Cost/Benefit Analysis

A Cost/Benefit analysis is an important part of any power quality audit, but is frequently omitted. There are three general causes for this:

  1. The auditor may think it is not important,
  2. The auditor may have difficulty determining the cost or value of the power quality problem to the customer, or
  3. The auditor may not have good information about the full cost of a solution or recommendation

To assist the auditor in determining the cost of power interruptions and problems there is the IEEE Orange Book: IEEE Recommended Practice for Emergency and Standby Power Systems for Industrial and Commercial Applications. This book provides a prescribed process that auditors should follow. When seeking data from the customer to use in the cost equation, the auditor must recognize that the customer may or may not have accurate information. In those instances where accurate data are not available, the auditor should guide the customer in estimating what the costs would be.

The information required from the customer as detailed by the IEEE includes:

  • Numbers of affected employees,
  • Rates of pay and overhead costs,
  • Clean up time and costs,
  • Lost materials and data, and
  • Cost of startup.

In some commercial applications there may also be a cost associated with lost sales during the problem time. In some instances, there is also a recognizable loss in customer confidence which can have an identifiable financial loss.

When the auditor is determining the costs associated with a recommended solution, care should be taken to ensure that all costs are considered. In addition to the direct purchase cost for some large mitigation equipment, there may also be costs associated with:

  • The installation contractor,
  • Other auxiliary equipment required by the solution,
  • Potential modification of customer facilities,
  • Permits and fees,
  • Additional air conditioning,
  • Added electric costs due to equipment inefficiencies, and
  • Periodic maintenance.