Does the size of a machine relate to its efficiency?

A rotating machine with either better-quality materials in terms of its "active" components (lamination steel and conductors) OR better understanding of the design OR both will generally have a higher electrical efficiency for the same power/speed/volt combination. Better-quality materials for mechanical interaction (brushes, bearings, seals, etc.) will also act to improve electrical efficiency.

Alternatively, adding more "active" material to a specific power/speed/volt design can - usually - increase electrical efficiency as well by reducing electrical losses (the machine runs cooler because it has larger conductor cross-section, for example). When this happens, the more efficient rotating machine is often physically larger than the original.

Now - as the power value increases for a given speed/volt combination it is probable that the rotating machine becomes more efficient from an electrical perspective. This is because the "fixed" losses remain fairly constant, and are thus a smaller percentage of the overall picture.

There is an upper plateau for most rotating machine types, which is at least partially dependent on each of the three major factors: power, speed, and voltage. The actual "surface" of the plateau changes in tune with the changes made to each factor; there is an ultimate "sweet spot".

Now - in terms of your "power distribution theory": the most efficient solution is to have a stable load for the generation capacity in question. This may mean a fairly small unit in close proximity to a primarily residential load - or a larger unit in proximity to one or two industrial loads. In reality, the load level varies drastically from one "user" to another in terms of absolute power AND on timing of peak delivery. This means the best case for a generation facility is to have a mix of industrial and residential consumers - which in turn will (likely) mean a more widespread distribution network.

In effect, this is what today's grid does. All the power (from all the generation facilities) is present on a user's doorstep until tapped. Some may be quite distant (think of the North American power grids, covering essentially an entire continent) and others quite close to the actual user.

Typically, a larger motor will have a better efficiency than a smaller motor. By that I mean in horsepower and speed ratings. A 100-hp will have a better efficiency than a 5-hp motor. A 5-hp motor can be anywhere from 80-85% efficient where the 100-hp motor will be in the mid 90's.

Motors come in standard frame sizes but if you take two 5-hp motors from different manufacturers they will have a different efficiency. This can boil down to the iron in the core being a different amount and/or a different quality. This will contribute to or improve on core losses. One may have a larger fan than the other. The larger fan will make for a cooler motor but also contribute to wind losses. One motor may have bigger bearings contributing to friction losses.

When deciding on a motor there are some decisions to make. The higher efficiency motor may run hotter because it has smaller bearings, and a smaller fan, (forget about the core for now), the higher efficiency motor may cost less to operate but may fail prematurely because of the heat. Buying a motor is like being between the proverbial rock and a hard place. What is best. The best, in my opinion will be a motor that is manufactured with high quality materials, as big a core as possible a bigger fan and larger bearings. This way you will have a good cost balance a cooler motor that will have good longevity and it should also have reasonably high efficiency.

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