Cost of electricity.
The user can then calculate operating cost and compare the pay-back time of different proposed project variants. Because pay back times generally are short no estimates of inflation, maintenance labour cost or rise in energy price will be taken into account. The user can then select the solution with the shortest pay-back time.
The user may also have a previously defined maximum pay-back time in his plant which is usually between 2 and 5 years. This period is considerably shorter than the expected lifetime of the motor system. It means that after a short pay-back time the motor continues to run until the end of its technical lifetime free of cost for the added investment. The motor generates in this phase a profit with a "golden end".
Life cycle cost
In the life cycle cost analysis the summation of the costs of all elements in three phases for different project variants are compared with the baseline:
Initial purchase (or repair), planning and installation cost,
Use-phase with operation cost (energy, maintenance and repair),
End-of-life phase with removal and recycling cost.
For accurate calculation a discounted cash flow analysis has to be made taking interest rates and inflation rates into account. The user has to know the purchase prices of different efficiency class motors and variable speed drives, the annual operating time, the cost of electricity, and also the expected duration of the lifetime and the average cost of maintenance and repair.
The cost of end-of-life is usually neglected in the calculation because recycling of the material of the motor pays for eventual cost of dismantling and transport.
The user can select the project variant with the least life cycle cost. The least life cycle cost is the best choice for the user. In larger investments they can help to decide on optimum projects.
Recent studies in Europe (EuP 2008: Figure 13) confirm that new IE3 motors between 1.1 and 110 kW have lower life cycle costs than IE1 or IE2 motors if they have more than 2000 operating hours per year.