Engineering Costs and Production Economics, IS ( 1989) 13 I- 138

Elsevier Science Publishers B.V., Amsterdam -Printed

in The Netherlands

TEQ-

131

A METHODOLOGY FOR COMPARATIVE

EVALUATION OF TECHNOLOGIES
Beno Zaidman and Guido Cevidalli

Hebrew University

of Jerusalem,

School of Applied Science and Technology,

9 1904 Jerusalem (Israel)

Casali institute

of Applied

Chemistry,

ABSTRACT

A methodology for a comparative evaluation

of technologies in the process industries is proposed. An expression called the Technology
Equivalence Equation is set and offers thepossibility of establishing areas of preference in
terms of capacity and exogenous variables for

two concurrent te~hnoiogies to be compared.

The scope of the methodology is discussed and
numerical examples are offered. The application of the equation to the industrial chemistry
of ethanol is presented,

1. INTRODUCTION

2. DETERMINATION

The profitability of a new technology for the

manufacture of a known product is usually assessed considering its internal production factors, the exogenous variables of the economic
environment and the current market price of
the product already manufactured by competitive technologies. Therefore, the economic
performance of the checked technology is influenced by the parameters of the rival manufacturing processes. However, in the majority
of comparative studies which deal with competitive technologies for producing a product
or a group of products, this situation is not
taken into account, or is tackled discontinuously for a limited number of possible scenarios. For this reason, we consider it interesting
to establish a general methodology for comparing, along a continuous function, two concurrent technologies for manufacturing of a
product in the process industries.

Let Tl and T, be the two defined technologies for manufacturing a product P from the
feedstocks fs, and fs,. Let T, be a known, industrially-applied technology and T2 a new,
emerging one. As a first stage of the comparative evaluation we propose to write cost-functions for T, and TZthat express the amount and
cost of resources used by each technology for
the manufacture of one unit of P. These functions must include exogenous variables (costs
of raw materials, energy, capital and labor),
technology related factors (MF - material utilization factor; CF - capital utilization factor;
LF - labor utilization factor; EF - energy utilization factor), and general expenses (Q overhead). Time and location cost indexes
must be included when a more comprehensive
function is sought.
The initial form of the cost functions will be:

0167-188X/89/$03.50

0 1989 Elsevier Science Publishers B.V.

OF ~ETHODOLGGY

132
Pcost= ( MF x feedstock

cost )

(I)

SGC= [Annual depreciation]

.~
[Investment]

+ (CF x capital cost ) + ( LF x labor cost )

+ [Annual

maintenance

+ ( EFx energy cost ) + Q

and supplies]

[Investment]
+ [Annual local taxes]
Investment]

2.1 Determination of MF

The material utilization factor MF, expresses the quantity of feedstock used for the
manufacture of one unit of product. For the
chemical processing industries, we propose the
following structure of the material utilization
factor:
MF=WSTCHRxGYLD

(2)

in which WSTCHR is the weighted stoichiometric ratio and GYLD the general yield of the
process.

(5)

The annual financial layouts related to capital

(interest to capital, return on equities) are expressed by an average interest rate i,. We have
established an expression which allows the calculation of the unitary cost related to capital,
for a desired capacity (Cap) when the reference values Inv, and Cap, are known.
UCC=CFxCa@-

(6)

CF=(SCC+i,)xInv,xCap,

(7)

This expression reflects the economic

struc-

TABLE 1
Calculation of capital factor CF: Numerical example

WSTCHR=

Yl x MW,,

MW

Basic data

When more than one important raw material

is used in the manufacturing process the value
of the weighted stoichiometric ratio will be:
WSTCHR=~ww
P

2.2

(4)

Determination of CR

In order to calculate the capital utilization

factor CR, one must choose as reference a capacity of production Cap, and obtain an investment value corresponding to this capacity - Inv,. The sum of the cost components
related to the capital invested in the venture
(as depreciation, maintenance, supplies, local
taxes) expressed as ratios to the investment, is
named by us the service to capital coefficient (SCC).

