Calculating The Life Cycle Cost Of Your Air Compressor

When you’re shopping for an industrial air compressor, or any product for that matter, it can be tempting to look for the lowest price. However, an investment in equipment that will power your
operation for the next 10 to 20 years should be based on value- not just price.

In this article, we’ll look at the true life cycle cost (LCC) of an air compressor, and explain why upfront cost is only one factor of many when making a purchasing decision.

How To Calculate Life Cycle Cost

Would you believe that the sticker price is often the smallest line item in your investment? Let’s break down the costs associated to buy, run and maintain your air compressor, and analyze the formula that determines life cycle cost.

Calculate LCC With The Following Formula:

Initial cost + energy cost + maintenance cost + downtime cost – residual value

Energy typically accounts for 70-80% of your lifetime costs, followed by maintenance at 10-15%, and lastly, purchase price is 10-15%.

The initial cost is the purchase price + installation + commissioning + ancillary equipment (dryers, filters, tanks, piping).

Energy costs are by far the biggest factor. This is why it is so important to choose the right air compressor that matches demand.

The Formula To Determine Your Energy Costs Is As Follows:

Power input in kW x operating hours/year x energy cost per kWh x years of operation

Don’t forget that cost per kW increases with part-load inefficiency on fixed-speed compressors vs. variable speed drive compressors, which is usually the single biggest lever a buyer can pull.

Budgeting for preventative maintenance of your compressed air system is one of the most important line items. Filters, lubricant, rebuilds- these add up steadily and predictably with scheduled care, but neglect an often overlooked and unexpected cost: downtime.

To Determine The Cost Of Downtime, Calculate:

Expected downtime hours/year x cost of lost production per hour x years

Lastly in the LCC formula is residual value. Subtract expected resale/salvage value at the end of your analysis period.

Calculating the life cycle cost of your air compressor can be a daunting task, but it can save energy, capital, and headaches down the road. If you need assistance from a compressed air system expert, don’t hesitate to reach out to Compressor Services.