Profits & Compressed Air!

Profits & Compressed Air!

By Henry Van Ormer, Air Power USA

Compressed air has moved to higher visibility in the energy conservation field. Unfortunately management in industry may not appreciate the impact on profit of the true cost of an uncontrolled compressed air system. The buzz words abound–The fourth utility–your most expensive utility–eight times more expensive than electricity–a quarter inch leak costs $9,000 in wasted energy. Yet awareness does not seem to have set in with most industrial managers.

As consultants, our compressed air reviews have become much more formal. They start with Level I that overs a basic system overview. More comprehensive levels evaluate the development and installation of total management control systems. Most plants find that the immediate savings are significant even with the basic Level I compressed air overview. Level I reviews incur costs in the mid-to-high four figures or low five figures. However, paybacks are often measured in months, not years. These reviews allow development of longer term follow-up opportunities that continue to reduce the operating cost. Some plants recorded reductions up to 80 percent. Yet industry in the United States does not seem to be availing itself of this significant opportunity that exists in every manufacturing facility in the country that has no formal compressed air program.

Expect an effective plant air system survey or audit to reduce air demand and power cost from 25 to 50 percent almost immediately. People often ask what are the most common problems we find during a survey.

  • Running excessive pressure?
  • Producing high pressure air only to use it at low pressure?
  • Poor selection of primary air supply?
  • Poor selection of application of compressor controls?
  • Poor selection of application of filters, dryers, connectors, regulators?
  • Poor air receiver placement?
  • Bad piping?
  • Poor selection of compressed air to do the job compared to an alternate energy source?
  • How can you compare relative costs if you don’t know the cost of compressed air?
  • Or, all of the above??

The truth is that it is always “all of the above” plus others. But this isn’t the problem. The problem is one of responsible management not being aware of the true cost of the compressed air, not aware of the gross magnitude of wasted air and power in most systems, not aware of the low cost to identify and implement changes with significant bottom line payback. Although many companies look at energy expense as a variable cost, in reality the production energy costs we save with a well-managed, well-controlled compressed air system represent a reduction in fixed costs. The reason is that as the electrical usage goes down, production will stay the same or even increase.

Let’s put this energy cost into perspective: As a pure transfer of energy, compressed air is inefficient–at $0.06 per kw, it can use $40,000 in electric power cost to do the same work which if performed electrically would cost $4,000 to $5,000. Does this mean compressed air is not a useful, effective power source for industry? Of course not!! It means compressed air is an expensive power source and production resource and its use should be managed and understood.

Is it managed? Consider these examples. A brake testing laboratory reduced their air usage 30 percent by installing of a $245 regulator. This represented a power cost savings of $12,000 per year and a maintenance cost savings of $6,000 per year.

A midwest manufacturing plant already running two 250-hp reciprocating compressors at full load called in a consultant to size and recommend a compressor type for a third unit. However, the consultant’s Level I basic review indicated that a third unit was unnecessary if certain changes could be implemented. After the changes, the plant shut off one of its two units. Operating now on one unit, the plant suffered no reduction in production. On the plus side of the equation, the documented electrical power cost savings in the first year was $80,000. The estimated cost savings for water, maintenance, and repair was $40,000 to $45,000. The air conservation program continues today. On the expense side of the equation, the total cost of material, labor, and the audit was only $35,000.

Let’s put it another way: How hard is it for you to move $120,000 to your bottom line? How much product do you have to ship to generate $120,000 of pre-tax profit? If you run a plant that generates $20 million in sales that yield 10 percent profit before taxes, then investigating your air system should appeal to you.

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