EURO Summer Course on

Sustainable Assessment of Clean Air Technologies

Lectures 1-3
Fundamentals of Thermoeconomics
Antonio Valero*, Luis Serra, Javier Uche
CIRCE, Center of Research for Energy Resources and Consumption
Centro Politécnico Superior, Universidad de Zaragoza
Zaragoza, Spain

Aim
The aim of this lecture is to introduce Thermoeconomics as an analytical and
powerful tool for the cost accounting, diagnosis, improvement, optimization and
design of energy systems using the combination of Second Law of
Thermodynamics and Economics.

OBJECTIVES
The lectures will comprise the following objectives:
§ A vision about the importance of Thermoeconomics as a tool for improving
energy systems and prevent damage on envioronment.
§ Introduce the basic concepts of exergy, cost, exergetic and monetary costs,
fuel, product, unit exergetic consumption and efficiency.
§ Describe the process of cost formation and distinguish between the physical
and the thermoeconomic plant models. The productive structure and its
mathematical representation.
§ Analyze the basic concepts to diagnose and optimize energy systems using
thermoeconomics.

*
Director of CIRCE and Chair on Thermal Systems
2

CONTENTS
1. Introduction to Thermoeconomics
2. Basic Concepts.
2.1. The Concept of Cost.
2.2. Fuel, Product and Unit Exergetic Consumption.
2.3. Physical and Thermoeconomic Plant Models.
3. Calculating Thermoeconomic Costs
3.1. Economic Resources and Thermoeconomic Costs
4. Thermoeconomic Applications to Complex Energy Systems .
4.1. Operation Thermoeconomic Diagnosis
4.1.1. Technical Exergy Saving
4.1.2. Impact on Resources Consumption
4.1.3. Malfunction and Dysfunction Analysis
4.1.4. Intrinsic and Induced Malfunctions
4.2. Thermoeconomic Optimization

KEYWORDS
Thermoeconomics, diagnosis, optimization, costs, exergy, exergetic cost,
irreversibility, malfunction, fuel, product.

GLOSSARY
Thermoeconomics: Science that combines Thermodynamics and Economics in
order to avoid the natural resources consumption in processes.
Malfunction: Effect of an inefficiency in a/several process units of a system.
Exergy: Amount of available energy in a physical process.
Cost: Amount of resources to obtain a product.

1. Introduction to Thermoeconomics

As the human population grows, our finite world is becoming smaller and natural
resources are more and more scarce. We must conserve them in order to
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survive and Thermoeconomics plays a key role in this endeavor. We should find
out how energy and resources degrade, which systems work better, how to
improve designs to reduce consumption and prevent residues from damaging the
environment. Thermoeconomics and its application to engineering energy
systems can help to answer these questions.
The production process of a complex energy system (e.g. a complex power
plant) can be analyzed in terms of its economic profitability and efficiency with
respect to resource consumption.
An economic analysis can calculate the cost of fuel, investment, operation and
maintenance for the whole plant but provides no means to evaluate the single
processes taking place in the subsystems nor how to distribute the costs among
them.
On the other hand, a thermodynamic analysis calculates the efficiencies of the
subsystems and locates and quantifies the irreversibilities but cannot evaluate
their significance in terms of the overall production process.
Thermoeconomic analysis combines economic and thermodynamic analysis by
applying the concept of cost (originally an economic property) to exergy (an
energetic property), (see e.g. Valero et al. (1986)). Most analysts agree that
exergy is the most adequate thermodynamic property to associate with cost
since it contains information from the second law of thermodynamics and
accounts for energy quality (Tsatsaronis (1987, 1998), Gaggioli and El-Sayed
(1987), Moran (1990)). Exergetic efficiency compares a real process to a
reversible one, (i.e. an ideal process of the same type). An exergy analysis
locates and quantifies irreversibilities in a process. Exergy based
thermoeconomic methods are also referred to as “exergoeconomics”
(Tsatsaronis and Winhold (1985)).
The physical magnitude connecting physics (thermodynamics) and economics is
entropy generation or, more specifically, irreversibility. This represents the
“useful” or available energy lost or destroyed (exergy destruction) in all physical
processes. All real processes in a plant are non-reversible and, as a
consequence, some exergy is destroyed and some natural resources are
consumed and lost forever, which creates cost. All natural resources have an
economic cost: the more irreversible a process, the more natural resources are
consumed (higher energetic cost) and the higher the required investment (higher
thermoeconomic cost). If we can measure this thermodynamic cost by
identifying, locating and quantifying the causes of inefficiencies in real
processes, we can provide an objective economic basis using the cost concept.
Thus, thermoeconomics assesses the cost of consumed resources, money and
system irreversibilities in terms of the overall production process. Consumed
4

