Life-Cycle Cost Analysis
Lecture No.22
Chapter 6
Contemporary Engineering Economics
Copyright © 2006
Contemporary Engineering Economics, 4th
edition, © 2007
Why Life-Cycle Cost (LCC) Analysis?
To select from among design
alternatives that fulfill the same
performance requirements, but differ
with respect to initial costs and
operating costs
 To predict the most cost-effective
solution

Contemporary Engineering Economics, 4th
edition, © 2007
Stages of Life-Cycle Cost
Contemporary Engineering Economics, 4th
edition, © 2007
Sketch of a Pumping System in Which the
Control Valve Fails
Contemporary Engineering Economics, 4th
edition, © 2007
Engineering Solution Alternatives




Option A: A new control valve can be installed to
accommodate the high pressure differential.
Option B: The pump impeller can be trimmed so
that the pump does not develop as much head,
resulting in a lower pressure drop across the current
valve.
Option C: A variable frequency drive (VFD) can be
installed, and the flow control valve removed. The
VFD can vary the pump speed and thus achieve the
desired process flow.
Option D: The system can be left as it is, with a
yearly repair of the flow control valve to be expected.
Contemporary Engineering Economics, 4th
edition, © 2007
Life-Cycle Cost Elements
Contemporary Engineering Economics, 4th
edition, © 2007
Cost Comparison for Options A Through D
Contemporary Engineering Economics, 4th
edition, © 2007
Sample LCC Calculation for Option A
Contemporary Engineering Economics, 4th
edition, © 2007
Comparison of LCC for Option A - D
Contemporary Engineering Economics, 4th
edition, © 2007
Life-Cycle Cost Analysis – Standard Motor versus
Premium Efficiency Motor
Standard
Motor
Size
25 HP
Cost
$13,000
Life
20 Years
Salvage
$0
Efficiency
89.5%
Energy Cost
$0.07/kWh
Operating Hours 3,120 hrs/yr.
Premium
Efficient Motor
25 HP
$15,600
20 Years
$0
93%
$0.07/kWh
3,120 hrs/yr.
(a) At i= 13%, determine the operating cost per kWh for each motor.
(b) At what operating hours are they equivalent?
Contemporary Engineering Economics, 4th
edition, © 2007
Solution:
(a):

Operating cost per kWh per unit
Input power =
output power
% efficiency
Determine total input power

Conventional motor:
input power = 18.650 kW/ 0.895 = 20.838kW

PE motor:
input power = 18.650 kW/ 0.93 = 20.054kW
Contemporary Engineering Economics, 4th
edition, © 2007
 Determine total kWh per year with 3120 hours of
operation
 Conventional motor:
3120 hrs/yr (20.838 kW) = 65,018 kWh/yr
 PE motor:
3120 hrs/yr (20.054 kW) = 62,568 kWh/yr
 Determine annual energy costs at $0.07/kwh:
 Conventional motor:
$0.07/kwh  65,018 kwh/yr = $4,551/yr
 PE motor:
$0.07/kwh  62,568 kwh/yr = $4,380/yr
Contemporary Engineering Economics, 4th
edition, © 2007


Capital cost:
 Conventional motor:
$13,000(A/P, 13%, 12) = $1,851
 PE motor:
$15,600(A/P, 13%, 12) = $2,221
Total annual equivalent cost:
 Conventional motor:
AE(13%) = $4,551 + $1,851 = $6,402
Cost per kwh = $6,402/58,188 kwh = $0.11/kwh
 PE motor:
AE(13%) = $4,380 + $2,221 = $6,601
Cost per kwh = $6,601/58,188 kwh
= $0.1134/kwh
Contemporary Engineering Economics, 4th
edition, © 2007
B
C
D
E
F
G
H
Example 6.6 How Premium Efficiency Motors Can Cut Your Electric Costs
Conventional
Premium
Motor
Efficiency Motor
Output power (hp)
Operating hours per year
Efficiency (%)
25
6,742
89.5
Initial cost ($)
Salvage value ($)
Service life (year)
Utility rate ($/kWh)
interest rate (%)
$
Capital cost ($/year)
Energy cost ($/year)
Total Equ. annual cost
Cost per kWh
$
$
$
$
25
6,742
93
13,000 $
0
20
0.07
13
1,850.60
9,834.28
11,684.88
0.09
Operating
Hours
$
$
$
$
0
500
1000
1500
2000
2500
3000
3500
4000
4500
5000
5500
6000
6500
7000
7500
8000
8500
8750
15,600
0
20
0.07
13
2,220.72
9,464.17
11,684.89
0.09
16000
14000
12000
10000
Conventional Motor
8000
PE Motor
6000
4000
2000
85
00
75
00
65
00
55
00
45
00
35
00
25
00
15
00
0
50
0
(b) break-even
Operating
Hours = 6,742
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Contemporary Engineering Economics, 4th
edition, © 2007
Conventional
Motor
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
1,851
2,580
3,309
4,039
4,768
5,497
6,227
6,956
7,685
8,415
9,144
9,873
10,603
11,332
12,061
12,791
13,520
14,249
14,614
PE
Motor
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
2,221
2,923
3,624
4,326
5,028
5,730
6,432
7,134
7,836
8,538
9,240
9,941
10,643
11,345
12,047
12,749
13,451
14,153
14,504