Concept: Process Economics – Operating Costs vs. Capital Costs

Context: Producing and Selling Chemical Commodities

Defining Question: What is the Economy of Scale?

Recap:

EngrD 2190 – Lecture 17

cost capitalprofitROI

lifetimeequipment cost capitalondepreciati

costs operatingrevenueprofit

ne methodstraightli

Calculation Session today: Spreadsheets for Mass Balances with Economic Analysis.Bring a charged laptop with Excel installed and the Solver routineinstalled and the spreadsheet template for Exercise 3.112 downloaded.See Monday’s Lecture Handout for basic Excel functions and instructionsto install Solver. Try the Mass Balance tutorial on pp. 182-186 of textbook.

Bring pp. 182-186 to Calculation Session.

Try Exercise 3.112 before Calculation Session. Start with the downloadedtemplate, enter formulae for mass flow rates in the process flowsheet and enterformulae for economic parameters.

Homework Teams:Peer Evaluations and New Team Questionnaires Due Friday 10/8.May be submitted in Calculation Sessions.New Teams to be announced Friday 10/15.

Want to remain with your present team? If so EVERY team membermust send e-mail FROM THEIR CORNELL NetID to engrd2190@gmail.comby Friday 10/8 at noon.

Want to request a team? If so EVERY team member must send e-mailFROM THEIR CORNELL NetID to engrd2190@gmail.com by Friday

10/8 at noon. Requested team must have no pairs from present teams.

Sophomores: study abroad at Imperial College London!

Five weeks during the summer - last week of June through July.

Study abroad at a world-class university and gain industrial trainingin the Carbon Capture Pilot Plant, built to the highest industrial standards

and spans four floors to provide a hands-on experience. The programalso offers instruction in five laboratory experiments and

a rig-building competition.

What is the errorin this comic?

yield%2/year02.0$ 30,000,000$/year 11,500,000 0.05

cost capitalprofitROI

If profits are only 2% of revenue,yield is 0.8%/year.

(reactants)

reactants: rate in rate consumed $/year to suppliersdt

d )assets(

labor: rate in rate consumed $/year to employees

utilities: rate in rate consumed $/year to service providers

(products)

products: rate out rate created +$/year from buyers

10% per year

equipment: rate in rate out $/year depreciation

depreciation

2150 k$

Solution is posted.

3930 k$/year

year/$000,930,3

kg$131

yeardaysproduction300

dayproductionkg100revenue

PP

year/$000,620,1

kg$70.2

yeardaysproduction300

dayproductioninertkg2000costreactant

+A

year/$900,96

kg$17.0

yeardaysproduction300

dayproductionwastekg1900costdisposal

year/$000,215

years10000,150,2$

lifetimecapitalcostcapitalondepreciati

2712 k$/year

year/$100,218,1

year/$900,711,2000,930,3

costoperatingrevenueprofit

1218 k$/year57 %/year

year/%57000,150,2$

year/$900,218,1

costcapitalprofitROI

3590 k$

Solution is posted.

3930 k$/year2473 k$/year1457 k$/year

41 %/year

year/$000,053,1

kg$70.2

yeardaysproduction300

dayproductioninertkg1300costreactant

+A

year/$200,61

kg$17.0

yeardaysproduction300

dayproductionwastekg1200costdisposal

year/$000,359

years10000,590,3$

lifetimecapitalcostcapitalondepreciati

year/$800,456,1

year/$200,473,2000,930,3

costoperatingrevenueprofit

year/%41000,590,3$

year/$800,456,1

costcapitalprofitROI

Scheme II has the higher profit! Why not build Scheme II?

Assume you have 3.59 M$ to invest.You have at least three options:

1. Build Scheme II.profit = 1.457 M$/year

ROI = 41 %/year

2. Build Scheme I and leave1.44 M$ in bank at 10%/year.profit = 1.218 + 0.144 M$/year

= 1.362 M$/yearROI = 1.362/3.59 = 38 %/year

3. Build a larger Scheme I.profit > 1.218 (2150/3590)

> 2.034 M$/yearROI > 57 %/year

Why? The Economy of Scale.In general, equipment costsscale to the 0.6 power.A reactor 2 as large costsonly 20.6 = 1.5 more.

3.112 The mass balances can be calculated iteratively with a spreadsheet.However, we will need a definitive solution to use Solver to optimize.

1. Overall mass balance(1)(90)

2. Equipment specification:½ of P in bottoms stream.

(9)

3. Composition into splitter =composition out of splitter.9 90 = 810

(810)

4. Mass balanceon splitter.

(8)(720)

5. Mass balanceon combiner.

(18)(810)

Mid-Semester Survey

Old Turbine: Profit = Revenue Operating Costs= 180,000 $/year 10,000 $/year = 170,000 $/year.

Old Turbine: Profit = 180,000 $/year (10,000 $/year + $300,000/10 years)= 137,000 $/year.

New Turbine: Profit = Revenue Operating Costs= 198,000 $/year (5,000 $/year + $450,000/15 years)= 163,000 $/year.

year/%46

$300,000year/$000,137ROI

:Turbine Old

year/%36

$450,000year/$000,163ROI

:Turbine New

Solution is posted.

What if both profits were negative?

year/%46

$300,000year/$000,137ROI

:Turbine Old

year/%36

$450,000year/$000,163ROI

:Turbine New

What if the cost of electricity doubles?

Mid-Semester Survey

Please pass to the center,then pass to the front.

Spreadsheets: Excel and Circular References

Should enter “= sum(B1:B4)”

Instead, incorrectly enter “= sum(B1:B5)”

PA liquid-gasseparator

reactorA P

50% conversion

A 100

Anegligible

purge

AP

A

Spreadsheets: Excel and Circular References, cont’d

= input + recycle = 0.5 reactor feed

= reactor output

= separator bottoms

Open Tools menu Options Calculation

Click here

Prelim 1 2021 - Statistics

Mean: 97 / 120 (81%)Std. Deviation: 19

A - L: Lucy (Front of room)M - Z: Kelsey (Back of room)

Solution is posted.

Problem 1: 29 8 / 40 (74%)Problem 2: 21 7 / 25 (82%)Problem 3: 47 11 / 55 (85%)