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Open resourceIt can compare compressor packages, treatment configurations, energy projects or other compressed-air alternatives, provided every option is modeled on the same service duty and financial basis.
1. Purpose and Engineering Decision
The lowest purchase price is not automatically the lowest-cost compressed-air solution. Energy, maintenance, consumables, major overhauls, downtime exposure, heat-recovery value, replacement timing and residual value can outweigh the initial price difference over the life of the asset.
No hidden escalation, discount or maintenance assumptions are allowed.
Mode | Primary output |
|---|---|
Simple lifecycle total | Undiscounted total cost over the selected horizon |
Discounted comparison | Net present cost / NPV-style cost comparison |
Equivalent annual cost | Annualized present cost for options with equal study horizon |
Scenario comparison | Base / low / high energy-price or maintenance cases |
Break-even analysis | Year or condition where higher CAPEX becomes lower lifecycle cost |
2. Lifecycle Cost Boundary
Cost / credit category | Typical items |
|---|---|
Initial CAPEX | Compressor, dryer, filters, receiver, controls, recovery package |
Installation | Foundation, piping, electrical, ventilation, commissioning, integration |
Energy | Compressor package kWh, dryers, fans, pumps and relevant auxiliaries |
Maintenance | Routine service, filters, oil, separators, labor, inspections |
Major events | Air-end overhaul, motor work, VSD replacement, dryer overhaul, vessel inspection |
Downtime / temporary cover | Optional user-entered business or rental consequence |
Heat-recovery credit | |
Residual / salvage value | End-of-horizon credit if intentionally included |
Every compared option must use the same boundary. If Option A includes dryer energy but Option B excludes it, the comparison is incomplete until the boundary is reconciled.
3. Core Undiscounted Lifecycle Equation
Lifecycle Cost = Initial Cost + Sum(Annual Costs + Major Event Costs - Annual Credits) - Residual Value
This mode is useful for transparent screening when the user does not want financial discounting. It should still show the year-by-year cost schedule so a reviewer can see where differences arise.
4. Discounted Present-Cost Model
PV_t = CashFlow_t / (1 + r)^t
Net Present Cost = Initial Cost + Sum(PV of future net costs) - PV of residual value
r is the user-entered annual discount rate. Costs are treated as positive outflows and credits as negative costs.
5. Escalation Logic
Cost_t = Cost_1 x (1 + g)^(t - 1)
Separate escalation rates should be allowed for electricity, maintenance, fuel or other categories because they may not move together.
6. Energy Cost Model
Annual Energy Cost = Annual kWh x Electricity Tariff
If annual demand varies by production year, the user should enter a year-by-year energy schedule rather than applying one constant value.
Energy input source | Recommended use |
|---|---|
Measured annual kWh | Highest-confidence existing-plant comparison |
Useful for multi-compressor alternative sequencing | |
Useful for load/unload control alternatives | |
Useful for package efficiency screening | |
Rated kW x assumed hours | Preliminary only |
7. Maintenance and Major-Overhaul Model
Routine maintenance can be modeled as annual fixed cost, cost per operating hour, or an explicit yearly schedule. Major events should be entered in the year they are expected rather than averaged away when their timing matters to discounted cost.
Annual Maintenance = Fixed Annual Cost + (Cost per Running Hour x Annual Running Hours)
Maintenance type | Model |
|---|---|
Routine service | Annual or per-hour |
Consumables | Annual / interval-based |
Major overhaul | Discrete year-specific event |
Predictive monitoring | Annual |
Temporary compressor during overhaul | Optional event-specific cost |
8. Downtime and Reliability Cost Boundary
Downtime cost can dominate a financial model but is also highly site-specific. It must never invent lost-production values.
Downtime Cost = Event Hours x User-Entered Cost per Downtime Hour
If business-interruption cost is not known or is politically sensitive, the user can set it to zero and compare only directly measurable ownership costs.
