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BY: MOHAMAD FAHRURRAZI TOMPANG SEM 2 11/12
ERT 422 BIOPROCESS
PLANT DESIGN II CHAPTER 6: ECONOMICS ASSESSMENT IN BIOPROCESS PLANT DESIGN
Overall Lecture (Wk 10-11)
Sustainability Assessment
Estimation of Capital Costs
Estimation of Manufacturing Costs
Introduction to Sustainability Assessment
Economic Assessment
Expected Outcomes from Economic Assessment
Sustainability Assessment
Sustainability Assessment
Idea of sustainability was brought in min 80’s by
Brundtland and further expanded by von Carlowitz
by its management to restrict on cutting more timber
in certain years
Sustainability or sustainable development defined
as ‘the development that meets the needs of the
present without compromising the ability of future
generations to meet their own needs’ by Brundtland
Sustainability Assessment
Other definition – ‘the optimal growth path that maintains economic development while protecting the environment and optimizing the social conditions with the boundary of relying on limited, exhaustible natural resources’
Thus, sustainability not only mean to preserve but to develop responsibilty
Three pillars supporting the sustainable development are economic, environmental and social development
The three pillars of sustainability. Adapted from Development of Sustainable
Bioprocesses: Modelling and Assessment, Heinzle, Biwer and Cooney, 2008
Economic Assessment
The first step is estimation of capital investment that
is usually based on the cost of necessary equipment
Then, operating cost of the process can be derived
from different cost items like raw material, energy
etc.
Later on, profitability analysis will be conducted to
examine the expected revenues and sets them in
proportion to the costs and number of other factors
like time-value money
Steps in the estimation of capital investment and operating costs. Adapted
from Development of Sustainable Bioprocesses: Modelling and Assessment,
Heinzle, Biwer and Cooney, 2008
Expected Outcomes from Economic
Assessment
1. How much money (capital cost) it takes to build a new plant.
2. How much money (operating cost) it takes to operate a
plant.
3. How to combine (1) and (2) to provide several distinct types
of composite values reflecting process profitability
4. How to select a best process from competing alternatives
5. How to estimate the economic value of making process
changes and modification to an existing processes
6. How to quantify uncertainty when evaluating the economic
potential of a process.
Classification of Capital Cost Estimate
Estimation of Purchased Equipment Costs
Estimating the Total Capital Cost of a Plant
Estimation of Capital Costs
6.1 Classifications of Capital Cost
Estimates
Classifications of Capital Cost Estimates
Detailed estimate
Definitive estimate
Preliminary estimate
Study estimate
Order-of-magnitude estimate
Types of Capital Cost Estimate
1. Order of Magnitude Estimate (Feasibility)
+ 40%, - 20%
BFD , Process Modification
2. Study Estimate / Major Equipment
+ 30%, - 20%
PFD , Cost Chart
Types of Capital Cost Estimate (cont’d)
3. Preliminary Design (Scope) Estimate
+ 25%, - 15%
PFD , vessel sketches , equip. diagrams
4. Definitive (Project Control) Estimate
+ 15%, - 7%
PFD , P&ID, all vessel sketches, equip. diagrams, preliminary
isometrics
Types of Capital Cost Estimates (cont’d)
Detailed (Firm or Contractors) Estimate
+ 6%, - 4%
Everything included – ready to go to construction phase
Estimate low so actual cost will be high (+)
Estimate high so actual cost will be low (-)
Why is + # > - #.?
Order of Magnitude (Ratio or Feasibility) Estimate
Data: This type of estimate typically relies on cost information for a complete process taken from
previously built plants. This cost information is then adjusted using appropriate scaling factors, for capacity,
and for inflation, to provide the estimated capital cost.
Study (Major Equipment or Factored) Estimate
Data: This type of estimate utilizes a list of the major equipment found in the process. This includes all
pumps, compressors and turbines, column and vessels, fired heaters, and exchangers. Each piece of
equipment is roughly sized and approximate cost determined. The total cost of equipment is then factored
to give the estimated capital cost.
