in a typical year mostly less than 3 minutes long) $70,000 $61,828 $60,000 Total losses due to outages are about$45.7B/yr ($23K/plant/yr) US economy loses$104 - $164B/yr $49,328 $50,000 Average annual outage cost $40,000 $30,000 $20,000 $10,598 $10,000 $0 Digital Economy Cont. Process Mfr. Fab. & Essn. Srvs. Total losses due to PQ are about$6.7B/yr ($3,406/plant/yr) US economy loses$15 - $24B/yr $12,000 Sectors Average annual per-establishment cost of PQ problems by sectors (on average 8.3 PQ problems per year) 9,643 $10,000 $8,000 Average annual PQ cost per-establishment $6,000 (9%-23% of costs of outages) $4,000 $2,859 $2,000 Source: EPRI’s CEIDS Report – 2001 $599 $0 Digital Economy Cont. Process Mfr. Fab. & Essn. Srvs.

10. The economic issue - summary 1 There are huge differences in reported financial losses per event, type of interruption, industry, utility and country. There is no uniformity in reporting the costs. Is there a need for “Customised Customer Damage Function”? The annual figures are very large and easily exceed several millions per utility, the losses on the country/economy level are much higher. Can we afford to ignore them in the present competitive environment? What steps should we take to put them under control and ultimately reduce them?

11. Customised Customer Damage Function The area of uncertainty is bound by CCDF produced with two extreme weighting factor selections; size dominant (a=1, b=0) and location dominant (a=0, b=1)

12. The economic issue - summary 2 From a technical point of view, all equipment can be designed so that it is completely immune to voltage dips. Complete immunity would come at substantial cost, and most equipment might become ”too immune” for typical disturbances and common areas of application. The end-user should balance the higher price that needs to be paid for higher immunity against the potential financial loss incurred due to a failure of less resilient equipment/process

13. The economic issue - summary 3 Do we need mandatory voltage dip immunity standards? The decision is essentially how much more should all end-users who buy particular equipment be required to pay for the increased immunity of that equipment, keeping in mind that, for large number of applications, voltage dips might not be an issue in the first place.

14. Summary on PQ costs The ultimate queston: What is it that following disturbance, or irregularity in supply, leads to generation of finacial loss to utility/end users? Are we worried because of equipment failure (or misoperation) or because of process failure? Are the the above two the same? Will equipment failure (or misoperation) always lead to process failure (interruption in production or service delivery)? If the industrial process or service eventually gets interrupted, how do we account for all relevant finacilal losses? Is there a standardised way to do so? How do we assess true economic value of potential soluton?

15. Assessment of financial consequences of inadequate Power Quality

16. Assessment of the cost of process failure Other considerations Calculated expected dip performance at equipment terminals Measured/ recorded dip performance at equipment terminals Fault statistics Cost of mitigating solution (at network, or process or equipment level) Investment decision Fault calculation with/without mitigating solution Equipment/process immunity threshold established based on PIT Assessed number of process failures with/without mitigating solution Cost of process failures

17. Customer requirements Source: Samsung's "Power Vaccine" Standard: Applications and Recommendations for a Stringent Power Quality Immunity Standard, A. McEachern

18. Fast Assessment Equipment Failure Risk (MDSI) MDSI Method Accurate Assessment Duration, Magnitude Voltage Sag and Short Interruption (from simulations or monitoring) Probabilistic Method Equipment Failure Risk (Probabilistic) DSI, MSI Equipment Failure Risk (Fuzzy) Fuzzy Method Sensitivity Index Equipment Failure Risk Assessment OPTIONS Improvement of equipment immunity. Injection of power to compensate lost voltage. Provide redundancy in supply. Preventing sags from propagating to sensitive loads. Reducing the number and duration of faults.

19. Process Immunity Time (PIT) Time constant specifying maximum time a process can continue operation after its main equipment tripped (CIGRE C4 1.10) Process will not be disrupted if the equipment is restarted within this time Process variable Instant of sensitive equipment failure due to PQ event Successful restarts of failed equipment Process failure threshold PIT Time

20. Financial loss due to equipment malfunction - 1 Direct costs - refer to production cost accrual at a given instance of disturbance, and are, therefore, a function of time and process activity. - Raw Material - Overhead - Energy - Lost Opportunity - Labour - Penalties Restart Costs Expert Damage Assessment Loss, Damage, Repair and Replace Restart Energy Idle and Restart Labour

21. Financial loss due to equipment malfunction - 2 Hidden Costs Decreased Competitiveness, Reputation and Customer Dissatisfaction Employee Annoyance as a Result of Process Disruption Other Factors Hit Rate and Miss Rate Pass Rate and Fail Rate Plant Voltage Disturbance Trend with Time COD Dependence on Time, Power Consumption and Business Type

22. Financial Risk Assessment & Load Profile

23. Cost of downtime Profile for a typical day’s work schedule and complete process disruption Profile for a typical day’s work schedule and partial process disruption

24. Cost of downtime Profile for a typical day’s work schedule and complete process disruption Adjusted profile for a typical day’s work schedule and complete process disruption

25. Net Present Value calculation 1 • Due to the long-term nature of investment in mitigation the financial tool should be able to account for the time value of money. • Stochastic Net Present Value (SNPV), a modification of conventional Net Present Value (NPV) is suitable for this type of analysis as it includes risk representation in analysis. • This feature is important for the problem in hand due to the non-deterministic nature of various components involved in the analysis, such as • equipment and plant sensitivities, • voltage sag profile, • variations in losses due to load profile and process cycle.

26. Net Present Value calculation 2 The best mitigation option for the plant is the one with the highest SNPV SCFt=stochastic net cash flow at year t T=project lifetime in years t=the year number I=initial investment (if applicable) r=discount rate N=total number of sags in year t n=sag number p=Process failure risk Mt=operation and maintenance costs of investment in year t (if applicable) L=Loss due to process trip obtained from financial calculation

27. Summary on economics of PQ immunity In some cases immunity is (or might be) economically impractical. Complete voltage dip immunity may be prohibitively expensive for some equipment. The costs also depend on the meaning of “immunity”, and how wide this immunity should be, i.e., immunity of the equipment or immunity of the process? The process of selecting appropriate immunity of the equipment or industrial/commercial process involves complex techno-economic optimisation, where setting of different parameters involved may require quite different expertise. Close collaboration between a range of specialists within an industrial facility is necessary for selecting an adequate level of equipment/process immunity to voltage sags.