Poor power quality warning for Auckland businesses

Energy management is a top-of-mind issue for many homeowners, with new data indicating that rising transmission and lines costs will push electricity bills up by up to 24% for some households. However, there are even greater implications for electricity costs to Auckland businesses, and many are likely to be severely affected if they don’t take action following recent increases in penalty charges – in some cases, up to 400%.

Common business devices can cause problems for the electricity network if they are not operating efficiently. Poor power quality (caused by poor power factor and harmonics) affects the electrical grid and can cause problems for New Zealand’s 29 electric utilities. This has motivated lines companies including Vector to establish penalty charges to incentivize businesses to maintain their power quality at acceptable levels, thereby reducing waste and delivery costs.

Aside from the repair or replacement of poorly performing equipment, power factor correction is one of the more effective ways to increase a site’s electrical efficiency. All electrical networks consume two types of power, active (which produces work) and reactive (non-working) power, which together form total power. Power factor is the ratio between active power and total power, which ideally is 1, with all power being used to produce work. 

In practice, power factor varies widely depending on the size and nature of the load, and many companies that run large machines such as motors and pumps can have poor power factor because they consume both working and a lot of non-working power, making the site electrically inefficient. The new power factor penalties are being imposed by lines companies on businesses that fail to achieve a ratio of at least 0.95. 

There are systems that can correct or mitigate the negative effects of a business’ low power quality before it flows back into the grid network. Businesses can use these to review their power use and weigh up the effect on capex of purchasing a bank of capacitors versus the ongoing pressure on opex of failing to find a solution.

“The implications of these new penalties are huge for many sectors,” says Mike Heron, the general manager for power and energy businesses at Schneider Electric. 

“We consult with large New Zealand companies and smaller organizations, and it is not unusual for the annual power bills of many enterprises to run into the hundreds of thousands, especially if they use a lot of machinery. 

“The effect of power factor penalty increases, coming right after many businesses will have set their budgets for the year, cannot be overstated. Many parts of industry, ranging from print operators to food and beverage manufacturers, will be affected if they do not act. These businesses themselves have customers and end users, and will be forced to pass on costs if they cannot manage them.”

For example, a company with a $200 per month power factor charge will now pay more than $800 per month for the same energy use.

Ewan Gebbie, executive officer at the Energy Management Association (EMANZ), says, “EMANZ supports an appropriate level of charge on those that cause poor power quality and unnecessary costs to others. However, we need to ensure these issues are resolved properly and permanently. We have seen too many installations that were neither cost-effective nor technically sound.”

To mitigate this risk, Gebbie encourages businesses to work with reputable, qualified professionals. 

In addition to 1.7 million residential consumers of electricity, there are 165,000 commercial consumers, 70,000 agriculture, forestry and fishing consumers and 40,000 industrial consumers.

The good news for those non-residential users is that with modest capital expenditure, correcting poor power factor is a relatively simple process involving the installation of a bank of capacitors at the site of usage. The technology enables the lines company to register that the site is consuming less reactive energy and presenting the appropriate power factor level. 

Though the size of the capacitor bank will be determined by factors such as the site’s load and the nature of the equipment it operates, the return on investment is typically seen in just one to two years. And in addition to eliminating penalty charges, the benefits include making more power – as much as 20% – available to the end user at no extra cost.

“That’s especially good for businesses wanting to expand operations or install more equipment,” says Heron. “If you have already optimized power factor, there is no need to install a bigger transformer or heavier cables as part of the upgrade.”

To boil it down, energy management consists of three factors: supply (the cost per unit of energy used); demand (the number of units used); and power quality, which is a measure of an ideal power supply system and consists of power factor and harmonics.