Preliminary Design (Scope) Estimate
Data: This type of estimate requires more accurate sizing of equipment than used in the study estimate. In
addition, approximate layout of equipment is made along with estimates of piping, instrumentation, and
electrical requirements. Utilities are estimated.
Definitive (Project Control) Estimate
Data: This type of estimate requires preliminary specifications for all the equipment, utilities,
instrumentation, electrical, and off-sites.
Detailed (Firm or Contractor’s) Estimate
Data: This type of estimate requires complete engineering of the process and all related off-sites and
utilities. Vendor quotes for all expensive items will have been obtained. At the end of a detailed estimate,
the plant is ready to go to the construction stage
Table 6.1 Summary of Capital Cost Estimating
Classifications
16
Cost of Estimate – See Also Table 6.2
1
2 3
5
4
Accuracy
Cost of Estimate (Time)
Example 6.1:
The estimated capital cost from a chemical plant using
the study estimate method (Class 4) was calculated to
be RM 2 million. If the plant were to be built, over
what range would you expect the actual capital
estimate to vary?
Table 6.2 Classification of Cost
Estimates (for example 6.1)
Solution:
For a Class 4 estimate, from Table 6.1, the expected accuracy range is between 3 and 12 times that of a Class 1 estimate. As noted in the text, Class 1 estimate can be expected to vary from +6% to -4%.
Lowest Expected Cost Range
High value for actual plant cost:
(RM 2 mil) [1+(0.06)(3)] = RM 2.36 mil
Low value for actual plant cost:
(RM 2 mil) [1-(0.04)(3)] = RM 1.76 mil
Highest Expected Cost Range
High value for actual plant cost:
(RM 2 mil) [1+(0.06)(12)] = RM 3.44 mil
Low value for actual plant cost:
(RM 2 mil) [1-(0.04)(12)] = RM 1.04 mil
6.2 Estimation of Purchased Equipment
Costs
Effect of Capacity on Purchased Equipment Cost
Effect of Time on Purchased Equipment Cost
Estimating Purchased Equipment Costs
Vendor quote
Most accurate
- based on specific information
- requires significant engineering
Use previous cost on similar equipment and scale for time and
size
Reasonably accurate
- beware of large extrapolation
- beware of foreign currency
Use cost estimating charts and scale for time
Less accurate
Convenient
Effect of Size (Capacity)
n
b
a
b
a
A
A
C
C
Cost Equipment Cost
Attribute - Size
Cost Exponent
naa KAC
bn
b
CK
A
(6.1)
where
(6.2)
Effect of Size (Capacity) cont.
n = 0.4 – 0.8 Typically
Often n ~ 0.6 and we refer to Eq.(6.1) as the (6/10)’s Rule
Assume all equipment have n = 0.6 in a process unit and scale-up using this method for whole processes
Order-of-Magnitude estimate
Equation 6.2 shows a straight line graph with a slope of n when log Ca is plotted versus log Aa as in Figure 6.1 (cost of single stage blower vs capacity of blower)
Figure 6.1 Purchased Cost of a Centrifugal Air Blower
Example 6.2
A New Plant Ordered a Set of Floating Head
Heat Exchangers (Area = 100 m2) cost $92,000.
What Would Cost be for a Heat Exchanger for
Similar Service if Area = 50 m2 and n = 0.44 ?
Example 6.2 - Solution
n
b
a
b
a
A
A
C
C
n
b
aba
A
ACC
$67,300aC
100 m2 Exchanger is not twice as expensive as a 50 m2 exchanger
Economy of Scale
44.0
100
50000,92
Effect of Capacity (cont…)
Other way of estimating the economy scale is to consider the
purchased cost of equipment per unit capacity.
Eq. 6.2 can be arranged to give following relationship:
(Eq. 6.3)
If Eq. 6.3 is plotted on log-log coordinates, the resulting
curve will have negative slope as in Fig. 6.2.
