COST ANALYSIS/ROI

TAS Energy’s Modular Utility Systems are the epitome of a smart financial investment. In a simple economic analysis, operating efficiency of any energy consuming industrial system is a key factor in determining monthly operating cost or what is frequently termed “life cycle cost."

Capital equipment decisions are normally based upon a net present value analysis as well as a simple project analysis known as payback. Additionally, some decision makers will make financial decisions simply based upon the up-front investment known as “first cost”.

Why efficiency matters

When faced with quarter-by-quarter competitive and financial pressures, many decision makers select the lowest first cost proposal even though this solution may have a much higher operating cost. First cost decisions are highly tactical in nature, and while they help performance on a short-term quarterly basis, they can impair longer-term competitive ability by increasing variable operating costs. The question decision makers ask is, “Should I save money today by purchasing a lower first cost solution, or should I save money over the longer term by investing in greater operating efficiency and performance?”  The question they should really ask is, “Which approach will be the optimal financial investment for my firm for the estimated useful life of the equipment?” To answer this question, an analysis of net present value is the most appropriate action.

The illustration below demonstrates how the life-cycle cost of air conditioning is only 22% capital investment, 12% operation and maintenance costs, and a full 66% energy costs! With over 1/3 of total utility bills a result of air conditioning demand, it only makes sense to ensure all air conditioners installed are optimized for efficiency in performance.