resource cost involves resources destroyed by inefficiencies and helps to point

out how resources may be used more effectively to save energy. Money costs
express the economic effect of inefficiencies and are used to improve the cost
effectiveness of production processes.
Assessing the cost of the various streams and processes in a plant helps to
understand the process of cost formation, from the input resource(s) to the final
product(s). This process can solve problems in complex energy systems that
cannot normally be solved using conventional energy analysis based on the First
Law of Thermodynamics (mass and energy balances only), for instance:
1. Rational price assessment of plant products based on physical criteria.
2. Optimization of specific process unit variables to minimize final product costs
and save resource energy, i.e. global and local optimization.
3. Detection of inefficiencies and calculation of their economic effects in
operating plants, i.e. plant operation thermoeconomic diagnosis.
4. Evaluation of various design alternatives or operation decisions and
profitability maximization.
5. Energy audits.
Specific examples of these applications will be given. Many reports also provide
specific information about thermoeconomic applications (Lozano and Valero
(1993), Tsatsaronis (1994), Lozano, Valero and Serra (1996), Valero et al.
(1994), Bejan et al. (1997), Valero and Lozano (1997), Valero, Correas and
Serra (1999), Lozano et al. (1994), Frangopoulos (1987), Von Spakovsky and
Evans (1993), El-Sayed and Tribus (1983), El-Sayed (1988)).
Thermoeconomic methods can generally be subdivided into two categories
(Tsatsaronis (1987)), those based on cost accounting (e.g. Exergetic Cost
Theory, Lozano et al. (1993), Average-Cost-Approach, Bejan et al. (1997),
Last-In-First-Out Approach, Lazzareto and Tsatsaronis (1997)) and those based
on optimization techniques (e.g. Thermoeconomic Functional Analysis,
Frangopoulos (1987), Engineering Functional Analysis, von Spakovsky and
Evans (1993), Intelligent Functional Approach, Frangopoulos (1990)). Cost
accounting methods help to determine actual product cost and provide a rational
basis for pricing, while optimization methods are used to find the optimum design
or operating conditions.
Unfortunately, there are almost as many nomenclatures as theories. This causes
confusion, complicates method comparison and impedes the development of
thermoeconomics in general (Tsatsaronis (1994)). The Structural Theory of
Thermoeconomics (Valero et al. (1992,1993)) provides a general mathematical
formulation using a linear model which encompasses all thermoeconomic
 5

methodologies. The most systematic and widespread methodologies (see above)

use exergy to linearly apportion costs when two or more coproducts appear, and
their results can be reproduced using the Structural Theory (Erlach (1998),
Erlach et al. (1999)). For this reason, all concepts and procedures explained here
are based on the general and common mathematical formalism of the Structural
Theory.
This introductory section on the fundamentals of thermoeconomics is divided into
three parts. First the basic concepts needed to perform and understand the
thermoeconomic analysis of complex energy systems are presented. Special
attention has been paid to explaining the thermoeconomic cost concept. Once
the average and marginal costs are defined, in the second part their meaning,
relationship and calculation procedures are fully explained with examples.
Finally, the third part describes some applications of thermoeconomic analysis as
applied to operation diagnosis and optimization of complex energy systems.

2. Basic Concepts

All thermoeconomic methodologies use costs based on the Second Law of

Thermodynamics when solving engineering problems. In this section, the cost
concept is explained together with all the new basic concepts, including fuel,
product and thermoeconomic models needed to perform a thermoeconomic
analysis of a plant.

2.1. The concept of cost

The cost of a flow in a plant represents the external resources that have to be
supplied to the overall system to produce this flow. Thermoeconomic analysis
distinguishes between exergetic costs and monetary costs.
The exergetic cost (Valero et al (1986)) of a mass and/or energy flow is the
units of exergy used to produce it, e.g. the exergetic cost of the net power is the
exergy provided by the natural gas to generate the electrical power delivered to
the net by the co-generation plant (see Figure 1). These costs are a measure of
the thermodynamic efficiency of the production process generating these flows.
The unit exergetic cost of a mass and/or energy flow represents the amount of
resources required to obtain one unit of exergy. Thus, if the unit exergetic cost
of the electricity is three, three units of plant exergy resources are consumed to
obtain one exergy unit of electrical power.
6

1
Com bus tor
1

2 3

5 6
Compres sor Turbine

2 3

0 4

HRSG
Ai r 7
Gases 4
Natural Gas
Work 8
Water/Steam

Figure 1. Physical structure of the co-generation plant.

The monetary cost takes into account the economic cost of the consumed fuel
(i.e. its market price) as well as the cost of the installation and the operation of
the plant and defines the amount of money consumed to generate a mass and/or
energy flow. These costs are a measure of the economic efficiency of a
process. Similarly, the unit monetary cost (also called unit exergoeconomic
cost or unit thermoeconomic cost) of a mass and/or energy flow is the amount
of monetary units required to obtain one unit of exergy.
We can further distinguish between average costs, which are ratios and
express the average amount of resources per unit of product, and marginal
costs, which are a derivation and indicate the additional resources required to
generate one more unit of the product under specified conditions.
Mathematically they are defined as:
unit average cost:
Bo
k* = (1)
Bi

unit marginal cost:

 ∂B̂ 
k* =  0  (2)
 ∂Bi conditions

The average costs are only known after production, when we know how many
resources were used and the production obtained. The average cost is not
predictive. Knowing the average unit cost of a product does not provide the cost
 7

of a production process P + ∆P. Thermoeconomic cost accounting theories

calculate average costs and use them as a basis for a rational price assessment,
under physical criteria, of the internal flows and the products of the plant.
Marginal costs can be used to calculate additional fuel consumption when the
operating conditions are modified. Thermoeconomic optimization methods
(Frangopoulos (1990, 1997)), Von Spakovsky and Evans (1993)) are based on
marginal costs when solving optimization problems.

