Evaluating Total Cost of Ownership for UPS Systems

White Paper 119

2128 W. Braker Lane, BK12

Austin, Texas 78758-4028

w w w. a c t i v e p o w e r. c o m
 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 Powers 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.

2
 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

Lets 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.

3
 Installation Costs
After 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 site

2. Perform internal, upstream, and downstream electrical connections
3. Start-up and test the UPS
4. Test and inspect energy storage
5. 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 Requirements
Space is usually a valuable fixed asset, thus its 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 4. Ability to house the UPS in a modular container if needed
 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. Lets 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 todays 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

5 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.
 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.
6 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.
 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, lets
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%

4 x VRLA Battery
Energy Storage Integrated Flywheel
Cabinets per UPS
Separate Battery
Energy Storage Monitoring Built-in
Monitoring

Energy Storage Replacement Never Every 5 years

kWh cost over 15 years $0.07

Table 2 - Summary key parameters for TCO scenario 1

7 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.
 Scenario 1 CapEx
Active Power UPS is overall 5% less expensive upfront against a battery UPS, as shown in
Table 3 below.

Active Savings (%)

Scenario 1 - CapEx Battery UPS Savings ($)
Power UPS 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.

Active Power Savings (%) vs.

Scenario 1 - OpEx Battery UPS Savings ($)
UPS 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.

8
 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 - Active Power Savings (%) vs.

Battery UPS Savings ($)
TCO Results UPS 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.
9
 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

10
 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%

3 x VRLA Battery
Energy Storage Integrated Flywheel
Cabinets per UPS
Separate Battery
Energy Storage Monitoring Built-in
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.

Active Power
Capex Battery UPS Savings ($)
UPS
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

11
Table 7 CapEx results for TCO scenario 2
 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.

Active Power Savings (%) vs.

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

Battery UPS Savings ($)
Results UPS 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

12
 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 Considerations

In 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
13
 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.

14