Energy Conversion and Management 54 (2012) 81–89

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Energy Conversion and Management

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A techno-economic analysis of cost savings for retrofitting industrial aerial coolerswith variable frequency drives

Patrick Miller, Babatunde Olateju, Amit Kumar ⇑Department of Mechanical Engineering, 4-9 Mechanical Engineering Building, University of Alberta, Edmonton, Alberta, Canada T6G 2G8

a r t i c l e i n f o

Article history:Received 6 June 2011Received in revised form 26 September 2011Accepted 27 September 2011Available online 9 November 2011

Keywords:Variable frequency driveAerial coolerEnergy savingsCost savingsTechno-economic assessment

0196-8904/$ - see front matter � 2011 Elsevier Ltd. Adoi:10.1016/j.enconman.2011.09.018

⇑ Corresponding author. Tel.: +1 780 492 7797; faxE-mail address: Amit.Kumar@ualberta.ca (A. Kuma

a b s t r a c t

A techno-economic model was created in order to develop curves that show the typical annual energysavings, rate of return, and payback for retrofitting aerial coolers with variable frequency drives (VFDs)for up to 50 motors, motor sizes from 4 to 186 kW (5–250 hp), and varying climate conditions. The costsavings due to installing a VFD depends on the reduction in energy used, as well as the reduction inpower demand, the capital cost of the VFD, installation cost of the VFD, change in operating cost, and costof electricity. The geographic locations examined in this report were Fort McMurray, Calgary, Vancouver,and Thunder Bay. This study found that the IRR increases rapidly with motor size, becomes greater than10% at a motor size of approximately 15 kW, and may be as high as 220% (for the case of fifty, 186 kWmotors). The IRR is sensitive to the number of fan motors retrofitted with VFDs, however the sensitivityrapidly declines as the number of motors is increased beyond five. The simple payback period becomesless than 1 year and nearly independent of number of motors and motor size for motors larger than90 kW. Ambient temperature and geographic location affect the profitability of the investment, althoughthe IRR only changes by approximately 4%.

� 2011 Elsevier Ltd. All rights reserved.

1. Introduction

As the supply of conventional energy sources declines, manycompanies are implementing energy conservation methods in or-der to reduce energy costs. The majority of the energy used aroundthe world is based from fossil fuels. Use of these fossil fuels for en-ergy results in the release of greenhouse gases (GHGs). Reductionof emissions of GHGs is a key driver for efforts towards conserva-tion of energy and increases in efficiency. Efficiency improvementcan be applied to various sectors of industries in the area of ther-mal and electrical use.

Installing variable frequency drives (VFDs) with electric motorsis an effective energy conservation method if the electric motors donot need to be run continuously at full load. VFDs are commonlyused with electric motors for fans, compressors and pumps. Manyresearchers have investigated the energy savings and economicbenefits of installing variable frequency drives. Dieckmann et al.have published a series of papers [1–5] that discuss VFD technol-ogy, as well as the energy savings from installing VFDs with blow-ers, compressors, and chiller auxiliaries for commercial andresidential HVAC systems. Other researchers have studied the en-ergy savings from installing VFDs with plastics processing [6],HVAC systems in agricultural buildings [7], HVAC systems inhospitals [8] and hotels [9], laboratory exhaust fans [10], boiler

ll rights reserved.

: +1 780 492 2200.r).

air supply fans [11], tobacco conditioning fans [12], and coolingtower fans [13]. Most of these studies discuss the potential energysavings that can be achieved from installing a VFD for a givenapplication but there is very limited research on the scale issuesin techno-economic assessment and the impact of climatic condi-tions on the economics of this energy conservation measure. Thisresearch paper is an effort to address these issues.

Variable frequency drives can also be applied to fan motors inindustrial aerial coolers, which are very common in the oil andgas industry and are used to cool steam, organic fluids (e.g. amine),refrigerant, hydrocarbons and other process fluids. For manyindustrial plants, aerial coolers present a great opportunity for costand energy savings but other than a case study by Fuchs [14] oninstalling a VFD for a benzene tower overhead condenser, thereis very little literature regarding energy savings for VFDs appliedto industrial aerial coolers. None of the studies mentioned earlierexamine how the economics change for retrofitting aerial coolerswith VFDs as the size of the cooler and climate conditions are var-ied. This study is an effort to fill this gap in the literature by deter-mining the typical annual energy savings, rate of return, andpayback for retrofitting aerial coolers with VFDs for a variety offan motor sizes and climate conditions. This study is focused onimplementation of this concept at four different locations inCanada. These four locations have been chosen based on theirdifferences in climatic conditions and represent four different setsof climatic conditions. Fig. 1 shows the four different locations

82 P. Miller et al. / Energy Conversion and Management 54 (2012) 81–89

(A – Fort McMurray, B – Calgary, C – Vancouver, D – Thunder Bay).The temperature profiles of the four locations are discussed later inthe paper.