2.2. Fuel, product and unit exergetic consumption.

A productive purpose, a certain good or service to be produced, can be defined

for every plant. In order to generate this product, some resources have to be
supplied to the plant and are consumed in the process. For example, in the co-
generation plant, natural gas is supplied to the plant to generate electric power
and process steam.
A productive purpose expressing a process unit function in an overall production
process can be defined for each process unit. The productive purpose of a
process unit measured in terms of exergy is called product. To create this
product, another exergy flow(s) is consumed. The flow of exergy which is
consumed in the process unit during the generation of its product is called
fuel(s).
Real process exergy is destroyed in any process. That is, part of the fuel exergy
is destroyed during product generation. Using the definitions of fuel and product,
the exergy balance for a process unit can be formulated as:
F = P+I (3)
Therefore, the fuel required to generate a certain amount of a product depends
on the amount of irreversibility (exergy destroyed). The fuel exergy required to
generate one exergy unit of product is defined as unit exergetic consumption k:
F
k= (4)
P
It is a measure of the thermodynamic efficiency of the process and equals one
for reversible processes and is greater than one for all real processes. The more
irreversible a process, the higher the value of the unit exergetic consumption.
Combining equation (4) with the exergy balance on a fuel/product basis
(Equation 3), the unit exergetic consumption k can also be formulated as:
I
k = 1+ (5)
P
8

The reciprocal of the unit exergy consumption is defined as the exergetic

efficiency η. It is equal to one for reversible processes and is less than one for
all real processes.
P I
η= = 1− (6)
F F
Fuel and product definitions for some typical process units in a dual-purpose
power and desalination plant are shown in Table 1. The fuel-product definition
for the process units of the co-generation plant (Figure 1) are shown in Table 2.

Process unit Fuel Product

Boiler Natural gas Exergy difference between
the generated steam flow
and the entering water
flow
Pump Work to drive Exergy supplied to the
pump/compressor working fluid
Turbine without Exergy removed from Generated work
extraction working fluid during the
expansion

Turbine with Exergy removed from Generated work

extraction working fluid during the
expansion

Generator Mechanical work Electric Work

Heat exchanger Exergy removed from the Exergy supplied to the cold
hot flow flow
Table 1. Fuel and product definitions for typical power plant units.
 9

No. Subsystem Fuel Product Technical

production
coefficients
1 Combustor F1 = B1 P1 = B3–B2 k cb = F1/P1

2 Compressor F2 = B5 = Wcp P2 = B2–B0 k cp = F2/P2

3 Turbine F3 = B3–B4 P3 = B5 + B6 = Wcp k gt = F3/P3

+ Wnet

4 HRSG F4 = B4 P4 = B7 = BHEAT k HRSG = F5/P5

5 Junction P1 = B3–B2 Pj1 = B3 r1 = P1/Pj1

P2 = B2–B0 r2 = P2/Pj1

6 Branching 1 Pj1 = B3 F3 = B3–B4

F4 = B4

7 Branching 2 P3 = B5 + B6 = F2 = B5 = Wcp
Wcp + Wnet B6 = Wnet

Table 2. Fuels and Products of the process units of the co-generation plant.

2.3. Physical and thermoeconomic plant models

A plant is analyzed using a physical model with a set of equations to describe the
physical behavior of the process units. It calculates parameters such as
temperatures, pressures, efficiencies, power generated etc. to describe the
physical state of the plant. Depending on the analysis, a decision has to be taken
on the detail required i.e., which flows and process units are to be considered.
The process units for the analysis do not necessarily correspond to physical
units. Various parts of the installation can be combined into one process unit and
physical units can be further disaggregated. It is important to choose an
appropriate aggregation level that properly defines the behavior of each process
unit and its purpose in the overall production process. The physical structure
(see Figure 1) depicts the process units, mass and connecting energy flows
considered in the physical model.
10

Comp F2 = B5

F3 = B3 – B4 Wnet
P3
Turb b2
P2 = B2– B0 Pj1 = B3

j1 b1
P1 = B3 – B2 P4 = B7 = Bheat
HRSG
F4 = B4
F1 =B1
Comb

Figure 2. Productive Structure of the co-generation plant.

The minimum physical data required in a thermoeconomic analysis are

temperatures, pressures, mass flow rates and compositions of all mass flows
together with the heat and power rates of the energy flows considered. Usually
all this information is fully or partially obtained from the physical model of the
plant. But it is not strictly indispensable if all the required data are measured
plant data, collected directly from the plant data acquisition system.
Nevertheless, when pricing all mass and energy flows in the thermoeconomic
analysis, it is absolutely necessary to define a thermoeconomic model of the
plant which considers the productive purpose of the process units, i.e. the
definitions of fuels and products and the distribution of the resources throughout
the plant. The productive model can be graphically depicted by the productive
structure diagram (Figure 2).
In this scheme, the flows (lines connecting the equipment) are the fuel and the
product of each subsystem. Each “real“ piece of equipment in the plant has an
outlet flow (product) and an inlet flow (fuel). The capital cost of the units is also
considered as an external plant resource and is represented as inlet flows
coming directly from the environment (not considered in Figure 2). Since the fuel
of a process unit can be the product of another and the product of a process unit
can be the fuel of several subsystems, two types of fictitious devices are
introduced: junctions (rhombs) and branching points or branches (circles). In a
junction, the products of two or more process units are joined to form the fuel of
another process unit. In a branching point, an exergy flow (fuel or product in the
productive structure –see Figure 2-) is distributed between two or more process
units. Sometimes the productive structure can be simplified (with the same
results) by merging the junctions and branches in a new fictitious process unit
called junction-branching point. For the sake of simplicity, the explanation of the
fundamentals of thermoeconomics will be made using the productive structure
depicted in Figure 2.
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The productive structure is a graphical representation of resource distribution