50.000 ton/year
6.370.000 $
0.65

Reference capacity, Cap,

Reference investment, Inv,
Size factor, s
Capital related cost components
Name
Annual depreciation/investment
Annual maintenance/investment
Annual local taxes/investment
Services to capital coefficient

AD
AM
ALT
see

Financial layouts
Ratio debt/equity
Interest on debt
Return on equity
Average interest, i,
Capitai~ctor,

Value
0.10
0.05
0.02
0.17
so/so
0.08
0.16
0.12

CF= (SCC+ i, ) xInv,

Caps

Unitary cost capital related, CFxCap-

= 136,2~Cap~~-

Capacity (ton/year)

Unitary cost ($/ton)

25.000
50.000
100.000

44.14
34.63
27.77

133
ture (the term SCC + i,) and the technical one
(the terms Inv, x Cap,) and is particular for an
economic venture to be analysed. For a numerical example of calculation of the term CF
see Table 1.
2.3

Determination

of UL

UL is the amount of labor (direct and indirect) used for the manufacture of a unit of
product (h/unit). A convenient relation for the
connection labor-capacity in the process industries has been empirically established by
Wessel [ 1 ]:

UL2
-=
UL,

(8)

In this expression, the term K takes different

values according to the degree of mechanization-automation
of the process, the term Nnumber of operational steps in the process expresses the technological complexity of the
process and the term Cap, - the daily production capacity - the size of the plant. The negative exponent -6, expresses the sharp decrease of the labor requirement per unit of
product, brought up by the increase in the plant
capacity. The numerical values of the exponent b, differ according to the size of the production capacity. Convenient values which
have been established by Cevidalli and Zaidman [ 21 are 0.76 when Cap, > 150 t and 0.86
for Cap, > 150 t.
For a given technology to be applied at two
different capacities of production, Cap,, and
Capd2, the values of UL will be:

(8C)

UL2 = UL, X Capsb2 X Cap,$

(8d)

The product of the terms UL, and Capzbz is

representative for a specific technology T to
manufacture P and we call it the labor utilization factor LF7:
The general expression which permits the
calculation of the cost of unitary labor at a capacity Cap,, by the technology T is:
UL,,=LF,XCap,,
in

UL=KxiVxCap,-b

Kx NxCapgzbz -- Cap,-,62
Kx NxCap$
-Cap,;b

xLHV

(8e)

which LHV signifies labor hourly value ($f

h).
2.4

Determination

of EF

To assess the energy utilization factor EF, we

use a conversion key proposed by Rudd [ 3 ] in
order to convert all the utilities required to obtain a unit of product P by a technology T (as
electricity, steam, cooling fluids, etc. ) to fuel
oil equivalents (see Table 2 ) . For a capacity of
production chosen as reference Cap, we will
obtain a value TFErT- ton fuel oil equivalent
per unit of product. The cost of utilities for
producing one unit of product at the reference
capacity CI_JrTwill be:
CUfT = TFErT x Cost of oil

(9)

The transposition of the energy factor from

the reference capacity of production ( TFErT)
TABLE 2

UL, =KXNxCap,;

(gal

UL,=KXNXCap,;h2

(=I

Energy conversion key

Let UL be a known value corresponding to a

reference capacity Cap,,. For a given technology T the terms K and N are constant relative
to capacity. In order to obtain values of the cost
of labor per unit of product, at different capacities, in terms of some reference data and desired capacity we make the following
operations:

Utility to be
converted

Unit

Net fuel oil

equivalent tons

Steam at: 600 psig

Steam at: 100 psig
Electricity
Fuel
Inert gas
Cooling water
Process water

ton
ton
000 kwh
MBTU
000 SCF
000 gal
000 gal

0.098
0.060
0.210
0.025
0.49
0.025
0.335

134
to an other capacity - same technology TFEiT
is made in our model by using a formula devised by Bridgewater
[ 41 for the cost of utilities in the process industries. This formula expresses the connection
between the cost of
utilities, the number of technological
steps of
the process (N) and the capital intensiveness
of the technology:
CU=0.748xN0~x