To complete these objectives, data-intensive techno-economicmodels were developed for aerial coolers with fan motor sizes from4 to 186 kW (5–250 hp) operating for 7 years. The models includedetailed cost estimates and technical characteristics for all aspectsof retrofitting the aerial coolers with variable frequency drives:VFDs, filters, electrical equipment, control system equipment,mechanical equipment, electrical labor, instrumentation labor,mechanical labor, and changes to operating and maintenance costs.All costs in this study are in 2011 Canadian dollars (Cad$) unlessotherwise indicated.

2. Technical descriptions

2.1. Aerial coolers

Aerial coolers use powerful fans to cause air at ambient temper-ature to flow over a tube bank containing a process fluid. The fansare usually mounted near the top of the cooler and blow air up-wards or downwards over tube banks containing process fluid thatflows horizontally through the cooler. Aerial coolers are often in-stalled with an electric drive motor that operates at a fixed speed.Changes in process cooling load can be accommodated by adjust-ing louvers on the cooler, which increases or decreases the airflowrate through the cooler. Although this arrangement works fairlywell to provide the required cooling, it wastes a great deal of elec-tricity. Details on the basic operation and technical characteristicsof the coolers can be found elsewhere [15,16].

In locations where the temperature does not normally exceed30 �C, e.g., the Province of Alberta, Canada, most aerial coolersare designed to meet a summer ambient temperature of 90 �F or32 �C [17]. Therefore, in the winter when much less airflow isneeded to provide the same amount of cooling, the fan still oper-ates at the same speed as it does in the summer. By installing a var-iable frequency drive (VFD) to operate the fan motor, the powerrequired to operate an aerial cooler can be substantially reducedat times when the ambient temperature is less than 32 �C becausethe fan speed can be reduced [17]. According to the relationshipbetween fan speed and fan power, a fan operating at half of itsmaximum speed will use one-eighth the power that it uses at itsmaximum speed. Fan motor sizes can range from 4 to 186 kW

Fig. 1. Locations chosen for this study.

(5–250 hp), and in large oil and gas processing facilities such asthose in Fort McMurray in the Province of Alberta, Canada, wherethe oil and gas industry is prevalent, there may be 50 or more fansoperating in parallel [18].

2.2. Variable frequency drives

A variable frequency drive can be used with an electric motor ina variable torque or constant torque application [1] and is alsocommonly referred to as an adjustable frequency drive or a vari-able speed drive. A VFD takes the supply power for an electric mo-tor at a fixed frequency and voltage and converts the power tovariable frequency and variable voltage [1]. A VFD accomplishesthe conversion using pulse width modulation. Several types ofpulse width modulation exist, such as hysteresis current control,sinusoidal pulse width modulation (SPWM) and four-switch [19].

The basic components of a VFD are a rectifier, a direct current(DC) bus, and an inverter. The rectifier takes the alternating currentinput power and converts it to direct current. The DC bus acts asfilter for the voltage waveform [20]. Finally, the inverter changesthe DC power back to AC power [21]. The overall pulses are con-trolled to keep the correct voltage to frequency (V/Hz) ratio in or-der to generate the rated torque.

For applications where the electric motor can often run at lessthan full speed, installing a VFD can significantly reduce powerconsumption. In addition to decreasing power consumption, VFDsprovide other benefits. With a conventional motor starter, the fullvoltage and frequency is applied to the motor windings as soon asthe motor is turned on (across-the-line start). The sudden in-rushof power with an across-the-line start stresses mechanical compo-nents of a motor, causes different components in the motor to ex-pand at different rates, and can damage the motor insulation byinducing dielectric stresses [21]. A VFD gradually increases thepower applied to the motor, which significantly reduces stress onthe motor, bearings, and belts, which can increase the lifetime ofthese components [22]. A soft-starter also gradually increases thepower applied to a motor during a start, and is usually cheaperthan a VFD but cannot adjust motor speed once the motor is run-ning. If the electric motor is usually run near full speed, or can beused intermittently, a soft-starter may be a better option than aVFD to save power [23]. Soft-starters can usually be bypassed afterthe motor has been started, which decreases efficiency losses com-pared to a VFD [23]. VFD efficiency is typically 95–97% [24] and95% was used for this study.

Although installing a VFD has many benefits, there are potentialproblems that can arise. Reflected voltage waves, increased changein voltage per unit change in time (dV/dt), increased peak voltagein the motor windings and unwanted harmonics on the AC inputline can all occur if a VFD is installed [1]. The risk of wave reflectionincreases as the length of the cable between the VFD and the motorincreases [21]. A high dV/dt causes increased stress on the first fewmotor windings and decreases motor life. Most electric motorinsulation is rated in terms of maximum peak voltage and dV/dt[21]. In general, a VFD can be installed with an existing motorwithout any problems [21]. However, to minimize the risk of prob-lems due to a VFD installation, one should always check with themotor manufacturer first to see if the motor can be used with aVFD [21]. Another way to minimize the risk of damaging a motor(either new or existing) is to install an input harmonic filter andan inductive–capacitive (LC) filter with the VFD [18].