throughout the plant. Thus, its flows are fictitious and are not necessarily
physical flows. While each plant has only one physical structure to describe the
physical relations between the process units, various productive structures can
be defined depending on the fuel and product definitions as well as decisions on
how the plant resources are distributed among the process units.
Thus, the thermoeconomic model (mathematical representation of the productive
structure) is a set of mathematical functions called characteristic equations,
which express each inlet flow as a mathematical function of the outlet flows for
all the productive structure process units and a set of internal parameters x l:

Bi = gi(x l, Bj ) i = 1,…,m–s (7)

where the index i refers to the input flows of the process unit l, the index j
refers to the output flows of the process unit l, and m is the number of flows
considered in the productive structure. Every flow is an input flow of a process
unit and an output flow of another process unit or the environment. For the flows
interacting with the environment, we define:
Bm-s+1 = ωi i = 1,…,s (8)

where s is the number of system outputs, and ωi is the total system product, i.e.
an external variable which determines the total product. The characteristic
equations for the system in Figure 2, are shown in Table 3:

Nº Process Entry Outlet Equation

unit

1 Combustor F1 P1 F1 = g (x 1 , P1 ) = k P1
F1 cb

2 Compressor F2 = Wcp P2 F2 = g (x 2 , P2 ) = k P2
F2 cp

3 Turbine F3 P3 = Wgt F3 = g (x 3 , P3 ) = k P3
F3 gt

4 H.R.S.G. F4 P4 =B HEAT=ω 4 F4 = g (x 4 , P4 ) = k P =k ω4 = k B
F4 HRSG 4 HRSG HRSG

HEAT

5 Junction 1 P1 , P2 Pj1 P1 = g (x 5 , Pj1 ) = r1 Pj1 = r1 (F3 +F 4 )

P1

P2 = g (x 5 , Pj1 ) = r2 Pj1 = r2 (F3 +F 4 )

P2

6 Branching 1 Pj1 F3 , F4 Pj1 = g (x 6 , F3 , F4 ) = (F3 +F 4 )

Pj1

7 Branching 2 P3 F2 , Wnet P3 = g (x 7 , F2 , ω 3 ) = F2 + ω 3 = Wcp + Wnet

P3
12

Table 3. Characteristic equations of the co-generation plant.

The inlet and outlet flows of the productive structure units are extensive
magnitudes, which are the product of a quantity (usually mass flow rate) and a
quality (specific magnitude). The magnitudes applied by most thermoeconomic
methodologies are exergy (Tsatsaronis (1987)), negentropy (Frangopoulos
(1983)) and money. Other magnitudes, like enthalpy or entropy, can also be
used.
The internal variables appearing in the thermoeconomic model depend on the
behavior of the subsystem and they are presumably independent of mass flow
rates. This implies that relations like efficiencies or pressure and temperature
ratios -which are mainly independent of the quantity of the exiting flows- can be
used as internal parameters.
Note that the main objective of the productive structure, and hence of the
thermoeconomic model, consists on sorting the thermodynamic magnitudes
related to the physical mass and energy flow-streams connecting the plant
subsystems, in a different way that the equations modeling the physical plant
behavior do, in order to explicitly determine for each subsystem its energy
conversion efficiency.
It is important to take in mind that, as it was already explained, thermoeconomics
connects thermodynamics, which is a phenomenological (black box analysis)
science, with economics. That is, by sorting the thermodynamic properties of the
physical mass and energy flow-streams of a plant, which in turn provide the
energy conversion efficiency of each subsystem, thermoeconomics analyzes the
degradation process of energy quality through an installation, i.e.
thermoeconomics evaluates the process of cost formation.
Depending on the analysis scope each subsystem can be identified with a
separate piece of equipment, a part of a device, several process units or even
the whole plant. Sometimes the objective consists on analyzing a plant in a deep
detail. In this case it is advisable, if possible, to identify each subsystem with a
separate physical process (heat transfer, pressure increase or decrease and
chemical mixture or reaction) in order to locate and quantify, separately if
possible, each thermal, mechanical and chemical irreversibility occurring in the
plant. If the objective consists on analyzing a macro-system composed of
several plants, probably in this case the more convenient approach is consider
each separate plant as a subsystem.
Thus, thermoeconomics always performs a systemic analysis, no matter how
complex the system is, basically oriented to locate and quantify the energy
conversion efficiency. It is out of the scope of thermoeconomics to model the
 13

