Cost-Benefit Analysis of Voltage Sag Mitigation

Methods in Cement Plants

Arup Kumar Goswami
Electrical Engineering Department

Chandra Prakash Gupta and Girish Kumar Singh

Electrical Engineering Department

NIT Silchar, Assam-India

IIT Roorkee, Uttarakhand-India

Abstract Voltage sags are responsible for nuisance process

trips in modern automated industrial facilities, thereby resulting
huge financial losses to customers. Therefore, both utility as well
as customers are having greater concerns for the improvement
in power quality. Everyone wants to determine the optimum
solutions. To do this, one need to evaluate solutions at all levels
of the power system from the utilitys transmission and
distribution system to the end users secondary system. One
needs to compare the cost of these improvements to the benefits
to determine the cost-effectiveness of the improvements.
Therefore, options for improving the voltage sag performance of
the supply system should be considered for these facilities based
on traditional engineering economic principles. Cement
manufacturing process is very vulnerable to voltage sags. This
paper describes the importance of the voltage sag problem in
such plant and possible mitigation methods.
Index Terms-- Power quality, Voltage Sags, Financial Losses,
Cement Industry, Voltage Sag Mitigation, FACTS, DSTATCOM, SVC

I.

INTRODUCTION

Power quality describes the quality of voltage and current

and is one of the most important considerations in industrial
and commercial applications today. It is essential that
processes in industrial plants, operate uninterrupted where
high productivity levels are an important factor. Power
quality problems commonly faced by industrial operations
include transients, sags, swells, surges, outages, harmonics,
and impulses that vary in quantity or magnitude of the
voltage [1]. Of these, voltage sags and extended undervoltages have the largest negative impact on industrial
productivity, and could be the most important type of power
quality variation for many industrial and commercial
customers. Recent survey results show that a typical
distribution system customer experiences an average of 70
events per year where the voltage drops below 70% of the
nominal voltage [2]-[3]. Industrial processes containing
variable speed drives are vulnerable to voltage sags. The
cement plant has a rotary-hearth furnace with fans for hot air
circulation, all driven by ASD. A DC electric filter is used to
eliminate the powder emission. This is the most sensitive

equipment to voltage sags. The industry is connected to

Bhagawanpur bus of Haridwar district distribution system [4]
the industry started working on March 2006 and immediately
problems appeared.
The protective devices of the automated industry started
to trip. They wrote a note describing the problems and how it
affected the production. A report of the events was provided
including date and hour, which machines were affected and
the consequences in the production. Everything led to the
conclusion that a power quality study was necessary. In this
paper a voltage sag assessment study has been done in a
cement plant. The total financial losses due to voltage sag
have been calculated and finally the cost-benefit analysis has
been performed to choose the best voltage sag mitigation
solution.
II.

ASSESSMENT OF FINANCIAL LOSSES DUE TO VOLTAGE

SAG

Voltage sag caused by balanced and unbalanced fault. For

finding voltage sag magnitude, the expression for the residual
phase voltages experienced at all the network buses for
balanced and unbalanced faults occur at a network bus and
along an arbitrary line are derived from [5]-[8]. In this
formulation, sag caused by a bus fault, sags caused by a line
fault as shown in Fig. 1 are considered. In this figure,
consider a fault position p moves along a line connecting
buses S and E; the location p at which the fault occur is
identified with the help of parameter . The
parameter varies from 0 to 1 as the fault position moves
from bus S to E.
i

Large Meshed Network

(1 ) Z c

Z c

Fig. 1: Sensitive load bus-i and short-circuit fault on line S-E

978-1-4673-6487-4/14/$31.00 2014 IEEE

866

Therefore,

is defined as

LSP
,0 1
LSE

(1)

The residual voltages due to single-line-to-ground fault

(SLGF), Line to-Line fault(LLF), Double-Line-to-Ground
fault(DLGF) and Three phase fault(3PF) are calculated. The
main requirement of voltage sag study is the expected number
of voltage sags per year, at the system buses, indicated within
a selected range of voltage magnitudes. In case of unbalanced
voltage sags, the lowest of all phase voltages is considered
for calculating number of voltage sags as in [7]. The voltage
sag performance at the Bhagawanpur bus (i. e, bus 29) is as
shown in Fig. 2. From the Fig 2, it is observed that the
voltage sag frequency is less for the deep sags (less voltage
sag magnitude) and more for swallow sags (large voltage sag
magnitude). The industry contains various PLC, ASD and
computer which are very sensitive to voltage sag
disturbances.