3. Methodology

In this study a data intensive spreadsheet-based model wasdeveloped and discounted cash flow techniques were used to

P. Miller et al. / Energy Conversion and Management 54 (2012) 81–89 83

assess different retrofit cases. The main variables for each retrofitcase were motor size, number of VFDs installed, and cooler loca-tion. The data for this study was collected from a variety of sourcesincluding literature, vendors, and industry experts.

3.1. Calculation of energy savings

3.1.1. Fan laws and power savingsFans can be broadly classified into centrifugal or axial flow fans;

with the former having the advantage of increased pressure energyof the fluid, and the latter the advantage of increased flow rate incomparison to one another [25]. However, both types of fans obeycertain performance laws, which govern the relationship betweenthe flow variables that dictate the performance of a fan [25]. Theperformance laws are not physical laws, and are derived fromempirical data with the application of dimensionless analysis[25]. The laws are embodied within three fan characteristics,namely: power coefficient, pressure coefficient, and the flowcoefficient [25].

For this study, the power coefficient is the most relevant; as itillustrates the relationship between the power consumption of afan and other relevant variables: the fluid density, rotor speed,and rotor diameter. The equation for the power coefficient isexpressed as follows [25]:

Power coefficient ¼ P

qN3d5 : ð1Þ

It can be seen from Eq. (1) that the power consumption of a fanis a function of the cube of the rotor speed. Hence, for the samefluid and the same size rotor, if the rotor speed is halved, the powerconsumption decreases by a factor of 8. Thus, retrofitting aerialcoolers with VFDs has the potential to achieve significant energysavings, as the speed of the fan motor can be modulated appropri-ately in relation to the ambient temperature, leading to energysavings.

3.1.2. Variable frequency drive (VFD) performance curvesThe performance of an aerial cooler fan with a VFD as a function

of ambient temperature is shown in Fig. 2. The two measures ofperformance illustrated in Fig. 2 are the percentage use of the max-imum fan power and speed respectively. These performance curveswere produced using aerial cooler design software and give theaverage of a series of coolers used for a number of fluids (e.g., nat-ural gas, amine, glycol) [26].

3.1.3. Ambient temperature distribution and geographical locationsThe ambient temperature of the operating environment of the

aerial cooler determines the fan motor speed required at any given

0%10%20%30%40%50%60%70%80%90%

100%

-20 -10 0 10 20 30 40

Spee

d

Temperature (Degrees C)

Power

Speed

Fig. 2. Effect of ambient temperature on aerial cooler fan speed and power [26].

point in time during its operation. Hence, the geographical locationselected for the aerial cooler is pivotal to the energy savings thatcan be realized. With this in mind, the annual average monthlytemperature for four different locations in Canada was obtained[27]. The locations selected were Fort McMurray (Alberta), Calgary(Alberta), Vancouver (British Columbia), and Thunder Bay (Ontar-io) as shown in Fig. 1.

The rationale behind the selection of the different locations wasto consider the regions with an active oil and gas industry i.e. FortMcMurray and Calgary, as well as accommodating the typical cli-matic conditions that exist in the commercial/industrial nerve cen-ters of selected provinces in Canada. The underlying premise of theselection is to illustrate the effect of different geographical loca-tions on the energy savings. The annual temperature distributionsof the different locations are shown in Fig. 3. Some of the key sta-tistical data of the temperature distribution in the regions selectedare provided in Table 1.

3.1.4. Energy savings calculation modelA data intensive energy savings spreadsheet-based model was

developed. Using the aerial cooler performance curves shown inFig. 2, the percentage power requirement of the VFD retrofittedaerial cooler was then obtained for each hourly temperature. Thisdata allowed for the calculation of the amount of energy (kW h)that is consumed each hour, and on an annual basis.

The VFD-case energy consumption was then compared to thecase of an aerial cooler with a fixed speed motor, whose powerconsumption is constant throughout the year. For a fixed speedaerial cooler, the flow rate of air is modulated with the use ofdampers/louvers while the power consumption remains approxi-mately unchanged. Both of the coolers are assumed to operatefor 95% of 8760 h, due to planned shutdowns, maintenance andother unforeseen circumstances at the operating facility (basedon the experience of the author).

Apart from the energy consumption, the peak power demand ofthe aerial cooler for each month in the year was also noted for thecalculation of annual demand charges. The rate schedule of whole-sale and retail electricity utility companies in Alberta (Fortis andEPCOR) were consulted for the calculation of the financial savings[28,29]. Fortis sells electricity to EPCOR at a wholesale price, andthe charges are then passed onto the consumer with an added pre-mium by EPCOR [30,31]. The added premium is only applicable tothe energy consumption charge ($/kW h) while the demand charge($/kW day) remains at the wholesale level stipulated by Fortis[30,31]. The Fortis Large General Service (Rate 63) rate schedulewas assumed to apply to the operating facilities of the aerial cool-ers. The eligibility for this rate schedule is a power demand of2 MW or greater [28]. The Fortis rate schedule also includes a de-mand ratchet, other minimum demand charges, as well as a con-tract kilometer charge ($/km day) [28]. Hence, the calculation ofthe energy bills, including all charges, would require energy con-sumption and other site-specific data of the actual plant in ques-tion. The approach taken in this study is the calculation of theincremental energy costs/savings that would occur with the useof a VFD aerial cooler against its fixed speed motor counterpart.This approach negates the requirement of plant specific energyconsumption data for the calculation of energy savings. The energysavings calculation was carried out for a range of motor capacitiesvarying from 4 to 186 kW (5–250 hp), considering a single unit foreach capacity.