behavior of the process units, which is made by the mathematical equations of

the physical model.
Even though (it is out of the scope of thermoeconomics simulate the behavior of
the subsystems), it is very important build the thermoeconomic model with
physical meaning. This is the reason, as already explained, of defining different
thermoeconomic models for the same plant. Depending on the aggregation level
and on the nature of the thermoeconomic equations the model will content
physical information about the actual system behavior with different accuracy
degrees. The obtained results from a very rough thermoeconomic model, without
any physical sensitivity related with the actual behavior of the plant, probably will
be useless.
The more extended thermoeconomic methodologies use exergy linear equations
in their thermoeconomic models, because they present practical (the model is
simpler and for this reason easier to understand when applied to very complex
energy systems) and conceptual advantages, as it will be explained. Moreover,
in many real plants it is possible to find an aggregation level where the system
and subsystems linearly behave with enough accuracy, under an engineering
point of view (Valero et al. (1999).
Thus, if the characteristic equations are first grade homogeneous functions with
respect to the subset B, of independent variables (as linear equations do), that is:
λBi = gi(λB1 ,…λBj , x l) λ∈ℜ (9)

Euler´s Theorem states that the homogeneous function of first order verify:

 ∂g     
Bi =  i  B +  ∂g i  B + ... +  ∂g i B l1 ,…,ls in Sl (10)
 ∂Bl  l1
 ∂Bl  l2
 ∂ Bl  ls
 1   2   s 

or using the marginal consumption notation,

∂g i
Bi = ∑ κ ij B j κ ij = i=1,...,m l=1,...,n. (11)
j∈Sl ∂B j

This property means that the input of a process unit varies at the same rate as
its outputs. Note that this property does not imply that the function must be
linear.
14

For instance, a Cobb-Douglas function z = a xα y(1-α), is also a homogeneous

first order function.
 15

κij are the technical production coefficients and represent the portion of the i-th
process unit production:
∂g i
κ ij = (12a)
∂B j

The sum of κij coefficients of a unit is the unit exergy consumption of that unit:
n
n ∑ Fi Fj
κj= ∑κ ij = i =0 = (12b)
i =0 Pj Pj

It can be identified three types of linear characteristic equations:

1. Those connecting each fuel of a process unit to its corresponding product:
Fi = κij Pj as for instance F1 = gF1 (x 1 , P1 ) = k cb P1 (13a)
There is one such equation for each process unit's fuel. These types of
equations are generated in the pieces of equipment and they inform about:
(i) the productive function of each process unit, i.e. its production (product)
(ii) what the process unit needs (fuel) to develop its productive purpose, and
(iii) the thermodynamic efficiency of the process in the process unit.
2. Structural equations model how the resources consumed by the plant are
distributed through the plant process units. They show how the process units are
connected from a productive point of view. Structural equations are
characteristic equations to describe the productive model of junctions and
branches, e.g.:
P1 = gP1 (x 5 , Pj1 ) = r1 Pj1 = r1 (F3 +F4 ) (13b)
3.When the capital cost of the equipment is also considered in the analysis, a
third type of characteristic equation is required; costing equations. These
equations are very often not linear, but in the case of these equations this is a
minor problem, because they can be linearized for different operation intervals.
They relate the investment cost of the process unit with thermodynamic
variables and its product. They express the amount of resources needed to build,
install, maintain (etc.) a process unit.
16

For example, a costing equation proposed by El–Sayed (1996) for a MSF

desalination unit is on the form:
Z = 0.02 ⋅ 10 ⋅ Q ⋅ ∆Tn− 0. 75 ⋅ ∆Tt−0.5 ⋅ ∆Pt−0.1 (13c)
The diagram of the productive structure is also called a Fuel/Product diagram
(Torres et al. (1999)) because in most cases the lines connecting the pieces of
equipment represent the fuels and products of the different units. Thus, the
characteristic equations (see Table 3) using the Fuel – Product notation can also
be written as:
n
Pi = Bi 0 + ∑ Bij i = 0,1,…,n (14)
j =1

This equation shows how the production of a process unit is used as fuel by
another unit or as a part of the total plant production. In the above expression,
Bij is the production portion of the i-th process unit that fuels the j-th process
unit, and Bi0 represents the production portion of the process unit i leading to the
final plant product (the subscript 0 refers to the environment, which is
considered another process unit interacting with the plant).
Equation (14) can be expressed in terms of the unit exergetic consumptions as:
n
Pi = Bi 0 + ∑ κ ij Pj i = 0,1,…,n (15)
j =1

In matrix notation it can also be expressed as:

P = Ps + KP P (16)

where Ps is a (n×1) vector whose elements contain the contribution to the final
production of the system Pi0 obtained in each process unit, and 〈KP〉 is a (n×n)
matrix, whose elements are the unit exergy consumption κij. This expression
helps to relate the production of each process unit as a function of the final
production and the unit consumption of each process unit:

P = P Ps where P ≡ (UD − KP )−1 (17)

In the same way, we can express the irreversibility of each process unit as:

I = I Ps where I ≡ (K D − U D ) P (18)

while the total resources of the system may be obtained as:

 17

FT = tκ e P Ps (19)

where tκ e ≡ (κ 01 ,...,κ 0 n ) , is a (n×1) vector whose elements contain the unit

consumption of the system-input resources.