(lnv/Cap)0.751

For two different capacities

same technology we have:

(10)

of production

CU, = 0.748 x .Y.774x ( Inv,/Cap,)0-75TFE,

x Cost of oil

(loa)
CU,=O.~~~XN~~X

(Inv,/Cap,)0~75TFE,xCost

of oil

(lob)

Dividing the expression

TFE, =TFE,

1Oa with 1Ob we obtain

x ( Inv,/Inv,)-751 x ( Cap,/Cap,)-0.75
(11)

The value of the investment Inv, needed for

a desired capacity Cap, can be expressed as a
function of the above capacity and of the values of a reference capacity and investment.
Inv, = Inv,( Cap,/Cap,)

x (Cap,/Cap,)SX0.75

x (Cap,/Cap,)-075
(13)

TFE, =TFE,

x (Cap,/Cap,)0.75(-)

(13a)

Eqn. 13a allows the calculation of the value

TFE for a chosen capacity when data for a reference capacity are known.
The ratio between the terms TFE, and
cap:.751
(sI )
is representative
for the quantify
of energy utilized in a technology
pi for producing P and we call it the energy factor EFT.
2.5

P Costr, = (MF,fsc,)+

(CF,Cap;-)

+(LF,Cap:pLHV)+
(EF,Cap~.75(-)COB)+Q,

(14)

A similar expression - Pcostrz - can be written for the manufacture of the product P by the
technology T2.
We are interested to obtain an expression
which will offer the possibility of establishing,
for the two compared technologies,
areas of
preference in terms of capacity and exogenous
variables. In this aim we must lind out points
of indifference
in which the costs of manufacturing P by T, are equal to those attained by
using T2. These points are determined by those
values of variables and capacity which satisfy
the condition Pcostr,= Pcostrz, as expressed in
the equation:
(MF,fsc,)+(CF,Cap;-)+(LF,Cap,LHV)
+(EF,Cap~75(X-)COB)+Q,

=(MF,fscZ)

+(CF,Cap;Z-)+(LF,Cap:pLHV)
+ (EF,Cap~.752-)COB)

+Q2

(IS)

(12)

where s is the size factor specific for an industrial branch [ 5 1.

Making the above substitution of Inv; in the
equation ( 11) we obtain:
TFE, =TFE,

the cost of manufacturing

the product P by the
technology T1 at the desired capacity Cap,:

Determination of manufacturing

At this stage we can write an expression

cost

for

3. DISCUSSION

AND SCOPE

Equation ( 15 ) , named by us the Technology Equivalence

Equation
(TEQ) offers a
quantitative
expression
of the relation between two technologies
T, and T, in specific
economic environments.
The TEQ expression
offers the possibility of establishing break even
values and areas of preference in terms of capacity and exogenous variables for two technologies for manufacturing
the same product.
By writing TEQ functions in a form which express the relationship between one variable of
the analyzed technology
T2, the capacity of
production
and values of variables of the two
technologies
one can determine
break-even
values for the technology T,, like cost of raw
materials, size of plant, rate of interest and so
on. Those critical values can represent valuable tools for the decision makers in the techni-

cal or economic areas. The fact that the TEQ

equation has been established by using expressions generally valuable at the first stages of
project evaluations in the chemical processing
industries (CPI) brings about some fimitations, We can compare by a TEQ analysis only
technologies in the CPI area. The break even
values determined by a TEQ analysis represent a primary indication and must be developed by more detailed calculations,

20

40

60

60

Capacity (000 tpo I

4. EXAMFLJ~~CATIO~
Some general examples of possible appfieation ofthe TEQ, will clarify its scope.
4.1

Fig. 1. Use of TEQ equation

determination.

