Energy Vol 18, No, 9, pp. 939-90, 1983 oo s42/93- $6.0 + 0.00 Pana in Grew Brun Al ge txeve ‘Consign © 1953 Pergamon Prom Lad THEORY OF THE EXERGETIC COST+ M. A. Lozano and A. Vatrrot Departamento de Ingenieria Mecinica, Universidad de Zaragoea, Maria de Luna 3, Zaragoza 5001S, Spain (Received 3 April 1992; received for publication 18 January 1993) Abstract—The theoretical basis and several applications of the theory of exergetic cost, a major approach to the field of thermoeconomics, are presented in this paper. The fundamentals and criteria that enable the description of the cost formation process and the assessment of the efficiency in energy systems are formulated. The use of the second law of thermodynamics through a systematic use of the exergy concept, the fuel-product concept based on the productive purpose of a component within an’ energy system, and the ‘mathematical formalization provided by systems theory are the cornerstones of the theory. ‘The methodology presented here is a powerful tool in the analysis of energy systems. The following applications are presented: (i) assessment of alternatives for energy savings, (ii) cost allocation, (iii) operation optimization, (iv) local optimization of subsystems, (v) energy audits and assessment of fuel impact of malfunctions. INTRODUCTION Growing concerns about energy savings have led to the development of analysis techniques based on the second law of thermodynamics, particularly on the concept of exergy.'? The exergy balance of an installation allows us to allocate and calculate irreversibilities in the production process and to identify which units and for what reasons they affect the overall inefficiency. A great number of published papers on exergetic analysis only deal with determining the irreversibility and efficiency of the plant and its units. This information although useful has proved to be insufficient. In practice, when attempting to achieve effective energy savings in an installation, the following three additional factors must be considered: (i) not every irreversibility can be avoided."* Thus, the technical possibilities for exergy savings are always lower than the theoretical limit of thermodynamic exergy savings. The difference between these depends on the level of decision** which limits the type of actions to be undertaken (operation, maintenance, circuitry, process, ete.). (ii) The local savings of exergy which can be achieved in the different units or processes of an installation are not equivalent.”” The same decrease in the local irreversibility of two different plant components leads, in general, to different variations of the total plant energy consumption, (ii) Saving opportunities can only be specified through a detailed study of the fundamental mechanisms of entropy generation.* Furthermore, it will be necessary to connect the possibilities of controlling these mechanisms to the design free variables and to the necessary investment costs. These factors have given rise to different theories based on the second law, which share the ‘aim of cost allocation and economic optimization for thermal systems.” Unfortunately, the transition from thermodynamics to economics is not a smooth one; this has hindered the creation of the necessary common principles, which would unify and clarify the concepts and methods typical of each of them." The theory of exergetic cost seeks to make a contribution towards achieving this aim. In this paper, its basic postulates are established and some applications are described. + This theory has been recognized with 1wo “Edward F. Ober” awash To whom all correspondence should be addressed. 939 car 1818-0940 M.A. Lozano and A. VaLeRo. FUNDAMENTALS. One of the aims of thermocconomics is to determine the theoretical bases of energy saving Therefore, we will formulate general criteria that enable us to assess the efficiency of energy systems and that rationally explain the process of cost formation of products. ‘A thermal power plant or a chemical plant are examples of energy systems formed from a set of subsystems or units, which are interrelated through the flows of matter and energy that they process. These systems interact with their environment, consuming some external resources, which are then transformed into certain products. The final purpose of this transformation is to increase the economic usefulness. The concept of efficiency is a key factor in any theory of production, The wish to produce a certain good is external to the system. In an Aristotelic sense, this good is the final cause and must be defined beforehand. Once this has been done, the design of the system and its functional structure will fit the aim of using the available resources (capital, raw materials, man power, etc.) or the material cause in an efficient manner. Every definition of efficiency demands a comparison of the product obtained with the cost needed to obtain it, In order for that comparison to have an unmistakable meaning, both concepts will be expressed in equivalent units, “The second law states that there is no natural reversible process. This means that each process entails the degradation of energy resources. It also allows us to quantify this irreversibility through the exergy function. The exergy of a thermodynamic system is the minimum amount of technical work needed for its production, starting from the reference environment (RE), where RE represents those resources that nature places at our disposal in endless quantities at a zero extraction cost assessed in technical work." ‘Once the RE has been defined, exergy is the thermodynamic function of state which makes it possible to formulate the equivalence ratio between the different energy and/or matter flows of a plant. Two flows or systems will be thermodynamically equivalent, that is it will be theoretically possible to get one from the other without additional consumption of scarce resources (energy sources) if, and only if, they have the same exergy.” Let us consider “P” as the production of a process (product) and “F” as the consumed resources (fuel), both being assessed in terms of their exergy. Accordingly, the following equation will be satisfied: F — P =1>0, where 1 = TS, (Gouy-Stodola theorem) will be the quantification, in terms of exergy destruction, of the irreversibility of the process. Its real thermodynamic efficiency will be given by = P/F=1, a non-dimensional number which, because of the fact that it necessarily lies between 0 and 1, represents a universal ratio for assessing the thermodynamic quality of the processes. The inverse of the efficiency function thus defined will represent the unit exergetic cost of the product, viz. ky= F/P=1/m,> 1. Ina strict sense, the aim of energy optimization must be directed toward