The Cost of Equipment Downtime for Manufacturers

Equipment downtime is inconvenient — and it's also costly for manufacturers. According to a recent global survey, unplanned outages cost industrial businesses nearly $125,000 per hour.

While equipment reliability and maintenance are essential, they’re not the only factors impacting downtime. An unexpected loss of power to a manufacturing plant can just as easily result in downtime — and even if you have a backup generator, there may be momentary power interruptions or “blips” that can cause significant issues. 

Understanding Equipment Downtime

Equipment downtime happens whenever your factory’s machinery and equipment aren’t operating properly. Manufacturers typically schedule planned downtime to make repairs or perform preventive maintenance. Because it's arranged and often targeted to a time of day that causes the least disruption, planned equipment downtime is less costly than unplanned downtime. 

The phrase ‘unplanned downtime’ might fill you with anxiety — and rightly so, since it’s an expensive surprise. You might think first of machine failures, breakdowns, or even cyberattacks as causes, and those are all potential problems to guard against. However, power surges and outages can also cause unexpected downtime. Even short interruptions or “blips” can trigger problems. For example, if your factory floor uses robotics and other connected technologies, power surges or interruptions can result in time-consuming reboots, lost data, and wasted materials on half-finished products.

Economic Impact of Downtime on Manufacturers

Equipment downtime can significantly impact a manufacturer’s bottom line — in more ways than simply slowing down the production line. The costs of downtime can be broken into two categories:

The direct impacts include halted production, scrapped products that are defective or unfinished, and increased labor costs — to pay workers to stay on call during the downtime and potentially pay them for overtime hours to catch up on production later. The longer the outage lasts, the more direct costs will accrue.

Even after you’re back up and running, it might take time to regain your facility’s normal efficiency levels following downtime. Depending on your equipment, production machinery could be damaged due to a prolonged outage or power surge. Downtime can also impact your supply chain and allow competitors to gain market share when you lose sales opportunities.

A recent report including data from manufacturers across sectors states that downtime costs 50 percent more than it did prior to 2020. According to the same report, an average large plant experiences 25 hours per month of unplanned downtime, costing between $39,000 and $2 million (for automotive plants) per hour.

Let’s look at a few real-world examples:

Power interruptions or surges can halt the work of key equipment such as a stamping press, which cuts and molds body panels, or a paint booth. Even a momentary interruption can result in faulty products and the need to scrap them, resulting in revenue loss.

At a manufacturing plant for consumer products and food items, downtime can interrupt the work of packaging machines and sterilization equipment, requiring manufacturers to discard affected products — or, if not caught in time, could result in recalled products and regulatory fines due to spoilage.

Semiconductor manufacturing plants depend on complex equipment to automate the production process. When that equipment experiences even a momentary interruption of power, the disrupted process may lead to scrapped products and lost revenue.

The Ripple Effects of Downtime

The ripple effects of downtime extend far beyond a momentary loss of productivity, leading to delays, increases in labor costs, missed deadlines, and potential loss of market share in competitive industries. Let’s take a closer look at some of these downstream consequences:

Production delays are the most visible byproduct of downtime — but in an unexpected power failure, consequences often go beyond just a few seconds of paused machinery. Equipment may need to be rebooted and reset and production schedules revised to account for the lost time.

Paying your workforce through downtime can be pricey — but sending them home only to call them back for overtime hours could be even more so. 

Extended downtime can cause manufacturers to miss deadlines for filling orders, creating bottlenecks in the supply chain.

Slowed production may result in lower inventory, triggering stockouts, backorders, and unhappy customers.

If a power surge or failure causes equipment to malfunction, the cost for parts and labor to make emergency repairs can be staggering.

Frequent or extended downtime can lead to lower morale among workers because it impacts their ability to be productive.

Manufacturers in Texas face a unique challenge around power-related downtimes. The Electric Reliability Council of Texas (ERCOT) predicts a 72 percent increase in energy demand by 2030, or approximately 62 GW of additional load. The staggering increase in demand — largely due to rapid economic and population growth in Texas — could exceed the pace at which transmission capacity can be built out to support it. A lack of dependable power could result in more downtimes, costing manufacturers millions.

