power and distribution equipment in the circular economy whitepaper
DESCRIPTION
This whitepaper explores how remanufacturing is an important component of the circular economy and how it provides a cost effective option for power distribution equipment. The paper focuses on the services offered at Slaters Electricals Ltd, a remanufacturer of transformers and switchgear based in the North East of England.TRANSCRIPT
Power and Distribution Equipment in the Circular Economy - a Whitepaper
Dr Rachel Waugh, Centre for Remanufacturing and ReuseClare Adams, Slaters Electricals Ltd
Power and Distribution Equipment in the Circular Economy – a Whitepaper
Slaters Electricals Ltd and Centre for Remanufacturing and Reuse
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Power and Distribution Equipment in the Circular Economy – a
Whitepaper
Dr Rachel Waugh, Centre for Remanufacturing and Reuse Clare Adams, Slaters Electricals Ltd
2015
Introduction
This whitepaper explores how remanufacturing is an important component of
the circular economy and how it provides a cost effective option for power
distribution equipment. The paper focuses on the services offered at Slaters
Electricals Ltd, a remanufacturer of transformers and switchgear based in the
North East of England.
What is the circular economy?
Make-use-dispose business practices lead to the over use of natural resources, intensive
use of energy and the production of a large amount of waste. Continuing to use the world’s
natural resources in this way will cause major, and potentially catastrophic, environmental
and economic impacts.
The ‘circular economy’ has become an increasingly popular term in the last few years with
widespread media coverage and an interest from politicians and high profile advocates. The
basic definition of the circular economy according to the Ellen MacArthur Foundation is:
‘A circular economy is one that is restorative by design, and
which aims to keep products, components and materials at
their highest utility and value, at all times.’
Circular economy activities cover the whole length of the supply chain, from product design
through to activities at the end of a product’s life. In a circular economy, the maximum value
from a product is derived by retaining as much of the embedded material, labour, energy and
capital as possible both throughout the supply chain and at the end of each service.
Power and Distribution Equipment in the Circular Economy – a Whitepaper
Slaters Electricals Ltd and Centre for Remanufacturing and Reuse
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The figure below shows the key material flows that characterise a circular economy.
Diverting materials and products away from disposal and back into use is not a new concept;
it has been practised for years, motivated predominantly by either cost savings or resource
scarcity. However, extending this circular thinking along the full length of the supply chain,
e.g. into product design, and prioritising strategies higher up the waste hierarchy are
examples of how circular thinking is becoming more joined up.
One of the key challenges of thinking circularly rather than linearly, is developing a new
vocabulary to describe the different circular approaches. The terminology used in the
diagram above can be defined as follows:
Definition
Maintenance Products undergo regular inspection during use to repair any
failing or failed components
Redistribution Products that have not reached the end of their useful life are
passed between users; for example, via a leasing scheme
Reuse Products, or their components, that are no longer needed by their
current owner or user are passed to a new user, often via a third
party
Refurbishment Used products or components are repaired to a lower or
equivalent standard compared to their original performance
Remanufacturing Used products or components are returned to at least their
original performance with a warranty that is equivalent or better
than that of the newly manufactured item
Recycling Materials (but not components) are recovered from the exi
product
Power and Distribution Equipment in the Circular Economy – a Whitepaper
Slaters Electricals Ltd and Centre for Remanufacturing and Reuse
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The remanufacturing element of the circular economy has had major focus in the last year.
The All-party Parliamentary Sustainable Resource Group (APSRG) produced two reports
focusing on the benefits of remanufacturing for the UK economy, and recommendations to
the UK Government on how the remanufacturing process should and could be implemented
into manufacturing practices.
The reports estimate that ‘remanufacturing typically uses 85% less energy than
manufacturing’ and the ‘value of remanufacturing in the UK is £2.4 billion, with potential to
increase to £5.6 billion alongside the creation of thousands of skilled jobs.’
Remanufacturing has been demonstrated to be commercially and technically feasible when
three conditions are met:
1. Value: the product has a high embedded
value, from the materials it contains and/or
from the labour used to manufacture the
original product.
2. Evolution rate: the product has a slow rate
of technological change, is not subject to
legislative restrictions, or can be upgraded to
overcome these challenges.
3. Re-constructability: the product design
and the existence of technical expertise allow
the product to be disassembled, cleaned and
repaired, re-assembled and tested.
Within this framework, this white paper focuses on remanufacturing of industrial power
distribution equipment.
