The Cost of Compressed Air
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Life Cycle Cost of a Compressor
A common way to describe and analyze the investment in a product, a material or a particular service in a systematic, yet simplified fashion, is by using a life cycle cost (LCC) analysis. This analysis examines all of the stages in the life cycle of the operating product or the service. This includes everything from the selection of raw material to final waste removal/recycling.
What is the ‘life cycle cost’?
The life cycle cost analysis is often used as a comparison tool between different investment options, for example, for products or systems with an equivalent function. The LCC result is often used to provide guidance in issues concerning specific processes or specific product design elements. LCC analyses can also be used by companies in communication with subcontractors, with customers or with the authorities to describe their system characteristics.
The results from an LCC analysis can serve as a basis for making decisions that will minimize a product or a service's operational impact on the environment. However, LCC analysis does not offer answers to all possible questions, which is why other aspects such as quality and available technology must be examined to provide relevant background material.
How to calculate a compressor’s life cycle cost?
LCC calculations are used more and more as a tool to evaluate various investment options. Included in the LCC calculation are combined costs due to the product operating over a specific period, which include the capital expenditure, the operating cost and the maintenance service cost.
The LCC calculation is often implemented based on a planned installation or a working installation. This serves as the basis for defining requirements for a new installation. It should, however, be pointed out that an LCC calculation is often only a qualified estimate of future costs and is somewhat limited due to it being based on current knowledge of the condition of equipment condition and impacted by future evolutions in energy prices. Nor does this calculation account for any "soft" values that can be just as important, such as production safety and its subsequent costs.
Making an LCC calculation requires knowledge and preferably experience with other compressed air installations. Ideally, it should be made jointly by the purchaser and the salesman. Critical issues include how different investment options affect factors like production quality, production safety, subsequent investment requirements, production machine and the distribution network maintenance, environmental impact, the quality of the final product, and risks for downtime and for rejections.
An expression that must not be forgotten in this context is LCP, Life Cycle Profit. This represents the earnings that can be gained through energy recovery and reduced rejections, to name but a few possibilities. When assessing service and maintenance costs, the equipment's expected condition at the end of the calculation period must also be taken into account (i.e. whether it should be seen as fully used or be restored to its original condition). Furthermore, the calculation model must be adapted to the type of compressor involved. The example in chapter 5 can serve as a model for the economic assessment of a compressor installation, with or without energy recovery.
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