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TCO contracts reduce costs, boost efficiency

ALWAYS AVAILABLE The WEG IE4 and IE1 motors available in stock to service customers

ALWAYS AVAILABLE The WEG IE4 and IE1 motors available in stock to service customers

SIGNIFICANT SAVINGS WEG IE4 motors offer super premium efficiency resulting in significant savings on energy costs

HERMAN LUES Using more efficient electrical equipment is a key starting point to reduce energy consumption

2nd June 2023

By: Simone Liedtke

Creamer Media Social Media Editor & Senior Writer

     

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The latest National Energy Regulator of South Africa-approved price increase of 18.55% means that the cost of electricity is now 63.08% more expensive than in April 2019, says motor and controls manufacturer Zest WEG strategic sales manager Herman Lues.

He explains that since the energy crisis first started in 2008, there has been a “definite inflection point for electricity tariffs in South Africa, as from 2007 to 2022, electricity tariffs have increased by 653%”.

Thus, electricity tariffs have quadrupled in “real money terms” over a 14-year period.

“With the cost of electricity rising year-on-year in South Africa and 60% of industrial power consumption being used by electric motors, reducing energy consumption to save costs is now a necessity rather than an option.”

In conversation with Engineering News, Lues notes that reducing energy consumption is a major cost saving tool, and that looking at more efficient electrical equipment – such as electric motors – is a key starting point.

“It is important, though, to change our mindset when it comes to procurement and the total cost of ownership (TCO) of equipment. Often procurement strategies look at the initial capital investment as a basis for saving costs at the procurement stage, not considering that the operational cost over the running life span of an electric motor outweighs the initial capital investment by far,” Lues states.

This is not without its challenges, as end-users often consider the initial capital expense, rather than the lifetime savings, he adds.

However, the biggest saving, he further notes, will be regarding the running cost of a motor. An electric motor consumes its capital procurement cost within just five weeks in energy costs.

“Over the life span of an electric motor, 2% of the cost is the capital investment cost, 3% is the maintenance cost and 95% is the running cost, meaning that 95% is electricity costs,” he explains.

Citing the price difference of about 15% between an IE1 and IE4 motor, Lues explains that the efficiency gained from IE1 to IE4 amounts to between 1% and 3%. Consequently, clients must consider whether they want up to 3% saving on lifetime running costs, or 15% on the initial purchase price of the motor.

Given the potential value for customers, Zest WEG offers tailor-made TCO agreements on IE3 and IE4 motors to end-users, based on their operational needs.

“These TCO contracts have great cost-saving benefits,” Lues says.

“The idea is to consider the total cost that a business will incur to operate an asset, and not just the upfront acquisition cost, for example, the complete cost associated with running equipment for production, which has a direct impact on profitability.”

Additionally, he highlights that installation is also critical, and he urges end-users to “make sure their motors are installed correctly”. On-site service is another value add offered by Zest WEG under its TCO agreements.

As such, Lues notes that entering a TCO agreement with Zest WEG will not only save the customer money, but by “using more efficient motors, the customer will also reduce pressure on the national energy grid with optimal use of the most efficient products available on the market”.

He adds that, of late, there has been a keen interest from end-users to learn how best to use Zest WEG’s products.

“We provide continuing professional development- (CDP-) accredited training, which means that, if you are an engineer, you earn CPD points for every course you attend,” he concludes.

Edited by Nadine James
Features Deputy Editor

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