3. Calculating Thermoeconomic Costs

Once the thermoeconomic model has been defined and the characteristic
equations corresponding to the productive structure of the system are known,
the costs of all flows in the productive structure can be easily calculated.
There are two different types of thermoeconomic costs: average costs and
marginal costs (equations 1 and 2). It is important to note that (as discussed
below) the average and marginal costs coincide when the characteristic
equations of the thermoeconomic model are first grade homogeneous functions
(Serra (1994), Reini (1994), Uche (2000)).
This result is very important since both costs can be calculated using the same
procedure. Marginal costs are a derivative (see equation 2) and can be
calculated by applying the chain rule of the mathematical derivation. Similarly,
average costs can also be obtained from the rules of the mathematical derivation
applied to the thermoeconomic model when the characteristic equations are first
grade homogeneous functions.
According to the previous premises, the cost of the plant resources can be
defined as:

e
Bo = ∑ k*o ,i Bi (20)
i =1

where e, is the number of system inputs, and k *o,i is the unit cost of the –i–
external resource.
Each flow, as a process unit input, is a function (defined by the characteristic
equation) of a set of internal variables, x, external variables ω and the output
flows of the process unit. The cost of the plant resources is then a function of
each flow, the set of internal variables of each process unit and the final product
of the plant B0 = B0 (Bi, x, ω ), according the relations (7) and (8).
18

When calculating the variation of the resources consumed in the plant

concerning a flow, the chain rule can be applied:
∂B0
= k *0,i i = 1,… ,e (21a)
∂Bi

∂B0 m ∂B0 ∂g j
= ∑ i = e+1,… ,m (21b)
∂Bi j =1 ∂B j ∂Bi
j ≠i

∂ B0
The expression represents the marginal costs which evaluate the additional
∂ Bi
consumption of the resources, when an additional unit of the flow –i– is
produced, under the conditions that the internal variables, x, do not vary
throughout this process.

∂g i
We can denote these marginal costs as k *i, and κ ij ≡ the marginal
∂B j
consumption of flow –i– to produce the flow –j–, then we can rewrite the
previous expressions, as:

k*i = k*0 ,i i = 1,… , e (22a)

m
k*i = ∑κ jik *j i = e+1,… , m (22b)
j =1
j ≠i

Note that the unit exergetic cost of each fuel entering the plant is unity because
there is no energy quality degradation nor exergy destruction at the very
beginning of the productive process. Hence, the amount of exergy consumed to
obtain each plant’s fuel is its own exergy content and therefore its unit exergetic
cost equals one.
It can easily be proved that the cost of each flow P* ij of the productive
structure using the Fuel/Product notation is:

Pij* = k*P ,i Bij (23)

And the exergetic cost of the product of each process unit is the same as the
cost of the resources needed to obtain it, hence:
 19

n
Pi* = Fi* = ∑ k*P , j B ji i = 1,…,n (24)
j =0

This cost equation can also be expressed in terms of the unit exergetic
consumptions:
n
k *P ,i = κ 0 i + ∑ κ ji k *P , j i =1,…,n (25)
j =1

which can be used to obtain the unit exergetic cost of the flows appearing in the
productive structure diagram as a function of the unit exergetic consumption of
each process unit.
Then, if the characteristic equations and the marginal consumptions for each
*
process unit are known, the marginal cost k for each flow can be obtained by
solving the system of linear equations (25).
Example 1
For the example of a co-generation plant (Figure 2), equations (21a), (21b) can
be written as:
∂B1
k*F1 =
∂F1

∂B1 ∂B1 ∂P3

k*F2 = = = k *P3
∂F2 ∂P3 ∂F2

∂ B1 ∂B1 ∂ Pj 1
k*F3 = = = k*Pj 1
∂ F3 ∂Pj1 ∂ F3

∂B1 ∂ B1 ∂ Pj1
k*F4 = = = k *Pj 1
∂F4 ∂ Pj1 ∂ F4

∂ B1 ∂B1 ∂F1
k*P1 = = = k*F1 kcb
∂ P1 ∂ F1 ∂ P1

∂ B1 ∂B1 ∂F2
k*P2 = = = k*F2 kcp
∂P2 ∂F2 ∂P2

∂B1 ∂B1 ∂F3

k*P3 = = = k*F3 k gt
∂P3 ∂F3 ∂P3
20

∂B1 ∂ B1 ∂ F4
k*P4 = = = k*F4 k HRSG
∂P4 ∂F4 ∂P4

∂B1 ∂B1 ∂P2 ∂B1 ∂P1

k*Pj1 = = + = k *P2 r2 + k *P1 r1
∂Pj1 ∂P2 ∂ Pj1 ∂P1 ∂Pj1

∂B1 ∂ B ∂P3
*
kW = = 1 = k*P3
net
∂ Pnet ∂P3 ∂ Wnet

The thermoeconomic model (characteristic equations) of an energy system

contains the mathematical dependence between the resources consumed and
plant flows (products and internal flows). It is therefore possible to define a set
of linear equations to calculate the costs of every flow of the plant's productive
structure. Note that these equations show the process of cost formation on the
productive structure.
The proposed procedure to calculate the marginal cost of all the flows of a plant
is general and valid for any thermoeconomic formulation that uses equations
connecting inlet and outlet flows of each process unit.
Just as –k * – was defined as a marginal cost when production is modified, we
can also obtain the marginal cost when the internal variables x are modified.
Similarly, applying the chain rule, we get:
∂B0 m * ∂g j
= ∑kj (26)
∂xi i =1 ∂xi