Slaters Electricals Ltd
Slaters Electricals Ltd has been involved in the electrical engineering industry since 1946.
Based in Blaydon, Tyne & Wear, the company specialises in the supply of power distribution
equipment such as transformers, switchgear and associated services.
Remanufacturing of equipment has been at the core of the business since its beginning - in
fact, remanufacturing in the power and distribution industry has been well established for
decades.
Power and Distribution Equipment in the Circular Economy – a Whitepaper
Slaters Electricals Ltd and Centre for Remanufacturing and Reuse
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What are transformers and switchgear?
Transformers are an integral part of an electrical power network. They ensure that the
correct level of power is delivered to a site or customer. It is more efficient to transmit
electricity from a power plant at high voltage (11kV) but it must then be ‘stepped down’ using
a distribution transformer to a suitable low voltage for use in a factory or private network.
Power transformers, by contrast, are used by large industrial users of energy and in
transmission networks to deliver electricity at high voltage.
Industrial switchgear controls, protects and where necessary isolates electrical equipment
such as transformers ensuring that they can be operated and maintained both safely and
efficiently. Both transformers and switchgear are vital components in any electrical network.
Business models for the circular economy
In response to the spectrum of its customers’ needs, Slaters Electricals has developed a
diverse portfolio of business models, many of which are centred on its expertise in
remanufacturing. The following flow diagram demonstrates how a customer might choose
what the most appropriate product offering is:
Power and Distribution Equipment in the Circular Economy – a Whitepaper
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The following three case studies explore scenarios of where each business model might be
appropriate, the pros and cons of each approach for Slaters Electricals, its customers and
the wider environment, and a description of the processing and procurement processes
involved.
Case study 1: Leasing power and distribution equipment
Slaters Electricals holds a comprehensive in-house stock of power distribution equipment for
hire. The equipment within the hire fleet can range from individual test probes up to 35MVA
power transformers, with hire periods ranging from a few weeks to several months at a time.
Leasing agreements can be tailored to a customer’s specific site or project requirements.
The leasing process:
When might a customer choose to lease a unit?
In an emergency situation – if a customer has experienced unplanned downtime or a
failure in equipment, hiring a replacement unit is a timely solution. Hire units can often be
despatched on the same day meaning that any plant downtime is kept to a minimum and
loss of production is reduced.
If a customer has a temporary power need – if a site needs additional power on a
temporary basis e.g. during a build, upgrade or expansion. Hiring power distribution
equipment is a cost effective and flexible solution. Units can often be installed within the
Power and Distribution Equipment in the Circular Economy – a Whitepaper
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existing network – which can keep installation cost and downtime to a minimum, and the hire
cost is paid weekly or monthly over the time the equipment is needed on site.
If the customer has budget restrictions – when hiring power and distribution equipment there isn’t a large upfront investment. Payment terms are usually weekly or monthly over the hire period, freeing up cash flow for elsewhere in the business.
Leasing power and distribution equipment has the following advantages and disadvantages for the different stakeholders:
Slaters Electricals
Pros Equipment is already in stock at the Slaters factory so Slaters can offer a very short
lead time. Can result in longer term solutions being purchased by the customer.
Cons Individual units/equipment can only be leased to one customer at a time. Customers arrange directly with Slaters to off-hire equipment so both Slaters and
the customer must co-ordinate this together.
Customers
Pros Hire fleet is in-house so units have a short lead time – resulting in reduced
downtime and disruption for the customer. No large upfront investment needed as payments are made weekly or monthly
over the hire period.
Cons Hire equipment is only a temporary solution.
The environment
Pros Equipment is remanufactured and reused for hire rather than these units being
disposed of at the end of first service life. Part of the sharing economy – “An economic model in which individuals are able to
borrow or rent assets owned by someone else. The sharing economy model is most likely to be used when the price of a particular asset is high and the asset is not fully utilised all the time.” - http://www.investopedia.com/terms/s/sharing-economy.asp
Reduces the impact of procuring new for a temporary use.
Cons Hire equipment is made up of remanufactured units which can be less efficient
during the use phase compared to new units.
Power and Distribution Equipment in the Circular Economy – a Whitepaper
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Case study 2: Remanufactured power distribution equipment
Slaters Electricals offers an extensive range of remanufactured power distribution
equipment. Equipment can be remanufactured to a customer’s specification so that it can be
integrated easily into the existing site set-up. Slaters also offers a remanufacturing and
retrofitting service for a customer’s existing equipment – upgrading or extending the
equipment either onsite or at the Slaters factory, depending on the requirements of the
project.
