Evaluating Total Cost of Ownership for UPS Systems

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Executive Summary

Total cost of ownership (TCO) is an important metric when evaluating uninterruptible power supplies (UPS) for mission critical facilities. There are many components to a TCO calculation that must be understood and properly evaluated. End users are increasingly concerned with the high costs of operating mission critical facilities and continuously looking for the lowest total cost of ownership solution.

This white paper will explain the relevance and impact of each TCO component in the evaluation of a UPS for mission critical facilities. Initial purchase and installation costs, UPS efficiency, cooling and maintenance requirements, and component replacement costs will all be factored into the analysis.

At the end, two common scenarios will be evaluated to demonstrate Active Power’s flywheel solution cost and carbon footprint advantages against a conventional battery based UPS. Over the 15+ year life of these installations, an end user can expect to see up to 40% total cost of ownership savings with an integrated flywheel UPS versus a traditional battery based UPS.

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The Bigger Picture

A total cost of ownership (TCO) analysis is an important tool that any decision-maker should use in evaluating what equipment best meets short and long term budgetary goals.

A well-crafted TCO comparison clearly presents all costs associated with owning and operating a piece of equipment, and helps stakeholders to see the bigger picture and to make the best informed decision for their business over the long term. Cost elements can be divided into initial costs for equipment; site preparation and installation; and ongoing costs to operate and keep the equipment running reliably. These costs are often described as capital expenses (CapEx) and operating expenses (OpEx) from an accounting perspective.

Table 1 below shows the main items included in these cost calculations for uninterruptible power supplies (UPS):

CapEx OpEx

UPS / Energy Storage Power Consumption (UPS)

Start-up / Installation Power Consumption (Cooling)

Cooling Equipment Preventive Maintenance

Space Energy Storage Replacement

Table 1 - CapiTal and operaTing expense ComponenTs of Ups TCo

Capital Expenses

Let’s consider the various elements of CapEx: equipment purchase price, installation costs, cooling, and footprint requirements.

Equipment Purchase Price The initial purchase price of a UPS is the first element most consider in a TCO study. Initial costs will vary depending on the number and size of UPS units purchased, driven by the amount of load the UPS needs to protect and the level of redundancy designed into the electrical system.

Beyond the UPS itself, the choice of energy storage is also important in determining the overall initial purchase and installation costs. Historically, the most common energy storage deployed in mission critical facilities is valve-regulated lead acid (VRLA) batteries. However, customers have now more control over their energy storage decision with the availability of alternatives like lithium-ion batteries, supercapacitors, and flywheels. The energy storage technology and the amount of backup time chosen will also influence the overall initial costs, as energy storage costs scale roughly linearly to runtime.

The purchase price of a UPS and its energy storage is generally about 25 - 40 percent of the TCO of a system.

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Installation CostsAfter the purchase price of the UPS and energy storage, the various cost elements of turning the UPS into an operational system need to be considered. Typically, this will include the following costs for electrical contractors and other trades to:

1. Install the UPS and energy storage at the customer site2. Perform internal, upstream, and downstream electrical connections3. Start-up and test the UPS4. Test and inspect energy storage5. Commission the UPS as part of the overall power system

UPS systems with batteries will also need battery monitoring and additional safety features like hydrogen detection and spill containment installed. Battery systems will see higher costs for installation, cabling, and testing than integrated flywheel UPS systems due to the larger number of separate cabinets and components involved in the solution.

Start-up, installation and on-site testing costs are generally 5 - 20 percent of the TCO.

Cooling Equipment UPS systems both generate heat and require some degree of air flow and conditioned air to operate. Energy savings and low TCO can be realized by choosing a UPS with energy storage that can operate in higher ambient temperature and has lower heat dissipation.

UPS batteries must be kept at 77 degrees Fahrenheit (25 degrees Celsius) to maximize their life, requiring additional cooling equipment and in some cases dedicated battery rooms. One advantage of a flywheel UPS is the fact that it can operate in environments up to 104 degrees Fahrenheit (40 degrees Celsius) with no degradation to performance. This wide ambient temperature operating range offers flexibility in deployment that enables operators to deploy the UPS where existing cooling cannot be expanded or is unavailable such as right on a manufacturing floor. The flywheel UPS also has less heat rejection compared to conventional battery UPS systems which further reduces cooling requirements.

