Using Aspen to Evaluate

Process Economics
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Abstract
This manual provides an overview of Aspens basic costing
features and describes the cost parameters needed to perform
an economic analysis. The manual focuses on Aspens
integrated mode of costing, which involves economic analyses
based on flowsheet conditions. The four different levels of
costing discussed in this manual include equipment costs,
capital costs, operating costs, and profitability. For each level,
the costing calculations are described along with the required
input parameters. The manual explains how to navigate
through the various input forms and what the various input
parameters mean. In some cases, the author suggests where
input information can be located in the literature.

Table of Contents
Preface
Introduction
Equipment Costs
Equipment Cost Models
Input Parameters
Capital Costs
Labor Costs

Cost Factors
Cost Sections
Operating Costs
Raw Material Costs
Utility Costs
Operating labor costs
Profitability
Product Revenue
Startup Costs and Working Capital Requirements
Internal Rate of Return
Net Present Value
Cash Flow Analysis Sheet
References
Bibliography

Introduction
Although Aspen is capable of performing stand-alone cost
analysis, this manual will focus on Aspen's integrated costing
mode (i.e. costs associated with a fully functioning process
simulation). In integrated mode, Aspen retrieves process
conditions from the flowsheet and uses them as the basis for
cost estimation. Therefore, it is essential that the mass and
energy balances for the process are complete before
proceeding to the costing stage.
Aspen contains four different levels of cost estimates:

1.
2.
3.
4.

Equipment Costs
Capital Costs
Operating Costs
Profitability

Each successive level builds on the previous level and requires

the user to supply additional costing parameters.
To specify the costing level,

use the costing "Options.Main" form.

Tip
Always start with the equipment costs level and progress to the higher
levels only when the previous level is fully functioning. This will help
isolate any errors that might occur when running the simulation.

Both the equipment costs and the operating costs are

calculated from a combination of user supplied information
and process conditions retrieved from the flowsheet. These
cost calculations rely heavily on the process flow rates, heat
transfer requirements, materials of construction, physical
properties of process fluids, etc. The capital costs include the
equipment costs, the installation costs, and the process
building costs. At the profitability level, Aspen performs a
detailed cash flow analysis for the life of the plant.

Equipment Costs
To estimate equipment costs, Aspen uses cost blocks which
are similar to the model blocks used on the flowsheet for mass
and energy balances. Each cost block calculates the size for a
piece of equipment. Aspen then uses internal cost correlations
to calculate the price for each piece of equipment based on its
size, shape, and material of construction.
Each model block depicted on the flowsheet should have at
least one cost block associated with it. Some model blocks
may require more than one cost block. For example, a
distillation tower needs a column, a reboiler, a condenser, and
an accumulator for collecting the distillate. The distillation
tower would only have one model block representing it on the

flowsheet (see Figure 1.1), but it would have four cost blocks
associated with it (see Figure 1.2). While the model blocks are
depicted on the flowsheet, the cost blocks are not actually
pictured.

Figure 1. Flowsheet containing distillation model block.

Figure 2. Dialog window used for managing equipment items

associated with a particular model block.

to the worksheet, select the appropriate model

block, click the right mouse button to bring up the popup
menu, and then select the menu item labeled "Costs". The
Equipment List Editor will appear (see Figure 1.2). Using this
editor, equipment models can be created for the current
flowsheet model. The editor is also used to access the input
and results forms for each equipment model.
To add cost blocks

Note
The Equipment List Editor will only display cost equipment models
that are appropriate for the currently selected flowsheet model. This
makes it easy to determine which equipment models need to be
created for each flowsheet model.

Equipment Cost Models

Aspen contains a variety of cost models which can be used for

sizing and costing equipment related to most types of unit
operations found on the flowsheet. Five main categories of
cost models exist:

heat transfer equipment - heat exchangers, coolers, and

heaters
vessels and tanks - process vessels and tanks
pumps and compressors - pumps, compressors, and
blowers
towers - trayed and packed towers
user models - user-defined models

All the models except the user models calculate the size and
cost of equipment using internal correlations. User cost
correlations can be attached to any of the cost models, but the
user models allow for customized sizing and costing
algorithms.
Input Parameters

For all the standard equipment models, two input forms will
require attention: the "Equipment.Main" form and the
"Equipment.Sizing" form.
launch the Equipment List Editor by
selecting the "Cost ..." menu item from the popup menu.
Select the equipment item of interest and click the Input
button. A menu form will appear facilitating navigation among
all the available input forms.
To access the input forms,

The "Equipment.Main" form is generally used for specifying

the material of construction and narrowing down the type of
equipment. In the distillation example mentioned previously,
two heat exchangers were created for the distillation tower.
One heat exchanger represents the condenser and the other
heat exchanger represents the reboiler. The default type for
heat exchangers is BEM. The default type is fine for one-pass
shell exchangers such as the condenser, but the AKT type is
more appropriate for the kettle reboiler (3:27). Using the AKT

heat exchanger for the reboiler instead of the BEM heat

exchanger significantly increases the cost estimate. This
increased cost estimate is much more accurate.
The majority of the parameters used in the sizing calculations
are retrieved directly from the process conditions. The input
blanks for these parameters will contain the word
"referenced" (see Figure 1.3). Other blanks may initially
contain a default value. Usually, these default values are
adequate for costing purposes; although new values should be
entered if the information is available.