In addition Slaters holds a small number of units that have been remanufactured to stock
which allows them to be available with a very short lead time.
The remanufacturing process
Slaters Electricals collects used equipment from a range of sources, including the open
market, site closures and demolitions, auctions and through part exchange. Existing power
distribution equipment arrives at Slaters to be used as input to the remanufacturing process;
these inputs are called ‘core’.
Most core is sourced in the UK but some has been sourced on the Continent, including from
France and Finland. The business also offers part exchange on redundant or unwanted
equipment when purchasing new or remanufactured equipment, through its Trade-In
Scheme.
Slaters Electricals will only purchase core originally manufactured later than 1980; however,
the company can sometimes remanufacture older equipment for clients.
Once the core arrives at Slaters, it is stored until it
is needed for remanufacturing. The equipment will
go through the process shown opposite.
Slaters has approximately 250 transformers and
450 switchgear units as core in stock. The business
also has the biggest stock holding of core and
spare parts in the UK.
Generally, core is remanufactured to fulfil specific
orders; however, some equipment may be
remanufactured to stock if there is spare capacity.
When remanufacturing to stock, high demand and
standard models will be remanufactured.
Remanufacturing activities for transformers are
kept separate from switchgear remanufacturing, to
prevent transformer oil contaminating switchgear
units.
Incoming core is tested for suitability for
remanufacturing; unsuitable core is recycled
Core is stripped, inspected and damaged or
unsuitable components are replaced
Moisture can be removed by heating the units in
an oven
If required, units are sand blasted by a sub-
contractor, ready for painting
Units undergo painting and finishing
Power and Distribution Equipment in the Circular Economy – a Whitepaper
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The typical time to remanufacture a unit is 40-60
hours; however, the time can vary from as little as 8
hours to as much as 400 hours. Slaters Electricals
remanufactures about 45 power and distribution
units per month.
Approximately 85% of the material in a transformer
and 75% of the material in switchgear is retained
during remanufacturing.
Remanufacturing power and distribution equipment either to stock or to order has the following
advantages and disadvantages for the different stakeholders:
Slaters Electricals
Pros Remanufacturing both to stock and to order allows the company to use the workforce more efficiently. Staff have developed a unique skill set and expertise specifically needed in the remanufacturing process.
Remanufacturing allows the business to compete in a sector where new equipment manufacture may not be economical in the UK.
The diverse nature of remanufacturing a variety of core (existing products that are used as inputs to the remanufacturing process) that arrives in a range of conditions can provide greater job satisfaction for the workforce than a conventional production line job.
Cons The business must hold a large volume of core to ensure that it can meet customer orders.
The high scrap price of metals squeezes the margins available from remanufacturing.
Customers
Pros Remanufacturing units allows Slaters Electricals to work to its customer’s own specification. This could include remanufacturing the customer’s own core.
Reliability —Slaters Electricals typically offers double the warranty for remanufactured products as for new.
Remanufactured equipment is typically 35-40% cheaper than a new unit.
Typically available more quickly than new equipment, particularly if it is held in stock.
Can give better performance than a second-hand or refurbished unit.
An attractive option if only one piece of equipment in a bank of equipment needs replacing. A similar remanufactured unit can be installed into an existing site set-up without the need of replacing all units.
Cons A remanufactured unit may not perform as well as a new unit, e.g. there may be slight degradation of high voltage performance and may not be as energy efficient during use.
The environment
Pros Not every part can be recycled. When equipment is remanufactured, fewer parts end up in landfill.
Recycling is also an energy and carbon-intensive process; remanufacturing reduces the amount of material sent for recycling, and so saves energy and carbon emissions.
Remanufacturing is generally a local activity. Compared to a new unit, a remanufactured unit has a much smaller environmental impact from transport.
Cons The electrical losses and therefore the energy in use for a remanufactured unit may be higher than for a new unit.
Units are tested and checked against standards
Units undergo internal quality control checks
Power and Distribution Equipment in the Circular Economy – a Whitepaper
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Case study 3: Purchasing new power and distribution equipment
Slaters Electricals also offers a full range of equipment that incorporates the latest product
developments. Slaters can work with customers throughout the purchasing process to
develop the most appropriate specification, supply of new units, associated services and the
provision of aftersales care.
