A Concise Capital Investment Cost Model for Gas Turbine Systems Useful in Energy Systems Education

Sheldon Jeter

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Conference: 2022 ASEE Annual Conference & Exposition
Location: Minneapolis, MN
Publication Date: August 23, 2022
Start Date: June 26, 2022
End Date: June 29, 2022
Conference Session: Mechanical Engineering: Poster Session
Page Count: 7
DOI: 10.18260/1-2--41631
Permanent URL: https://peer.asee.org/41631
Download Count: 352

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Sheldon Jeter Georgia Institute of Technology

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Sheldon M. Jeter has mechanical engineering degrees from Clemson, the University of Florida, and Georgia Tech. He has been on the academic faculty at Georgia Tech since 1979 and will retire in August 2022. He has written over 250 refereed journal articles and conference papers and numerous research reports and other articles. He has supervised 16 Ph. D. graduates and numerous other research students. His research interests are thermodynamics, experimental engineering, heat and mass transfer, solar energy, and energy systems including concentrating solar power and other solar issues, building energy systems, and HVAC issues in health care facilities.

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Abstract

Education for energy systems education is incomplete without practicing techno-economic analysis (TEA). This analysis requires at a minimum (1) capital cost or investment estimation, (2) operating cost analysis, and (3) engineering econ analysis. In energy system the operating cost is generally dominated by the cost of fuel or analogous inputs, but other operating and maintenance (O&M) costs should be included. Estimating the energy-based component of the operating cost is probably most familiar and comfortable for undergraduate students. Straightforward system analysis or simulation is adequate to support estimating the energy consumption. Usually, the intermediate result in popular mechanical engineering instructional topics is the energy efficiency or other input/output ratio of the system, from which the annual consumption of fuel, electricity, or other input can be calculated. If a current year unit cost for the energy or feedstock input and an estimate of the annual runtime are available, the initial annual energy cost can be readily evaluated. A more subtle task is estimating the other O&M costs such as labor, supplies, repair parts, taxes, insurance, etc. This task typically requires some historical information at least for similar systems or some other reasonable generic estimation. Simple engineering economic analysis adequate for undergraduate education can be relatively straightforward once a suitable economic scenario is assumed. This simple scenario includes inflation rates for the annual costs, the Minimally Acceptable Rate of Return (MARR) for present worth analysis, and crucially the economic planning period or “economic lifetime” of the system. The economic scenario largely determines if a more efficient and consequently more expensive system is worthwhile economically. Consequently, any thermal energy design exercise requires an adequate means to estimate the required “capital expenditure”, commonly called the CAPEX in recent literature and practice. So, some efficient means to estimate the CAPEX is vital to a realistic but feasible analysis and design exercise or project.

Capital cost or CAPEX data to assist design engineers has been assembled at several levels of detail, specifically: (1) System Costs, (2) Module Costs, (3) Unit Costs, and (4) Detailed Costing. Integral or System costs are interesting and useful in high level planning and in simple instructive engineering econ examples useful early in a design-oriented course. Unit Costs are actually fully weighted costs (for example, piping) including labor and overhead and typical auxiliaries (such as supports and insulation for piping). The straightforward and relatively safe application of the Unit Cost approach should be distinguished from very challenging and time-consuming Detailed Costing, which requires exhaustive Work Breakdown Statements and Bills of Materials at a minimum. While Unit Costs are interesting in some courses and related practice such as HVAC engineering, Detailed Costing is best avoided except when attempted in semester long design courses. In an introductory course, however, students should be cautioned about reliance on Detailed Costing, especially about its tendency to be biased low. Exponential cost models are especially useful Modular Costing, where a module is defined as a specific functional or support sub-system. A typical modular cost formula, which can be presented in product form, is

(S.2) Or in words (for an all-text abstract) The Total Modular Cost = Base Case Cost x ((size ratio)^scaling exponent) x ((premium ratio)^cost exponent) x (current year cost index) / (base year cost index)

In the proposed poster presentation, exponential cost models will be presented for the usual components in a generic Brayton Cycle power plant. A simple cycle combustion turbine power plant was the original basis for the modular costs. Obviously, the actual costs from an industrial supplier even if available would be highly proprietary. Instead, the base case modular costs were obtained from a published system level cost disaggregated by estimating the fractional costs for each component. This estimate was reviewed and revised by an experienced engineer from industry who was familiar with the overall costing of such systems, and the resulting fractions were assessed to be reasonably accurate for this educational use. Scaling exponents were obtained from the process engineering literature and normalized using data from a recent publication that provides reliable costs for similar combustion turbines of several sizes. Premium cost exponents are more challenging but are needed to access the additional costs for features that increase energy efficiency. In this context the most important premium costs are the turbine inlet temperature and the compressor pressure ratio. A brief and readily available data base for the costs of high temperature alloys was used to estimate the premium cost exponent for temperature, and a semi-quantitative design-based estimate was used to estimate the premium cost estimate for pressure ratio.