9. Heat-Recovery and Other Credits
Other user-defined credits may include avoided rental, avoided demand charges or recovered by-product value, but only when their calculation boundary is documented.
Net Annual Cost = Energy + Maintenance + Other Costs - Verified Credits
10. Residual Value
Residual or resale value is a credit at the end of the analysis horizon. It should be discounted in present-cost mode and should be entered only when there is a defensible basis.
PV_Residual = Residual Value / (1 + r)^N
11. Equivalent Annual Cost
Equivalent annual cost converts present cost into a constant annual amount over the analysis horizon. It is useful when managers prefer an annualized comparison.
EAC = NPC x [r(1+r)^N / ((1+r)^N - 1)]
If r = 0, EAC reduces to lifecycle cost divided by the number of years.
12. Input Model
Input group | Field | Validation / note |
|---|---|---|
Study | Analysis horizon N | Positive integer years |
Finance | Discount rate r | >= 0 |
Option | Initial equipment cost | >= 0 |
Option | Installation / commissioning cost | >= 0 |
Energy | Annual kWh or annual schedule | >= 0 |
Energy | Year-1 electricity tariff | >= 0 |
Energy | Electricity escalation g_e | Can be negative but warn |
Maintenance | Annual fixed / per-hour / schedule | >= 0 |
Major events | Year + cost | Year within horizon |
Downtime | Hours + cost/hour | Optional explicit input |
Credits | Heat recovery / other verified credits | Explicit schedule |
Residual | End-of-horizon value | >= 0 |
13. Reference Test Case A - Simple Five-Year Comparison
Option A has Rs 32 lakh initial installed cost, annual energy cost Rs 18 lakh and annual maintenance Rs 2.0 lakh. Option B has Rs 38 lakh initial installed cost, annual energy cost Rs 15 lakh and annual maintenance Rs 2.4 lakh. Ignore escalation, discounting and residual value for this first screening case.
Option | Initial Rs lakh | Annual Rs lakh | 5-year lifecycle Rs lakh |
|---|---|---|---|
A | 32.0 | 20.0 | 132.0 |
B | 38.0 | 17.4 | 125.0 |
Over five years, Option B is lower by approximately Rs 7.0 lakh despite the higher initial price.
14. Reference Test Case B - Ten-Year Discounted Comparison
Use the same Option A and B annual costs over 10 years with a 9% discount rate and no escalation. This case demonstrates the present-cost calculation only.
Result | Option A | Option B |
|---|---|---|
Net present cost, Rs lakh | 160.4 | 149.7 |
Equivalent annual cost, Rs lakh/y | 25.0 | 23.3 |
Lower NPC | B by 10.7 lakh |
15. Reference Test Case C - Major Overhaul Timing
Assume Option A requires a Rs 8 lakh overhaul at the end of Year 6 while Option B requires Rs 10 lakh at the end of Year 8. Discount both at 9%.
Event | Nominal cost | Present cost at 9% |
|---|---|---|
Option A overhaul - Year 6 | Rs 8.0 lakh | Rs 4.77 lakh |
Option B overhaul - Year 8 | Rs 10.0 lakh | Rs 5.02 lakh |
The example shows why lifecycle analysis should preserve the timing of major events rather than comparing only nominal totals.
16. Reference Test Case D - Energy-Tariff Sensitivity
Suppose Option B saves 100,000 kWh/y relative to Option A. Compare the first-year value of that energy difference at tariffs of Rs 7, Rs 9 and Rs 12 per kWh.
Tariff | Annual energy-cost advantage of B |
|---|---|
Rs 7/kWh | Rs 7.0 lakh/y |
Rs 9/kWh | Rs 9.0 lakh/y |
Rs 12/kWh | Rs 12.0 lakh/y |
17. Break-Even Year
For simple undiscounted screening, the tool can report the first year in which cumulative lifecycle cost of the higher-CAPEX option becomes lower than the alternative.
Break-even occurs when Cumulative Cost_B <= Cumulative Cost_A
For discounted mode, the same comparison is performed using cumulative present cost.
