ECONOMIC ANALYSIS

To estimate the major costs involved in the design project by considering various
assumptions and predictions referring to the economic, technological, legal
environments and using techniques from engineering economics.
Schematic:
Step 1. Estimate the total capital investment.
Step 2. Determine the economic, financial, operating, and market input parameters
for the detailed cost calculation.
Step 3. Calculate the total revenue requirement.
Step 4. Calculate the levelized product cost.
1. Estimation of total capital investment
TCI = FCI + OO = DC + IC + OO
Where:
TCI is the total capital investment
FCI is the fixed-capital investment
DC is the direct costs
IC is the indirect costs
OO is the other outlays
FCI = the total system cost assuming a so-called overnight construction, that is, a
zero-time design and construction period. Fixed-capital investment consist of two
major cost elements: direct and indirect
costs.
DC = the costs of all permanent equipment, materials, labor, and other resources
involved in the fabrication, erection, and installation of the permanent facilities .
IC = required costs for the orderly completion of the project .
OO = other outlays consist of the startup costs, working capital, costs of licensing,
research and development, and allowance for funds used during construction (interest
incurred during construction).
1.1. Estimates of Purchased Equipment Cost
- Onsite costs (or: inside-battery-limits costs) correspond to the installed
equipment cost (including supporting equipment and connections) for all
items shown on the process flow diagram (These items are built within a
specific geographic area called battery limits ).
- Offsite costs (or: outside-battery-limits costs) include costs associated with
the production and distribution of utilities, roads, general offices,
wastewatertreating facilities, and storage facilities for raw materials and
finished products.
The best cost estimates for purchased equipment:
- Can be obtained directly through vendors quotations.
- Shipping and installation charges need to be estimated separately.
- For large projects, vendors quotations should be obtained at least for the
most expensive equipment items.
- Cost values from past purchase orders, quotations from experienced
professional cost estimators, or calculations using the extensive cost
databases often maintained by engineering companies or company
engineering departments.
- Commercial software packages.
Estimating Charts:
Why?
Lack of vendor quotations
Limitation of the cost or time requirements to prepare cost estimates
The purchase prices of various equipment items are usually given in the form of
estimating charts.
The module cost:
C M =C B f d f m f T f p f BM =C B [( f d + f T + f p ) f m + f BM 1]

Where:
CB is the base cost of purchased equipment, is obtained from the appropriate cost
chart
CPE is the purchased cost for the equipment item being considered
fd: design-type factor
fm: material factor
fT: temperaturefactor
fp: pressure factor
fBM = bare module factors
Effect of Size on Equipment Cost: