When I’m asked to explain to friends and family just what I do, my normal response is to use the analogy of insurance. People that specify and purchase critical power protection do so because they want peace of mind from blackouts and other problems they might face with the utility supply. Specifically, they want to ensure that business life carries on uninterrupted at their manufacturing or processing plant, or data center. Life is On, we like to say at Schneider Electric.
But the reality is that just like insurance, peace of mind comes at a cost – and sometimes a premium cost at that. So what exactly is the best way to get a handle on the true cost of ensuring the uptime of critical equipment? After all, once a professional has calculated that the risks and costs associated with downtime outweighs the capital investment required for an uninterruptible power supply (UPS), many believe that it’s just a question of procuring sufficient runtime for the lowest first cost.
That, of course, could be an unwise decision. An analysis of the Total Cost of Ownership (TCO) – or probably more usefully the Life Cycle Cost (LCC) – could quickly show how specifying the wrong UPS could add up to a costly error. TCO and LCC are powerful analysis tools because they accurately calculate the sum of all costs throughout the entire lifetime of an asset like a UPS, and not just the asset cost itself together with what is initially visible.
Over the life cycle of a UPS there are many direct and indirect costs to be considered; however, many cost-conscious organizations set KPIs only for initial capital expenditure (Capex), while operating expenses (Opex) and other future costs are treated with relative minor importance. Types of cost which all equipment incurs includes maintenance, insurance premiums, security, depreciation, replacement and disposal. Customer’s might also consider the cost of floor space too.
For those organizations that wish to focus exclusively on low first costs, one must strongly consider design quality. Any system is the result of its parts, and not all parts are created and tested equally. The design limitations imposed due to low cost componentry can result in unplanned downtime due to unpredictable system reliability.
The real costs of inferior products can quickly add up, compounded by the need for additional maintenance and upkeep. The budget for replacement parts may be increased due to the cost of spares as well as a higher frequency of repair. All of this may also result in prolonged planned and unplanned downtime due to limited system availability – the primary issue a UPS was installed to protect against in the first place.
Energy costs can be higher due to a less efficient system. Efficiency can be tricky because sometimes low energy costs give the false impression that any gains could be marginal. But when the plant is being commissioned for a working life measured in decades, marginal gains are important – and that’s before we get into the cost of emissions. Finally, the equipment itself may simply not be suitably matched to the life cycle of the plant it’s protecting and may need replacement unfeasibly early.
In short, driving down the capital cost of UPS can result in lower reliability and drive up opex. Increasing service complexity can drive down system availability also resulting in higher opex. A recent analysis of UPS Life Cycle Costs at Schneider Electric revealed that not only can low interest rates actually boost the cost of selecting the wrong UPS, over 22 years it can more or less double it. Making a decision based exclusively on initial costs could result in a very expensive mistake. You might save now, but you’ll pay for it later – as we say here in my country.
If you’d like more insight into TCO and ways to control it, Schneider Electric white paper #6 “Determining Total Cost of Ownership for Data Center and Network Room Infrastructure” provides a useful framework for discussion and is available as a free download.