Tax Relief Act: OEMs, manufacturers hurry to get financial, operational incentives
Companies hurry to meet year-end deadline, get immediate ROI by immediately deducting the cost, rather than lifetime depreciation.
John Boville, Roger Manus
In late 2010, President Obama signed into law the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010, extending and increasing bonus depreciation to almost all automation machinery, equipment, and computer hardware, and software bought before year-end 2011 and placed into service before Jan. 1, 2012.
The Act allows companies to deduct the full cost of the investment in 2011 instead of having to depreciate it over the life of the equipment. This significant financial benefit provides a means for manufacturers and OEMs to combat the rising cost of commodities, a disrupted global supply chain, and a slowly recovering economy.
Companies holding off on upgrade projects that encompass automation technologies can potentially realize return on investment (ROI) immediately through these tax incentives, as well as gain long-term operational benefits with improved process visibility and faster cycle time. Energy-efficient equipment and automation strategies will save companies even more in operational costs well beyond 2011. Some of the most effective eligible technologies falling under this Act, which enjoy high rates of long-term ROI beyond the initial tax benefits, include energy monitoring, remote monitoring, and energy-efficient retrofits and upgrades to equipment.
Examples of investments follow.
Visible energy monitoring
Production energy optimization tools for energy management and analysis of intensive industrial processes can reduce energy consumption per unit of production and make energy as a unit cost of production more predictable for forecasting purposes. Less-intensive processes also can benefit from other comprehensive energy management architectures that leverage process domain experience of industrial automation, as well as intelligent monitoring and control of automation and power management products.
Simsbury Water Pollution Control Facility: Serving the Connecticut towns of Simsbury, Avon, and Granby, the Simsbury Water Pollution Control Facility processes approximately 2.2 million gallons of water per day, relying on numerous parallel systems to safely treat the local water supply. To streamline and optimize energy, the facility recently upgraded to a new system to monitor all local equipment and processes.
The system consists of five control cabinets that communicate via a Modbus TCP Ethernet link connected to a PC-based supervisory control and data acquisition (SCADA) system. Before the system was implemented, the facility had to monitor key parameters periodically but was essentially blind to actual events between monitoring cycles. Now, the facility is able to track and trend all data in a real-time environment and can see how the plant is behaving at any given point in time, allowing facility managers to better understand operations and adjust energy usage accordingly.
Remote monitoring technologies
Technologies allow integration of multiple monitoring systems into one overall, comprehensive SCADA system, enabling superior automation solutions that increase reliability, optimization, and efficiency; decrease production costs; and ultimately achieve significant improvements to an organization’s bottom line. Among benefits are significant reductions in facility operating and maintenance costs. By enabling operators and managers to access a complete view of all points, systems, and data, they receive a clear picture of what is happening in various areas.
Outdated systems lack a centralized view of activities and functions, so maintenance staff has to work significantly harder to control and monitor different functions. With implementation of an over-arching SCADA system, operators can have one portal through which to view all activities of all points.
This significant increase in operational benefits, coupled with the financial and tax relief incentives available in 2011, make an extremely strong case for companies to invest in such an upgrade.
Nuremberg Exhibition Center: A facility that has integrated an overall SCADA monitoring system and received efficiency benefits is the Nuremberg Exhibition Center, one of the largest and fastest-growing exhibition centers in Germany. The center combined disparate systems, integrating, consolidating, and optimizing systems from multiple vendors, which enabled one visual, control, and alarm interface for all on-site systems.
BACnet-protocol network helped with integration of systems from seven major automation vendors, incorporating 43,000 tags, nine I/O servers, and three display clients, and a response time less of than 5 sec. Standardizing operational functionality from multiple vendor systems brings higher staff productivity, more efficient operational performance, and lower maintenance and operating costs. Openness and flexibility ensure easier future integration, which will lower installation costs and further increase the ROI of installing such systems now.
Efficient upgrades, retrofits
Schneider Electric Lexington, Ky., plant: To affordably reduce manufacturing costs, optimize efficiency, and reduce energy consumption, Schneider Electric’s Lexington, KY, plant used radio frequency identification (RFID) technology and conveyor systems, reducing wasteful material handling and eliminating isolated systems.
Previous material handling processes required 128 miles of fork truck travel a day, and the previous system would have work in process (WIP) in the system as volumes would increase.
The new RFID system, called OSITrack, offered numerous ideal applications, providing production, logistical, and identification data in one complete system, with the ability to track each production unit throughout the plant.
Upgrading the 50-year-old facility helped the plant to improve productivity and ROI on multiple fronts:
- Forklift activity was reduced by more than 66%
- Up to 30% more system capacity was gained through increased load densities
- Cycle times were reduced on various production steps
- Non-value-add work content was reduced by nearly 70%
- Personnel requirements for transportation, loading, and unloading were minimized by more than $1 million per year
- WIP inventory was reduced by $500,000, generating an ROI of nearly 33%.
These upgrades can provide real-time, actionable information that translates directly into bottom-line savings of up to 30% or more, providing the incentives necessary for companies to implement these solutions now, not only to increase their bottom lines through improved production, greater efficiency, and reduced energy costs, but to commit to a more sustainable and cleaner industrial future.
Technology examples for the Tax Relief Act
Technologies eligible for the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010, which extends and increases bonus depreciation to almost all automation machinery, equipment, and computer hardware and software purchased before year-end 2011 and placed into service before Jan. 1, 2012, include the following:
- Schneider Electric’s Production Energy Optimization (PEO) encompasses energy management and analysis for intensive industrial processes, reducing energy consumption per unit of production while making it more predictable for forecasting purposes.
- Less-intensive processes also can benefit from other comprehensive energy management architectures, such as Schneider Electric’s EcoStruxure solution, which leverages process domain experience of industrial automation, as well as intelligent monitoring and control of automation and power management products.
- Simsbury Water Pollution Control uses five Schneider Electric Modicon Premium-based control cabinets, communicating via a Modbus TCP Ethernet link connected to a PC-based supervisory control and data acquisition (SCADA) system.
- Nuremberg Exhibition Center leverages a BACnet-protocol network, in which Schneider Electric designed a system that promoted the seamless integration of facility systems and equipment from a diverse range of vendors, including Siemens, Sauter, Honeywell, Saier, Kieback & Peter, and Johnson Controls.
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- John Boville is market segment manager, installed base and automotive, and Roger Manus is system integrator segment manager, industry business, both with Schneider Electric.
- Edited by Mark T. Hoske, CFE Media, Control Engineering, www.controleng.com