Creative financing for energy management projects


VSDs and industrial motors

VSDs optimize the voltage and frequency input into an industrial motor to change its speed of operation, rather than the traditional method of “choking” constant speed motors. This greatly reduces consumption of electricity. Correctly designed VSD systems typically reduce energy consumption by up to 70%, depending on the application. The most receptive applications tend to be pumps, fans, and centrifugal compressors, although worthwhile savings may even be achieved on more demanding applications such as mixers, centrifuges, reciprocating compressors, and extruders.

Figure 2: Energy efficiency upgrades can consider energy, maintenance, and repairs as part of the life cycle cost of equipment. Energy is by far the largest share of the costs. Courtesy: Siemens

In addition to providing substantial energy reduction, other VSD benefits include soft start-up of the equipment, reduced current on starting, reduced mechanical stress, and high power factor. VSDs are intelligent devices that can easily be integrated into energy management systems, and may also be a key component in dynamic power management by helping with rate management and demand reduction. Figures 2 and 3 show potential financial advantages of deploying VSDs—and using alternative financing methods for their purchase.  

The gains to be made from installing VSDs should not be confused with the process of installing motors, which themselves are more energy efficient. Both activities—installing VSDs and replacing inefficient motors with more energy efficient models—will yield energy cost savings.

Figure 3: Table details, for various operating hours per year, percentage of totals costs for a variable speed drive, maintenance and repairs, and energy costs. Energy costs are more than 95% of total costs in all three examples. Courtesy: Siemens

As far as industrial electric motors are concerned, legislative efforts have been underway in several countries for more than a decade to encourage the transition to more efficient electric motor driven systems. These include the implementation of Minimum Energy Performance Standards (MEPS) requiring that electric motors meet a certain efficiency level to enter the national market.

Governments have clear incentives for implementing these policies. Electric motor systems use approximately 40% of total global electricity, and their share in industrial electricity consumption is much higher, standing at 65% according to the International Energy Agency.

With the global cost of electricity on the rise, any equipment that results in energy savings constitutes a valuable investment. The case for energy efficiency becomes all the more compelling in the light of the fact that more than 95% of the lifetime cost of an industrial motor is the cost of the electricity it consumes.

Implementing VSDs in appropriate processes offers greater energy savings than simply upgrading to more energy efficient motors. Moreover, the full energy and cost-saving potential of VSDs is a long way from being realized. Globally, the penetration of VSDs (as a proportion of installed motors) is still low. Information in this area is limited, but evidence indicates that the highest levels have been achieved in the U.S., at nearly 20%. The UK and China are at a mere 10%, and figures suggest Europe stands at no higher than 15%. However, in Germany estimates show that 30% of industrial electric motors are currently sold with a VSD.

Quantifying savings from greater VSD implementation

In order to give an idea, country by country, of the level to which greater implementation of VSDs could offer cost savings to industry, Siemens has drawn on its data sources and customer experiences to create a financial model.

All aspects of this model are designed to be cautious and conservative, at each stage choosing the lower end of reported experiences to ensure that the resulting estimates are likely to understate the situation rather than exaggerate it.

The starting point is industrial energy consumption for the 10 countries studied. This number is published by a number of official sources, as is pricing for industrial electricity. The most complete, verified dataset for industrial electricity prices and consumption across these 10 countries is for 2010. Therefore, this data has been used for the model, factoring out escalating factors such as increased consumption and rising prices. This is the first point at which the model introduces a note of careful conservatism.

Figure 4: Estimated savings from variable speed drive implementations vary by country. Courtesy: Siemens

Next, a number of sources testify that, throughout the world, over 60% of industrial electricity is used to drive electric motors. However, in the countries studied, between 10% and 20% of industrial motors are controlled through a VSD. Therefore, industrial energy consumption must be reduced by this proportion, which is already energy efficient.

In addition, not all motors are applied to variable speed processes (i.e., where the motors do not run at constant speed all the time). Sources testify that at least 50% of industrial processes would benefit from variable speed drives, and that the proportion could be nearer 70%. The lower of these numbers has been used in the model.

Finally, what level of energy efficiency gains do VSDs typically enable, and how much can electricity costs be reduced? Most sources cite a range between 20% and 70%, depending upon the application. To ensure the model generates a conservative estimate, a low average savings level of 25% was used.

