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UNIT V ECONOMIC BALANCE

5.1 ESSENTIALS OF ECONOMIC BALANCE

A study of the costs in design of equipment and processing operations

will show in most cases that there are certain costs that increase whereas
others decrease when the costs are related to some common variable.

Since the total costs is the sum of all costs, these relationships
immediately suggest the possibility that an optimum region exists where
operations at values of this common variable will produce the lowest total
cost.

Thus, we can define the term ECONOMIC BALANCE as the design of

equipment or the selection of operation conditions whereby the increasing
costs are balanced by the decreasing costs to give the greatest economic
return.

In general, economic balance requires an understanding of how the

fixed costs vary with the common variable which is selected as a basis for the
analysis. The variable costs must then also be related to this common variable.

Fig: General case for economic balance

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The general problem of economic balance in process engineering is shown in

figure above, where some independent variable can be related to the fixed
costs and the direct costs.

Usually, at some minimum limit for the variable, either the direct costs or the
fixed costs or both, will reach a high value. A similar situation occurs at some
high value of the common variable.

5.2 ECONOMIC BALANCE APPROACH

DERIVATION:

For the simple case, where either of the two costs (fixed or direct) varies
linearly with the common variable and the other varies linearly as the
reciprocal of the common variable, the minimum total cost occurs as follows:

C1 = ax + b ----------------------eqn.1

where

C1 is a cost, in Rs.

x is a common variable

a and b are constants

C2 = c / x + d ----------------------eqn.2

where

C2 is another cost, in Rs.

c and d are constants

The total cost CT is given by:

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CT = C1 + C2

CT = ax + b + c / x + d ----------------------eqn.3

When this is differentiated and set equal to zero,

dCT / dx = a – c / x2 = 0

or a = c / x2

or x2 = c / a

gives x = (c / a)1/2

Thus, the optimum value of the common variable ‘x’ can be determined by
economic balance approach.

5.3 ECONOMIC BALANCE FOR INSULATION

The economic balance for insulations is based on the common variable, the
insulation thickness.

As the thickness of insulation increases, the fixed cost associated with the
material cost of insulation increases linearly.

For example,

The annual fixed costs for insulating a certain steampipe installation can be
expressed as:

CF = 30 S + 40 Rs. per year --------------------------------eqn.1

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Where

S = thickness of insulation, in inches

CF = Annual fixed cost, in Rs.

On the other hand, as the thickness of insulation increases, the direct cost
decreases linearly.

This is because the direct cost in insulation is the energy cost. Since the
insulation of the steam pipe results in energy savings, the direct cost
associated with energy decreases with increase in the thickness of the
insulation.

For example,

The annual direct cost of energy lost by providing insulation over the steam
pipe can be expressed as:

CD = 100 / S Rs. per year --------------------------------eqn.2

Where

S = thickness of insulation, in inches

CD = Annual direct cost, in Rs.

The optimum insulation thickness for economic balance over insulation can be
determined by two methods, as follows:
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1. Determination of the optimum insulation thickness by GRAPHICAL

METHOD.

2. Determination of the optimum insulation thickness by ANALYTICAL

(ALGEBRAIC) METHOD.

GRAPHICAL METHOD:

Based on the given equations 1 and 2, the following calculations can be made
for various thickness of insulation in inches assumed within the practical range:

S.No. Insulation Annual Fixed Annual Direct Total Annual

Thickness, in. Cost, Rs. Cost, Rs. Cost, Rs.

1 ½ 55 200 255

2 1 70 100 170

3 2 100 50 150

4 3 130 33 163

5 4 160 25 185

6 5 190 20 210

7 6 220 17 237

The above data can be plotted graphically as follows:

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Annual Costs Vs. Insulation thickness

300

250
Annual Costs, Rs.

Total Cost
200
Fixed Cost
150

100

50
Direct Cost
0
0 1 2 3 4 5 6 7

Insulation thickness, in.

Fig: Graphical Determination of optimum insulation thickness

From the above graph, the optimum thickness of insulation can be easily
determined. The optimum insulation thickness refers to the value of thickness
in inches corresponding to minimum total cost i.e. when the sum of fixed cost
and direct cost is a minimum.