4.2
One more example is offered. In the previous case the i, value has been the same for T1
and 2;. One can imagine a situation in which,
for extra-economic reasons (as promotion of
the use of a local waste, fsZ) a focal authority is

1 - feedstock

TABLE 3
Numericai vafues for Exampie 1
Parameter

In a first example, Iet us check a situation in

which a company intends to use a new feedstack fsZfor manufacturing P by technology TZ.
The product P is already on the market and is
actually produced by technology T, from feedstock fs, with a different ratio of production
factors, The cost of the feedstock fsl being
known (fsc, ) we can build a function
fsc, =f(cap ): which allows the determination
of break-even values for fsc2 for different production capacities. Such functions can be built
for different values of i, reflecting different
economic environments
( fsc2 =f( cap; i, ). A
graphic representation of this type of utilization of the TEQ equation, is presented in Fig.
1 for a technology T,-capital intensive and a
technology T,-material intensive. The famify of
graphs presents different values for t,. The numerical values utilized are presented in Table

Example

Basic datu
Reference capacity Cap,. 000
t/Y
Reference investment Inv,,
OOD$
Size factor f
Service to capitai SCC
Material factor MF, t/t
Feedstock cost fsc, $/ton
Unitary labor UL, h/ton
Labor cost LHV, $/h
Fuel equivalent used TFE,
t.f.o.e./t
Cost of fuel ail eq. Co. Oil, $/
t.f.0.e.
Overhead expenses Q, $/ton

factors
Capital utiiization factor CF
at i,=4%
at i,=8%
ati -12%
Labor Tactor LF
Energy factor EF

Technology
7-1

Technology
T;

50

30

6.370
a.55

2.250
0.70
0.17
I.35
9

a.17
1.2

840
0.9
14
0.2

0.46
14
0.16

110

110

10

C&&ted

125.2
i45.3

65
76

1es.3

87
15.2

73
0.585

0.344

aBreak even values of fsc, to be obtained by using the TEQ

methodology.

interested in preferentially supporting a capital-intensive technology ( TZ> for producing P,

The support can materialize in the form of a
convenient loan offered to a potential entre-

136
TABLE 4
Numerical values for Example 2
Technology
TI

Parameter

Technology
TZ

Raslc data

Reference capacity Cap,, 000

S/Y
Reference investment Inv,,
000 $
Size factors
Service to capital SCC
Material factor MF. t/t
Feedstock cost fsc, $/t
Unitary labor UL
Labor cost LHV, $/h
Fuel equivalent used TFE,
tfoe/t
Cost of fuel oil eq/COB, $/tfoe
Overhead expenses Q, $/ton
Calculated

30

50

2.250
0.70
0.17
1.35
370
0.46
14

6.370
0.70
0.17
1.2
840
0.9
14
0.2
110
IO

0.16
110
8

will be introduced in the equation for the variable fscr z fsc2 and i,, and a function ia =f( cap )
will be built. If there is a possibility of change
in the cost of fs2 (by a subsidy on the processing of the waste, or by increasing the penalty
on the waste-generator)
a set of equations, for
different values of fsc2 can be built. In this way
an optional way of supporting T,can be found,
using two possible tools: reduced-interest
loan
( ia2) or subsidized price of waste ( fscZ) or a
combination
of both. The numerical
values
utilized in this exercise are presented in Table
4. The results are resumed, in a graphic form
in Fig. 2.
5. APPLICATIONS
TO THE INDUSTRIAL
CHEMISTRY OF ETHANOL

factors

Capital utihzation factor CF

at i,=4%
at i, = 8%
at i,= 12%
Labor factor LF
Energy factor EF

125.2
145.3
165.3
73.0
0.516

66
76
87
15.2
0.344

The TEQ methodology

has been used by us
for a comparative
evaluation of technologies
for the manufacture of chemicals from ethanol.
We bring here two examples:
5.1

Cost of feed
-

stock

7-

The technologies of manufacturing

ethylene
by the cracking of naphta [ 41 and by dehydration of ethanol [ 61 are compared. The results
are presented in a graphic form in Fig. 3. The
break-even
capacity for a cost of ethanol of
$400/tori (to be eventually obtained from solid

800

20

40
Capmty

(000

Fig. 2. Use of TEQ equation

determination.