Active Power flywheel UPS reduces, and in some cases eliminates, the need for additional cooling provisioning or expansion, effectively lowering its TCO versus a battery based UPS.

Footprint RequirementsSpace is usually a valuable fixed asset, thus it’s important to consider the footprint of the UPS and energy storage when planning for electrical installations. While data centers are specifically designed to house a UPS and necessary energy storage, most facilities, such as hospitals, manufacturing plants and pharmaceuticals are not. These other environments typically must utilize existing rooms or floor space to install the UPS, which means that any footprint savings are beneficial for these types of customers.

Choosing a UPS with a smaller footprint means:

1. More space for critical equipment like servers, MRI machines, or robotic assemblers 2. Reduced need to build or lease more space 3. Ability to fit the UPS in an existing area 4. Ability to house the UPS in a modular container if needed

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Active Power UPS systems take up to 50 percent less space than a battery based UPS so operators can optimize space for revenue generating equipment such as servers in a data center or diagnostic imaging equipment in a hospital. Due to the high variability of mission critical facilities and the different value that it provides to end users, footprint savings are not directly incorporated into the TCO model as a dollar figure.

All told, CapEx represents 30-50 percent of the TCO of the system.

Operating Expenses

While the upfront costs of a UPS are certainly important due to potential budget restrictions and financial planning, TCO evaluations need to consider long-term operating costs. These costs can quickly exceed the initial investment of a UPS. Let’s take a look at the factors that will affect operational costs.

Electrical and Cooling Efficiency Energy efficiency plays a significant role in operating costs of a UPS over the life of the product. A difference in 1-2 points of efficiency can have a dramatic impact on TCO, making high efficiency UPS products a must for today’s budget-and environmentally-conscious data center operator.

UPS efficiency is determined through a combination of fixed losses (e.g., fans, control power, energy storage charging, etc.) and variable losses driven by the load and the topology of the UPS. Efficiency is highly load dependent and most UPS vendors publish an efficiency curve showing expected efficiency across a variety of rated loads. For traditional UPS loads in the 40-70 percent range, a conventional double conversion UPS is approximately 95-96 percent efficient versus an integrated flywheel UPS at approximately 96-97.5 percent.1 See Figure 1 below for efficiencies across typical loads.

figUre 1: Ups effiCienCy aCross TypiCal loads

1 Active Power UPS efficiency from data from www.activepower.com. Competitor efficiency averaged from leading battery UPS manufacturers. See Active Power white paper 114, High Efficiency UPS Systems for a Power Hungry World, http://www.activepower.com/white-paper-114/, for additional information.

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The dollar value of savings will depend on the utility rate and the load. On average, industrial facilities pay between 5 and 10 cents per kilowatt hour for utility power, with a 7 cent per kWh average.2 A two percent (2%) UPS efficiency improvement might not sound like much, but when factored into multiple megawatts of critical load over a 15 year period, it can provide millions of dollars of savings, as shown in Figure 2 below:

figUre 2: effiCienCy CosT savings

In the examples above, a 1 MW facility can experience over $200k in savings, while a 5 MW facility can have over $1M in utility power savings over 15 years of operation.

Energy efficiency also has a secondary benefit: further reducing the cooling load on the facility. UPS losses generate heat into the surrounding room, and that heat must be cooled to keep the facility within its operating parameters. A good rule of thumb is that it takes 0.3 kW of cooling to offset 1 kW of heat losses. Thus, for every kilowatt saved by choosing a more efficient UPS, total savings increases to 1.3 kW.

All told, electrical and cooling losses generally amount to 20 – 25 percent of TCO.

Maintenance and Component Replacement Mission critical facilities require a certain amount of maintenance in order to ensure high reliability and availability to critical loads. That said, maintenance events are a frequent cause of downtime due to procedural or human error. Maintenance is also a service that incurs costs to vendors. Products with lower maintenance requirements can generally lower operational expenses and reduce the risk of downtime.

