How Important is the Purchase
Price of a Compressor?
Evaluating the true-life cycle cost of compressor ownership – If you are considering investing in a new compressor or compressed air system, what criteria will you use in making your selection? The initial purchase price? The installation price? Maintenance requirements and cost? Energy efficiency?
Hopefully, it is all of the above and then some. As an asset and an investment with a ‘life-span’, the true cost of your compressor will not start and end with just the initial purchase price but will transcend across its entire life cycle. Considering the true-life cycle cost (LCC) of a compressor or a new system is therefore key if you want to truly understand the total lifetime cost of ownership. In this blog post we discuss LCC as an approach to assessing the true and total cost of a compressor.
Why the life cycle cost matters
Like other machinery, a compressor will not last forever. It will have a lifespan. On average this is around 10 years, however, that will largely depend on a number of factors, not least the compressor technology, the operating hours plus the operational conditions and the environment.
Let us take the example of a good quality, oil-injected rotary screw compressor with an expected 10-15 year lifespan. It is useful to calculate the purchase costs over the average internal write off period of five years using the current interest rate. The pie chart below highlights how all the costs associated with operating this compressor is likely to breakdown over the first 5 years.
Interestingly, the initial capital investment accounts for only a small fraction of the total costs at around 15% and even the maintenance costs are significantly low at just 8%. However, as you can see, upwards of 69% of the total cost of ownership of a medium sized compressor over the first 5 years is attributed to energy costs. This prompts the question: what should guide your purchasing decision?
When you start to really see how the total cost of ownership breaks down into categories, and their overall weighting, you really start to understand why there are several other critical factors that you should consider when
it comes to deciding which compressor to purchase, and not just the initial purchase price itself. Again, at 69% of the total cost of ownership – the energy efficiency of the compressor is a very important consideration.
Evaluating the total life cycle cost (LCC) of a compressor
What the example above demonstrates is that the initial capital investment cost is just one factor when it comes to the total operational lifetime costs. On the surface are your visible initial investment costs at around 15% of the total life cycle cost. However, under the surface are your indirect costs estimated at approximately 85% – such as maintenance and energy costs – and added together you get your true total lifetime cost of ownership.
So, applied to our example above, what we can see then, is that the initial investment cost actually plays a subordinate role in the overall cost of compressed air production. Evaluating other key areas, such as the compressor’s energy efficiency and its maintenance requirements and costs, is essential if you want to truly understand the overall cost of operating the compressor. Any initial savings on investment cost for compressed air components, for example, may be greatly outweighed by higher energy costs.
Need some compressed air advice?
Energy efficiency is a top priority of Kerr Compressor Engineers – Sole Scottish Authorised Distributor for KAESER HPC Compressors
Compressed air specialists in Scotland for over 40 years, we know that the cost of energy is the biggest component by far of the total lifetime cost of a compressor. We have therefore been striving for more than 40 years to help reduce our customer’s energy expenses and lifetime costs from compressed air production. In addition, we never lose sight of the service and maintenance costs and the importance of constant availability of the compressed air supply.
Source & Credit: Many thanks to Beth Wood and our colleagues at KAESER – Australia for kindly allowing Kerr to repurpose and share this ‘KAESER Know How Blog’.