The energy consumption charge and demand charge utilized inthis study are $0.0755/kW h [29] and $0.1345/kW day [28] respec-tively. A motor efficiency of 90% is also accounted for, along with aVFD efficiency of 95%. The various formulae utilized in the develop-ment of the energy savings model are provided in the Appendix.

-20

-15

-10

-5

0

5

10

15

20

25

1 2 3 4 5 6 7 8 9 10 11 12Te

mpe

ratu

re (°°

C)

Month Number

Calgary

Fort McMurray

Vancouver

Thunderbay

Fig. 3. Annual mean monthly temperature for locations considered [27].

Table 1Annual ambient temperature statistics for different locations in Canada [27].

Temperature statistic(�C)

Calgary FortMcMurray

Vancouver ThunderBay

Mean 4.5 2.3 10.9 5.0Median 5.2 4.2 10.6 6.3Mode 12.8 13.5 8.0 2.3Standard Deviation 10.5 13.1 5.5 12.2Range 61.1 62.5 38.5 61.0

y = 119.6x + 2,343.1R2 = 1.0

R2 = 1.0

R2 = 0.9y = 12.9x + 1,069.8

y = 57.9x + 2,116.9

0

5,000

10,000

15,000

20,000

25,000

30,000

0 50 100 150 200

Com

pone

nt C

ost (

$)

Motor Size (kW)

VFD Cost

LC (Inductive Capacitive) Filter

Input Harmonic Filter

Fig. 4. Capital costs for VFDs and filters [18].

y = 125.2x - 425.3R2 = 1.0

20,000

25,000

84 P. Miller et al. / Energy Conversion and Management 54 (2012) 81–89

3.2. Calculation of life-cycle retrofit costs

In order to calculate the life cycle cost to retrofit an electric fanmotor on an aerial cooler with a variable frequency drive, manycost components must be considered. The costs can be broken intodirect equipment costs, automation costs, installation costs, andoperating and maintenance costs. All costs are given in CanadianDollars with a base year of 2011.

0

5,000

10,000

15,000

0 50 100 150 200

Mot

or C

ost (

$)

Motor Size (kW)

Fig. 5. Capital costs for aerial cooler electric fan motors [18].

3.2.1. Direct equipment costsIn this study the direct equipment costs considered were the

costs of the VFD, the input harmonic filter, and the inductive–capac-itive filter. The average cost for each piece of equipment was pro-vided by KJ Controls [18], an Alberta-based company withextensive experience in VFD installations. The costs given for theVFDs and filters could vary by plus or minus 15%, depending on thevendor and the manufacturer [18]. Cost data was collected for VFDsand filters designed for motors with power ratings from 4 to 186 kW(5–250 hp). The cost for each component increases linearly with mo-tor power rating, as shown in Fig. 4. A discount on the prices shown inFig. 4 could likely be negotiated if multiple units were purchased butno discount was considered for this study.

If an existing motor is not compatible with a VFD, it will be nec-essary to install a new motor along with the VFD. Cost data for aer-ial cooler fan motors in the range of 4–186 kW (5–250 hp) isshown in Fig. 5. Once again, these are average costs and could varyby approximately plus or minus 15% depending on the vendor andmotor manufacturer [18]. The electric motor cost increases linearlywith motor power rating and the motor cost is similar to the VFDcost. In this study, it is assumed that the VFD can be installed withan existing electric motor so the cost to purchase a new motor isnot included.

3.2.2. Automation costsMany aerial coolers are controlled manually, where an operator

checks the process fluid outlet temperature, then adjusts thelouvers on the aerial cooler to increase or decrease cooling. To

optimize the power savings from installing a VFD on an aerial cool-er, the control process must be automated. A basic method to auto-mate the process is to measure the temperature of the process fluidat the outlet of the cooler, send the temperature signal to the con-trol system, then the control system would send a signal to the VFDto increase or decrease the fan speed in order to maintain the pro-cess fluid temperature at the desired setpoint. If a cooler has multi-ple fans, it is assumed that the process fluid splits into a parallelstream for each fan. Therefore, temperature measurement wouldbe needed for each fan so that the speed of each fan could be ad-justed individually. It is cheaper to automate the process usingonly one temperature transmitter for multiple fans if the processoutlet from each cooler is commingled. However, measuring thetemperature for each fan provides the operator with more flexibil-ity and useful troubleshooting information. For example, if thetubes in a tube bank for one of the fans begin to foul, that fan will

Table 2Summary of automation and installation costs.

Description Cost/Unit

Capacity Ref.