The meaning of the –ve slope is that capacity of a piece of
equipment increases, the cost per unit of capacity decreases.
Figure 6.2 Purchased Cost per Unit of Flowrate of a Centrifugal Air Blower
Effect of Time
Time increases – cost increases (inflation)
Inflation is measured by cost indexes - Figure 6.3
Chemical Engineering Plant Cost Index (CEPCI)
Marshall and Swift Process Industry Index
Numbers based on “basket of goods” typical for
construction of chemical plants - Table 6.3
Figure 6.3 The variation in several commonly used cost indexes (1986-2001)
Table 6.3: The Basis for the Biochemical / Chemical Engineering Plant Cost Index
Components of Index
Weighting of Component (%)
Equipment, Machinery and Supports:
(a) Fabricated Equipment
(b) Process Machinery
(c) Pipe, Valves, and Fittings
(d) Process Instruments and Controls
(e) Pumps and Compressors
(f) Electrical Equipment and Materials
(g) Structural Supports, Insulation, and
Paint
37
14
20
7
7
5
10
100 61% of total
Erection and Installation Labor 22
Buildings, Materials, and Labor 7
Engineering and Supervision
10
Total
100
Table 6.4 Values for the Chemical Engineering Plant Cost Index (CEPCI) and the Marshall and Swift (M & S)Equipment Cost Index (1986-2001)
Copyright - R.Turton and J. Shaeiwitz 2008 33
Equation for Time Effect
C = Cost
I = Value of cost index
1,2 = Represents points in time at which costs required or known and index values known
1
212
I
ICC
Example 6.3
Cost of vessel in 1993 was 25,000, what is
estimated cost today (Sept 2007 – CEPCI = 500)?
Solution of Example 6.3
820,34$359
500000,25
1993
1993
I
ICC now
now
Example 6.4
Accounting for Time and Size
2 heat exchangers, 1 bought in 1990 and the other in 1995 for the same service
A B
Area = 70 m2 130 m2
Time = 1990 1995
Cost = 17 K 24 K
I = 358 381
What is the Cost of a 80 m2 Heat Exchanger Today ? (I = 500)
Solution of Example 6.4
Must First Bring Costs to a Common Time
A = 70
A = 130
500(2007) 17 $23,743
358aC
500(2007) 24 $31,496
381bC
Solution of Example 6.4 - (cont’d)
nKAC $23,743 (70)nK
$31,496 (130)nK
log 31,496 log(23,743)0.4565
log 130 log(70)n
0.4565
23,743$3,414
70n
CK
A
0.4565
3,414 80 $25,235C
6.3 Estimating the Total Capital Cost of
a Plant
The capital cost for a biochemical/chemical plant must take into consideration many costs other than the purchased cost of the equipment
If an estimate of the capital cost for a process plant is needed and access to a previous estimate for a similar plant with a different capacity is available, then the principles already introduced for the scaling of purchased costs of equipment can be used, namely:
The six-tenths-rule (Eq 6.1 with n = 0.6) may be used to scale up/down to a new capacity
The Chemical Engineering Plant Cost Index (CEPCI) should be used to update capital costs
6.3 Estimating the Total Capital Cost of
a Plant (cont…)
The six-tenths-rule is more accurate for estimation
the cost of a single piece of equipment
For n < 0.6, the six-tenths-rule overestimate the cost
of unit operations
For n > 0.6, the six-tenths-rule underestimate the
cost of unit operations
When the sum of cost is determined, these
difference will cancel out each other
6.3 Estimating the Total Capital Cost of
a Plant (cont…)
The CEPCI can be used to account for changes that
result from inflation
The CEPCI values in Table 6.4 are composite values
that reflect the inflation of a mix of goods and
services associated with chemical process industries
5.3 Estimating the Total Capital Cost of
a Plant (cont…)
In most situation, cost information will not be
available for the same process configuration,
therefore, other estimating techniques must be used,
which some are:
1. Lang Factor Technique
2. Module Costing Technique
3. Bare Module Cost for Equipment at Base Conditions
4. Bare Module Cost for Nonbase Case Conditions
5. Grass Roots and Total Module Cost
Table 6.6 Factor affecting the costs associated with evaluation of capital cost of chemical plants
Table 6.6 Factor affecting the costs associated with evaluation of capital cost of chemical plants (cont…)
Lang Factor Technique
A simple technique to estimate the capital cost of a
chemical/biochemical plant is the Lang Factor
method
The cost determined from Lang Factor represents the
cost to build a major expansion to an existing plant
The total cost is determined by multiplying the total
purchased cost for all the major items of equipment
by a constant
Lang Factors (cont’d)
n
i
piLangTM CFC1
Purchased Cost of Major Equipment
From Preliminary PFD
(Pumps, Compressors, vessels, etc.)
