Using Aspen to Evaluate Process Economics

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Using Aspen to Evaluate

Process Economics

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Abstract

This manual provides an overview of Aspens basic costingfeatures and describes the cost parameters needed to performan economic analysis. The manual focuses on Aspensintegrated mode of costing, which involves economic analysesbased on owsheet conditions. The four dierent levels ofcosting discussed in this manual include equipment costs,capital costs, operating costs, and protability. or each level,the costing calculations are described along with the requiredinput parameters. The manual e!plains how to navigatethrough the various input forms and what the various inputparameters mean. "n some cases, the author suggests whereinput information can be located in the literature.

Table of Contents

Preface

Introduction

Equipment Costs

Equipment Cost Models

Input Parameters

Capital Costs

Labor Costs

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Cost Factors

Cost Sections

perating Costs

!a" Material Costs

Utilit# Costs

perating labor costs

Profitabilit#

Product !evenue

Startup Costs and $or%ing Capital !equirements

Internal !ate of !eturn

&et Present 'alue

Cas( Flo" Anal#sis S(eet

!eferences

)ibliograp(#

Introduction

Although Aspen is capable of performing stand#alone costanalysis, this manual will focus on Aspen$s integrated costingmode %i.e. costs associated with a fully functioning processsimulation&. "n integrated mode, Aspen retrieves processconditions from the owsheet and uses them as the basis forcost estimation. Therefore, it is essential that the mass andenergy balances for the process are complete beforeproceeding to the costing stage.

Aspen contains four dierent levels of cost estimates'

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(. )quipment *osts+. *apital *osts. -perating *osts. /rotability

)ach successive level builds on the previous level and requiresthe user to supply additional costing parameters.

To specif# t(e costing level*use the costing 0-ptions.1ain0 form.

Tip

Always start with the equipment costs level and progress to the higherlevels only when the previous level is fully functioning. This will helpisolate any errors that might occur when running the simulation.

2oth the equipment costs and the operating costs arecalculated from a combination of user supplied informationand process conditions retrieved from the owsheet. Thesecost calculations rely heavily on the process ow rates, heattransfer requirements, materials of construction, physicalproperties of process uids, etc. The capital costs include theequipment costs, the installation costs, and the processbuilding costs. At the protability level, Aspen performs a

detailed cash ow analysis for the life of the plant.

Equipment Costs

To estimate equipment costs, Aspen uses cost bloc3s whichare similar to the model bloc3s used on the owsheet for massand energy balances. )ach cost bloc3 calculates the si4e for apiece of equipment. Aspen then uses internal cost correlationsto calculate the price for each piece of equipment based on itssi4e, shape, and material of construction.

)ach model bloc3 depicted on the owsheet should have atleast one cost bloc3 associated with it. 5ome model bloc3smay require more than one cost bloc3. or e!ample, adistillation tower needs a column, a reboiler, a condenser, andan accumulator for collecting the distillate. The distillationtower would only have one model bloc3 representing it on the

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owsheet %see igure (.(&, but it would have four cost bloc3sassociated with it %see igure (.+&. 6hile the model bloc3s aredepicted on the owsheet, the cost bloc3s are not actuallypictured.

Figure 1.lowsheet containing distillation model bloc3.

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Figure 2.7ialog window used for managing equipment itemsassociated with a particular model bloc3.

To add cost bloc%s to the wor3sheet, select the appropriate modelbloc3, clic3 the right mouse button to bring up the popupmenu, and then select the menu item labeled 0*osts80. The)quipment 9ist )ditor will appear %see igure (.+&. :sing thiseditor, equipment models can be created for the currentowsheet model. The editor is also used to access the inputand results forms for each equipment model.

&ote

The )quipment 9ist )ditor will only display cost equipment modelsthat are appropriate for the currently selected owsheet model. Thisma3es it easy to determine which equipment models need to becreated for each owsheet model.

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Equipment Cost Models

Aspen contains a variety of cost models which can be used forsi4ing and costing equipment related to most types of unitoperations found on the owsheet. ive main categories of

cost models e!ist'

heat transfer equipment # heat e!changers, coolers, andheaters

vessels and tan3s # process vessels and tan3s pumps and compressors # pumps, compressors, and

blowers towers # trayed and pac3ed towers user models # user#dened models

All the models e!cept the user models calculate the si4e andcost of equipment using internal correlations. :ser costcorrelations can be attached to any of the cost models, but theuser models allow for customi4ed si4ing and costingalgorithms.

Input Parameters

or all the standard equipment models, two input forms willrequire attention' the 0)quipment.1ain0 form and the

0)quipment.5i4ing0 form.

To access t(e input forms*launch the )quipment 9ist )ditor byselecting the 0*ost ...0 menu item from the popup menu.5elect the equipment item of interest and clic3 the "nputbutton. A menu form will appear facilitating navigation amongall the available input forms.