60
tpo

80

Example 2 - Rate of interest

preneur. The TEQ equation can be used to assess what must be the rate of interest on a
loan - ia (in function of planned capacity, cost
of alternative
feedstock fs,, and commercial
cost of money) in order to make T2 equivalent
to the already commercial
T,.Known values

Capmty

(000

tpa

Fig. 3. TEQ application to ethylene manufacture. Alternative

technologies: cracking of naphta, or dehydration of ethanol.

137
EF
fsc
GYLD
i,
Inv
Inv,
K

IO

25

50

75

Capactty

100

i 000

125

tpa

150

175

Fig. 4. TEQ application to ethylbenzene manufacture. Alternative technologies: alkylation agent ethanol, or alkylation
agent ethylene.

urban waste) is in the order of magnitude of

250 thousands of tons per year for a price of
naphta of $1.1 /gal.

Figure 4 resumes the result of the comparative evaluation of the technologies for obtaining ethylbenzene by the alkylation of benzene
with ethylene [ 7,8] or with ethanol [ 91. The
different graphs in this figure are TEQ curves
for different possible prices of ethylene, the
feedstock of the commercial technology. The
results show a break-even value for capacity in
the order of magnitude of 25 thousands of tons
per year tons when a price of ethylene of $0.30/
lb is considered.
NOMENCLATURE

Cap
Cap,
Cap,
CF
COB

MWP
N
n

5.2

LC
LF
LHV
MF
MW,,

constant
in
eqn.
(6)>
dimensionless
Yearly capacity of production,
OOOt/year
Daily capacity of production, t/
day
Reference yearly capacity of production, OOOt/year
Capital utilization factor
Cost of oil, $/barrel oil

P costTi
8

see

T,

WSTCHR
ucc
u
UL

Energy utilization factor

feedstock cost, $/ton feedstock
general yield, dimensionless
interest,
average
yearly
dimensionless
investment cost, OOO$
investment cost reference, OOO$
degree of automation
factor,
dimensionless
unitary labor cost, $/ton product
labor utilization factor, h
labor unitary value, $/h
material utilization factor
molecular weight of raw material, dimensionless
molecular weight of product,
dimensionless
number of technological steps,
dimensionless
stoichiometric ratio (feedstock/
product ) , dimensionless
cost of product P,, $/ton
product manufactured by technology T,
overhead
constant,
$/ton
product
factor
in
eqn.
6,
size
dimensionless
service to capital coefficient,
dimensionless
defined technology for producing P
weighted stoichiometric
ratio
( feedstock/product
), kg/kg
unitary capital cost, $/t product
unitary energy cost, $/t product
unitary labor, h/t product

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Wessel, H.E., 1952. New graph correlates operating labor
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Cevidalli, G. and Zaidman, B.. 1980. Evaluate research
projects rapidly. Chem. Eng., July 14: 145.
Rudd, D.F. and others, 198 I. Petrochemical Technology
Assessment. J. Wiley & Sons, New York, pp. 159-I 62.

138
4

Bridgewater, A.V., 1973. The build-up of costs. Chem.

Eng.. November: 538.
5 Holland, F.A. and others, 1974. Introduction to Process
Economics. Wiley & Sons, London, pp. 123-I 25.
6 Baba, T.B. and Kennedy, J.R., 1979. Ethylene and its coproducts. In: V. Cavaseno (Ed.), Process Technology and
Flowsheets. McGraw Hill, N.Y., pp. 149-l 62.
7 Utach. T. and Reilly, J.W., 1978. Ethylene from ethanol.
Hydrocarbon Proc., February, 133-136.

8 Hatch, L.F. and Matar, S., 1981. From Hydrocarbons to

Petrochemicals. Gulf Publishing Co.. Houston, pp. 137139.
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research for obtaining chemicals via ethanol, Hebrew University of Jerusalem, pp. 177-206.
(Received
November

September
14,

1988)

17,

1987;

accepted

in revised

form