Total Module Cost
where: CTM = Capital cost (total module) of the plant
Cp,i = Purchased cost for major equipment cost
n = Total no. of individual units
FLang = Lang factor (from Table 6.7)
Table 6.7 Lang Factor for the estimation of capital cost for chemical plant
Module Costing Technique
The equipment module costing is a common
technique to estimate the cost of new chemical plant
It is the best method for making preliminary cost
estimates
The costing technique relate all costs back to the
purchased cost of equipment evaluated for some
conditions
Module Costing Technique (cont…)
Deviations from base conditions are handled by
using multiplying factors that depend on the
following:
1. The specific equipment type
2. The specific system pressure
3. The specific materials of construction
Module Costing Technique (cont…)
The bare module cost for each piece of equipment can be calculated by:
(Eq. 5.6)
where:
CBM = bare module equipment cost: direct indirect cost for each unit
FBM = bare module cost factor: multiplication factor to account for the items in Table 6.6
Cp = purchased cost for base conditions: equipment made of the most common material, usually carbon steel and operating at near ambient pressures
Bare Module Cost for Equipment at
Base Conditions
Bare module equipment cost represents the sum of
direct and indirect costs shown in Table 6.6
The conditions specified for the base case are
1. Unit fabricated from most common material, i.e carbon
steel
2. Unit operated at near-ambient temperature
Table 6.8 Equations for Evaluating Direct, Indirect, Contingency & Fee Cost
Bare Module Cost for Equipment at
Base Conditions (cont…)
For Table 6.8 :
Column 1: List of factors given in Table 5.6
Column 2: List equations used to evaluate each of
the costs
Column 3: For each factor, the cost is related to
the purchased cost Cp by an equation of
the form.
(Eq 6.7)
where function f (αi,j,k…) is given in Column 3 in Table 6.8
Bare Module Cost for Equipment at
Base Conditions (cont…)
The bare module factor for base condition is given by :
(Eq. 6.8)
The values for the bare module cost multiplying factors
vary between equipment modules.