minimizing the unit exergetic cost of the functional products. After determining the conceptual relationship among the second law, the efficiency and the exergetic cost, the application of the general systems theory will allow us: (i) to break down the irreversibility or inefficiency of a system, no matter how complex itis, into units or concepts (exergetic analysis), (ji) to calculate the exergetic costs of its internal flows and final products (cost control), and (iii) to precisely assess the impact on fuel consumption caused by the incorrect operation of any of the system units (exergetic audit). The final evaluation of any process must be carried out in monetary terms, incorporating every one of the resources used into the cost of the internal flows and products. Industrial systems with energy-transformation processes are determined by two interrelated environ- ments: (i) the physical environment, which is composed of the RE, energy and raw materials, and (ii) the economic environment characterized by market prices, together with what TribusTheory of the excrgetic cast oat and El-Sayed" call “capital corrosive measures”, which include, for instane: maintenance accounting rules When analyzing the process of cost formation of the internal flows and products of a system, taking into account only the physical environment, the relevant variable is the exergetic cost, which informs us of the actual amount of exergy that is needed to produce them. This will depend on both the structure of the system (functional relationship between units and flows) and the performance (exergy efficiency) of the units. An improvement in the structure of the system or in the efficiency of the units will always imply lower consumption of resources. When the economic environment is considered, the perspective is widened by the introduction of two additional factors: market prices (cp), which are not necessarily linked to the exergy of the processed resources, and cost for the depreciation and maintenance of the installation needed for the productive process (Z). The economic optimization of a system is much more complex than the purely thermodynamic optimization, as there are now several factors that are involved. The improvement in the structure of the system or in the efficiency of the units will normally mean an increase in capital costs. For this optimization problem, the objective function is the unit economic cost of the product, viz. ce= (¢pF + Z)/P = cekp + ZIP. , depreciation and THEORY OF THE EXERGETIC COST ‘The fundamental problem of costs allocation can be formulated as follows:!® Given a system whose limits have been defined and a level of aggregation that specifies the subsystems which constitute it, how to obtain the cost of all the flows that become interrelated in this structure. Its advisable to clarify this proposition. There is no doubt that the origin of every cost lies in the irreversibility of the processes. This statement is a cornerstone in thermoeconomics. A higher irreversibility (1) in a subsystem always implies higher consumption of resources of the plant (F;) if the products (P, and P,) remain constant. Itis essential to know how to link the variation in the local irreversibility (A/,) to the increase of resources consumed (AF;). Thus, the quotient AF;/AJ, defines a “cost” which is very useful for the thermoeconomic analysis of systems, It is now necessary to mention something that is frequently neglected, namely, that it is possible to obtain this cost without making use of any theory, either by measuring it or using a hypothetical simulator. However, the function of the theory is to interpret and to make sense of reality.'® Three basic conditions are set out in order to ereate every theory of costs: (i) the defined limits of the system and the definition of resources are always partial and refer to the system under study. Generally speaking, energy, raw materials, economy, information, and labour resources are those which are put at the disposal of the system within its limits of analysis and with known unit prices. (ii) The level of aggregation provides a breakdown of the total irreversibility among the plant components. The chosen level of aggregation will affect the conclusion of the analysis. In fact, if we do not have more information about the system than that defined by its level of ageregation, then we cannot demand from the set of costs obtained more than the information we have introduced. Conversely, the analyst, not the theory, should be required to disaggregate the plant in flows and subsystems until the information can be used effectively. (ii) Efficiency as an indicator of the goodness of the behaviour of the subsystems, because, as we have seen, irreversibility is localized in them. Efficiency and irreversibility must be connected to each other and to the rest of the technical and economic variables which affect them. Physical structure To solve the fundamental problem, it is advisable to formulate it in a compact form. The plant will be defined beforehand as a set of subsystems or units linked to each other and to theon, M. A. Lozano and A. VALERO Gas ° Heat t Heat ' Steam Fuel 2a 1a --| | ot aly a 1 Boley Le} OS Mechanical, S| ecerca ‘Work ‘Work 5 ‘Auxiliary Work (2) Physical structure of the thermal power plant EFFICIENCY i SUBSYSTEM F P L 1 | Boiler Bl 2 | Cycle 3 | Alternator 4+ Power Plant (b) Productive structure of the thermal power plant. Fig. 1. After defining the productive and physical structures ofa plant, the theory of exergtic cost {enables us to solve the problem of cost assignment. environment by another set of matter, heat, and work flows. In essence, this constitutes the flowsheet in Fig. I(a) corresponding to a thermal power plant which will be used as an example. In a general way and according to the general systems theory, we can express this follows: energy system = subsystems or units + matter and/or energy flows, where the relation- ship between the flows and subsystems is set up through the incidence matrix A [n Xm], m being the number of subsystems and m the number of flows. In Table 1, this matrix is presented for the thermal power plant represented in Fig. 1. As can be seen, the elements of the matrix a, take the value +1 if flow j enters subsystem i; —1, if the flow leaves the subsystem; and 0, if there is no direct physical relationship between them. In the case of a steady-state operation, it will be possible to describe the balances of matter, energy, and exergy as follows: AXM=0, AXE=0 and AXB=D, where M, E and B are column vectors of dimension [7m] whose elements correspond to the mass, energy, and exergy of the flows. When the element j of the vectors M, E and B corresponds to a mass flow, M, represents the mass, E; the energy