Fig. 3. Typical connections of sensitive equipments

participating in a process [13]
The overall probability of process trip is given by

Ptrip = 1 (1 p1 ) (1 p2 p3 ) (1 p4 )

(2)

where, p j is the cumulative probability of tripping of jth

device. In general, the probability of a process trip can be
expressed as
n
m

Ptrip = 1 1 p j ,k

j =1 k =1

(3)

where
m
is
the
number
of
series-connected
equipment/equipment groups and n is the number of parallelconnected equipments in jth equipment group. p j , k is the

cumulative probability of tripping of kth equipment of the jth

serially connected equipment group.
The process trips in the cement industry (i.e., bus 29) are
calculated as 185 trips per year. The voltage sag costs per
trips are assumed Rs 7,50,000 (approximately) as per the data
provided by the company. Procedure for assessment of
financial losses due to voltage sag is developed from [14][18]. The financial loss due to voltage sag occur at cement
industry bus are found to be Rs 2.82 million per year.
III.
Fig. 2. Number of voltage sags at industry bus

In case of three phase loads and asymmetrical sags, it was

assumed that all three phases are exposed to symmetrical sag
having the magnitude equal to the magnitude of the voltage
sag in the most affected phase. The duration of voltage sags is
determined by the fault-clearing time of protective devices
assuming that all faults are cleared by the primary protection
(i.e., 100% reliable primary protection system). The adopted
fault rates and durations are taken from [9]-[11].
For the stochastic assessment of process trips due to the
voltage sag performance at the site, depending upon the
sensitivity of individual equipment participating in an
industrial process, six different generic process configurations
as mentioned in [13], comprising of series /parallel
connections of four pieces of commonly used industrial
equipments PLCs, ASDs, PCs and AC contactors are
considered. For example, consider a simple process
consisting of four sensitive devices having mutual
connections as shown in Fig. 3.

METHOD OF FINANCIAL ANALYSIS

The economic analysis uses standard financial measures,

such as the payback period, net present value (NPV), and
internal rate of return (IRR) and profitability index to assess
the alternative [19].
A. Payback Period:
The payback period is the number of months of benefits
required for the project to break even. The payback time can
be estimated by the following equation
net investment
(4)
Payback(months)
=
12
net annual return
Many industrial companies look for projects with a payback
of less than 1-2 years in order for them to be considered. This
is equivalent to a 50-100% return.
B. Internal rate of return:
The internal rate of return is defined as the discount rate at
which the NPV is equal to zero. A project is accepted if the
internal rate of return exceeds a certain predefined rate often
called hurdle rate. The IRR is the discount rate that makes
the present value of projects cash flows equal to its initial
investment. The equation used to calculate the IRR is:

867

CFt
C0 = 0

t
t = 0 (1 + R )
n

(5)

Where, R is the internal rate of return. The project with an

IRR greater than the cost of capital should be accepted;
otherwise it should be rejected.

After assessment of the power quality improvement with

the installation of a mitigation device, cost-benefit analysis is
done to find out the best suitable mitigation method taking
into account the initial and operating costs of the mitigation
devices. The equations of price of FACTS devices are the
result of curve fitting from Fig 4.
US$/KVAr

C. Net Present Value (NPV) Method:

In the NPV method, all marginal cash flows of a project
are taken into account during its entire lifetime. Cash flows in
upcoming years are discounted to t = 0 by using an
appropriate rate called the Opportunity Cost of Capital
(OCC), hurdle rate, discount rate or required rate of return,
which results in the Present Value of these cash flows.
The Net Present Value of these cash flows (if the salvage
value of the equipment is assumed to be negligible) is
calculated by:
n

NPV =
t =0

CFt
C0
(1 + r )t

(6)

Where, CFt is the net cash flow at time t

C0 is the initial investment
r is the cost of capital (discount rate )
t is the number of years
n is the life time of the investment
The business should have a target cost of capital. Using this
cost of capital and the selected project life time, if the NPV is
positive then the project should be accepted.
D. Profitability Index:
The Profitability Index is similar to the NPV, but
expressed as a ratio form, i.e., as the present value of the
projects benefits to the present value of its costs:
PV
Profitability Index =
(7)
C0
Where, PV is all the forecasted discounted future cash flows
C0 is the initial investment at t = 0. A project is accepted if
the profitability index exceeds 1.