Figure 3. Form used for entering packed tower sizing parameters.

In the example above (Figure 1.3), the "Hetp" parameter could

not be referenced and no default value was available. The
height equivalent to a theoretical plate (HETP) depends on the
specific distillation system being modeled. Because UAH does
not have the necessary license to perform HETP calculations
in Aspen, the user must calculate the HETP on his/her own
and enter it into the blank. In Distillation Design by Henry
Kister, the author presents empirical correlations that are
useful for estimating the HETP value (4:528-529). These

correlations can be implemented in Aspen using a FORTRAN

block.
For the accumulator used in the distillation example, the
engineer also had to determine the appropriate value for the
residence time parameter. In cases like these, design
heuristics, or rules of thumb, can be used for determining the
appropriate value. A good book to consult for sizing heuristics
is Rules of Thumb for Chemical Engineers by Carl Branan (5).
Note
When running a simulation, Aspen sometimes generates errors saying,
"The calculated equipment size is below the minimum value required
for the cost correlation." If this happens, then the piece of equipment
is probably so small that its cost is negligible. Delete the cost block for
the item to avoid unnecessary calculations.

Capital Costs
The capital cost estimates are derived directly from the
equipment costs using a factor method. The capital costs
include the following items:
Service costs - offices, cafeterias, laboratories, maintenance
buildings, etc.
Site costs - land development/purchase
Installation costs - installation of equipment/unlisted
equipment
Indirect costs - contractor expenses, fees, permits, insurance
Contingency - allowances for unpredictable events
select "Costing/Capital-Cost"
from the Forms menu. A menu form containing links to the
various capital cost parameters will appear.
To access the capital cost parameters,

Labor Costs

Aspen needs labor cost information for calculating

construction costs. Indicate the wage rate for installation
labor on the "Labor-Cost.Main" form. A job condition factor
should be entered to account for the productivity of the
workers. For help estimating the job condition factor (JCF),
consult the worksheet in the appendix of the Aspen Plus
Costing Reference Manual (1:A-4).
To access the labor cost parameters,

select "Costing/Labor-Cost"

from the Forms menu.

Cost Factors

All five types of capital costs are calculated using a factor

method. Each specific cost is estimated using a factor which
relates it to either an equipment cost or a labor cost. For
example, the material installation costs are calculated using
factors that relate them to the equipment costs. The number
of hours required to install the equipment is also calculated
using a factor which is related to the equipment cost. Using
the labor rate information, the labor installation costs can
then be calculated from the estimated instillation time.
Aspen already contains default values for all the factors used
in capital cost estimation. These factors were derived from
experience, and they generally provide good estimates for
preliminary plant designs. InConceptual Design of Chemical
Processes by James Douglas, the author reaffirms that Aspen
contains some of the most up-to-date cost correlations
available (6:33).
Tip
If you wish to exclude a particular cost, such as land purchase, from
your economic analysis, simply override the default cost factor with a
zero.
Cost Sections

Aspen calculates installation costs for each cost section of the

flowsheet. Cost sections provide a convenient method for

grouping related equipment items. For example, one section

might represent all the equipment items related to a
distillation tower: column, condenser, reboiler, accumulator,
feed pump, etc. Every equipment item should be assigned to a
particular cost section. When Aspen generates the costing
results, the installation costs will be itemized for each cost
section. By including all the equipment items for a distillation
tower in one section, Aspen will only produce one estimate for
concrete, piping, insulation, framework, etc. for the entire
distillation system.
set the Section
parameter on its "Equipment.Main" form. The names for the
cost sections can be defined in advance using the CostSections editor, but this is not necessary. When you input a
new name for an equipment section parameter, Aspen will
automatically create a Cost-Section object with that name.
To assign an equipment item to a cost section,

Operating Costs
While the capital costs are one-time expenses which are
incurred at the start of the project, the operating costs are
annual expenses which occur over the life of the plant. The
operating costs include

Raw material costs

Utility costs
Operating labor costs
Maintenance costs
General works costs
Depreciation

The raw material and operating costs are often two of the
largest contributors to overall production expense.
Raw Material Costs

Aspen calculates the annual operating expense due to raw

materials based on both the raw material prices and the mass
flow rates indicated by the flowsheet. Raw material prices
should be entered for each feed in the process. A good source

for raw material prices is the Chemical Marketing

Reporter (7). On the "Material-Cost" form, enter the price
along with the date of the price quote. Aspen will then scale
the price accordingly using internal inflation indexes.
select a feed block on the flowsheet,
click the right mouse button to bring up the popup menu, and
then select the menu item labeled "Costs...".
To enter raw material prices,

Utility Costs

Aspen meticulously models the utilities and their interactions

with the various equipment items on the flowsheet. A utility
block must be created for each type of utility used in the
plant. The price for utility consumption is entered on the
"Utility.Main" form. The physical properties of the utility are
entered on the "Utility.Properties" form (see Figure 1.4).

