Simple Economic Criteria

To evaluate design options and carry out process optimization, simple economic criteria are needed. Consider what happens to the revenue from product sales after the plant has been commissioned. The sales revenue must pay for both fixed costs that are independent of the rate of production and variable costs, which do depend on the rate of production. After this, taxes are deducted to leave the net profit. 

Fixed costs independent of the rate of production include  

More accurate methods to calculate refrigeration costs will be discussed in Chapter 24. 

Labor cost. The cost of labor is difficult to estimate. It depends on whether the process is batch or continuous, the level of automation, the number of processing steps and the level of production. When synthesizing a process, it is usually only necessary to screen process options that have the same basic character (e.g. continuous), have the same level of automation, have a similar number of processing steps and the same level of production. In this case, labor costs will be common to all options and hence will not affect the comparison. 

however, options are to be compared that are very different in nature, such as a comparison between batch and continuous operation, some allowance for the difference in the cost of labor must be made. Also, if the location of the plant has not been fixed, the differences in labor costs between different geographical locations can be important. 

There can be an element of maintenance costs that is fixed and an element which is variable. Fixed maintenance costs cover routine maintenance such as regular maintenance on safety valves which must be carried out irrespective of the rate of production. There also can be an element of maintenance costs which is variable. This arises from the fact that certain items of equipment can need more maintenance as the production rate increases. Also, royalties which cover the cost of purchasing another company s process technology may have different bases. Royalties may be a variable cost, since they can sometimes be paid in proportion to the rate of production. Alternatively, the royalty might be a single-sum payment at the beginning of the project. In this case, the single-sum payment will become part of the project s capital investment. As such, it will be included in the annual capital repayment, and this becomes part of the fixed cost. 

Two simple economic criteria are useful in preliminary process design  

EP = value of products - fixed costs - variable costs - taxes 

---

In a simple sensitivity analysis, each parameter is varied individually, and the output is a qualitative understanding of which parameters have the most impact on project viability. In a more formal risk analysis, statistical methods are used to examine the effect of variation in all of the parameters simultaneously and hence quantitatively determine the range of variability in the economic criteria. This allows the design engineer to estimate the degree of confidence with which the chosen economic criterion can be said to exceed a given threshold. 

Plant economic criterion simple 3-year payout... 

As with all of die processes described, drese are first studied in detail in the laboratoty with an industrial application as dre objective. Those processes which pass the criterion of economic potential are used in a pilot plant smdy, and dretr, if successful, at the production level which must be optimized. The materials which are produced are mainly, in the present instance, for application in the elecU onics industry where relatively high costs are acceptable. It will be seen drat the simple kinetic theory of gases is adequate to account for dre rates of these processes, and to indicate the ways in which production may be optimized on dre industrial scale. 

Other than for simple glycolysis, a substantial capital investment must be made to conduct commercial depolymerization of PET to regain PET monomers for repolymerization of PET. As the capital costs rise at roughly the 0.6 power of the relative volume [68], larger facilities are more economically attractive than smaller facilities. Besides the availability of capital to build very large depolymerization facilities, the limiting criterion has been and is likely to continue to be the sure supply of adequate PET feedstock at acceptable prices. 

Multi-objective optimization (MOO) has attracted considerable attention from researchers in chemical engineering, particularly in the past decade. Reported MOO studies have mainly used criteria such as selectivity, yield, productivity and/or energy consumed see Chapter 2 for the chemical engineering applications studied since 2000 and the objectives used in them. However, profit, an important criterion in any commercial operation, was not used in many of these studies. Apart from the simple profit, several economic criteria such as payback period (PBP), net present worth or value (NPW or NPV) and internal rate of return (IRR) are popular for evaluating projects in industrial practice. Edgar et al. (2001) compared the pros and cons of these three profitability criteria. Studies by Huskies (1997) and Pintaric and Kravanja (2006), show that optimal solutions of chemical processes are dependent on the economic objective selected. This indicates the conflicting nature of some, if not all, economic objectives, which means MOO is probably required even if one is interested in only the profitability criteria. 

---