Thus, it can be seen from the graph, for this case, the optimum insulation
thickness is achieved around 1.8 to 2 inches corresponding to a minimum total
cost of about Rs.150.

Putting insulation above this thickness leads to increase in total cost since the
fixed cost component of the total cost increases at a rapid rate compared to
the direct cost component which decreases only slowly above this thickness.
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ANALYTICAL METHOD:

Annual Fixed cost is given by:

CF = 30 S + 40 Rs. per year --------------------------------eqn.1

Annual Direct cost is given by:

CD = 100 / S Rs. per year --------------------------------eqn.2

Annual total cost is given by:

CT = CF + CD

i.e.

CT = 30 S + 40 + 100 / S Rs. per year --------------------------------eqn.3

Differentiating eqn.3 with respect to insulation thickness S and equate to zero,

d CT / d S = 30 - 100 / S2 = 0

gives

30 = 100 / S2

S2 = 100 / 30

S = (100 / 30)1/2

S = 1.82 in.

Thus, the optimum insulation thickness as determined by analytical alzebraic

method is found to be 1.82 inches which again matches with the result of
graphical method also.
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As a further check, a test is made at values of S > 1.82 and S < 1.82, using the
first derivative as shown in the following table:

S.No. Insulation thickness, in. Rate of change in annual cost with thickness

1. 1.81 -0.5 (decreasing trend)

2. 1.82 0

3. 1.83 +0.1 (increasing trend)

Alternatively, the sign of the second derivative may be determined analytically;

where it is positive, a minimum cost is indicated.

A study of the above example for economic balance over insulation indicates
that the economic balance first requires knowledge of the technical relation
viz., here the fact that the heat loss decreases when the pipe is insulated and
then increases after a certain thickness of insulation.
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5.4 ECONOMIC BALANCE FOR EVAPORATION

A classical example in economic balance for evaporation is the selection of the

economic number of effects for use in multiple-effect evaporator.

A multiple-effect evaporator is an apparatus for efficiently using the heat from

steam to evaporate water. In a multiple-effect evaporator, water is boiled in a
sequence of vessels, each held at a lower pressure than the last. Because the
boiling temperature of water decreases as pressure decreases, the vapor
boiled off in one vessel can be used to heat the next, and only the first vessel
(at the highest pressure) requires an external source of heat from fresh steam
fed to it.

Consider two evaporators connected so that the vapour line from one is
connected to the steam chest of the other as shown in Figure below, making
up a two effect evaporator.

Figure : Double effect evaporator – forward feed

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Figure : Triple effect evaporator

Steam economy is the ratio between total steam evaporated and steam
consumed.

Steam Economy =Steam evaporated/steam flow at start

It should be above 1 for multiple effect systems. The steam economy

determines the efficiency of the system.

At first sight, it may seem that the multiple effect evaporator has all the
advantages, the heat is used over and over again and we appear to be getting
the evaporation in the second and subsequent effects for nothing in terms of
energy costs. Closer examination shows, however, that there is a price to be
paid for the heat economy in terms of increased capital cost of installing more
number of effects.

In multiple effect evaporators, steam economy has to be paid for by increased

capital costs of the evaporators. Since the heat transfer areas are generally
equal in the various effects, the n effects will cost approximately n times as
much as a single effect.
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Comparative costs of the auxiliary equipment do not altogether follow the

same pattern. Condenser requirements are less for multiple effect
evaporators. The condensation duty is distributed between the steam chests of
the effects, except for the first one, and so condenser and cooling water
requirements will be less.

The optimum design of evaporation plant must then be based on a balance

between operating costs which are lower for multiple effects because of their
reduced steam consumption, and capital charges which will be lower for fewer
evaporators.

The comparative operating costs are illustrated by the figures in Table below
based on data from Grosse and Duffield (1954); if the capital costs were
available they would reduce the advantages of the multiple effects, but
certainly not remove them.

TABLE : STEAM CONSUMPTION AND RUNNING COSTS OF EVAPORATORS

Steam
Total running cost
Number of consumption
(relative to a single-
effects (kg steam/kg
effect evaporator)
water evaporated)
One 1.1 1
Two 0.57 0.52
Three 0.40 0.37

The common variable for economic balance over evaporation is hence the
number of effects, an increasing number of which increases the fixed costs but
reduces the direct costs because of the steam economy of multiple effect
evaporation.
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As an example, the following economic balance problem is undertaken:

Determine the most economical number of effects to use in the recovery of

black liquor in a paper industry if the following cost data are available:

The annual fixed cost increases essentially linearly with each effect in a
multiple effect evaporation system because each effect adds to the capital cost
of the installation.

If a fixed amount of evaporation is to be obtained and each unit is to have

1000 ft2 of heating surface with a service life of 5 years, the annual fixed cost CF
would be (using cost data of Rs.25000 for a single evaporator of 5000 ft2 ,
employing the 0.6 factor, and neglecting interest):

CF = (1000/5000)0.6 (25000/5) N , in Rs. per year

Where

N is the number of effects

Because of the steam economy in multiple-effect evaporation operation, the

direct costs for steam will decrease and the total of all annual direct costs, CD,
has been established for this type of operation as:

CD = 65000 N-0.95 , in Rs.

The solution to the above problem may be devised as follows:

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The total cost CT for a fixed amount of evaporation per year is the sum of CF
and CD.

Or

CT = CF + CD

For this case, the total cost is given by:

CT = (1000/5000)0.6 (25000/5) N + 65000 N-0.95

Or

CT = 1900 N + 65000 N-0.95

Differentiating CT with respect to N and equating to zero,

d CT / d N = 1900 – 61800 N-1.95 = 0

gives,

N = 5.95

i.e. 6 effects

Thus, the optimum number of effects required for economic balance for the
given evaporation problem is 6 effects.

This is a minimum as proved by testing for the second derivative which is

positive.
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GRAPHICAL ANALYSIS:

Total Annual
Number of Annual Fixed Cost, Annual Direct
Cost,
evaporator Cost,
CF = (1000/5000)0.6 CT =
effects, N CD = 65000 x CF + CD ,
(25000/5) N , in Rs.
in Rs.
per year N-0.95 , in Rs.

1 1900 65000 66900

2 3800 33646.11 37446.11

3 5700 22890.13 28590.13

4 7600 17416.32 25016.32

5 9500 14089.38 23589.38

6 11400 11848.67 23248.67

7 13300 10234.58 23534.58

Annual Costs Vs. No.of effects

80000

70000

60000
Annual Cost, Rs.

50000

40000 Fixed Cost

30000 Direct Cost
20000 Total Cost

10000

0
0 1 2 3 4 5 6 7 8
No. of effects of evaporator
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Making a graphical analysis would give a curve with a flat minimum indicating
that either five or six effects could be used with essentially the same cost per
pound of water evaporated. In this case, five would probably be selected
because 5-effect evaporation is less complicated in operation compared to 6-
effect.

5.5 ECONOMIC BALANCE FOR HEAT TRANSFER

The economic balance for heat transfer gives an alternate economic balance
chart where the fixed cost would decrease and the direct cost would increase
which is the reverse of economic balance for insulation and evaporation seen
previously.

It is very often convenient to use heat exchangers in which one or both of the
materials that are exchanging heat are fluids, flowing continuously through the
equipment and acquiring or giving up heat in passing.

One of the fluids is usually passed through pipes or tubes, and the other fluid
stream is passed round or across these. At any point in the equipment, the
local temperature differences and the heat transfer coefficients control the
rate of heat exchange.

The fluids can flow in the same direction through the equipment, this is called
parallel flow; they can flow in opposite directions, called counter flow; they
can flow at right angles to each other, called cross flow. Various combinations
of these directions of flow can occur in different parts of the exchanger. Most
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actual heat exchangers of this type have a mixed flow pattern, but it is often
possible to treat them from the point of view of the predominant flow pattern.

Examples of these exchangers are illustrated in Figure below:

Figure : Heat exchangers

Consider a heat exchanger where a given quantity of material is to be cooled
with water at a given inlet temperature at a suitable pressure for cooling by
heat exchange.

The problem is to determine the most economical temperature to which the

outlet water should be heated.