Figure 4. Form used for entering steam utility properties

For a steam utility, properties such as steam pressure and

saturation are usually defined. For a water utility, inlet and
outlet temperatures are usually defined.

To create a new utility,

menu.

select "Costing/Utility" from the Forms

After creating the required utilities, link each piece of heat

transfer equipment to a specific utility.
open the Equipment List Editor
for a flowsheet block, select the desired equipment item, and
then click the reference button. A dialog box will appear
allowing you to select a particular utility.
To link equipment items to utilities,

Note
The utility properties will affect the amount of coolant flowing through
a heat exchanger. A large flow not only causes higher operating costs,
but also requires a larger heat exchanger increasing capital costs.

If utilities contribute a significant amount of cost to the overall

production expenses, then consider using heat integration (i.e.
pinch technology). The Aspen Technology web site contains a
good overview of pinch technology (8).
Operating Labor Costs

Operating labor costs reflect the labor expenses incurred due

to daily plant operation. On the "Operating-Cost" form,
indicate the average hourly wage for plant operators along
with the number of hours the plant operates in one year.
In Plant Design and Economics for Chemical Engineers by
Peters and Timmerhaus, the authors provide typical values for
both operating labor and plant operation time (9).
To access the labor cost parameters,

from the Forms menu.

select "Costing/Operating-Cost"

Profitability
Aspen Plus performs a detailed cash flow analysis for the life
of the plant. The two most important measures of profitability
which Aspen calculates are

internal rate of return (IRR)

net present value (NPV).

The profitability calculations consider

Capital expense
Operating costs
Product revenue
Startup costs
Working capital requirements.

In the previous costing levels, Aspen calculated the capital

expenses and operating costs. At the current costing level,
Aspen will calculate the product revenue, startup costs and
working capital requirements needed for determining
profitability.
Product Revenue

The product revenue is a function of product and byproduct

flow rates multiplied by their respective selling prices. The
procedure for entering product and byproduct prices is
practically identical to the procedure used for entering feed
prices. Review the Raw Material Costs section for help on
entering material prices.
Startup Costs and Working Capital Requirements

The startup costs include expenses related to the training of

operators and maintenance workers during the first few
months of plant operation. The working capital requirements
include the money needed to maintain inventories and cover
accounts payable. The working capital expense is charged at
the beginning of plant operation, but is never actually
consumed. When the plant shuts down, the working capital is
returned as a credit. Both the startup costs and the working
capital requirements are calculated using factor methods. To
adjust these factors, go to the "Profitability Menu" form.
select "Costing/Profitability"
from the Forms menu. A menu form containing links to the
various profitability parameters will appear.
To access the profitability parameters,

Internal Rate of Return

The internal rate of return (IRR), also known as the

discounted cash flow rate of return (DCFROR), is calculated
using the net cash flow projections over the life of the plant.
The IRR is the amount of interest that the investors could pay
themselves annually without bankrupting the project. Aspen
calculates an annual interest rate that would reduce the
investment balance to zero at the end of the plant life. This
measure of profitability is usually reported for the optimum
process alternative.
Net Present Value

To determine the net present value (NPV), Aspen adjusts the

annual cash flows for the time-value of money at the start of
the project and then sums the annual adjusted net incomes..
The NPV represents the sum of all future profits based on the
time-value of money at the start of the project. The NPV is
calculated using a base IRR (usually 15%) which is indicated
on the "Profitability.Param" form.
The NPV is needed to accurately compare process
alternatives. The IRR is not a good comparison tool for
alternatives because it ignores differences in initial
investment (10). Companies generally look for projects which
will provide an IRR at or above 15%. If plenty of investment
money is available, then a company would usually prefer to
invest the maximum amount of money available which will still
provide an IRR at or above 15%. One alternative may require
$10,000,000 initial investment and have a 30% IRR, while a
second alternative may require $15,000,000 initial investment
and have a 25% IRR. At first glance, the IRR of 30% may
appear more attractive; but the company is accruing interest
on a smaller principal amount. By choosing the second
alternative, the company can invest more money and,
therefore, make more money. The best way to compare the
two alternatives involves using the NPV. The NPV provides a
value for the excess profit which would be earned after paying
an IRR of 15%. The alternative with the largest NPV is usually
the best choice.

Cash Flow Analysis Sheet

Aspen generates a cash flow worksheet containing the cash

flow for each quarter the plant is in operation (see Figure 5).
The cash flow varies over the life of the plant because of
inflation. The product prices, raw material prices, utility costs,
operating labor costs, etc. all vary according to different
inflation indexes. Aspen contains separate internal inflation
indexes for each type of cost.

Figure 5. Plant cash-flow for the life of the plant. The arrows are
used to scroll through the entire worksheet.
To view the profitability results,

from the Forms menu.

select "Reports/Exec-Sum/Profits"