The 0)quipment.1ain0 form is generally used for specifyingthe material of construction and narrowing down the type of

equipment. "n the distillation e!ample mentioned previously,two heat e!changers were created for the distillation tower.-ne heat e!changer represents the condenser and the otherheat e!changer represents the reboiler. The default type forheat e!changers is 2)1. The default type is ne for one#passshell e!changers such as the condenser, but the A;T type ismore appropriate for the 3ettle reboiler %'+

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heat e!changer for the reboiler instead of the 2)1 heate!changer signicantly increases the cost estimate. Thisincreased cost estimate is much more accurate.

The ma=ority of the parameters used in the si4ing calculations

are retrieved directly from the process conditions. The inputblan3s for these parameters will contain the word0referenced0 %see igure (.&. -ther blan3s may initiallycontain a default value. :sually, these default values areadequate for costing purposes> although new values should beentered if the information is available.

Figure 3.orm used for entering pac3ed tower si4ing parameters.

"n the e!ample above %igure (.&, the 0?etp0 parameter couldnot be referenced and no default value was available. Theheight equivalent to a theoretical plate %?)T/& depends on thespecic distillation system being modeled. 2ecause :A? doesnot have the necessary license to perform ?)T/ calculationsin Aspen, the user must calculate the ?)T/ on his@her ownand enter it into the blan3. "nDistillation Designby ?enry;ister, the author presents empirical correlations that areuseful for estimating the ?)T/ value %'+B#+C&. These

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correlations can be implemented in Aspen using a -DTDAEbloc3.

or the accumulator used in the distillation e!ample, theengineer also had to determine the appropriate value for the

residence time parameter. "n cases li3e these, designheuristics, or rules of thumb, can be used for determining theappropriate value. A good boo3 to consult for si4ing heuristicsisRules of Thumb for Chemical Engineersby *arl 2ranan %&.

&ote

6hen running a simulation, Aspen sometimes generates errors saying,0The calculated equipment si4e is below the minimum value requiredfor the cost correlation.0 "f this happens, then the piece of equipmentis probably so small that its cost is negligible. 7elete the cost bloc3 forthe item to avoid unnecessary calculations.

Capital Costs

The capital cost estimates are derived directly from theequipment costs using a factor method. The capital costsinclude the following items'

5ervice costs # oices, cafeterias, laboratories, maintenancebuildings, etc.

5ite costs # land development@purchase

"nstallation costs # installation of equipment@unlistedequipment

"ndirect costs # contractor e!penses, fees, permits, insurance

*ontingency # allowances for unpredictable events

To access t(e capital cost parameters*select 0*osting@*apital#*ost0from the orms menu. A menu form containing lin3s to the

various capital cost parameters will appear.

Labor Costs

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Aspen needs labor cost information for calculatingconstruction costs. "ndicate the wage rate for installationlabor on the 09abor#*ost.1ain0 form. A =ob condition factorshould be entered to account for the productivity of thewor3ers. or help estimating the =ob condition factor %F*&,consult the wor3sheet in the appendi! of the Aspen /lus*osting Deference 1anual %('A#&.

To access t(e labor cost parameters*select 0*osting@9abor#*ost0from the orms menu.

Cost Factors

All ve types of capital costs are calculated using a factormethod. )ach specic cost is estimated using a factor which

relates it to either an equipment cost or a labor cost. ore!ample, the material installation costs are calculated usingfactors that relate them to the equipment costs. The numberof hours required to install the equipment is also calculatedusing a factor which is related to the equipment cost. :singthe labor rate information, the labor installation costs canthen be calculated from the estimated instillation time.

Aspen already contains default values for all the factors usedin capital cost estimation. These factors were derived frome!perience, and they generally provide good estimates forpreliminary plant designs. "nConceptual Design of Chemical

Processesby Fames 7ouglas, the author reairms that Aspencontains some of the most up#to#date cost correlationsavailable %G'&.

Tip

"f you wish to e!clude a particular cost, such as land purchase, from

your economic analysis, simply override the default cost factor with a4ero.

Cost Sections

Aspen calculates installation costs for each cost section of theowsheet. *ost sections provide a convenient method for

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grouping related equipment items. or e!ample, one sectionmight represent all the equipment items related to adistillation tower' column, condenser, reboiler, accumulator,feed pump, etc. )very equipment item should be assigned to aparticular cost section. 6hen Aspen generates the costingresults, the installation costs will be itemi4ed for each costsection. 2y including all the equipment items for a distillationtower in one section, Aspen will only produce one estimate forconcrete, piping, insulation, framewor3, etc. for the entiredistillation system.

To assign an equipment item to a cost section*set the 5ectionparameter on its 0)quipment.1ain0 form. The names for thecost sections can be dened in advance using the *ost#

5ections editor, but this is not necessary. 6hen you input anew name for an equipment section parameter, Aspen willautomatically create a *ost#5ection ob=ect with that name.

perating Costs

6hile the capital costs are one#time e!penses which areincurred at the start of the pro=ect, the operating costs areannual e!penses which occur over the life of the plant. Theoperating costs include

Daw material costs :tility costs -perating labor costs 1aintenance costs Heneral wor3s costs 7epreciation

The raw material and operating costs are often two of thelargest contributors to overall production e!pense.