IV.

COST-BENEFIT ANALYSIS OF MITIGATION STRATEGIES

Since the expected annual financial losses due to voltage

sags are too high. For the minimization of financial losses,
industries are ready to installed two types of mitigation
devices D-STATCOM and/or SVC at their bus. The modeling
of D-STATCOM and SVC are described in [20]-[25]. The
approximate load at industry bus is 10 MW and assuming a
power factor of 0.95. So, the reactive power requirement is
3.6 MVAR. After installation of a mitigation device (either
D-STATCOM or SVC), number of process trips is reduced to
111 and 123 from 185 for D-STATCOM and SVC,
respectively. The associated financial losses due to voltage
sags are also reduced to 1.34 and 1.65 million rupees after the
installation of D-STATCOM and SVC, respectively; resulting
in net savings of 1.48 and 1.17 million rupees with DSTATCOM and SVC installation, respectively. Here it is
observed that D-STATCOM is more beneficial than SVC.

160
140
120
100

STATCOM

80

SVC

60
40
20
100

200

Source : Siemens AG Database

300

400
500
Operating Range in MVAr

Fig. 4. Price of SVC and D-STATCOM [26]

From Fig 4, the costs of D-STATCOM and SVC in terms of
their ratings SD-STATCOM and SSVC, respectively, can expressed
as
(8)
CD STATCOM = 2.80 103 S2 D STATCOM + 217.9 S D STATCOM + 24.28

CSVC = 2.25 103 S 2 SVC + 189.5 S SVC + 47.21

(9)
Let us assume a discount rate of 12% for these devices, i.e.
Discount rate r = 12 % assumed. Cost of D-STATCOM of 3.6
MVAR rating is calculated as 1.85 million rupees and the
maintenance cost is 0.2781 million rupees. Cost of SVC of
same rating is 1.494 million rupees and the maintenance cost
is 0.2241 million rupees. Therefore, net installation costs are
2.12 million rupees for D-STATCOM and 1.7181 million
rupees for SVC. Again the economic analysis was performed
using by various methods as discussed in [19] and the results
obtained are as given in Table 1. From Table 1, it is observed
that payback periods are 1.43 and 1.46 years for DSTATCOM and SVC, respectively.
Table 1 Economic analysis of installation of FACTS devices
Devices
DSTATCOM

Pay-back
period

NPV

(in years)

(in million
rupees)

1.43

6.83

IRR
(%)

PI

40

SVC
1.46
5.34
38
3.1
Therefore, D-STATCOM provides early recovery of
installation cost and therefore is a better choice based on
payback period. Results obtained with the NPV analysis of
installation of D-STATCOM and SVC are as shown in Tables
2 and 3, respectively and the funds accumulated over the
years of their service are as given in Figs 5 and 6,
respectively. From these two figures it is observed that both
D-STATCOM and SVC are capable of providing positive
cash flows after two years of service but funds accumulated
after their end of 20 years of service, are 7.00 million rupees
for D-STATCOM and only 5.00 million rupees for SVC
installation. So from the NPV analysis also it is observed that
D-STATCOM is more beneficial than SVC.
Again IRR values are 40% and 38% for D-STATCOM

868

and SVC, respectively. Therefore both the solutions are

feasible for the cement industry. Since D-STATCOM is
having higher IRR, D-STATCOM is more beneficial than
SVC. On the basis of Profitability index (PI), it is observed
that PIs are 3 and 3.1 for D-STATCOM and SVC. Therefore,
performance indices are almost same for both the devices.
As the trends in corporate finance, the investments are
generally made on the basis of early financial returns,
therefore the decision are mostly made on the basis of
payback periods. The investment providing early returns are
generally selected. Therefore, for the cement industry
selected, a D-STATCOM of 3.6 MVAR is proposed. Since it
is also helping more returns, at the end of 20 years of service
so it is the best mitigation device for the industry.
V.