Mj(4;— hy») and B, the exergy My(l — Tos; ~ jqo) of this flow."” If element j corresponds to a heat or work flow, then M,=0, B, is Q, or W, and B, is, Q\(1 ~ ToT.) or W,. Element D, of the column vector D of dimension [n] represents the exergy destroyed in the unit / because of internal irreversibilities. ‘The more detailed the definition of the incidence matrix, the better the possibilities of analyzing the causes of inefficiency of the installation, However, a more detailed incidence“Theory ofthe exergetic cost ons ‘Table 1, The incidence matrix represents the physical structure of the plant "The matrices of fuel, product and losses represent its productive stracture, INCIDENCE MATRIX Subsystem Vf wom m3 4 5 6 78 fer a 2 Joo 1 rei ont celle va 3 [oo feet se eee Poverpas[ tb OOO Furt Subsystem Tf wom me 3 6s 6 7 t ler Tpit T 2 4 a L 2 1 a 3 ro Fi LOSSES: Subsystem Vie a me 3 4 $s 6 7 8 [emo 3 AL matrix implies an increase in both the number of physical measurements to be taken in a performance test and in the complexity of calculating the diagnosis vector D. Therefore, itis necessary to find an optimum level of aggregation, which will basically depend on the goals of the analysis. Productive structure A plant is something more than a set of flows and units. Each unit has a particular productive function which contributes to achieving the final aim of production, Following Tsatsaronis,"” and in order to define this function, we will clearly indicate which flow or combination of flows constitutes the product of the unit (P), which ones are resources or fuel consumed (F) and, finally, which flows are losses (L), ice. those flows that leave the unit and the plant and are not. subsequently used. In order to obtain the F-P-L definition which best represents the productive function of the units, itis necessary to simultaneously examine the energetic transformation that takes place in them. For productive units, the F-P-L. definition has to meet certain conditions, which can be summarized as follows: (j) all the flows entering or leaving the unit will be present in the F-P-L definition only once. (i) All the components, either individual flows or a combination of flows, of F, P and L will have a positive or zero exergy. (ii) It will be possible to specify the exergy balance corresponding to the unit as a function of the flows in terms of F-P-L = D.ou M. A. Lozano and A. VaLERO ‘Table 2. Energies and exergies of the plant flows in Fig. ‘OPERATION DESIGN i Flow 2 = = = 1s [Fon Tio Tio Too | 100 w|i ° ‘ ° ° 2 | seam « 10 ss 110 Mechanical Power so] on 2 2 hcl Poser » Fy 0 x0 5 | Aasiian Power us 1s 1 ' 6 |oas ss | os ‘ 6 7 |e ° ° ° 3 5 {es « ls a 1 Figure 1(b) shows the F-P-L definition assigned to the units of the thermal power plant: (i) boiler—its energetic transformation aims to increase the capacity for producing work from the water flow. For this purpose it is necessary to bring into play the fuel exergy and a certain amount of electrical energy for operating their auxiliary units. The exergy that remains in the exhaust gases is lost 10 the environment. (ii) Power cycle—in this subsystem the product supplied by the boiler is consumed in order to produce mechanical energy. The exergy of the heat rejected to the environment is lost. (iii) Alternator—this converts mechanical energy (fuel) into electrical energy (product) which is separated into two parts: the net product of the plant and the electrical energy consumed by the boiler auxiliaries, Using the F-P-L definition, we develop matrices Ay, Ap and A, so that A= Ap~ Ap~ A, as Table 1 shows. Starting from these matrices and using the data from design and operation of the thermal power plant shown in Table 2, itis possible to carry out the exergetie and energetic analysis of the plant, The necessary equations and the obtained results are shown in Table 3 Determination of the exergetic costs Valero et al!® have formulated a rational procedure for determining costs, based on four propositions. (PL) The exergetic cost of a flow (B*), fuel (F*) or product (P*) is the quantity of exergy needed to produce it. Therefore, the exergetic cost is a conservative property. ‘This allows us to formulate as many equations of exergetic cost balance as the number of units in the installation. ‘These balances can be expressed, in the absence of an external assessment, as AX B*=0. (P2) In the absence of an external assessment, the exergetic cost of the flows entering the plant equals their exergy. This allows us to formulate as many equations (B= B,) as flows entering the plant. (P3) All costs generated by the productive process must be included in the cost of final products, In the absence of an external assessment we have to assign a zero value for the cost of the losses of the plant. This allows us to formulate as many equations (Bj =0) as existing loss flows. From this proposition, and from the first, we obtain the following corollaries for every unit: L =0 and F} =P We now reconsider the problem of cost allocation. If one wants to calculate the cost of each of the m flows relevant to the level of aggregation considered for analysis, it will be necessary to write m independent equations, If all units have only an output flow that is not clasified as & Joss flow, then the problem is solved by applying the stated propositions. In this case, we say that the system or process analyzed is sequential In the opposite case. additional equations must be written for each unit equal to the number of output flows that are not loss flows minus one. At this point we need to use exergy to rationally assign costs, because this is the property which enables us to compare the945 ‘Theory ofthe exergetic cost WT [aro] oc | eT | a : to tecro| om | see [ss_|_ oe Bel] wll, ed wor fase] | 1 | © |e if two [seo] st_|st_[ o_| ste ‘ wast [oor ot eee eee oer fiiso| | | o | z veer [osore| is | a |r | os soz emo sis | i [ss | ts 1 wet we a wes +[*]sfelvta : SISEWY VTONODIS WOLD | SOE ore a] ; fac | tore |ceee0 oe | 0 ae LH ace Te a # smo st_| ste rire © Soe fe ne # tam a sa oaheg =f ata SISATWNY MYT ISHED Janwe “EP946 M. A, Lozano and A. VaLERO equivalence of the flows according to the principles of thermodynamics, The additional propositions are as follows: (P4a) If an output flow of a unit is a part of the fuel of this unit, then itis understood that its unit exergetic cost is the same as that of the input flow from which it comes. (P4b) If a unit has a product composed of several flows, then the same unit exergetic cost will be assigned to all of them. The reason for this proposition lies in the fact that, even if two or more products can be identified in the same unit, their formation processes are inseparable or indistinguishable at the level of aggregation considered and, therefore, we