Recalculating: Including Productivity Gains in Total Cost of Ownership
As businesses transition from traditional power sources like fossil fuels and lead-acid batteries to new energy technologies like hydrogen fuel cells and lithium-ion batteries, it’s easy to get caught up in the dollar signs. It’s a big check. But when considering new technologies, there is so much more that goes into calculating a return on investment besides initial cost. Although cost is a major factor, the productivity gains these new technologies provide are why the material handling industry has increasingly embraced them and should be included when calculating the total cost of ownership.
The two largest new energy technologies in the North American market are lithium-ion batteries (LIBs) and hydrogen fuel cells. To give you an idea of the growth in these markets, the U.S. is expected to hit a 50 percent LIB adoption rate in the year 2028-2029. That is when LIBs will make up 50 percent of the power source in the warehouse/material handling industry. In Europe, that adoption rate will happen sometime this year. Hydrogen fuel cells currently make up only 2 percent of the global renewable power market, however at 47 percent market share for 2024, North America is the largest hub for hydrogen power and driving most of that sector’s growth.
Productivity Gains: Lithium-ion Batteries
When it comes to powering a warehouse, lithium-ion batteries have tremendous productivity advantages. LIBs’ high energy density and longer lifecycles enable users to get large volumes of usage from one battery. High energy density also allows the battery to provide high levels of power for a long time with less weight. Consider your smartphone battery. The device works the same whether your battery is at two percent power or at 100 percent. It’s also lightweight and fits in your pocket. Now imagine that linear power in a forklift providing the same consistent performance throughout the workday.
Another advantage is less maintenance. Forklifts no longer need oil changes and have fewer moving engine parts to break down. No need to worry about the downtime or safety issues involved in cleaning up the spills or leaks of lead-acid batteries either. Today’s LIBs can last up to a decade before needing replacement so there’s no need for as much extra battery storage as there is with lead acid and less time performing battery exchanges that take time away from production.
Warehouse safety is another major productivity gain. LIBs provide smoother acceleration and instant torque control, reducing operator fatigue. Lighter batteries also lead to fewer incidents of injury when moved or dropped by employees. Using LIBs inside the four walls of a warehouse means there’s less heat, less exhaust fumes, less noise, and less vibration, all issues that can affect workers’ health. There have been past cases where one in-plant accident has cost a company over a million dollars in a settlement. Switching to LIBs can provide an almost instantaneous ROI by eliminating just one incident.
Productivity Gains: Hydrogen Fuel Cells
In this technology, hydrogen – the most abundant chemical element in the universe – is the fuel. Hydrogen fuel cells generate electricity through a chemical reaction between hydrogen and oxygen with water and heat the only byproducts. Not only do they provide consistent electrical power, but they also offer quick refueling, just like filling a car’s gasoline tank. Unlike charging a lead-acid battery, which can take hours, hydrogen refueling only takes a few minutes. Hydrogen cells can also operate longer between refuels, making them ideal for heavy-duty, high-utilization applications and the equipment is easy to scale as fleets and businesses grow.
Food for Thought
Both technologies have proved valuable to the food industry because both are safe to use around perishables, unlike exhaust-emitting fossil fuels and leaky lead-acid batteries. No exhaust fumes in a food storage facility slows the overripening of fruits and vegetables, leading to less food waste. Therefore, using these technologies not only keep perishables safe for consumption, but less spoilage adds to company revenue.
Operational Savings
While some of these productivity gains appear intangible, there are significant cost savings to be had that will show up on a company’s bottom line. Although the initial capital investment in new energy technology is higher, businesses will see reduced overall costs over time after the switch. This is achieved through reduced fuel costs, reduced maintenance fees, and reductions in warehouse downtime through energy conversion efficiency. As mentioned before, fewer safety incidents will provide instant operational cost savings.
Productivity Leads to Sustainability
The last new energy technology productivity gain is the most difficult to quantify, but may be the most important to consider – the peace of mind these technologies will provide U.S. businesses, both economically and environmentally. Both technologies emit little to no carbon in the atmosphere thus meeting any corporate ESG policies along with any regulatory compliance that could arrive from our government or foreign trade partners in the future. And as the U.S. continues developing these technologies, we’ll have less dependence on foreign energy sources to power our supply chains.
Final Calculations
As for which new technology is right for your business, that depends on a variety of factors. Companies must evaluate their current needs and future goals to discover which power source makes the most sense for them. Reaching out to Advanced Energy Council member companies is a good place to start because once the switch is made, the gains will be great.
For more information about the Advanced Energy Council: mhi.org/aec
For further articles from the Advanced Energy Council:
Charging Forward: What’s Next in Advanced Energy
What Is a Battery Passport? A Ticket to Lithium-ion Battery Transparency
ROI of Energy Sources: Automation
Advanced Energy Solutions Deliver ROI
Achieving ROI with Advanced Power Sources
Advanced Power ROI: Efficiency