The lower this temperature, the more water is required and higher is the direct
costs for the water.
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However, if a high outlet temperature is used, the mean driving temperature

difference becomes less and more heat exchanger area is required.

Thus, by expressing the two costs ( water costs and exchanger surface costs) in
terms of the hot-end temperature difference, an equation can be developed
for the total cost and , when this is differentiated and set equal to zero, the
optimum outlet temperature can be found.

The relation expressed as a function of the hot-end temperature

difference is:

f (∆t) = U CW H / CF

where

U = overall constant heat transfer coefficient

f (∆t) = a complex function of the various temperature difference

CW = cooling water cost

H = hours of operation per year

CF = annual fixed costs per unit of heat exchanger surface

For a condensing liquid, the relation is:

∆ tr / ∆ th - ln ∆ tc / ∆ th = U CW H / CF

Where

∆ tr = water temperature rise

∆ th = hot end temperature difference

∆ tc = cold end temperature difference

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A general relation for liquid counter-current exchangers for waste heat

utilization is given by Lewis et al:

∆ t2 ∆ t1 / ( T1 – t1 ) = M/R U

Where

∆ t2 and ∆ t1 are temperature differences at hot and cold ends respectively.

T1 is hot fluid inlet temperature

t1 is cold fluid inlet temperature

M is the total costs for the heat exchanger including operation

R is the plant value of the heat utilized in Rs. and includes the cost that would
otherwise be required to cool the hot stream

U is the overall heat transfer coefficient

If a parallel flow is employed, the above equation reduces to:

Minimum final ∆t = M / R U since ( T1 – t1 ) becomes ∆t1

Where the final ∆t2 is the difference between the condensing or boiling
temperature and liquid exit temperature and M,R and U are the same.

Example:

Methyl alcohol condensed at 148°F is to be cooled to 100°F for storage at a

rate of 10000 gal/hr by water available at 75°F in a counter-current heat
exchanger.
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The overall heat transfer coefficient is constant and estimated at 200 Btu/ft2 hr
°F. Heat exchanger annual costs including operation are estimated as Rs.2 per
ft2.

The cooler is to operate 5000 hr/year and the value of heat utilized is
estimated as Rs.5 x 10-7 per Btu. What is the estimated optimum cost of the
heat exchanger if the cost for surface is Rs.90 per ft2?

Solution:

Since the outlet temperature for the methyl alcohol is fixed, the cold ∆t is fixed
at 100-75=25°F.

The hourly cost is:

2 / 5000 = Rs.4 x 10-4 per ft2-hr

The hot end ∆t is calculated from ∆ t2 ∆ t1 / ( T1 – t1 ) = M/R U as follows:

∆ t1 = M ( T1 – t1 )/R U∆ t2

Or

∆ t1 = 4 x 10-4 ( 148 – 75 )/ (5 x 10-7 x 200 x 25)

= 11.7 °F

The outlet temperature difference therefore for water is 148 – 11.7 = 136°F.

Using a density of 0.79 g/cc and specific heat of 0.5 for methyl alcohol, the
heat duty q is given by:

q= m Cp ∆T

= [10000 gal/hr x 8.33 x 0.79 g/cc ]x 0.5 x (148-100)

= 1580000 Btu/hr
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The log mean temperature difference is given by:

∆tm = (25 – 11.7)/ln(25-11.7) = 17.7 °F

From the general heat transfer equation of q = U A ∆t, the area A can be
determined as follows:

A = q / U ∆t

= 1580000 / (200 x 17.7)

= 446 ft2

The estimated optimum cost is then found by:

= 446 ft2 x Rs.9O per ft2

=Rs. 4014O

SUMMARY OF PROCEDURE FOR ECONOMIC BALANCE ANALYSIS:

• The technical relations must be known between rates of production,

capacity and size – this may be theoretical or empirical.

• From the known or estimated cost data, a cost equation which

incorporates the technical relations is set up.

• It includes the fixed costs per unit of size plus the cost of operation and
includes all other pertinent costs.

• The economic balance equation is based on common parameters such as

the equipment size or dimensions, numbers required, temperature
difference, time etc., but it may contain more than one variable. When
the economic balance equation contains two or more variable, partial
differentiation is required or the equation must be restricted by setting
certain of variables constant.