will assign them a cost proportional to their exergy. We consider the case of the thermal power plant in Fig. 1. Two units with two non-loss output flows are present: the cycle (lows 2b and 3) and the alternator (flows 4 and 5). This implies that we will have to formulate an additional equation for each of these units, using propositions P4a and P4b. The boiler has only one output flow (flow 2a) and, therefore, does not require any additional equation. We then examine the productive purpose or efficiency of these units, which has been previously stated in the F-P-L definition in Fig. 1, in order to support the resulting equations. In the case of the cycle, flows 3 (mechanical power) and 2b (water) play different roles in the productive function of the unit. The first constitutes its only identifiable product, whereas water ‘exergy has not taken part in the process of the energetic transformation F + P developed in the cycle, Consequently. proposition P4a must be applied to this case, and this results in the following equation: B3,/B2, = B4/By, or k= 3. Alternatively, if we define x2 Boy/B2, B3,/B3, as the bifurcation rate corresponding to the fuel (2a-2b) of the cycle, then =12B3,+ Bi,=0. In the case of the alternator, the two output flows (4 and 5) constitute the total product and, therefore, we will have to apply proposition P4b, which results in the following equation: BI/B,= B3/B, or k= KS. Alternatively, if we define x, Bs/B,= B2/B3 as the bifurcation rate corresponding to the product of the alternator, then —x;Bi + B3 = 0, We note in Table 4 how the 10 equations derived from propositions PI through P4 form a system of linearly independent equations whose unknown quantities or exergetic costs of the flows will be calculated if their exergy values are known. Table 5 shows the results obtained Table 4. System of equations forthe calculation of costs of flows ithe plant of Fig. 1 A xB*¥= YeTheory of the exergeticeost on Table 5. Exerpetic cost of the lows forthe plant in Fig. 1 ‘OPERATION DESIGN i FLOW | oe) | ed] eee ia [Font no fro | 1 | 100 [i00 | 1 w | air ofo |i ofo [a 2 | Steam 60 | 12333) 2139 | ss | 3667] 2067 2» | Water 6 | ass 209 | 5 | 19.333 | 2067 3 [Mechanical Power | 33 iss | 3500 | 32 |yosass) 3229 4 [Etecvica Power | 30 ]1i0 | 3467 | so |100 | 3x9 5 |avniiayroner | 1s] ss | 367 | 1] sam] sax 6 [cases ss} o Jo | a] o jo 7 | Hea of o fo | ofo jo 8 [Hea fe erovses | Hosea! | ot Hordes) |) We now consider the general problem and its matrix description. We consider a plant with units and m flows. We assume that the exeray of these flows is known. The set of balances of exergetie costs (PI proposition) of the units will provide the following system of n equations: AX BP =0 [x xm] x [m X 1] =[n X 1], where A is the incidence matrix which represents the physical structure of the plant. ‘The number of flows will be higher than the number of units; therefore, (m —n) auxiliary equations will be needed to determine the costs of the flows. In a ‘matrix way this means stating the elements of a new matrix a (production matrix) and a column vector w which provides the system of auxiliary equations: a X B* = o[(m —n) Xm] x [mm x 1] = [(mm ~ n) x 1] It can be demonstrated”"* that stating the productive structure of the plant through the F-P-L definition of the units that form it and the subsequent application of propositions P2 through P4 determines matrix a and vector @ unmistakably (in the absence of an external assessment and when all the units of the plant are productive). Therefore, the system of equations needed to calculate the exergetic costs of the flows can be formulated as follows: AXBt=¥* [mx m]x [mx 1]=[m XI], a where A =[A | al is the matrix of costs and Y* = [Y* | othe vector of external assessment (¥* equalling 0 for what has been expressed so far). ‘After calculating the exergetic costs of the flows, it will also be possible to determine the exergetic costs of fuels and products, and the unit exergetic costs of all of them. Table 6 presents the pertinent equations and the results obtained for the thermal power plant. Table 6. Exergetic cost inthe units of the plant shown in Fig. 1 i rleflelelelel]e T ros | sass | 2139 | 206 tars | s0_| 10333 | 2.067 | 2.020 zy | 33 | uss | 3300 | 1636 2067 | 32 | r9aas | 3229 | 1562 aso | sis [iss | 3007 | toa 39 | m_| ross | 3.333 | Lose v xo [10 | 3607 | 3.607 1 30 |r | 3.33 | 3.333 Power Plantos M. A. Lozano and A. VaLERO Exergoeconomic cost Calculating the monetary cost of the internal flows and final products in energy or chemical plants is a problem of the utmost importance, as it is directly linked to the production costs of the different parts, sections or units which constitute the productive process. For these plants the formation of the economic cost of the internal flows and final products is related to both the thermodynamic efficiency of the process giving rise to them and to the depreciation and maintenance cost of the units. Therefore, one can define the exergoeconomic cost of a flow as the combination of two contributions: the first comes from the monetary cost of the exergy entering the plant needed to produce this flow, i.e. its exergetic cost, and the second covers the rest of the costs generated in the productive process associated with its achievement (capital, maintenance, ete) ‘Tsatsaronis'” used this procedure for the first time for evaluating the monetary costs of the internal flows and products of complex plants. According to him, we may write the balance of exergoeconomic cost for any individual unit of the plant in the following way: [ly + Z =p, where Ip(ITp) is the exergoeconomic cost of the flows constituting the fuel (product) of the unit and Z represents the contribution of the non-energetic production factors. Considering the Previous equation for all of the units of the plant and proposition P3 for the loss flows, we obtain the following system of equations: AX IT the exergoeconomic costs of the flows. As for the exergetic costs, (m~n) auxiliary equations are requited to find the exer- goeconomic costs of the flows. The auxiliary equations must be formulated using propositions P2 through P4,"" viz, a XI1=T1,, where the vector T.