Thermocouple $300 N/A [32]Temperature transmitter $2400 N/A [32]Cable for transmitter $500 N/A [32]Labor to install transmitter $1000 N/A [32]Analog input card $3000 16

Transmitters[32]

Instrumentation labor to program & installAI & ModBus cards

$1000 N/A [32]

Electrical labor to install transmitter, AI &ModBus cards

$6000 N/A [32]

Welder labor to install transmitter supports $1000 N/A [32]ModBus card $8000 4 VFDs [32]Cable, tray, connectors & electrical labor for

VFD install$3000 N/A [33]

Technical support for control system $1500 N/A [33]Technical support for VFD $1500 N/A [33]Junction box $1000 24

Transmitters[32]

24 Pair cable for junction box $2000 24Transmitters

[32]

Cable tray for junction box $2000 N/A [32]Electrical labor for junction box install $6000 N/A [32]Welder labor for junction box supports $1000 N/A [32]Total automation & installation cost for 1

unit$41,200

Incremental Cost for next unit $10,700

P. Miller et al. / Energy Conversion and Management 54 (2012) 81–89 85

be required to operate at a higher speed than other fans to main-tain the desired outlet temperature. If an operator is aware ofone fan operating at a higher speed than others, he knows that itmay be time to shut that section of the cooler down so that itcan be cleaned to operate more efficiently. In this study, it is as-sumed that the outlet temperature of the process fluid is measuredfor each fan.

Two possible methods to measure and transmit the tempera-ture signal are to:

(1) Measure the temperature with a thermocouple and use athermocouple card to interface with the control system.

(2) Measure the temperature with a thermocouple and temper-ature transmitter and use an analog input card to interfacewith the control system.

In this study, a thermocouple and a temperature transmitterwith an analog input card are used. Analog input cards with 8 or16 inputs are common [32] and in this study the analog input cardsused have 16 inputs each. It is assumed that a thermo-well alreadyexists in the process piping so no pipe modifications are requiredto install the thermocouple and transmitter. In most cases if thetemperature is already measured with a temperature gauge, thethermocouple and transmitter could simply replace the tempera-ture gauge. For this study a pipe stand is used to support the trans-mitter. A heated instrumentation box and heat tracing are used if atransmitter is installed outdoors and must be kept warm. In gen-eral, heated instrumentation boxes and heat tracing are used ifthe risk of freezing is high or if the process that the transmitteris monitoring is a critical process. For this study it is assumed thata heated instrumentation box and heat tracing are not required.

To allow the VFD to communicate with the control system, aninterface card such as a ModBus card is needed. The type of inter-face card would change depending on the communication protocolused in the industrial facility. In this study it is assumed that aModBus card is used which can accommodate up to four VFDs [32].

For many projects in industrial facilities, it is wise to make pro-visions for future upgrades or installations. In this study it is as-sumed that a junction box must be installed with a 24 pairhome-run cable to provide connections for the temperature trans-mitters. Each junction box can accommodate up to 24 transmitters.Other automation costs that must be considered are the cost forcables to connect devices to the control system, the cost for cableconnectors, and the cost for tray to support the cables. The costfor cable, tray, and connectors for an actual installation will varydepending on the distance from the device to the control system.Sometimes spare cables or tray exists that can be used, but for thisstudy it is assumed that all new cable and tray must be installed.

3.2.3. Installation costsThe cost of labor to install the VFD, filters, and automation

equipment is significant. An electrician and an instrumentationtechnologist would be required to install the VFD, filters, thermo-couples, transmitters, ModBus cards, analog input cards, and junc-tion boxes. A welder is required to install the pipe stands tosupport the transmitters and to install miscellaneous supports re-quired for the cable tray and junction boxes. Technical support toinstall the VFD and to integrate the VFD with the control systemcould come from an internal or external employee and is assumedto cost $100/h. If more than one VFD is installed, the technical sup-port cost is assumed to drop to 50% of the cost of technical supportto install the first VFD, due to efficiency benefits that would arisefor multiple units. The labor cost to install the equipment wouldalso likely drop but since more manual labor is involved in install-ing the equipment, the labor cost for subsequent units is only as-sumed to drop to 75% of the cost of the labor to install the first

unit. A summary of the labor and equipment required to installthe VFD and to automate the controls of the aerial cooler is shownin Table 2.

Due to the declining labor and technical support cost for multi-ple units, the automation and installation cost on a ‘‘per unit’’ basisis much higher for the first unit than for subsequent units. Notethat since a single ModBus card has capacity for 4 VFDs, a singleAI card has capacity for 16 transmitters, and a single junctionbox has capacity for 24 transmitters, there is a jump in total auto-mation and installation cost when the number of units installed isone greater than a multiple of 4, 16, or 24.

3.2.4. Operating and maintenance costsSeveral components of operating and maintenance (O&M) costs

will change due to the installation of a VFD. If the cooling duty pro-vided by the aerial cooler is needed for a critical process, it may benecessary to purchase additional VFDs or filters to keep in stock ascritical spares. The cost of critical spares was not considered here.The O&M costs would increase because preventative maintenancewould need to be performed for the VFD, filters, and transmitters.However, the O&M cost would decrease because a VFD starts a mo-tor at a lower speed, which reduces stress on the motor, belts, andbearings, which would increase the lifetime of these components.Overall, the net O&M cost change will likely be small so therewas no O&M cost change considered for the analysis in this study.The typical lifetime of a VFD is 5–10 years depending on the man-ufacturer and during that time virtually no maintenance is re-quired [18].