Example 6.5:
The purchased cost for a carbon steel heat exchanger operating at ambient pressure is RM 10,000. For a heat exchanger module, the following cost information:
Item % of Purchased Equipment Cost
Equipment 100
Materials 71.4
Labor 63.0
Freight 8.0
Overhead 63.4
Engineering 23.3
Using the information given above, determine the equivalent cost multiplier given in Table 5.8 and the following: a. Bare module cost factor, FBM
b. Bare module cost, CBM
Solution:
Item % of Purchased
Equipment Cost
Cost Multiplier
(Table 5.8)
Value of Multiplier
Equipment 100 1.0 -
Materials 71.4 αM 0.714
Labor 63.0 αL 0.63/(1+0.714)=0.368
Freight 8.0 αFIT 0.08/(1+0.714)=0.047
Overhead 63.4 αO 0.634/0.368/(1+0.714)=
1.005
Engineering 23.3 αE 0.233/(1+0.714)=0.136
a. FBM = (1+0.368+0.047+(1.005)(0.368)+0.136)(1+0.714) = 3.291
b. CBM = (3.291)(RM 10,000) = RM32,910
Bare Module Cost for Nonbase Case
Conditions
For equipment made from other materials of
construction and/or operating at nonambient
pressure, the values for FM and FP > 1.0
In the equipment module technique, these additional
costs are incorporated into the bare module cost
factor, FBM
Factors are considered on the cost of equipment:
Pressure factors
Materials of Constructions (MOC)
Bare Module Cost for Nonbase Case
Conditions (cont…)
Pressure Factors
As the pressure increases, the thickness of walls of equipment will increase
The relationship between design pressure and wall thickness is given as:
where t is wall thickness (m), P is design pressure (bar), D is diameter of vessel (m), S is maximum allowing pressure of material (bar), E is weld efficiency, and CA is corrosion allowance (m)
Figure 6.5 Maximum Allowable Stresses for Materials of Construction as Function of Operating Temperature
Bare Module Cost for Nonbase Case
Conditions (cont…)
Materials of Construction
The choice of what MOC to use depends on the chemicals that will contact the walls of the equipment
Many polymeric compounds are nonreactive in both acidic and alkaline environments but they lack of structural strength and resilience of metal
But under operational condition of 120°C in corrosive environment, use of polymers as liners for steel equipment often give the most economical solution
Carbon steels, most common MOC, has less than 1.5% carbon can give varying amounts of hardness and ductility, easy to weld and cheap
It is the choice of material if corrosion is not a concern
Grass Roots and Total Module Costs
Term grass roots refers to completely new facility
that need to be constructed on undeveloped land
Term total module cost refers to the cost of making
small-to-moderate expansions or alteration to
existing facility
Grass Roots and Total Module Costs
(cont…)
The total module cost:
The grass roots cost can be evaluated:
Factors Affecting the Cost of Manufacturing a Chemical/Biochemical Product
Cost of Operating Labor
Utility Costs
Raw Material Costs
Yearly Cost and Stream factors
Estimation of Manufacturing Costs
6.1 Factors Affecting the Cost of
Manufacturing a Chemical Product
Direct manufacturing costs
Include operating expenses that vary with production rate
When product demand drops, production rate is reduced below the design capacity
These reduction direct proportional to production rate
Fixed manufacturing costs
Include costs are independent of changes in production rate i.e property taxes, insurance, and depretiation
General expenses
Table 6.1 Factors affecting the cost of manufacturing (COM), for a chemical product
Table 6.1 Factors affecting the cost of manufacturing (COM), for a chemical product (cont…)
Factors Affecting the Cost of Manufacturing a Chemical Product (cont…) The equation used to evaluate the cost of manufacture using these costs becomes:
Cost of Manufacture (COM)
=Direct Manufacturing Costs (DMC)+Fixed Manufacturing Costs (FMC)+General Expenses (GE)
COM can be determined when the following costs are known:
1. Fixed capital investment (FCI): CTM or CGR
2. Cost of operating labor (COL)
3. Cost of utilities (CUT)
4. Cost of waste treatment (CWT)
5. Cost of raw material (CRM)
Table 6.2 Multiplication factors estimating
manufacturing cost
The equation of estimating the costs for each of the categories are:
DCM=CRM+CWT+CUT+1.33COL +0.069FCI+0.03COM
FMC=0.708COL+0.068FCI+depreciation
GE=0.177COL+0.009FCI+0.16COM
COM=0.280FCI+2.73COL+1.23(CUT+CWT+CRM)
COMd=0.180FCI+2.73COL+1.23(CUT+CWT+CRM)
Factors Affecting the Cost of Manufacturing a Chemical Product (cont…)