(I1,,=¢.,«0,) now represents the external economic assessment of the flows entering the plant . where the unknown quantities TT, are We conclude that the mathematical problem of calculating the exergoeconomie costs of the flows of a plant requires solving the following system of equations: AxM=Z — [mxm]x{mx1]=[mx 1} 2 where 2=[-2Z |] is the vector that contains the external economic asses External assessment The uniqueness of the matrix of costs A, when applied to the calculation of the exergetic and exergoeconomic costs, reflects the fact that passing from the former to the latter simply involves modifying the units in which the production factors are expressed (kJ or $). The connection between thermodynamics and economics is graphically illustrated in Fig. 2, Up to now, we have considered the system or plant thermodynamically without allowing for the physical or economic relationships with other systems or plants, The elfects of these relations on costs can be introduced into the analysis by suitably modifying the external assessment vector. In any case, the matrix of costs will remain unaltered, Some important cases are the following. Exergetic amortization. In the balance of exergetic costs, we have not considered the fact that the units that form an installation are functional products and therefore have their own cexergetic cost. In order to keep them in good operation, additional exergy will be required. After determining the exergetic costs of the units, it will be necessary to distribute these costs over the total working lives. In this way, it is possible to obtain with conventional methods a vector of dimension [7] which corresponds to the exergetie amortization of the units. In a parallel manner, the vector of exergetic maintenance will be obtained. By defining the vector sum of both as ¥* = ¥X + ¥% it is possible to reformulate the balances of the exergetic cost of the installation (PI proposition) in general as AX B* = —Y* Residues. Some of the flows of exergy losses will require an additional exergetic cost for disposal. An example is the flows of slag and fly ash in a coal boiler which require power-operated units without which the plant could not work. Thus, removing these flows from"Theory of the exergetic cost oo () Bes A7x ¥* (2) kt = BF /B, @) msa'xge (4) 2B, () ct=11, Be Fig. 2. The uniqueness of the matrix of costs makes it possible 1o calelate both the economic and 7 i a coal boiler entails an exergetic cost that equals R*; therefore, the equation resulting from application of proposition P3 to this flow of losses (a residue) leads to @ = —R Assessment of the plant fuels. ‘The fuel flows consumed by an industrial installation are rarely composed of non-transformed primary resources (fuels, metals, geothermal deposits, etc.) whose values are represented by their thermodynamic disequilibrium with the RE, that is to say, from their exergy. Thus, the coal processed by a boiler has an exergetic cost of primary resources V* which is higher than its exergy due to different processes: extraction, storage, transport, ete. If we want to incorporate their contribution to the exergetic costs of the flows and products of the plant into our analysis, we must apply the proposition P2 to coal flow in the following form: w = V*. Cumulative exergetic cost. ‘The vector Y* incorporates the external information which finally determines the exergetic costs of an installation. In a conventional assessment, we distinguish between the thermodynamic system which constitutes the installation and its thermodynamic environment, ignoring completely the irreversibilities that take place there and which form part of the process using the primary resources to generate the final products. As these assessments are being incorporated, the exergetic costs will include a greater part of the external irreversibilities. The latter have their origin in the manufacture, installation, repair and maintenance of the units Y*, in the elimination of residues R*, and in the previous production of the flows entering the plant V*. Logically, the most appropriate external assessment will, depend on the aims of the analysis that is carried out. The natural assessment of vector Y" consists of considering each and every one of the external irreversibilities and, therefore, ¥*, R* and V* reflect their costs of primary resources. There have been very few papers published ‘on calculating the cumulative exergetic cost of the functional products." Boustead and Hancock"? and Leprince et al” have tried to satisfy a similar aim, but using methodologies of analysis based on the first law Dissipative units. Some units are characterized by the absence of production which can be measured in terms of exergy. Their usefulness lies in their interaction with other units of the plant in order to obtain one or several common products. This interaction sometimes results in higher production or efficiency (¢.g., with the condenser of a power cycle). In other occasions, the presence of dissipative units is essential for the plant to be operative from both the physical950 M. A, Lozano and A. VaLexo (the induced draft fan of a boiler) and legal (electrostatic precipitators if the boiler burns coal) points of view. The presence of these units in an installation makes it compulsory to broaden the rules of cost assignment. No general rules for dissipative units have yet been determined. However, the costs of the irreversibility associated with their operation must be charged as a fuel to the productive units. THE PROCESS OF COST FORMATION In this section we analyze how the costs in a productive process are determined, and we reach important conclusions which will then be applied to the analysis, accounting, and ‘minimization of the cost of production in real plants. An individual unit Let us consider a generic unit i which forms a part of a plant. The unit exergetic and exergoeconomie costs of its product can be expressed as follows Abs = PUP, = FUP, = ke BIP, = kek, (G3) and nu = Mo P= Mes + Z)/P, = (Cea + ZB, = eek + Zit, “ Bearing in mind that k,—1=/P, it follows that ki, —k,=k?h/P, and cps ers = (Cede + ZIP. These equations reveal that the unit cost of the product is always greater than or equal to that of the fuel. Any difference is calculated in terms of the irreversibility (J) and capital Z,) costs. Tsatsaronis!” has defined the exergoeconomic factor of a unit as &, = Z,/(cy,dj + Z,) and has applied it to evaluate the possibilities of improving the design of complex plants."!=? This parameter measures the relative weight that investment costs have on the increase of the unit exergoeconomic cost in a plant component. A small exergoeconomic factor shows that, at least theoretically, it will be possible and probably profitable (o invest in the unit in order to improve its thermodynamic efficiency A sequential process We now consider a sequential process. The product of a unit is the fuel of the following unit as shown in Fig. 3. In this case, an external conventional assessment shows that ©) and 71P.= TL ke © ‘These expressions show that the unit exergetic cost of the product of a unit equals the product of the unit exergetic consumption of the subsystems taking part in its production, and that the exergetic cost is charged with both the exergy of the product and all of the irreversibilities which occur in these subsystems. 