This equation expresses the effect on additional resource consumption when an

internal parameter x i is modified and is the basis for the thermoeconomic
diagnosis (explained in detail below). To determine the physical model of the
system, a set of equations must be defined which relate the internal and external
variables to the thermodynamic laws: mass, energy and entropy balances.
The most developed thermoeconomic optimization methodologies (Frangopoulos
(1987, 1990), Von Spakovsky et al. (1993)), use the Lagrange multipliers
optimization method to calculate the marginal costs defined in the previous
section. It can easily be proved (Serra (1994), Reini (1994)) that the Lagrange
multipliers are the marginal costs defined in equation (2), i.e:
∂B0
λi = i = 1, ...,m (27)
∂Bi

This multiplier represents the variation of the objective function B0 concerning

the state variable Bi.
 21

3.1. Economic resources and thermoeconomic costs

Thermoeconomic cost calculation considering the process unit capital cost Z, is

similar to the above method but should be explained in more detail. The capital
cost of each process unit Z can be considered an external flow of plant
resources from the environment to the process unit (see Figure 3). This will
represent the monetary units per second needed to compensate the depreciation,
maintenance cost and so on, of the process unit.

Economic Zl = Z l ( Bl , B j , B h)
Resources

B
j
B
xl B
0 B h
i

Figure 3. Economic resources scheme.

According to marginal cost analysis, Z represents an environmental resource and

can be handled in the same mathematical way as energy resources. The amount
of resources consumed when manufacturing a device are, in fact, resources
consumed to obtain the plant products. Some authors (Brodyansky et al. (1993),
Le Goff (1979)) have developed methodologies to evaluate the total amount of
resources consumed when building a process unit. Then the marginal unit cost
∂Z/∂B, can be considered a marginal consumption κzj .
For the process unit depicted in Figure 3 the characteristic equations are:
Bi = f(Bj, κij) (28a)
Z j = Z(Bj, κzj) (28b)
And the cost of the product is:
∂Bi * ∂Z j
k*j = k + = k *jκ ij + κ zj (29)
∂B j i ∂B j

If Zj is proportional to the production of the unit, or in other words its

characteristic function is first order homogeneous, the marginal cost is equal to
the average cost. But, unfortunately Zj is a non-linear function of the production
in most cases.
22

4. Thermoeconomic applications to complex energy sytems

Having defined the tools needed for a thermoeconomic analysis of a complex

system, some applications to thermoeconomic diagnosis and optimization can be
presented. The methodology is presented together with a simple application.

4.1 Operation thermoeconomic diagnosis

Diagnosis is the art of discovering and understanding signs of malfunction and

quantifying their effects. In the case of Thermoeconomics, the effect of a
malfunction is quantified in terms of additional resources consumed to obtain the
same production, both in quality and in quantity.
The main problem in energy system diagnosis can be summarized in the
following question: Where, how and which part of the consumed resources can
be saved by keeping the quantity and quality of the final products constant? To
answer these questions, we need:
(a) Procedures that accurately determine the state of the plant.
(b) A theory to provide the concepts and tools to understand and explain the
causes of this state.
The methodology presented here applies Structural Theory to provide the tools
to investigate the causes of the irreversibilities and the cost formation process.
In order to clarify the explanation of the proposed method we use a simple
example (a more complex one can be found in Lerch et al. (1999)), the co-
generation plant depicted in figure 1, whose design and operational exergy flow
values are shown in Table 4. The plant has a co-generation gas turbine cycle
and uses the turbine outlet gases as thermal energy in a heat recovery steam
generator that produces steam (flow #7) together with the electric energy
produced in the turbo-generator (flow #6).

Flow (kW) 1 2 3 4 5 6 7 8
Design 11 781 2704 9614 3831 2977 2500 2355 388
Operation 11 914 2758 9753 3887 3056 2500 2355 424

Table 4. Design and operation exergy flow values of the co-generation plant
(Figure 1)
 23

4.1.1. Technical exergy saving

Once the exergy flows have been supplied by an appropriate performance test
or a model simulator, the irreversibilities in each productive unit can be obtained
from the exergy balance. But not all exergy losses can be saved in practice. In
fact, the potential exergy saving is limited by technical and/or economic
constraints. It also depends on the decision level that limits the actions to be
undertaken. In contrast to conventional thermodynamic analysis,
Thermoeconomics assumes a reference situation of the plant operating under
design conditions. From this perspective, in the plant of Figure 1, we see that
only 133 kW, of the 7.06 MW of total irreversibilities can be saved with respect
to design conditions.
Therefore, the additional fuel consumption can be expressed as the difference
between the resource consumption of the operating plant and the resource
consumption for a reference or design condition with the same production
objectives:

∆FT = FT − FT0 (30)

and it can be broken up into the sum of the irreversibilities of each process unit:
n
( )
∆FT = ∆I T = ∑ I j − I 0j = ∑ ∆I j
j =1
n

j =1
(31)

However, even though the methods based on Second Law Analysis (Kotas
(1985)) and Technical Exergy Saving are useful to quantify the additional fuel
consumption, they fail when trying to identify the real causes of the additional
resources consumption.

