The new LCC method to estimate the Life Cycle Cost of an air compressor
Autore: Giulio Contaldi
Throughout industrial manufacturing, LCC is a well-recognised method to simulate the full cost of ownership for capital equipment. The calculation of the LCC for an industrial machine will vary from industry to industry, and in the Air Compressor Industry it is typically calculated by taking into consideration three major factors.
- Capital Equipment Expenditure (Capex) – What is the cost of acquiring the equipment? If the LCC exercise is being run to compare two Air Compressors from competing brands, this will include only the compressor cost (as in this example). If the LCC exercise is being run to calculate full return on investment then installation and ancillary costs will also be take into account here.
- Ordinary Maintenance Costs – What is the cost of maintaining the equipment? The manufacturer declared costs of maintaining the equipment regularly with the use of consumables, including the labour cost involved in the maintenance.
- Energetic Consumption Costs – What is the cost of running the equipment? A simulation of how much the Air Compressor will cost to run. This depends fist and foremost on the performance of the compressor and is typically measured by the number of kW needed to compress 1 m3/min of air. This is known as the compressors Specific Energy. The Specific Energy can then be multiplied by the Free Air Delivery, the Operating Hours and the local cost of electricity, to have a complete cost of running the compressor.
Whilst Capex is fixed, both Maintenance costs and running costs will vary depending on a couple of factors, such as yearly running hours and local energy costs. LCC simulations become more common the larger the installed power of the compressor, and the larger the installed power, the longer the running hours in a year.
As an example that we will be using throughout this paper, let’s consider an industry standard:
In this example the LCC for the 5-year life of the compressor is calculated in the following way:
Example Compressor LCC
In this example the cost of running the compressor far outweighs the sum of the Capex and Maintenance costs, and makes up more than 90% of the overall LCC of this installation.
The importance of the Specific Energy of a compressor has taken centre stage over the last decades due to these very high running costs. For this reason, many manufacturers have invested their R&D budgets to continually improve the performance of their products. Although the race to reduce the power consumption of air compressors has been typically driven by commercial aspects, nowadays, manufacturers of air compressors also have to face the fact that their products can directly affect the environment by means of their energy efficiency, and they must be held accountable for these performances.
Typical Compressor Life Cycle Cost Evaluation
Currently a potential client, who is interested in buying an industrial air compressor, will typically ask the manufacturer for the compressor’s technical data sheet to estimate the Life Cycle Cost of his investment over the next 5-10 year period. In the USA, the Compressed Air and Gases Institute (CAGI) has set up a consumer friendly portal from which one can download technical data sheets regarding air compressors of various global manufacturers. Any data published on the CAGI website has been independently verified and approved by a third party tester, INTERTEK USA, which will have tested the compressor under the current guidelines regulating air compressor performance evaluation defined in the International Standard ISO 1217.
As there tends to be scepticism around much of the published performance data of many global compressor manufacturers, the CAGI Datasheets have become recognised as the most precise and impartial way to calculate Life Cycle Costs in the industry, and in doing this CAGI has provided a valuable tool to protect end users.
Using the same principles as shown in Table 1 and extending the example to compare two Air Compressors with slightly different Capex and Maintenance costs but identical CAGI verified Specific Energies, would result in the following LCC simulations:
In the above example, Compressor 2 costs 10% more in Capex and 20% more in Maintenance Costs than Compressor 1, but at identical CAGI verified Specific Energies, the resulting difference in LCC is only € 9,000 out of total of € 790,000 or 1,1%-
The potential end user now believes that he has all the necessary data to make an informed decision on which Compressor to buy and install in his plant. Unfortunately this method relies on one key assumption that is fundamentally incorrect and can therefore result in potentially misleading end users in their decision making process:
Air Compressor Specific Energy is constant over time.
This assumption cannot be applied either to Screw Compressors or Vane Compressors. Although the Vane Compressor and the Screw Compressor have identical CAGI Zero Hour Specific Energy, we can now proceed to include the performance deterioration for the screw and the performance improvement for the Vane in the LCC calculations.
It is important to underline that different Screw Compressor manufacturers choose to use a variety of different bearings in their machines. For this reason one cannot arbitrarily choose one deterioration rate for all Screw Compressors. On the other hand it has been shown, through scientific research, that all it takes is bearing wear equivalent to one fourteenth of the width of a human hair to lose nearly 2% in volumetric performance in a Screw Compressor. Therefore we will run the New LCC calculations with -2%, -5% and -10% screw performance deterioration over the 5-year lifetime of the compressor (before the required overhaul) in an attempt to encompass most Screw Compressor manufacturers bearing choices.
Considering identical Capex and Maintenance costs, and selecting two 75kW compressors of identical CAGI data sheet Zero Hours Specific Energy, one could represent the specific energy over time in the following manner.
Applying the New LCC considerations to the sample compressor installation from Table 1, the following results are obtained:
Extending the LCC calculation to a 10-year period, one has to consider the costs of the Screw Compressor complete overhaul to return the air end to its original condition and avoid bearing failure. In this example the industry standard cost of the original manufacturer overhaul of 50% of Capex is used. For the Rotary Vane there is no overhaul cost over the lifetime of the compressor and this is evident by the 10 year air end warranty that Mattei applies to its compressors. In this example the overhaul cost for the Vane compressor is equivalent to zero.
The New Life Cycle Costing method proposed takes into consideration both the improvement in the performance of the Rotary Vane compressor, and the loss of performance of the Screw Compressor over time. It is evident that there is an important difference in energy cost simulations when applying the New LCC method, as opposed to the industry recognised standard LCC method. In the case of a 10% Screw performance degradation, over a ten-year period with overhaul, the client could spend € 168,000 or 12% more (over 3 times the original Capex cost) by selecting a Screw over a Vane even though these have identical CAGI verified Zero Hours Compressor Performances. This issue has to be addressed, especially in view of the fact that Zero Hour Compressor Performance data is now being used to draft new legislation to help curb the current global warming crisis. If such important information is not considered, the beneficial effect expected on lowering the energy consumed by Industrial Air Compression by the new legislation is at serious risk of not being reached.