UPS products are usually covered by maintenance contracts that include periodic scheduled maintenance and replacement of certain components such as bearings or DC capacitors. For battery-based UPS, this normally includes maintenance checks of the UPS and the batteries two-to-four times per year.3 An integrated flywheel UPS generally requires only one maintenance visit per year.

2 451 Research, Will energy prices power US datacenter growth or short-circuit energy efficiency?, Feb. 2013, https://451research.com/report-short?entityId=76124.3 Emerson Network Power, Battery Maintenance Solutions for Critical Facilities,http://www.emersonnetworkpower.com/documentation/en-US/Services/Market/Data-Center/Documents/LS%20Literature/E-Book/battery-maintenance-solutions-ebook-CHAPTER%201-4-complete.pdf.

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Much like tires on your car, VRLA batteries are typically excluded from maintenance contracts due to their high value and wide variability in performance. Batteries are normally replaced after five years of usage, although a range of between three and seven years is often reported.4

Battery replacements generally cost about 80-90 percent of the initial purchase price of batteries, which can represent over 40 percent of the TCO of a battery based UPS after three replacements over 15 years. By contrast, flywheel energy storage is designed to last 20 years in operation without replacement.

TCO in Action

Now that we have covered each individual component of a TCO analysis and understand the impact of each to the total cost of owning and operating an UPS in a mission critical facility, let’s take a look at some typical scenarios. Two different scenarios are presented below.

Scenario 1 – Parallel UPS Configuration with 540 kW Load In this scenario, we examine an estimated load of 540 kW which is well-suited for a small data center, hospital or manufacturing plant. This is a redundant failover configuration with two 750 kVA UPS in parallel at a 40% load each. If one UPS fails, then the redundant UPS is able to accept the entire load with some margin of error. The battery UPS has four battery cabinets for energy storage for at least ten minutes of backup time, or for five minutes of backup time and one redundant battery cabinet. The Activ Power UPS systems use integrated flywheel energy storage to support the load. Table 2 below shows all parameters used in this comparison:

Scenario 1 Active Power Battery UPS

UPS Power Rating (kVA/kW) 750/675 750/675

Number of UPS 2 2

UPS Configuration Parallel 1+1 (2N) Parallel 1+1 (2N)

Estimated UPS Load % 40% 40%

Estimated UPS Load (kW) 540 540

UPS Efficiency (at load) 96% 95%

Energy Storage Integrated Flywheel 4 x VRLA BatteryCabinets per UPS

Energy Storage Monitoring Built-in Separate Battery Monitoring

Energy Storage Replacement Never Every 5 years

kWh cost over 15 years $0.07

Table 2 - sUmmary key parameTers for TCo sCenario 1

4 IEEE Std 1188-2005, IEEE Recommended Practice for Maintenance, Testing, and Replacement of Valve-Regulated Lead- Acid (VRLA) Batteries for Stationary Applica-tions, https://standards.ieee.org/findstds/standard/1188-2005.html.

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Scenario 1 – CapExActive Power UPS is overall 5% less expensive upfront against a battery UPS, as shown in Table 3 below.

Scenario 1 - CapEx Active Power UPS Battery UPS Savings ($) Savings (%)

vs. Comp.

UPS Equipment $450,000 $200,000

Battery Cabinet Cost $200,000

Battery Monitoring System $48,000

Spill Containment $8,000

UPS Start-up $15,000 $15,000

Installation Costs $25,000 $45,000

Total $490,000 $516,000 $26,000 5%

Table 3 – Capex resUlTs for TCo sCenario 1

The initial cost of both UPS is very similar; however, the Active Power solution is not burdened by additional costs like battery monitoring, spill containment and battery cabinet installation and cabling.

Scenario 1 – OpEx Active Power UPS is overall 52% less expensive to operate over the 15 year product lifecycle. See Table 4 below.

Scenario 1 - OpEx Active Power UPS Battery UPS Savings ($) Savings (%) vs.

Comp.