The method used to estimate operating labor requirements is based on data obtained from 5 chemical companies
The operating labor requirement for biochemical processing plant given by:
6.2 Cost of Operating Labor
where:
NOL = no. of operators per shift
P = no. of particulate solid processing steps
Nnp = no. of nonparticulate processing step
The value of NOL is the no. of operators required to
run the process unit per shift
A single operator works on average 49 weeks a
year, five 8-hr shift a week resulting 1095
operating shift per year if the plant operating in
24 hrs
To estimate the cost of operating labor, the
average hourly wage of an operator is required
6.2 Cost of Operating Labor (cont…)
6.2 Cost of Operating Labor (cont…)
In general for process considered of value of P=0, and
the value Nnp is given by:
Compressors Towers Reactors Heaters Exchangers
Table 6.3 Result for estimation of operating labor requirement for toluene hydrodealkylation using equipment module approach
6.3 Utility Cost
Background information on utilities
The cost of utilities are directly influenced by the cost of
fuel
It is difficult when estimating the cost of fuel, which
directly impact the price of utilities i.e electricity, steam
& thermal fluids
Fuel costs have increased more rapid and much more
chaotic fashion than CEPCI
Therefore, natural gas is the fuel of choice
Figure 6.1 Changes in fuel prices from 1990 to
2000
Table 6.4 Utilities provided by off-sites for a plant with multiple process units
Table 6.4 Utilities provided by off-sites for a plant with multiple process units (cont…)
Calculation of Utility Cost
Cooling Tower Water
Cooling water is supplied to process unit from central facility
The cooling of the water occurs in cooling tower where some of the water is evaporated, thus adding makeup water is necessary
Because essentially pure water is evaporated, there is a tendency for inorganic material to accumulate in circulating loop, thus water purge or blowdown from the system is necessary
Figure 6.2 Schematic diagram of cooling water
loop
Calculation of Utility Cost (cont…) Refrigeration
The basic refrigeration cycle consists of circulating a
working fluid around a loop consisting of a compressor,
evaporator, expansion valve or turbine, and condenser
The Carnot efficiency of a mechanical refrigeration
system can be expressed by reversible coefficient of
performance, COPREV :
Figure 6.3 Process flow diagram for a simple
refrigeration cycle
Calculation of Utility Cost (cont…) Steam Production
Steam is produced by the evaporation and superheating of specially treated water
The fuel that is used to supply the energy to produce steam is by far the major operating expense
Because there are losses of steam in the system due leaks and more important due to process users not returning condensate, there is a need to add makeup water
This water is filtered to remove particulates and then treated to reduce the hardness
Figure 6.4 Typical steam producing system for a
large chemical facility
6.4 Raw Material Costs
To locate cost for individual items it is not sufficient
to look solely at the current issue, but it is necessary
to explore several of most current issue
Large seasonal price fluctuations may exist, it is
advisable to look at average price over a period of
several month
In doing economic evaluations for different chemical
materials, it is important to obtain accurate prices if
realistic economic evaluation are to be obtained
Figure 6.4 Cost of some common chemicals
6.5 Yearly Costs and Stream Factors
In order to calculate the yearly cost of raw materials or utilities, the fraction of time that the plant is operating in a year must be known.
This fraction is known as Stream Factor(SF):
• Typical value of the stream factor ranging from 0.96 to 0.90
• Even the most reliable and well-managed plant will typically shut down for maintenance, having SF=0.96
• Less reliable processes may require more down time and hence lower SF values
Evaluation of Cost of Manufacture for the
Production of Benzene via the Hydrodealkylation
of Toluene
Calculate the cost of manufacture without depreciation
(COMd) for the toluene hydrodealkylation process.
Solution
Total Utilities = RM 6, 385, 000 / yr
Total Raw Material = RM 60, 549, 000 / yr
No waste treatment = RM 0.00 / yr
COL= (14)(52,900) = RM 741,000 / yr
FCI = RM 11.7 x 10E6 from CGR
COMd = 0.180FCI + 2.73COL + 1.23 (Utilities+RW+WT)
COMd = (0.180)(11.7x10E6) + 2.73(741,000) + 1.23 ( 6,385,000+ 60,549,000+0)
COMd = RM 86.46x10E6