12 i {% aie en F, i ae is > = | Tes] 7,0) | Mex Ars | 4 6). iy) | Ten Fig. 3A sequential processTheory of the exergtic cost 951 Principle of technical non-equivalence of the local irreversibiliies We now consider the process shown in Fig. 3. The balance of exergy for the plant will be given by F,=P, +. If the quantity of total product is kept fixed, any modification in the design or operation of the plant will cause an increase or decrease in the consumption of resources equal to the variation of the total irreversibility, viz. AF; = Al;. We could suppose that this change is due to the variation in the exergetic efficiency of only one unit, say i. Then, under the conditions stated, the unit exergetic cost of the fuel of unit é will remain constant, ki, = RIE Fe + AR)A+ AR) (Py const., ker cons.) 0 ‘Also the product of unit will remain constant. Therefore AF,= AJ, and the increase in consumption of resources AF; due to the malfunction of the unit i, represented by Al, will be AF y= Aly BAR =kz,Al, — (Prconst., k,., const). (8) For an infinitesimal malfunction, we get dFy/dl,= kf,, concluding that the marginal exergetic cost of the irreversibility produced in unit i because of its malfunction equals the unit exergetic cost of fuel of this unit. AA first conclusion from this analysis is that there is no equivalence among the irreversibilities of the units of an installation. The more advanced in the process the unit location, the bigger the impact on resources consumption obtained for the same amount of malfunction. A second consequence is that when modifying the efficiency of unit i, a local variation of the irreversibility (disfunction) of all the units that precede it will take place. This disfunction can easily be assessed by Aly— Al, KE, 1) ML (Py const., kyo, const.) O) The application of these consequences to performance tests in actual installations will allow us to clarify and quantify the causes of the excessive consumption of resources. APPLICATIONS, The issues to consider in the design and/or diagnosing of a thermal plant are:” Where, how and which part of the consumed resources can be saved by keeping the quantity and specifications of the final products constant? ‘An approach to this problem will consist of developing a plant simulator for addressing “what if. ..?” questions. This simulator should satisfy at least two requirements: its suitability for the plant under analysis and its capacity for representing in a reliable way both the different design alternatives and the operation modes. The variety of the plants is so large and the problems that may arise are so particular that this approach proves unfeasible or unnecessarily complex in many cases. ‘The theory of exergetic cost is based on general concepts like resources, structure, efficiency and purpose.” Any plant or process can be characterized using these concepts. Starting from this basis and in the field of energy processing plants this theory provides the appropriate tools, for achieving an optimum management of resources and has the advantage of its general application Assessment of alternatives Given a unit whose productive aim is clearly defined, different options exist when choosing both its construction features and type of fuel to be consumed. Gaggioli™ has solved some of these problems using a thermoeconomic approach.932 M. A. Lozano and A. VALERO We consider a simple case relative to the soot-blowing system of a coal-fired boiler in a thermal power plant.” The designer satisfies the soot-blowing needs by using superheated steam (P,=110 bar, t, = 490°C, b, = 1462 kJ/kg). This steam is throttled and water is sprayed before being sent to the soot-blowing system, which requires lower pressure and temperature values. Given the high irreversibility of these processes, it seems appropriate to make good use of some of the steam flows from the power cycle which have been previously expanded in the turbine, This steam must have the lowest possible values of exergy and cost. This possibility is technically feasible and is sometimes recommended by power plant designers. After a detailed study one concludes that the best alternative is to use cold reheated steam (P;=44 bar, t= 354°C, b= 1210 kI/kg). For the plant analyzed in Ref. 7 it appears that the unit exergetic cost of both flows is about the same (k*=2.35) and the monetary cost of the fuel processed in the plant (lignite) is 10"*S/kJ. Now, the economic saving of fuel for the alternative suggested per kilogram of steam used in the soot-blowing process will be as follows: ck*(b, — bs) = 2.96-10"* $/kg. For a soot-blowing flow of 8600 kg/h and 6000 h/ yr of operation this means a fuel saving of 2040 t/yr (6 ~HHV = 15,000 kJ/kg) with an economic value of 15.3:10°8/yr. The comparison between the economic value of fuel saving and the investment needed to modify the installation will make it possible to determine the economic feasibility of the alternative suggested Cost allocation ‘The first proposal for using exergy as a criterion for cost allocation was presented in 1932 by Keenan,” who suggested that the production costs of a cogeneration plant should be distributed among the produets (work and heat) according to their exergy. This criterion of cost distribution has been rejected by several authors,*** sometimes because of a wrong interpretation, sometimes because of an incorrect application. Let us judge this argument by the results obtained in the cogeneration plant shown in Fig. 4(a).” The theory of exergetic cost does not require the disaggregation of the system analyzed into subsystems to exactly reproduce its physical structure, associating a unit to each device. In fact, as in this plant, a disaggregation that states the functions or internal production purposes” of the plant will prove more suitable, Thus, one might not consider the pumps and the mixing heat exchanger, given their low effect on costs. Then, the productive process is better explained by taking into account the contributions to the final product of the three steam flows into which the boiler product can be separated conceptually, as shown in Fig. 4(b). The thermodynamic conditions of the different states and some parameters typical of the operation developed in the plant are shown in Fig. 4(c) and Table 7. The products of the boiler are (B1.