18. Scenario and Sensitivity Matrix
Variable | Low case | Base case | High case |
|---|---|---|---|
Electricity tariff escalation | User input | User input | User input |
Annual operating hours | User input | User input | User input |
Maintenance escalation | User input | User input | User input |
Overhaul cost | User input | User input | User input |
Heat-recovery credit | User input | User input | User input |
Discount rate | User input | User input | User input |
The calculator should identify whether the ranking between alternatives changes across scenarios. A decision that changes under small input variations should be reported as sensitive rather than definitive.
19. Different Service Lives
If alternatives have materially different economic lives, a single-horizon comparison can become misleading.
The tool must not automatically extend one option's life without a replacement cost or residual-value rule.
20. Tax, Financing and Depreciation Boundary
Taxes, loan interest, depreciation benefits and corporate accounting treatment vary by organization. They should remain optional user-defined modules rather than embedded assumptions.
21. Confidence Model
Input source | Suggested confidence |
|---|---|
Measured energy + actual maintenance history + firm CAPEX quote | High |
Verified performance model + service-cost proposal | Medium-High |
Vendor performance + engineering estimates | Medium |
Nameplate power + generic service allowance | Preliminary |
Unverified downtime / resale assumptions dominate result | Economic result uncertain |
22. Validation and Guardrails
Condition Watch A short explainer on this topicSlide-by-slide engineering explainers from Reddy Compressors. More in the video library. | Required behaviour |
|---|---|
Horizon <= 0 | Block calculation |
Discount rate < 0 | Warn / require explicit advanced override |
Energy / maintenance / CAPEX < 0 | Block unless field is explicitly defined as a credit |
Major event outside horizon | Exclude with visible warning |
Residual value > original installed cost | Warn and require confirmation |
Compared options have different duty boundary | Flag comparison incomplete |
Energy inputs use unmatched pressure / flow basis | Require normalization before ranking |
Credits exceed gross operating cost | Allow only with explicit trace / warning |
23. Output Specification
Output | Display rule |
|---|---|
Initial installed cost | Currency |
Undiscounted lifecycle cost | Currency over horizon |
Net present cost | Currency |
Equivalent annual cost | Currency/y |
Energy share | % of total lifecycle cost |
Maintenance / overhaul share | % of total |
Credits | Heat recovery / other, separately visible |
Break-even year | If reached inside horizon |
Sensitivity result | Stable ranking / sensitive / reverses |
Confidence / warnings | Always visible |
Calculators and worked examples
These tools give indicative figures for screening, comparison and for preparing an enquiry. They run in your browser and send nothing. Prices, tariffs and efficiencies shown are example values: replace them with your own. Results are not a performance guarantee or a design certificate; final selection is confirmed by an engineer against the machine data sheet and the site.
Lifecycle cost comparison
Compare two options over their life: purchase, energy and maintenance. The cheapest machine to buy is rarely the cheapest to own.
The worked example below shows the method with fixed numbers. Turn on JavaScript to change the inputs.
Worked example
Inputs
- Option A: purchase (₹): 1500000
- Option A: input power at working load (kW): 75
- Option A: annual maintenance (₹): 120000
- Option B: purchase (₹): 1900000
- Option B: input power at working load (kW): 66
- Option B: annual maintenance (₹): 110000
- Running hours per year: 6000
- Electricity tariff (₹/kWh) — enter your own: 8
- Years: 10
- Discount rate (%): 8
Result
- Option A lifecycle cost: ₹ 2,64,61,503 present value
- Option B lifecycle cost: ₹ 2,38,95,647 present value
- Lower lifecycle cost: Option B by ₹ 25,65,856
Method. Lifecycle cost = purchase + (annual energy + annual maintenance) × years, optionally discounted. Energy = input kW × hours × load factor × tariff.
What to take from it. Energy usually outweighs the purchase price over the life of a compressor. Run the comparison with your own running hours.