3.3. Calculation of IRR, NPV, payback

Over 2600 pre-tax discounted cash flow forecasts were devel-oped to determine the rate of return and simple payback associ-ated with retrofitting an aerial cooler with a VFD for a variety offan motor sizes and climate conditions. The different scenariosdeveloped are shown in Table 3. The key assumptions used to de-velop the discounted cash flow forecasts are shown in Table 4.

Table 3Scenarios developed.

Location Motor sizes (kW) Number of motors

Fort McMurray, AB 4–186 1–50Calgary, AB 4–186 1–50Vancouver, BC 4–186 1–50Thunder Bay, ON 4–186 1–50

Table 4Key assumptions used to develop discounted cash flow forecasts.

Factor Value Ref.

VFD lifetime 7 years [18]Inflation 2% N/AInternal rate of return (for calculating NPV) 10% N/ABase year 2011 N/ASpread of construction costs All in year 1 N/AElectricity price $0.0755 (kW h) [29]Demand charge $0.1345 (kW day) [28]Motor efficiency 90% [23]VFD efficiency 95% [24]Aerial cooler downtimea 5% N/A

a The aerial cooler downtime is estimated based on the author’s experienceworking in a sour natural gas processing plant, which had multiple aerial coolers.

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

4 6 7 15 19 22 37 45 56 75 112 149 186

Savi

ngs

($)

Motor Size (kW)

CalgaryFort McMurrayVancouverThunder Bay

Fig. 7. Annual savings due to demand (kW) reduction.

86 P. Miller et al. / Energy Conversion and Management 54 (2012) 81–89

4. Results and discussion

4.1. Energy savings model results

Figs. 6 and 7 show the dollar value of savings for the energyconsumption reduction and demand reduction respectively thatresult from retrofitting an aerial cooler with a VFD. The savingsillustrated in Figs. 6 and 7 are for a single VFD unit, for a motorat a specified capacity (kW), operating for a period of 1 year.

As seen in Figs. 6 and 7, the financial savings as a result of re-duced energy consumption are more than one order of magnitudegreater than the savings realized from peak demand reduction. Therelatively minute demand charge savings are due to the differencein magnitude of the energy consumption charge and the demandcharge. The energy consumption charge is a per kW h charge, asopposed to per kilowatt per day rate of the demand charge.

With regards to the geographic location of the aerial coolers, ofthe four locations considered, Fort McMurray is the region with thehighest total savings. This result is intuitive as Fort McMurray hasthe lowest mean temperature of all four regions, as well as thecoldest winter (see Table 1 and Fig. 3). Calgary is close behind FortMcMurray in terms of savings, as on average, it has a cold winter,and more importantly, the coldest summer of all the regions con-sidered as illustrated in Fig. 3. Thunder Bay and Vancouver are

0

20,000

40,000

60,000

80,000

100,000

120,000

4 6 7 15 19 22 37 45 56 75 112 149 186

Savi

ngs

($)

Motor Size (kW)

Calgary

Fort McMurray

Vancouver

Thunder Bay

Fig. 6. Annual savings due to consumption (kW h) reduction.

almost identical with regards to the financial savings. However,the savings in Thunder Bay are slightly higher than those realizedin Vancouver, due to Vancouver being the warmest of all the re-gions on average. Having said that, Vancouver has some potentialif the peak demand savings become significant. As shown inFig. 7, it has the highest peak demand savings of all four regions,even though the savings are miniscule relative to the energy con-sumption savings. The ambient temperature variation in Vancou-ver is the least volatile of all the regions considered as reflectedin its relatively small standard deviation of 5.5 �C. The reducedstandard deviation of Vancouver will mitigate abrupt increases/spikes in peak demand, which will lead to increased savings incomparison to other regions.

4.2. Discounted cash flow analysis results

To put the financial savings realized into an economic context,the results from the pre-tax discounted cash flow analysis are pre-sented in Figs. 8a and b. Fort McMurray was used as the geographiclocation of the cash flow analysis, as it is an oil and gas industrialheartland, coupled with the fact that it has the most favorableweather conditions for the aerial coolers.

4.2.1. Internal rate of return (IRR)As seen in Figs. 8a and b, the IRR of the investment exhibits a

non-linear, second order increase as the motor size is increased.This illustrates the importance of scale; as an example, the IRRfor a single unit only attains a value above 10% for a motor sizeabove 15 kW. For all other capacities below this threshold theinvestment is not profitable. Furthermore, the slope of the curvesalso increases as the number of units increases. However, the in-crease in IRR as a result of an increase in the number of units de-cays gradually to the point where an increase in the numberunits has little effect on the IRR. This trend is a result of the instal-lation costs of the VFD, which rise significantly as the number of

0%30%60%90%

120%150%180%210%240%

0 20 40 60 80 100 120 140 160 180 200

Inte

rnal

Rat

e of

Ret

urn

Motor Size (kW)

1 Unit2 Units5 Units50 Units

Fig. 8a. Internal rate of return.