CONCLUSION

Power quality improvement options need to be evaluated

in a systematic manner, considering the economics of the
impacts associated with power quality variations and the
costs associated with different alternatives to improve the
performance. The installation of any mitigation device
requires its optimal placement in the system network for their
maximum effectiveness.
Therefore, the evaluation requires an understanding of the
costs of financial losses due to voltage sags and also requires
an understanding of the costs and performance characteristics
of the possible mitigation solutions. A practical example of
cement industry illustrates the application of methods used
for cost-benefit analysis of voltage sag mitigation strategies
showing how to make an optimal choice in a practical
situation. Starting from the best mitigation methods to protect
industrial processes against voltage sags, this paper has
analyzed how to choose the most cost-effective mitigation
method. Three methods like NPV, IRR and Payback period
methods are discussed. Two types of mitigation devices (DSTATCOM and SVC) are used. D-STATCOM is found to be
more beneficial as compared to SVC. An important
conclusion which comes out from the whole analysis is that
before taking the step of installing a mitigation device against
voltage sags, power quality audits of customer facilities are
must for voltage sag mitigation strategies.
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Table 2 NPV analysis of installation of D-STATCOM at industry bus

Year

Financial
losses
(in million
rupees)

0
1
2
3
4
5
6
7
8
9
10

2.82
2.82
2.82
2.82
2.82
2.82
2.82
2.82
2.82
2.82
2.82

Cost of
FACTS
devices
(in million
rupees)
2.12
0
0
0
0
0
0
0
0
0
0

Financial losses
with DSTATCOM
(in million
rupees)
1.34
1.34
1.34
1.34
1.34
1.34
1.34
1.34
1.34
1.34
1.34

Maintenance
cost
(in million
rupees)

Savings in
losses
(in million
rupees)

Net savings
(in million
rupees)

PV
(in million
rupees)

NPV
(in million
rupees)

0.00
0.27
0.27
0.27
0.27
0.27
0.27
0.27
0.27
0.27
0.27

0.00
1.48
1.48
1.48
1.48
1.48
1.48
1.48
1.48
1.48
1.48

-2.12
1.21
1.21
1.21
1.21
1.21
1.21
1.21
1.21
1.21
1.21

-2.12
1.07
0.95
0.85
0.76
0.68
0.60
0.54
0.48
0.43
0.38

-2.12
-1.04
-0.09
0.76
1.52
2.20
2.81
3.35
3.83
4.27
4.65

NPV in million rupees

Table 3 NPV analysis of installation of SVC at industry bus

Year

Financial
losses
(in million
rupees)

0
1
2
3
4
5
6
7
8
9
10

2.82
2.82
2.82
2.82
2.82
2.82
2.82
2.82
2.82
2.82
2.82

8
6
4
2
0
-2
-4

Financial
losses with
SVC
(in million
rupees)
1.65
1.65
1.65
1.65
1.65
1.65
1.65
1.65
1.65
1.65
1.65

Cost of
FACTS
devices
(in million
rupees)
1.71
0
0
0
0
0
0
0
0
0
0

Maintenance
cost
(in million
rupees)

Savings in
losses
(in million
rupees)

Net savings
(in million
rupees)

PV
(in million
rupees)

NPV
(in million
rupees)

0.0
0.22
0.22
0.22
0.22
0.22
0.22
0.22
0.22
0.22
0.22

0
1.17
1.17
1.17
1.17
1.17
1.17
1.17
1.17
1.17
1.17

-1.71
0.95
0.95
0.95
0.95
0.95
0.95
0.95
0.95
0.95
0.95

-1.71
0.84
0.75
0.67
0.60
0.53
0.47
0.42
0.38
0.34
0.30

-1.71
-0.87
-0.12
0.55
1.15
1.69
2.16
2.59
2.97
3.32
3.62

10

11

12

13

14

15

16

17

18

19

20

Year

NPV in million rupees

Fig. 5 NPV analysis of installation of D-STATCOM

6
5
4
3
2
1
0
-1
-2

10

11

12

Year

-3

Fig. 6. NPV analysis of SVC installation

870

13

14

15

16

17

18

19

20