FINANCIAL IMPACT OF POOR POWER QUALITY TO THE CUSTOMERS


CASE STUDY ON THE FINANCIAL IMPACT OF POOR POWER QUALITY


Power quality disturbances can have significant financial consequences to different customers and the network operators. It is quite hard to estimate correct financial losses of poor PQ as many uncertainties are involved. Therefore field surveys, interviews and case studies are carried out to get an indication of the costs of poor PQ.

From literatures, many analyses are found on PQ costs for various types of customers. In contrast, very limited information is available on PQ cost for the network operators. As the cost evaluation of poor PQ is a complicated issue, the CIRED/CIGRE ‘Joint Working Group’- JWG C4.107 was formed to develop a systematic approach for estimating various costs related to PQ problems. This group proposed methodologies to determine PQ costs for the customers as well as the network operators.

Problem For Customers
From worldwide customer surveys on the electric supply, it is found that voltage dip is one of the PQ problems that causes large inconveniences and has significant financial impacts to various industrial process equipments. The actual financial losses are customer specific and depend mainly on customer category, type and nature of activities interrupted and the customer size.

Also, financial losses are event specific and different severity could incur different losses to various customers. It is noticed from different surveys that short interruptions and voltage dips are the major contributors to financial losses in terms of PQ related costs.

The European Power Quality survey report declared that PQ problems cause a financial loss of more than 150 billion Euros per year in the EU-25 countries [Targosz & Manson, 2007]. The survey was done over two years period during 2003-2004 among 62 companies from different industries and service sectors.

It was found that 90% of the total financial losses are accounted to the industries. Fig. 8 shows the percentage shares of total financial losses on various PQ aspects in the EU-25 countries. It shows that 56% of total financial loss in EU-25 is a result of voltage dips and interruptions, while 28% of the costs are due to transients and surges. Other financial losses (16%) are because of harmonics, flicker, earthing and EMC related problems.



As per the proposal of the CIRED/CIGRE JWG 4.107 group [Targosz & Manson, 2007], two distinct methods of measuring the economic impact of poor PQ have been identified.

• The first method is a direct method, which is an analytical approach to consider the probabilities and impacts of the events. This method leads to a precise answer, but mostly it is difficult to obtain correct input values.
• The second method is an indirect method, which considers historical data for analysis and the customer’s willingness to pay for solving PQ problems.

Total cost of a PQ disturbance for a production company consists of expenditures in various accounts as follows:

• Staff cost – this is the cost because of personnel rendered unproductive for disrupted work flow.

• Work in progress – this category includes the costs of raw material involved in production which is inevitably lost, labour costs involved in the production, extra labour needed to make up lost production etc.
• Equipment malfunctioning – if a device is affected, the consequences can be slow down of the production process, extra ‘idle’ time.
• Equipment damage – if an equipment is affected, consequences can be complete damage of the device, shortening of its life time, extra maintenance, need of stand-by equipment etc.
• Other costs – the costs paid for penalties due to non-delivery or late delivery, environmental fines, costs of personal injury (if any), increased insurance rate etc.
• Specific costs – this category includes extra energy bill due to harmonic pollutions produced by non-linear devices, fines for generating harmonic pollution in the network (if applicable). Reduction of personal working efficiency; related health problem due to flicker can also be included in this cost category.
• Savings – there are some savings in the production too. It includes saving from the unused materials, saving from the unpaid wages, savings on energy bill etc.

In a typical continuous manufacturing sector large financial losses are incurred by the lost work-in-progress (WIP) which is (most of the cases) about one third of total PQ costs. Also, the slowing down of processes and labour costs are quite significant in this sector.

In other sectors, the situation is not very clear with the labour cost and equipment related costs. In the public services like hotels and retail sectors, PQ impact is measured as slowing down their business activities, in terms of revenue lost.

In the industries the losses are mainly because of voltage dips, interruptions and transient surges. Fig. 9 shows the distribution of PQ costs in various accounts in industries and service sectors, as estimated in the LPQI survey for the EU-25 countries [Manson & Targosz, 2008].



PQ cost estimation survey was also performed by the EPRI and CEIDS consortium for the American industries in 2000. It was estimated that the US economy loses annually 119 billion dollars to 188 billion dollars due to voltage dips, short interruptions and other PQ problems [Lineweber & McNulty, 2001]. 

Digital economy and continuous manufacturing industries are found to be the most affected sectors. It can be remarked here that PQ cost data, obtained from different surveys, is quite difficult to compare as the references of representations in different surveys often vary. 

Hence, proper evaluation method of the analysis is required for correct interpretation of the cost data. Another report [McNulty et al., 2002] estimated the costs of momentary and 1 hour outages for various sectors in the USA. Similar type of survey was also conducted by UMIST, UK in 1992 [Kariuki & Allan, 1996] to estimate costs of outage to different customer groups. 

Table 3 compares both the findings of these surveys. It shows that outage costs in different sectors in UK and US vary significantly, except for the industrial customers suffering momentary outages.


It is quite difficult to make a general conclusion on financial losses in different industries as the PQ cost and the cost of outage due to interruption depend largely on the customer's installation characteristic and the devices involved.

Among the industries, there can be a wide range of variety in device usages and their sensitivity to PQ problems. The same is also applicable for the commercial sectors.

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