Texas Manufacturers Need a Power Contingency Plan

In Texas, traditional solutions will prove insufficient to address the complex energy challenges facing the state — but there are options available to mitigate dependence on aging public utilities. Backup power generation is one option many manufacturing companies already have in the form of diesel generators. However, there are downsides to diesel: they depend on non-renewable fossil fuels, are costly to operate, can’t handle long-term outages, and are prone to maintenance issues. Today, as organizations push toward decarbonization and ESG goals, relying on diesel-powered generators is no longer, in any sense of the word, sustainable.

Instead, many organizations are exploring the idea of a microgrid — a self-sufficient energy system typically consisting of distributed energy sources (DES) such as solar panels or wind turbines, a battery energy storage system (BESS), and a software management system. A microgrid can manage power for your entire business site or manufacturing plant, and it’s capable of operating independently — meaning it can maintain a steady flow of conditioned power even when the public grid is down.

If you’re a Texas-based manufacturing company contemplating a microgrid solution, the state currently has three financial incentives in place to support your project:

Prop 7: The Texas Backup Power Package

Proposition 7 allowed the creation of the Texas Energy Fund. This legislation allows the Public Utilities Commission, backed by the Texas legislature, to allocate funds to modernize electricity-generating facilities.

Inflation Reduction Act (IRA)

Under the IRA, qualifying microgrid system projects that kick off before 2025 are eligible for tax credits up to 30 percent of the cost of installation. Other incentives under the IRA include the Production Tax Credit (PTC), which covers renewable energy production; incentives for energy efficiency and clean energy technologies; and electric vehicle (EV) incentives.

Investment Tax Credit (ITC)

This federal income tax credit for microgrid controller projects reduces a business’s tax liability on a dollar-for-dollar basis.

To find out if your business is eligible, check the Department of Energy’s Energy Communities website, which provides comprehensive details on eligibility requirements and benefits, including an eligibility map.

It’s Time To Embrace Grid 3.0 

In a manufacturing plant, the cumulative effects of small disruptions are many and wide-reaching. As power demand increases on an aging grid in Texas — and across the U.S. — manufacturers must transition to Grid 3.0 or continue to lose thousands or millions of dollars from the effects of downtime.

What is Grid 3.0?

Grid 3.0 is the next generation of electric power systems — a new grid model where energy is efficient, autonomous, and clean. It involves a critical rebalance of transmission and distribution networks, solving for the lack of supply and the increased variability of renewable inputs. Grid 3.0 reduces dependence on traditional power grids and encourages decentralization, digital management tools for power, and the adoption of renewable sources of energy such as wind, solar, and geothermal.

A Proactive Response to Energy Challenges: R3Di®

Take advantage of current incentives and gain energy autonomy when you embrace a fully integrated turnkey microgrid solution that enables integration with renewables and the grid — so your organization is not fully dependent on either one. 

Building out a microgrid solution on your own can be pricey and time-consuming, potentially causing you to miss the window for some of the Texas incentives. 

When you choose a turnkey solution such as R3Di®, you can get the system online much sooner. A utility-grade, onsite power generation system that delivers conditioned, uninterrupted power to end users, the R3Di® system delivers  a self-contained, turnkey power platform installed without requiring an interconnection agreement or costly public utility upgrades.

 It’s capable of providing instantaneous full-load pickup — which means no “blip” or interruption to manufacturing equipment — in the event of an outage and sustaining power during long-duration blackouts. Relying on safe and sustainable lithium iron phosphate (LiFePO4) battery chemistry for energy storage, R3Di® can store and provide up to 1 MW of power and includes a natural gas generator for additional support. 

With Grove365® , you'll be empowered to uncover savings with the help of our energy management team. We'll use historical data and advanced analytics to predict peak demand times — so you can avoid increased charges. We work with a large supplier network to secure the most competitive rates and terms based on your company's needs.

To survive and thrive, Texas-based manufacturers must stay on the edge of innovation. Now is the time to take a proactive approach to minimize the cost of unexpected power-related downtimes — with a system that improves reliability and resiliency while supporting the move to Grid 3.0. 

Sources:

https://new.abb.com/news/detail/107660/abb-survey-reveals-unplanned-downtime-costs-125000-per-hour

https://www.ercot.com/files/docs/2024/04/08/2024_RTP_Load_Review_Update_April_2024_RPG.pdf

https://energycommunities.gov/