When this highly conservative model is applied to industrial electricity consumption in the 10 countries studied—USA, UK, France, Germany, Spain, Poland, Turkey, Russia, India, and China—the numbers shown in Figure 4 are revealed.

This is a careful estimate of the amount of money that industrial enterprises will potentially waste over the next five years, as a direct result of not implementing VSDs on all appropriate industrial processes.

Positive prospects  

The projected sums for the potential energy cost savings to be gained from full implementation of VSDs in industrial enterprises serve to illustrate what could be gained from just one of many possible energy efficiency initiatives that industrial enterprises adopt.

Appropriate financing arrangements are now available for industrial companies to employ. These financing tools provide an alternative to standard bank borrowing, offset equipment investment costs against energy cost savings, and effectively offer businesses a zero-net-cost method of acquiring energy efficient equipment. This not only saves on energy costs, but is often more productive than the equipment it replaces, and is less expensive to maintain and service than previous generation technology.

It appears that, with innovative financing methods now widely available, the outlook for energy efficiency investment is positive.

This article is an excerpt from a whitepaper titled “Turn Down the Power” written by Siemens Financial Services. Edited by Sidney Hill, Jr., contributing content specialist, CFE Media. For more information, visit

Send IEM comments to

This article is part of the Industrial Energy Management supplement for CFE Media publications. 

See the links at the bottom of this article to read other articles in this supplement.

<< First < Previous 1 2 Next > Last >>

No comments
The Top Plant program honors outstanding manufacturing facilities in North America. View the 2015 Top Plant.
The Product of the Year program recognizes products newly released in the manufacturing industries.
The Engineering Leaders Under 40 program identifies and gives recognition to young engineers who...
Safety for 18 years, warehouse maintenance tips, Ethernet and the IIoT, GAMS 2016 recap
2016 Engineering Leaders Under 40; Future vision: Where is manufacturing headed?; Electrical distribution, redefined
Strategic outsourcing delivers efficiency; Sleeve bearing clearance; Causes of water hammer; Improve air quality; Maintenance safety; GAMS preview
SCADA at the junction, Managing risk through maintenance, Moving at the speed of data
Safety at every angle, Big Data's impact on operations, bridging the skills gap
The digital oilfield: Utilizing Big Data can yield big savings; Virtualization a real solution; Tracking SIS performance
Applying network redundancy; Overcoming loop tuning challenges; PID control and networks
Driving motor efficiency; Preventing arc flash in mission critical facilities; Integrating alternative power and existing electrical systems
Package boilers; Natural gas infrared heating; Thermal treasure; Standby generation; Natural gas supports green efforts

Annual Salary Survey

Before the calendar turned, 2016 already had the makings of a pivotal year for manufacturing, and for the world.

There were the big events for the year, including the United States as Partner Country at Hannover Messe in April and the 2016 International Manufacturing Technology Show in Chicago in September. There's also the matter of the U.S. presidential elections in November, which promise to shape policy in manufacturing for years to come.

But the year started with global economic turmoil, as a slowdown in Chinese manufacturing triggered a worldwide stock hiccup that sent values plummeting. The continued plunge in world oil prices has resulted in a slowdown in exploration and, by extension, the manufacture of exploration equipment.

Read more: 2015 Salary Survey

Maintenance and reliability tips and best practices from the maintenance and reliability coaches at Allied Reliability Group.
The One Voice for Manufacturing blog reports on federal public policy issues impacting the manufacturing sector. One Voice is a joint effort by the National Tooling and Machining...
The Society for Maintenance and Reliability Professionals an organization devoted...
Join this ongoing discussion of machine guarding topics, including solutions assessments, regulatory compliance, gap analysis...
IMS Research, recently acquired by IHS Inc., is a leading independent supplier of market research and consultancy to the global electronics industry.
Maintenance is not optional in manufacturing. It’s a profit center, driving productivity and uptime while reducing overall repair costs.
The Lachance on CMMS blog is about current maintenance topics. Blogger Paul Lachance is president and chief technology officer for Smartware Group.
This article collection contains several articles on the vital role of plant safety and offers advice on best practices.
This article collection contains several articles on the Industrial Internet of Things (IIoT) and how it is transforming manufacturing.
This article collection contains several articles on strategic maintenance and understanding all the parts of your plant.
click me