The EU Ecodesign Directive
The Ecodesign Directive for small, medium and large transformers is an EU legislation which
requires new transformers placed on the market after July 1 2015 (Tier 1) to meet strict
energy efficient requirements. A second tier is also due to be enforced in 2021 which will
require all new transformers to be a further 10% efficient.
The legislation covers all of the EU but does not affect transformers manufactured for export
to countries outside the European Union. Any units already in operation before July 1 2015
will also not be affected by the Directive. Slaters’ range of new transformers are Eco-design
compliant ensuring that if customers opt for a new unit they are receiving the latest energy
efficiency and legal requirements.
When might a customer choose to purchase a new unit?
Required in the specification of the project – new units are sometimes specified as a
requirement in a project’s specification.
Multiple order of units – if a customer requires a multiple order of the same or similar units
it may be more economical and flexible to newly manufacture these.
Purchasing new power and distribution equipment has the following advantages and
disadvantages for the different stakeholders:
Slaters Electricals
Pros New equipment range offers customers the latest product developments and technology and allows Slaters to compete within this market.
Cons Long lead time which needs to be factored into the delivery date for customers.
Customers
Pros Offers customers the latest energy efficiency ratings which can reduce energy bills and carbon footprint.
Cons Long lead time which can cause problems if there is a tight deadline or urgent need.
New equipment is more expensive.
New equipment typically has a shorter warranty period.
The environment
Pros New equipment has the latest energy efficiency ratings meaning units are typically more environmentally friendly and economical during the use phase.
Cons Manufacturing new units uses large amounts of resources, raw material and energy.
Power and Distribution Equipment in the Circular Economy – a Whitepaper
Slaters Electricals Ltd and Centre for Remanufacturing and Reuse
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Summary and conclusions
Remanufacturing of power and distribution equipment is a commercially and technically
attractive business. For customers, availability, price and product lead time can be priority
factors and, in response, Slaters Electricals has developed a range of services that both
meet different customer needs and optimise its own day-to-day operations.
Remanufacturing can be encompassed by a range of different business models, such as
remanufacturing units to stock or to order, and remanufacturing of hire equipment. These
business models are all valuable components of a circular economy.
However, there are challenges to remanufacturing power distribution equipment either for
hire or for sale:
Some customers perceive remanufactured units to be “second-hand” and therefore
“second-rate”.
Buyers today are less familiar with purchasing equipment that is not new, e.g.
remanufactured, refurbished or second-hand. They are more likely to buy new
equipment, even if a remanufactured unit would have benefits (e.g. shorter lead time,
lower price) over new.
Competitors may describe their products as “remanufactured”, when they have not in
fact been through the full remanufacturing process. By marketing sub-standard
products as remanufactured, the whole remanufacturing industry reputation is
damaged.
Old units have a high scrap value due to the high metal content. This squeezes the
market for remanufacturing.
Despite these challenges, Slaters Electricals continues to demonstrate that remanufacturing
is a profitable and circular business activity. The remanufacturing process is deeply rooted
within its business philosophy and has been for nearly 70 years. It is the ethical belief of
Slaters Electricals that remanufacturing is paramount in helping to mitigate energy waste
and reduce the environmental impact of the manufacturing process.
In addition to remanufactured products, Slaters Electricals recognises that, as power and
distribution equipment consists of energy consuming products, there are inevitably trade-offs
between the environmental impacts of different purchasing decisions: new equipment will
likely have improved energy efficiency during use because of increasingly stringent
legislative requirements, such as the EU Ecodesign Directive, whilst using remanufactured
equipment displaces the environmental impacts of disposal, recycling and new product
manufacture.
Power and distribution equipment in the Circular Economy represents a wide range of
opportunities, from diverting material from landfill, by remanufacturing and recycling, through
to reducing energy consumption during use by developing increasingly energy efficient
Power and Distribution Equipment in the Circular Economy – a Whitepaper
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products. Companies like Slaters Electricals have successfully moved away from the
traditional ‘linear’ supply chain model and embraced the wide range of opportunities the
Circular Economy offers to create sustainability benefits to their business, to their customers
and to the environment.
For further information on the benefits of remanufactured power and distribution equipment
please visit the Slaters Electricals Ltd website at www.slaters-electricals.com
Alternatively contact the office on +44 (0) 191 414 2916 or [email protected]