~ Bin), (Bas ~ Bzy) and (By,~ Bx»). Applying proposi- tions P4a and P4b it can be concluded that k= (kts = Kix) = (k3y= Ks) = (hy = ki) = ‘The costs of the products of subsystems B and D, with a single product, can now be calculated as kfi = kaky =4.10 and ks = kak = 3.46, The exergy of steam flow m is used for the simultaneous production of two produets, wm2 and q2. For the former, exergy Bz, — Bs. is consumed as fuel. Then k$, =k. For the latter, the fuel is the remaining exergy Ba. Bay. Therefore Ka = Kakc: =3.02 and kia =Kaker~ kp, With these costs we are now able to take a technical decision. The average unit exergetic cost of the heat and electricity produced, given by fey — maida + mab (ga)k ga} 1 Yn b(qa) + m6(42)) (10) and mariska + mywsk a] [ream + msys) ayTheory of the exergetie cost 953 wetneoa 1a ue Fig. (a), Physical structure of the cogeneration plant Fig. 4(b). Productive structure of the cogeneration plant Fig. (c). Ts diagram for the cogeneration plant.9a M.A. Lozano and A. VALEKo. Table 7. Characteristic parameters of the cogeneration plant, + Unit's efficiencies [Exergotic ficiency of boiler om Isentropic efficiency ofthe high pressure turbine 03s Isentropic efficiency of he low pressure turbine = 0.80 etgetic efficiency of alkemator = 095 + Exergy efficiencies: na) = 037 koay=2.70 1) (B) = (olay) C-TO7TS)/(o1a- BID) k@)=132 (CI) = (h2e-hde)/(b2a-b2e) = 0.89 kh = 112 (C2) = (Hde-ADB) (1-TOPTS) /(H2e-B2B)~ 1.00 (C2) = 1.00 (BD) = (88-6) /a-b30) = k@) = 128 ne) = 095 ke) = 105 + Product per unit mass qin 2611 Wag bagl) = 743 Ue 2161 KAR b(@2)=615 Khe flow}: wa=OR3KIAE g =0 where k22=kinakr = 3.17 and kis =Kinske = 3.63, will depend on how the steam produced by the boiler is processed. The products obtained from steam flow ms logically have lower costs than those of their alternative production (k22Q, msw2+mw3 = W, and other inequality restrictions. such those that express the limitation of plant capacity as a function of the steam flows. For the production (W =8000kW, Q=25,000kW) the following results are obtained: 0, m= 11.57 kg/sec (Q2=25,000KW, Ws=SI9SKW) and m;=3.01 kg/see (Wy 2805kW); with average costs of kj =Akjp=270, KG=kGp=0.77, kbe=3.33 and a fuel consumption of 45,890 kW. Once the optimum operating conditions have been established we can now examine what happens if demand for heat and/or work changes. If the ratio W/Q remains constant, then ‘m[ms does not change, and m,=0. Under these conditions the unit costs will remain approximately constant. The variation of W keeping Q constant will make it necessary to modify ms, keeping m, constant. In this case the marginal cost of work will approximately be equal to kz. A variation in the need of Q will make it necessary to modify both mz and mr. InTheory of the exergtie cost 955 this case the marginal cost is calculated as (Bon = 0.67, (3) Local optimization ‘The knowledge of thermoeconomic costs provides an economic meaning to the structural interactions in the plant. This allows us to formulate in a simple way problems related to the local optimization of the subsystems, Let us assume that we want to optimize the heat exchanger (unit k) of the cogeneration plant and that the heat flow Q,=25,000kW is used to evaporate a fluid at temperature T= 406.15 K. We wonder if the value previously assigned to the high-pressure turbine exhaust pressure, P, = 4 bar, is the most adequate. Note that this pressure determines T, and, therefore, the thermal gradient in the heat exchanger AT=T,~ Tq, the heat transfer surface Q,/U AT, the investment to be made J = BA’, the local irreversibility ! = T,Q,(T, — T,)/(T.T,) and also its efficiency 1 = (T./T,)(T,~ Ta)/(T.~ Ty). It will be possible to adopt any of these variables, A for example, as the only free variable of design, ‘The objective function to be minimized is given by the annual cost of the operation of the plant? NYA) te B(A) + aaa) + | +0. «aay When analyzing the process of cost formation, we have seen that the cost of the malfunction of a unit has a repercussion on fuel consumption given by dF: k2, dl, (hypothesis 1). The amortization costs ofthe remaining plant units are assumed to be constant (hypothesis 2). Then the condition of minimum cost is reece an) as In the case analyzed and considering that 7,7, ~T? as T,— T, «T,, the following expression is obtained: di,/dA = —(Q3%)/(A°UT;). Thus, the criterion of optimization is finally reduced to =e” In Table 8 the results obtained are shown and compared to those corresponding to the previous design. It also shows the errors resulting from these hypotheses. In the case of hypothesis 1, using a simulator of the plant, it can be demonstrated that dFy/dh, = 3. Kotas? hhas carried out an optimization, taking into account the effect of the design change in the heat exchanger on the investment costs of the remaining units of the plant; that is to say, without assuming hypothesis 2. The difference among these three designs is irrelevant in practice. This simple procedure can prove valid for the local optimization of individual units in complex plants. Aorr= ( (16) Energy audit ‘The difference between the thermoeconomic analysis proposed here for audit management and the conventional exergetic analysis, stems from the following three ideas.’ Technical exergy saving. Not all exergy saving which is thermodynamically possible can be achieved in practice. In fact, the real saving potential of each unit is limited by a series of technical and/or economic restrictions. Thus, for a subsystem or installation, the technical exergy saving can be expressed as J, = I ~ Ip, where Ip is the intrinsic irreversibility. This is the or 109-69565 M. A. Lozano and A. VALERO le 8. Parameters and resulis for the optimization of the heat ‘exchanger. PARAMETERS. Annual ine of lan operation 2252108 syne Ann! aanizatin tr 01968 year! Constants for heat exchange invesment: = SHO Got ea wants coetcet Skink Esvroamentemperti: eB115K Unitenegee cost of heat 270 eco cr 5.7630% Sn Pant production (0, = 25000 kw W = 000 KW RESULTS: puastous | dy je | ak pea a) ae Ee a0 ark 108 a a in Par 100 336 a 377 ro) “200 | ros000 | 72000 | e000 ow 7 is i 16s ‘arrow Ts wT ma Sivngs ear] —_— se000 | ex000 [79000 irreversibility when the plant operating under design conditions supplies the same total product. Then it will be possible to express the additional total consumption of fuel as follows: AR = Fr (F)p=har= Eley (Py const.) an Table 9 shows the results obtained for the thermal power plant starting from the data presented in Table 3. Malfunction and disfunction. When studying the process of exergetic cost formation, we have found that the malfunction of @ unit causes a disfunction in others. Consequently, technical exergy saving detected in an individual unit can be split in two parts: (i) malfunction (eu). which is caused by a deterioration in the efficiency of the unit, and (ii) disfunction (le ~ In)» Which is due to a modification in the quantity of product which must be provided on account of the malfunction of the rest of the units. We will use the exergy balance J, =F - P= (k, = I)P, for unit / in order to separate both Table 9. Energy audit of the performance test of plant in Fig. x [os] ele] [aloo] Pun [omen ¥ [srs] so} os | 2005] 2020] oss] sea | soo] 40 | 2a { 426 | sos | 1036] ase 2 | 20 | ino} 30 | 1036] 1562] oom} aso | x20} 10 | 200] oot | so] 2u0| 522 a | ts | 10] os | rom] 1032] oo] as | avo | os | oso] oo2 | os2 | asm] 125 u sat] 492 | 1929 290 1002 ax | wo | r00 [ron | 36s [aaas[ ose s00 [mofo fiom | o | wmlTheory of the exergtic cost 97 parts. When modifying the operation conditions of the installation, it can be possible for both the efficiency and the amount of product to change. Therefore, for an infinitesimal modification we have dij=P.dk, +(k,~1)dP. Integrating from design conditions to those of real operation, one obtains the technical saving broken down as Te = PAK + (ki = WAP. = Tout Dew — (Pr const.). (as) For the installation we have imposed the condition that the product doesn’t vary. Therefore, I.r™Pr Oke. Table 9 shows the terms of malfunction and disfunction of the units for the analyzed thermal power plant. Fuel impact, The repercussions on the total consumption of fuel which can be obtained by improving a unit until its efficiency becomes again the design efficiency, will be assessed by multiplying its malfunction or endogencous irreversibility by the unit exergetic cost of the fuel consumed by this unit Aga Kihea= KEP Mk; (Pr const). (a9) ‘We have seen that this approximation is correct in the case of a sequential process. It can also be proved that it will remain valid provided that the perturbation in the efficiency of unit does not induce a variation in the efficiency of the remaining units or in the exergy recycling ratios.” On the whole, it can be assumed that it is a reasonable approximation for small perturbations, Table 9 presents the impact on fuel of the units for the thermal power plant. Note that the addition extended to the set of the units is a reasonable approximation to the technical exergy saving of the installation; that is to say h Af. She DAau — Prconst. (20) In general, itis not true that A,.;~z,» except in the case of the total plant. Table 10 summarizes the results corresponding to the thermoeconomic analysis of the thermal power plant carried out using the data available in a performance test. The thermodynamic saving of fuel J; is 80MW and its distribution in accordance with a conventional exergetic analysis 4, reveals that the boiler subsystem is responsible for nearly ‘60 MW, the cycle for the remaining 20 MW and the incidence of the alternator is negligible. These figures clearly describe the wastefulness of resources with respect to an ideal situation where the existence of reversible devices is postulated. In contrast, the point of view of thermoeconomics is to assume the reference situation being that of the plant already operating in design conditions. From this perspective, we realize that only 10 MW (AF;) out of the 80 MW (/r) are liable to be saved at the level of decision taken by the engineers responsible for the plant operation. From that, 65% are physically located in the Table 10. Summary ofthe results forthe performance test of plant in Fig. 1 Boer Gt) ‘Gye Gea) | Aeraor G3) Par “Themadynamic Swing] S7580(708) | 2LoMWasay | 1sswas) | soorsw 00m) "TectilSaring esmwese) | somwaos | asnwise) | 10080 doom Fel Impact asmwass) | samwose | remvass | 9ssw ions)958 M.A. Lozano and A, VaLER0 boiler, 30% in the cycle and the remaining 5% in the alternator, in accordance with the technical exergy saving calculated (I,,) However, savings possibilities must be ordered according to their impact on the total consumption of fuel for the plant (4,,) which derives from the malfunction detected in the units (J,,). Thus, the boiler is only responsible for less than 30% of the additional fucl consumption registered, the cycle for more than 50%, and the alternator for nearly 20%: CONCLUSIONS ‘Our thesis is that the bases of thermoeconomics have to be found in the consequences which the second law imposes on the consumption of resources of every productive system. In other words, we are stating that the only rigorous way of measuring the production cost (not its ‘market value) is the second law, the unique way to identify, allocate, quantify and attribute @ cause to the inefficiencies of real plants which are responsible for the consumption of resources and the origins of cost. The theory of exergetic cost is based on economic concepts such as resources, structure, efficiency, and purpose. It also uses the tools of general systems theory, However, these concepts and tools do not suffice to give a physical explanation of the product cost. On the other hand, even if thermodynamics offers solutions for quantifying, explaining and decreasing the irreversibilities it is incapable of assessing their economic consequences using its current formulation. The theory of exergetic cost links thermodynamics and economics. It postulates that the process of exergetic cost formation of products runs parallel to the continuous and inexorable process of energy degradation of resources. The result is @ rigorous procedure that calculates the costs of all process streams in a system based on the matrix of costs A that defines the system interactions from a thermoeconomic point of view. Acknowledgements—The authors gratelully acknowledge to Profesor G. Tsatsitonis, A, Tsatsronis and J. Pisa their ‘useful comments on this pape REFERENCES 1. W. J, Wepfer. “Application of the Second Law to the Analysis and Design of Energy Systems,” Ph.D. Thesis, University of Wisconsin, Madison, WI (1979), 2. M. J, Moran, “Second Law Analysis. What is the State of the Art?” in A Future for Energy, pp. 249-260, S. S. Stecco and M. J. Moran eds., Pergamon Press, Florence, Italy (1990), 3. T. J. Kotas, The Exergy Method of Thermal Plant Analysis, Butterworths, London (1985) 4. B. 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Reistad eds., The American Society of Mechanical Engineers, New York, NY (1987) NOMENCLATURE Roman letters P= Product Entropy generation Exergy bifurcation rate ‘apital-cost amortization Greek leners 6, = Subsystem efficieney detect (/,/F,) = Biliciency T1= Exergoeconomic cost nit exergy consumption ea nit exergetic cost i= Subsystem Losses j= Flow0= Environmental state 0 = Dead state Superscripis t nergy ransposed matrix, Vectors and Matrices A idence matrix [n x m] M. A. Lozano and A, VaurRo ‘Ay-= Buel matrix [nm] ‘Ap Produet matrix [n x m] Ac = Losses matrix [1 Xm] A= Costs matrix [mx mi] Exergy destruction vector [n x 1] E = Flow energy vector [m x 1] Fuel exergy vector {n ¥ 1] Fuel exergetic cost vector {7 x 1] = Irreversibility vector [n > 1] P= Product vector [nx 1] P* = Product exergetic cost vector [n x I] ‘YF = Vector of external assessment [m X 1] Z= Vector of extemal assessment [m X 1] Production matrix [(m ~n) xm} Exergocconomic cost vector {m % 1]