!a" Material Costs

Aspen calculates the annual operating e!pense due to rawmaterials based on both the raw material prices and the massow rates indicated by the owsheet. Daw material pricesshould be entered for each feed in the process. A good source

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for raw material prices is the Chemical MarketingReporter%

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To create a ne" utilit#* select 0*osting@:tility0 from the ormsmenu.

After creating the required utilities, lin3 each piece of heattransfer equipment to a specic utility.

To lin% equipment items to utilities*open the )quipment 9ist )ditorfor a owsheet bloc3, select the desired equipment item, andthen clic3 the reference button. A dialog bo! will appearallowing you to select a particular utility.

&ote

The utility properties will aect the amount of coolant owing througha heat e!changer. A large ow not only causes higher operating costs,but also requires a larger heat e!changer increasing capital costs.

"f utilities contribute a signicant amount of cost to the overallproduction e!penses, then consider using heat integration %i.e.pinch technology&. The Aspen Technology web site contains agood overview of pinch technology %B&.

perating Labor Costs

-perating labor costs reect the labor e!penses incurred dueto daily plant operation. -n the 0-perating#*ost0 form,indicate the average hourly wage for plant operators alongwith the number of hours the plant operates in one year."nPlant Design and Economics for Chemical Engineersby/eters and Timmerhaus, the authors provide typical values forboth operating labor and plant operation time %C&.

To access t(e labor cost parameters*select 0*osting@-perating#*ost0from the orms menu.

Profitabilit#

Aspen /lus performs a detailed cash ow analysis for the lifeof the plant. The two most important measures of protabilitywhich Aspen calculates are

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internal rate of return %"DD& net present value %E/I&.

The protability calculations consider

*apital e!pense -perating costs /roduct revenue 5tartup costs 6or3ing capital requirements.

"n the previous costing levels, Aspen calculated the capitale!penses and operating costs. At the current costing level,

Aspen will calculate the product revenue, startup costs andwor3ing capital requirements needed for determiningprotability.

Product !evenue

The product revenue is a function of product and byproductow rates multiplied by their respective selling prices. Theprocedure for entering product and byproduct prices ispractically identical to the procedure used for entering feedprices. Deview the Daw 1aterial *osts section for help onentering material prices.

Startup Costs and $or%ing Capital !equirements

The startup costs include e!penses related to the training ofoperators and maintenance wor3ers during the rst fewmonths of plant operation. The wor3ing capital requirementsinclude the money needed to maintain inventories and coveraccounts payable. The wor3ing capital e!pense is charged atthe beginning of plant operation, but is never actuallyconsumed. 6hen the plant shuts down, the wor3ing capital is

returned as a credit. 2oth the startup costs and the wor3ingcapital requirements are calculated using factor methods. Toad=ust these factors, go to the 0/rotability 1enu0 form.

To access t(e profitabilit# parameters*select 0*osting@/rotability0from the orms menu. A menu form containing lin3s to the

various protability parameters will appear.

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Internal !ate of !eturn

The internal rate of return %"DD&, also 3nown as thediscounted cash ow rate of return %7*D-D&, is calculatedusing the net cash ow pro=ections over the life of the plant.

The "DD is the amount of interest that the investors could paythemselves annually without ban3rupting the pro=ect. Aspencalculates an annual interest rate that would reduce theinvestment balance to 4ero at the end of the plant life. Thismeasure of protability is usually reported for the optimumprocess alternative.

&et Present 'alue

To determine the net present value %E/I&, Aspen ad=usts the

annual cash ows for the time#value of money at the start ofthe pro=ect and then sums the annual ad=usted net incomes..The E/I represents the sum of all future prots based on thetime#value of money at the start of the pro=ect. The E/I iscalculated using a base "DD %usually (J& which is indicatedon the 0/rotability./aram0 form.

The E/I is needed to accurately compare processalternatives. The "DD is not a good comparison tool foralternatives because it ignores dierences in initialinvestment %(K&. *ompanies generally loo3 for pro=ects whichwill provide an "DD at or above (J. "f plenty of investmentmoney is available, then a company would usually prefer toinvest the ma!imum amount of money available which will stillprovide an "DD at or above (J. -ne alternative may requireL(K,KKK,KKK initial investment and have a KJ "DD, while asecond alternative may require L(,KKK,KKK initial investmentand have a +J "DD. At rst glance, the "DD of KJ mayappear more attractive> but the company is accruing interest

on a smaller principal amount. 2y choosing the secondalternative, the company can invest more money and,therefore, ma3e more money. The best way to compare thetwo alternatives involves using the E/I. The E/I provides a

value for the e!cess prot which would be earned after payingan "DD of (J. The alternative with the largest E/I is usuallythe best choice.

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Cas( Flo" Anal#sis S(eet

Aspen generates a cash ow wor3sheet containing the cashow for each quarter the plant is in operation %see igure &.The cash ow varies over the life of the plant because of

ination. The product prices, raw material prices, utility costs,operating labor costs, etc. all vary according to dierentination inde!es. Aspen contains separate internal inationinde!es for each type of cost.

Figure 5. /lant cash#ow for the life of the plant. The arrows areused to scroll through the entire wor3sheet.

To vie" t(e profitabilit# results*select 0Deports@)!ec#5um@/rots0from the orms menu.