Risks and Costs to Consider with Unplanned Power Outages

Power outages may not have been something that you or your organization have thought too much about. However, recent headlines about record heat driving record power consumption in parts of the U.S. may make you start to think about outages a little bit more. Even this May during a U.S. Senate hearing, Federal Energy Regulatory Commissioner Mark Christie said that power plants are retiring faster than they’re being replaced. “The arithmetic doesn’t work,” he said.

With this in mind, there are three different factors to consider when quantifying the risks and costs associated with an unplanned power outage: Damaged products, loss of productivity, and keeping your sales and customers in mind.

Damaged product or equipment:

Some products and equipment need constant power to ensure that they are still useable and free from damage. How dependent is your operation on computers and data centers to function?  Some manufacturing processes require continued power, too. Imagine pharmaceuticals or semiconductors that require clean rooms and rely on positive pressure environments. Once power is lost, that positive pressure is gone, and with it goes the integrity of the environment.

Not all products are impacted immediately. Some take a gradual amount of time for changes to take place. For example, products that rely on refrigeration for their integrity can stay cold without power, but only for a limited time. In instances like this, it is common to calculate how much of a temperature change takes place in an hour and see how many hours are available until you start losing product.

It is important to ask around in your organization and assess the impacts if you lost power for one second, one minute, one hour, several hours and a couple of days.

Loss of productivity:

Research states that the average automotive manufacturer loses $22,000 per minute of downtime.  Chances are your organization does not lose that much monetarily. Nevertheless, your organization should look at the value of their opportunity costs. If your facility is down for any amount of time, that time is lost forever. In some cases, the goods and services that could have been created during that down time can never be made up, particularly if your organization is operating a 24/7 or nearly 24/7 operation.

Lost Sales & Customers:

  • Call Centers: When a facility loses power, how do you think it will continue to take and process orders? Call centers cannot accept orders without power and distribution centers can’t replenish their stores.
  • Competitors: It is important to consider the niche aspect of a business when power outages occur. If a power outage occurs, could your customers easily complete their transaction with another company?
  • Customers: Are your customers willing to wait for your power to turn back on? The calculation does not always need to be a loss, but a differentiator. Would your organization or business be better positioned to serve their community during a power outage relative to your competitors? While difficult to quantify, the brand awareness and customer loyalty that this would foster must have value.

Closing

Hopefully, this has been given you some ideas on how to start your own journey of better quantifying what your organization must lose in the event of a power outage. With that information in hand, the next question is, what options are available to your organization to prevent or mitigate those losses and how much do those options cost?  AEP Energy is here to help with that step, as well.

To learn more about your potential for power outages and what you can do to supplement them, please contact Victor Hoerst by email at vlhoerst@aepes.com . If you are already working with an AEP Energy Sales Representative, they will happily provide more information. Not currently working with an AEP Energy Sales Representative? Click here to request more information.

AEP Energy does not guarantee the accuracy, timeliness, suitability, completeness, freedom from error, or value of any information herein. The information presented is provided “as is”, “as available”, and for informational purposes only, speaks only to events or circumstances on or before the date it is presented, and should not be construed as advice, a recommendation, or a guarantee of future results. AEP Energy disclaims any and all liabilities and warranties related hereto, including any obligation to update or correct the information herein. Summaries and website links included herein (collectively, “Links”) are not under AEP Energy’s control and are provided for reference only and not for commercial purposes. AEP Energy does not endorse or approve of the Links or related information and does not provide any warranty of any kind or nature related thereto.

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