Power and Distribution Equipment in the Circular Economy Whitepaper

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.



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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



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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.



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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:



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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



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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.

http://www.investopedia.com/terms/s/sharing-economy.asp



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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



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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



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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.



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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



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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]

http://www.slaters-electricals.com/

mailto:[email protected]

Power and Distribution Equipment in the Circular Economy Whitepaper

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