Energy savings and resource efficiency

Business

Case study: Compressed air

Find out how a processing plant using an Environmental Upgrade Agreement (EUA) to finance an energy efficient compressed air system determined that they would be better off by about $90,000 over 15 years if they invested in an energy-efficient system. 

Situation

A processing plant is looking at replacing their existing air compressor with a new unit. The compressor runs 8,400 hrs. p.a. at an average load of 50%. They have the option of purchasing a standard screw compressor (55kW) with load/unload type of control or an energy-efficient VSD compressor (55kW) with higher efficiency components.

How does the energy-efficient (EE) system compare to the standard system?

Equipment type Standard EE
Cost to install ($) $27,000 $50,000
Operation and maintenance costs ($ p.a.) $6,300 $4,800
Electricity use (kWh p.a.) 333,667 256,667
Equipment life (years) 15 15
Electricity cost reduction in first year from the system ($)   $15,400
Simple payback period for the system (years)   4.7
Simple payback period for the system (years), with marginal capital1 (years)   2.2

Item  NPV 
Standard -$494,742
EE system -$404,640
Difference $90,102

Finance option selected: Environmental upgrade agreement (EUA).

The company decides to seek an EUA to finance their energy efficiency compressed air system, as this would result in the highest expected NPV.

1This is the payback period for the energy-efficient (EE) option using the difference in capital outlay between the standard and EE equipment, rather than the full capital outlay for the EE equipment.

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Page last updated: 10 December 2015