0123456789

10

0 20 40 60 80 100 120 140 160 180 200

Sim

ple

Payb

ack

(yea

rs)

Motor Size (kW)

1 Unit2 Units5 Units50 Units

Fig. 8b. Simple payback period.

P. Miller et al. / Energy Conversion and Management 54 (2012) 81–89 87

units is increased. The rise in costs is due to labor costs and thecapacities of given components such as the Modbus card, junctionbox, and analog input card, which have to be re-purchased whentheir capacities are exceeded. From Figs. 8a and b, it can be inferredthat the IRR of the investment has a greater sensitivity to the motorsize, as opposed to the number of motors (units).

4.2.2. Simple payback periodThe simple payback period decreases sharply as the motor size

is increased. This trend continues until a motor size of about 90 kWis reached, where the payback period remains fairly constant as themotor size is increased further. This occurs because the ratio be-tween the investment costs and the annual financial savings re-mains approximately constant for all motor sizes above 90 kW.This suggests that the economies of scale, in the context of the pay-back period, are only advantageous up to a motor size of approxi-mately 90 kW.

4.3. Effect of geographic location on economic viability

The effect of geographic location on Internal Rate of Return forthe investment is shown in Fig. 9. Note that a common motor sizeof 37 kW (50 hp) was chosen to compare the locations. From Fig. 9,we can see that compared to Fort McMurray, Calgary has the nextbest IRR, followed by Thunder Bay, and Vancouver. The differencein IRR occurs due to the difference in climate for each region, asdiscussed in Section 4.1.

It is important to stress that the effect of the geographical loca-tion of the aerial coolers is not just limited to the ambient temper-ature distribution. The cost of energy in different jurisdictions evenwithin Canada will vary according to the energy mix of a givenlocation. For the purposes of this study, it has been assumed thatthe utility rates that apply in the Province of Alberta, also applyto Vancouver, BC and Thunder Bay, ON. Hence, it is important to

-5%

-4%

-3%

-2%

-1%

0%0 10 20 30 40 50

IRR

for 5

0hp

Mot

or v

s. F

t. M

cMur

ray

Number of Units

Ft. McMurray

Calgary

Vancouver

Thunder Bay

Fig. 9. Effect of geographic location on economic viability.

note that the economic viability of the VFD investment in practiceis also subject to the cost of energy in a given jurisdiction.

Another factor that would impact the results of this study is thetypical design temperature for an aerial cooler in a given region.For Vancouver and Thunder Bay, the maximum ambient tempera-ture in the summer is different than in Alberta, so the design tem-perature of a typical aerial cooler in those regions would likely bedifferent. For Vancouver, the maximum summer ambient temper-ature is usually lower than in Alberta, so the savings calculated inthis study are likely slightly over estimated. For Thunder Bay, themaximum summer ambient temperature is usually higher thanin Alberta, so the savings calculated in this study are likely slightlyunder estimated.

4.4. Emissions reduction

In addition to the energy savings discussed earlier, significantGHG reductions can also be achieved with the installation of VFDson fixed-speed aerial coolers. The yearly emissions avoided due toa VFD installation were calculated using the emission intensity ofthe electricity grid in Alberta (0.88 kg CO2e/kW h [34]) and areshown in Fig. 10. Although Alberta does have a carbon tax of$15/tonne of CO2e, the tax only applies to companies who exceedcertain emission limits [35], so the tax was not included in thefinancial analysis for this study.

4.5. Effect of fixed speed motor shutdowns on economic viability

As explained earlier, a 5% annual downtime was assumed forthe operation of both the VFD and fixed speed aerial coolers. How-ever, in the event where the fixed speed aerial coolers are underthe supervision of an efficient operator, the annual downtime ofthe fixed speed coolers may be as high as 25%. This scenario as-sumes that the operator takes advantage of cold temperatures,and shuts down fans at an opportunity where the ambient temper-ature makes it permissible.

The effect of this conservative scenario on the economics andemission reduction associated with the VFD investment is shownin Fig. 11a–c, again for Fort McMurray. The results for this scenarioare intuitive, as it is expected that the IRR of the investment, andemissions reduction would decrease relative to the initial 5%downtime scenario. The payback period also increases intuitively.The magnitude of the IRR, emissions reduction, and payback peri-ods change, however the trends are identical to those of the 5%downtime case.

4.6. Comparison of results with existing literature

The economic results developed in this study generally agreewith those in established literature. In terms of payback for VFDinstallations, Abbott found payback periods from 0.4 to 1.5 years

0

1

2

3

4

5

6

7

0 20 40 60 80 100 120 140 160 180 200

Emis

sion

s A

void

ed

(k

tonn

e C

O2e

)

Motor Size (kW)

1 Unit2 Units5 Units

Fig. 10. Yearly emissions avoided due to VFD retrofit.