UPS Electrical Losses $206,955 $261,417 $54,462 21%

UPS Cooling Costs $62,087 $78,425 $16,339 21%

Scheduled Services $379,860 $423,888 $44,028 10%

Battery Replacement $0 $588,000 $588,000 100%

Total Costs $648,902 $1,351,730 $702,828 52%

Table 4 – opex resUlTs for TCo sCenario 1

Active Power UPS is more efficient and requires less cooling than a traditional battery based UPS, resulting in over $70k savings against the competition. Additionally, the lack of battery replacements represents $588k savings over the life of the product.

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Scenario 1 - Summary Results While the initial investment (CapEx) between both UPS is very similar, Active Power shows a reduction of more than 50% in operating costs (OpEx) compared to a battery UPS. Overall, Active Power UPS reduces TCO by nearly 40% or $700k versus a battery UPS over a 15 year life. Most of the savings are attributed to lower installation and support equipment costs, higher UPS efficiency, and the absence of expensive battery replacements. These savings are summarized in Table 5 and Figure 3 below:

Scenario 1 -TCO Results

Active Power UPS Battery UPS Savings ($) Savings (%) vs.

Comp.

CapEx $490,000 $516,000 $26,000 5%

OpEx $648,902 $1,351,730 $702,828 52%

Total $1,138,902 $1,867,730 $728,828 39%

Table 5 – sUmmary TCo resUlTs for sCenario 1

figUre 3 – soUrCes of TCo savings for sCenario 1

Figure 4 below shows the TCO savings over time. At the beginning of the project, the Active Power solution is 5% less expensive due to avoided costs for battery monitoring, battery safety, and installation costs. From there, the flywheel UPS shows steady savings due to higher energy efficiency and lower utility bills. Major chunks of savings are realized every 5 years as the battery UPS systems need expensive battery replacements. By year 5, the Active Power solution is 25% less expensive – almost $250k. By year 15, the facility sees 39% TCO savings – cost reductions of almost $730k.

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figUre 4 – sCenario 1 TCo savings over Time

Scenario 1 – Additional Benefits In this scenario, a flywheel UPS also reduces footprint requirements by 54% or 83 square feet. Due to its higher efficiency and lower cooling demands, the flywheel UPS has the ability to reduce carbon emissions by 900 metric tons or 27% versus the competition over a 15 year period based on this scenario. This is the equivalent of powering 108 homes or removing 194 cars off the road for 15 years

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Scenario 2 – Distributed Redundant Configuration with 5 MW Load This scenario has an estimated load of 5 MW, which is well suited for a medium to large data center, such as a colocation site or large hospital facility. In this example, ten (10) 750 kVA UPS are operating in a distributed redundant configuration, providing a high level of redundancy, but with individual UPS loads at 75%. The battery UPS takes a more aggressive energy storage approach with only three battery cabinets or 5 minutes of backup time without any redundancy. This reduces the costs of battery energy storage, along with battery monitoring and spill containment. The table below shows all parameters used in this comparison:

Scenario 2 Active Power Battery UPS

UPS Power Rating (kVA/kW) 750/675 750/675

Number of UPS 10 10

UPS Configuration Distributed Redundant Distributed Redundant

Estimated UPS Load % 75% 75%

Estimated UPS Load (kW) 5000 5000

UPS Efficiency (at load) 97.5% 96%

Energy Storage Integrated Flywheel 3 x VRLA Battery Cabinets per UPS

Energy Storage Monitoring Built-in Separate Battery Monitoring

Energy Storage Replacement Never Every 5 years

kWh cost $0.07

Table 6 - sUmmary key parameTers for TCo sCenario 2

Scenario 2 - CapEx Active Power UPS upfront costs are slightly higher than a battery UPS, as shown in Table 7 below.

Capex Active Power UPS Battery UPS Savings ($)

UPS Equipment $2,150,000 $950,000

Battery Cabinet Cost $750,000

Battery Monitoring System $180,000

Spill Containment $40,000

UPS Start-up $75,000 $75,000

Installation Costs $100,000 $175,000

Total $2,325,000 $2,170,000 -$155,000

Table 7 – Capex resUlTs for TCo sCenario 2

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The initial cost of both UPS is similar; again, the Active Power solution is not burdened by additional costs like battery monitoring, spill containment and battery cabinet installation and cabling.

