Pumping system economics for pump engineering.pptx

agricultural engineering groundwater and pump engineering

1. ECONOMICS OF PUMPING

2. The well is designed and pump selection is done as already discussed earlier. Now we discuss the economics of pumping. ECONOMIC EVALUATION An investment on a wells and pumps is economically justifiable only if it shows a profit. It is , therefore, important that the work is analysed from the economic angle and its profitability assessed. The returns from the investment should have a clearly higher value than the cost of all the inputs involved. Economic evaluation includes the determination of total benefits and total costs. The economic analysis is performed in a series of steps. The resulting physical consequences of the inputs are predicted. A monetary value is placed on each physical consequence. A discount rate is selected and applied to convert the predicted time stream of monetary values into an equivalent single number .

3. For example, in case of a wells and pumps, the cost of installation of wells and pumps, their annual cost of each short-lived item, and the benefit resulting from the increased yield of every crop in each year, should be determined. The various methods used to carry out the economic analysis of water well and pump project. 1. The benefit-cost method, 2. The present worth method, and 3. The internal rate of return method.

4. The benefit-cost method The economic feasibility of a project is based on the benefit-cost relationship. The total benefit B should be more than the total cost C . A project is economically feasible under the following conditions: B > C B-C > 0 Or B/C > 1 It is essential to take into consideration the time element of both benefits and costs. The costs include the fixed cost, which are incurred usually in the initial stages. These include the cost of planning and design, equipment and accessories, installation and commissioning. The second are the annual costs usually termed OMR (operation, maintenance and replacement) and the expenditure on taxes and insurance. Annual benefits are always considered.

5. For a comparison of benefits and costs, both are expressed in the same terms, namely, present worth values or annual values, which include amortization on the initial investment . In situations where several competing projects are to be considered within a limited budget, or alternative proposal are available, they are to be compared and ranked in a series of decreasing values, such as decreasing net benefits or decreasing returns on the money invested. In comparing benefits to costs, two alternative criteria are available, namely, the expression of net benefit B-C, provides the relative returns from each unit of the money invested. When funds are limited, it is advisable to use the B/C criterion which will allocate the available funds to a combination of smaller, efficient projects rather than one or two large ones.

6. PRESENT-WORTH METHOD In this method, the algebraic sum of benefits minus costs over the life of the project are converted into their present worth. The present worth is defined as follows: (P/F, i %, t) is the abbreviation for the single payment present worth factor. The notation P and F imply present AND future amounts , based on discount rate and period of analysis. For a given value of discount rate i and period n , the present-worth factor is

7. Where i is in fraction remains constant over the project life, except the initial first cost K, the basic PW equation may be modified to (P/A, i %, n ) is the abbreviation for the series present-worth factor. A denotes equal amounts at the end of each of n years. For a given value of discount rate i and period n , the series present-worth factor is Where i is in fraction

8. E XAMPLE 14.1 The initial investment on a tube well and pump project is Rs . 50,000. The yearly net benefit is Rs . 8000. Estimate the present worth if the project period is 20 years and discount rate is 10 %.

9. INTERNAL RATE OF RETURN The profitability of a project may be measured by means of a comparison between its benefits and costs , through the use of the internal rate of return. The internal rate of return, r , is defined as the interest rate which will provide the equalization of total cost to benefits. Considering the annual values of benefits and costs, the internal rate of return may be expressed mathematically as If the value of r is higher than the market value of interest on investments, the project is economically feasible .

10. EXAMPLE In a tube well and pump project, the initial cost is Rs 50,000. The project period is 20 years . The annual net benefit is Rs 7000. Estimate the internal rate of return.

11. In the economic evaluation of projects (on wells and pumps) it is important to include all costs and benefits in the analysis. The annual cost of a project includes both fixed and variable costs. The fixed costs will include depreciation plus interest on investment. Fixed costs, also referred to as investment or initial costs, include the following: 1. Planning and design costs 2. Cost of wells, pumps, electric motors/engines and pumping plant accessories, and installation 3. Pump house, if any 4. Electric power connection, monitoring, metering and recording equipment 5. Water conveyance and distribution systems, if included in the project 6. Equipment for water application, sprinkler/drip irrigation equipment, if used.

12. Annual operating costs include the following 1. Fuel/electricity 2. Lubricants, minor repairs and painting 3. Replacement of short-lived elements 4. Operating manpower (Manpower costs include salaries, social benefits, housing, insurance, medical treatment, transportation and other similar items) Depreciation: Depreciation is the loss in value of the pumping plant due to operation or age. The average interest on the investment plus the depreciation cost gives the annual fixed cost.

13. In addition to interest on investment and depreciation, the annual fixed costs may include taxes, insurance (if applicable) and the amount charged for providing electrical connection. If the electrical connection charges are paid in a lump sum, the annualized cost may be worked out as described above assuming an expected service life of about 25 years. If the charges are to be paid annually, the same are to be added to the annualized investment cost to arrive at the annual fixed cost. Variable Costs Variable costs include the cost of power/fuel (electricity/diesel/petrol), cost of lubricants, labour charges for operating the pumping set, and the expenditure on repairs and maintenance of the equipment and accessories. The cost of power is often the most important component in variable cost . The usual practice is to calculate the requirement of energy per hour of operation from the known discharge rate of the pumping plant, total operating head and its overall efficiency .

14. The requirement of power is expressed in kilowatt-hours per hour for electricity, and litres of diesel or gasoline per hour of consumption. The input horse power required per hour of operation of a single unit is estimated as follows : Fuel consumption per hour of operation = BHP (Specific fuel consumption) (Cost of fuel per litre )

15. EXAMPLE The water horse power of a centrifugal pump installed in an open well and operated by a direct-coupled 3-phase electric motor is 2.3. The efficiencies of the pump and electric motor are 68 per cent and 76 per cent, respectively. The pump is operated for a total of 2600 hours in 210 days a year. Estimate the annual cost of operating the pump. The cost of the pump and the motor are Rs . 2400 and Rs . 6600 respectively. The total cost of the suction and discharge pipe, pipe fittings, foot valve and strainer amounts to Rs . 2850. The cost of electrical accessories including starter, switch and wiring is Rs . 2460. The cost of electricity is rupees 1.20 per unit. The prevailing interest rate is 8 per cent. The salvage value of pump and motor may be assumed to be Rs . 100 and Rs . 300, respectively. The salvage value of other items is negligible. The time spent by the operator on pumping set is 1 hour daily. The wages of operator is Rs . 60 per day, including his other duties.