0%20%40%60%80%

100%120%140%160%180%

0 20 40 60 80 100 120 140 160 180 200

Inte

rnal

Rat

e of

Ret

urn

Motor Size (kW)

1 Unit2 Units5 Units50 Units

Fig. 11a. Internal rate of return (25% Downtime Case).

0123456789

10

0 20 40 60 80 100 120 140 160 180 200

Sim

ple

Payb

ack

(yea

rs)

Motor Size (kW)

1 Unit2 Units5 Units50 Units

Fig. 11b. Simple payback period (25% Downtime case).

0

1

2

3

4

5

6

0 20 40 60 80 100 120 140 160 180 200

Emis

sion

s A

void

ed

(k

tonn

e C

O2e

)

Motor Size (kW)

1 Unit2 Units5 Units

Fig. 11c. Yearly emissions avoided due to VFD retrofit (25% Downtime case).

88 P. Miller et al. / Energy Conversion and Management 54 (2012) 81–89

for various motor sizes and applications [36] and Garibotti found a2-year payback for a 200 kW brine blowdown pump [37]. Lonn-berg found less than a 1-year payback for a 19 kW fan [8], and Kili-caslan and Ozdemir found a 0.8-year payback for a 30 kW fan [11]but in this study the motor size needed to be greater than 90 kWfor a payback period of less than 1 year. However, it is importantto note that the fans in these earlier studies were used for differentapplications (hospital air conditioning and boiler air respectively)compared to the fans in this study. In terms of energy savings,World Pumps demonstrated a decrease in average power con-sumption of 52% for a water pump in a limestone quarry after aVFD was installed [38]. For a VFD-retrofitted industrial aerial cool-er in Fort McMurray, the results developed in this study showedthat the average power consumption could be reduced by up to88%. The slight differences in results for this study compared toother literature can be attributed to the differences in applicationsexamined and the subjective nature of the cost estimates.

5. Conclusion

This paper discussed the development of a spreadsheet-basedmodel to assess the economic viability of retrofitting fixed-speedindustrial aerial coolers with variable frequency drives (VFDs).Since the power consumed by a fan is inversely related to the cubeof the fan speed, using a VFD to control airflow rather than louverscan save a significant amount of energy. A wide variety of scenarioswere evaluated to assess the impact of fan motor size, number offan motors, and geographic location on the economics of theinvestment.

The results in this paper show that retrofitting an industrial aer-ial cooler with a VFD is normally a sound financial investment andcan appreciably offset greenhouse gas emissions. The simple pay-back becomes less than 2 years for motor sizes greater than40 kW, and less than 1 year for motor sizes greater than 90 kW.The IRR of the investment increases rapidly with motor size, be-comes greater than 10% at a motor size of approximately 15 kW,and may be as high as 220% (for the case of fifty, 186 kW motors).The IRR is sensitive to the number of fan motors retrofitted withVFDs, however the sensitivity rapidly declines as the number ofmotors is increased. Ambient temperature and geographic locationaffect the profitability of VFD investment, although the IRR onlychanges by approximately 4%. Based on the emission intensity ofthe electricity grid in Alberta, retrofitting a 186 kW motor with aVFD can offset nearly 1.4 k tonnes of CO2 per year.

Acknowledgements

The authors would like to thank Barry Martel of KJ Controls forhis input regarding costs for VFDs, fan motors, and auxiliary equip-ment, as well as general considerations for VFD installations. Theauthors are grateful for the input from Andrew Kulynych of Talis-man Energy and Clint Nordell of Tarpon Energy Services for provid-ing information needed to develop the automation and installationcost components for this study. The authors would also like tothank the Natural Sciences and Engineering Research Council ofCanada (NSERC) for providing financial support to do this research.

Appendix A. Calculation of energy and cost savings

Glossary of symbols

a VFD monthly demand charge ($/month) b VFD yearly demand charge ($/year) c Fixed speed motor yearly demand charge ($/year) d Yearly demand charge savings ($/year) Dm Number of days per month (days) Dy Number of days per year (days) Em Motor efficiency Ev VFD efficiency e VFD hourly power consumption (kWh) f VFD yearly energy consumption charge ($/year) g Fixed speed motor yearly energy consumption charge ($/

year)

h Yearly energy consumption charge savings ($/year) H Number of hours per year (h) Pc VFD percent power consumption for each hour in a year

(%)

Pd Peak power demand per calendar month (kW) Pm Motor rated power (kW) Rc Consumption charge rate ($/kW h) Rd Demand charge rate ($/kW day)

P. Miller et al. / Energy Conversion and Management 54 (2012) 81–89 89

A.1. Demand charge savings calculation

(i) a ¼ Rd�Pd�DmEm�Em

(ii) b ¼Pn¼12

i¼1 ai

(iii) c ¼ Rd � Pm � Dy

Em

(iv) d = c � b

A.2. Consumption charge savings calculation

(i) e ¼ Pc � PmEm � Em

.

(ii) f ¼ ðPn¼8760

i¼1 eiÞ � Rc � 0:95.

(iii) g ¼ Rc � Pm � H � 0:95Em

.

(iv) h = g � f.

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