Scenario 2 - OpEx Active Power UPS is overall 50% less expensive to operate over the 15 year product lifecycle. See Table 8 below.

Scenario 2 - OpEx Active Power UPS Battery UPS Savings ($) Savings (%) vs.

Comp.

UPS Electrical Losses $1,176,833 $1,940,203 $763,370 39%

UPS Cooling Costs $353,050 $582,061 $229,011 39%

Scheduled Services $1,899,300 $2,119,440 $220,140 10%

Battery Replacement $0 $2,280,000 $2,280,000 100%

Total Costs $3,429,183 $6,921,704 $3,492,521 50%

Table 8 – opex resUlTs for TCo sCenario 2

Active Power UPS is more efficient and requires less cooling than a traditional battery based UPS, resulting in nearly $1M savings against the competition. Additionally, the lack of battery replacements represents $2.2M savings over the life of the product.

Scenario 2 - Summary Results The initial investment (CapEx) between both UPS is similar, however, Active Power shows a reduction of 50% in operation costs (OpEx) compared to a battery UPS. Active Power UPS reduces TCO by 37% or just over $3.3M versus a battery UPS over a 15 year life. Most of the savings are attributed to lower installation and support equipment costs, higher UPS efficiency, and the absence of expensive battery replacements. These savings are summarized in Table 9 and Figure 5 below.

Scenario 2 - TCO Results

Active Power UPS Battery UPS Savings ($) Savings (%) vs.

Comp.

CapEx $2,325,000 $2,170,000 $155,000 -7%

OpEx $3,429,183 $6,921,704 $3,492,521 50%

Total $5,754,183 $9,091,704 $3,337,521 37%

Table 9 – sUmmary TCo resUlTs sCenario 2

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figUre 5 - soUrCes of TCo savings for sCenario 1

Figure 6 below shows the TCO savings over time. At the beginning of the project, the Active Power solution is at a slight premium versus a competitive battery UPS. From there, the flywheel UPS shows steady savings due to higher energy efficiency and lower utility bills. Major chunks of savings are realized every 5 years as the battery UPS systems need expensive battery replacements. By year 5, the Active Power solution is 21% less expensive – at $900k. By year 15, the facility sees 37% TCO savings – cost reductions of $3.3M.

figUre 6 – sCenario 2 TCo savings over Time

Scenario 2 – Other ConsiderationsIn this configuration, a flywheel UPS also reduces footprint requirements by 46% or 303 square feet. Due to its higher efficiency and lower cooling demands, the flywheel UPS has the ability to reduce carbon emissions by 9,768 metric tons or 39% versus the competition over a 15 year period based on this scenario. This is the equivalent of powering 1,175 homes or removing 2,107 cars off the road for 15 years

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Final Thoughts

A TCO analysis can be the driving force behind making the best long term decision for a UPS or any other electrical product in a mission critical facility. The typical lifespan of data centers is around 15-20 years, while hospitals and manufacturing facilities can exist two or even three times longer. This is a long time to be paying for ever-increasing operating costs.

Companies have many options for energy storage for UPS solutions. Most of these options are external to the UPS, such as VRLA batteries, supercapacitors, and flywheels. Active Power is committed to saving customers up to 40% in TCO savings with its high efficiency, small footprint UPS with built-in permanent flywheel energy storage versus a traditional battery UPS. These savings can add up to millions of dollars as shown in the two scenarios above. Additionally, Active Power reduces carbon emissions by 25 - 40% over the life of the product, supporting green and sustainability efforts.

More end users, consultants, and engineers are requesting TCO studies than ever before, thus proving the importance and relevance of choosing a product that provides cost saving potential over its useful life. For more information, or for a customized TCO analysis for your organization, please contact Active Power or visit us at http://www.activepower.com/tco-analysis/.

About Active Power

Active Power (NASDAQ: ACPW) designs and manufactures flywheel uninterruptible power supply (UPS) systems, modular infrastructure solutions (MIS), and energy storage products for mission critical and renewable applications worldwide. For more information, visit www.activepower.com. To offer feedback and comments on the content of this white paper, please visit www.activepower.com/ask-an-expert.