The proposed poster presentation is offered to assist instructors in undergraduate thermal systems analysis and design courses and possibly to guide further cost engineering student research on this topic.

Citation
Format

Jeter, S. (2022, August), A Concise Capital Investment Cost Model for Gas Turbine Systems Useful in Energy Systems Education Paper presented at 2022 ASEE Annual Conference & Exposition, Minneapolis, MN. 10.18260/1-2--41631

TY - CPAPER
AB - Education for energy systems education is incomplete without practicing techno-economic analysis (TEA). This analysis requires at a minimum (1) capital cost or investment estimation, (2) operating cost analysis, and (3) engineering econ analysis. In energy system the operating cost is generally dominated by the cost of fuel or analogous inputs, but other operating and maintenance (O&M) costs should be included. Estimating the energy-based component of the operating cost is probably most familiar and comfortable for undergraduate students. Straightforward system analysis or simulation is adequate to support estimating the energy consumption. Usually, the intermediate result in popular mechanical engineering instructional topics is the energy efficiency or other input/output ratio of the system, from which the annual consumption of fuel, electricity, or other input can be calculated. If a current year unit cost for the energy or feedstock input and an estimate of the annual runtime are available, the initial annual energy cost can be readily evaluated. A more subtle task is estimating the other O&M costs such as labor, supplies, repair parts, taxes, insurance, etc. This task typically requires some historical information at least for similar systems or some other reasonable generic estimation. Simple engineering economic analysis adequate for undergraduate education can be relatively straightforward once a suitable economic scenario is assumed. This simple scenario includes inflation rates for the annual costs, the Minimally Acceptable Rate of Return (MARR) for present worth analysis, and crucially the economic planning period or “economic lifetime” of the system. The economic scenario largely determines if a more efficient and consequently more expensive system is worthwhile economically. Consequently, any thermal energy design exercise requires an adequate means to estimate the required “capital expenditure”, commonly called the CAPEX in recent literature and practice. So, some efficient means to estimate the CAPEX is vital to a realistic but feasible analysis and design exercise or project.

Capital cost or CAPEX data to assist design engineers has been assembled at several levels of detail, specifically: (1) System Costs, (2) Module Costs, (3) Unit Costs, and (4) Detailed Costing. Integral or System costs are interesting and useful in high level planning and in simple instructive engineering econ examples useful early in a design-oriented course. Unit Costs are actually fully weighted costs (for example, piping) including labor and overhead and typical auxiliaries (such as supports and insulation for piping). The straightforward and relatively safe application of the Unit Cost approach should be distinguished from very challenging and time-consuming Detailed Costing, which requires exhaustive Work Breakdown Statements and Bills of Materials at a minimum. While Unit Costs are interesting in some courses and related practice such as HVAC engineering, Detailed Costing is best avoided except when attempted in semester long design courses. In an introductory course, however, students should be cautioned about reliance on Detailed Costing, especially about its tendency to be biased low.

Exponential cost models are especially useful Modular Costing, where a module is defined as a specific functional or support sub-system. A typical modular cost formula, which can be presented in product form, is

(S.2)
Or in words (for an all-text abstract)
The Total Modular Cost =
Base Case Cost x ((size ratio)^scaling exponent) x ((premium ratio)^cost exponent)
x (current year cost index) / (base year cost index)

In the proposed poster presentation, exponential cost models will be presented for the usual components in a generic Brayton Cycle power plant. A simple cycle combustion turbine power plant was the original basis for the modular costs. Obviously, the actual costs from an industrial supplier even if available would be highly proprietary. Instead, the base case modular costs were obtained from a published system level cost disaggregated by estimating the fractional costs for each component. This estimate was reviewed and revised by an experienced engineer from industry who was familiar with the overall costing of such systems, and the resulting fractions were assessed to be reasonably accurate for this educational use. Scaling exponents were obtained from the process engineering literature and normalized using data from a recent publication that provides reliable costs for similar combustion turbines of several sizes. Premium cost exponents are more challenging but are needed to access the additional costs for features that increase energy efficiency. In this context the most important premium costs are the turbine inlet temperature and the compressor pressure ratio. A brief and readily available data base for the costs of high temperature alloys was used to estimate the premium cost exponent for temperature, and a semi-quantitative design-based estimate was used to estimate the premium cost estimate for pressure ratio.

The proposed poster presentation is offered to assist instructors in undergraduate thermal systems analysis and design courses and possibly to guide further cost engineering student research on this topic.

AU - Sheldon Jeter
CY - Minneapolis, MN
DA - 2022/08/23
PB - ASEE Conferences
TI - A Concise Capital Investment Cost Model for Gas Turbine Systems Useful in Energy Systems Education
UR - https://peer.asee.org/41631
DO - 10.18260/1-2--41631
ER -