4.1.2 Impact on resources consumption

The Fuel / Product diagram of the co-generation plant is shown in Figure 2. This
diagram can be simplified by merging junction 1 and branching point 1 in a new
fictitious process unit called junction – branching point (see Figure 4). This new
productive structure is slightly different than Figure 2, and is more compact.
The characteristic equations of this new productive structure are obtained as in
the previous section applying equation (16)

P = Ps + KP P
For the sake of simplicity we did not consider thermal and mechanical exergies
as separate entities. Two auxiliary variables also appear r1 = (B3-B2)/B3 and r2
= B3/B2, which correspond to the part of the fuel of the turbine and the heat
24

recovery steam generator (HRSG) coming from the combustor and the
compressor respectively. Flow #8, produced in part in the combustor and in the
compressor, also leaves the system as a residue. Only a part of the entering
gases to the turbine: B3-B8 are used as a fuel of other process units of the
system. Therefore, only a part of the combustor’s and compressor’s product is
used as a fuel for other process units (useful product). Accordingly, Figure 4
shows the chosen disaggregation scheme of the system and the Fuel/Product
values for the design conditions are shown in Table 5. The F-P definition is
shown in Table 6.

(5)
2
(6)
(3)-(4) 3
(2)

(3)-(2)
(7)
(4)-(8) 4
(1) (8)
1

Figure 4. Fuel/product diagram for the co-generatiron plant shown in Figure 1

F0 F1 F2 F3 F4 Total

P0 0 11 781 0 0 0 11 781

P1 0 0 0 4156 2474 6631

P2 0 0 0 1627 968 2595

P3 2500 0 2977 0 0 5477

P4 2355 0 0 0 0 2355

Total 4855 11 781 2977 5783 3443

Table 5. Fuel and energy flows (kW) in design conditions for the co-generation
plant shown in Figure 1

Nº Process unit Fuel Product Residu

e
 25

1 Combustor B1 B3-B2
2 Compressor B5 B2
3 Turbine B3-B4 B6
4 HRSG B4-B8 B7 B8

Table 6. Fuel and product definition corresponding to Figure 5.

In order to bring together the problem of the impact of resources consumption
with thermoeconomic diagnosis we need to know the increase of the unit exergy
consumption of each process unit of the plant. A performance test or a simulator
provides the real values of the unit consumptions which are then compared with
the design values.
The values of the unit exergetic consumption increase are found as:
∆κij = κij (x) − κij (x0)
Table 7 shows the ∆κij values for the plant in Figure 1.

∆ κe 0.4006 0.0000 0.0000 0.0000

0.0000 0.0000 -0.1667 0.3857
∆ KP 0.0000 0.0000 0.1593 0.4636
0.0000 1.1147 0.0000 0.0000
0.0000 0.0000 0.0000 0.0000
∆k 0.4006 1.1147 -0.0074 0.8493

Table 7. Increase of unit exergetic consumption (100∆κij).

Equation (19) is used to obtain the increment of the total resources of an

operating plant regarding the reference conditions:

∆FT =∆ t κ e P 0 + t κ e ∆P (32)
The increase of the process unit production from equation (16) may be
expressed in terms of the unit exergy consumption as:

∆P = ∆Ps + ∆ KP P 0 + KP ∆P (33)
26

hence, applying equation (17), we obtain:

(
?P = P ?Ps + ? KP P0 ) (34)
If we want to analyze the fuel impact due to an increment of the exergy unit
consumption of the process units, equation (32) could be written as:

∆FT =∆ t κ e P 0 + t κ *P ∆ KP P 0 + t κ *P ∆Ps (35)

If no change in the total production of the plant is assumed, then:

(
∆FT = ∆t κ e +t k*P ∆ KP P 0 ) (36)

or in scalar format:
n n 
∆FT = ∑  ∑ k*P, j ∆κ ji  Pi 0 (37)
i =1 j = 0 
The ∆〈KP〉 matrix is the key to predict the impact on fuel of a physical variation
of a parameter in the system.
Using the above equation, the additional resource consumption ∆FT (also called
Fuel Impact; Reini (1994)) can be expressed as the sum of the contributions of
each process unit.
The variation of the exergetic unit consumption of each process unit increases
its resources consumption and its irreversibilities in a quantity ∆κ ji Pi0 , which we
call, malfunction. Consequently, this implies an additional consumption of
external resources given by k *P, j ∆κ ji Pi 0 , which is also named the malfunction
cost. Therefore, the total fuel impact can be written as the sum of the fuel
impact or malfunction cost of each process unit, as shown in equation (37).
The proposed method provides the exact values of the additional resource
consumption of each process unit malfunction for any operational state. Other
methods, such as the Theory of Perturbations (Lozano et al. (1996)), only
provide an approximate predictive value, based on marginal costs (Lagrange
multipliers) which is valid for an operating state close to the reference
conditions.
Figure 5 compares the fuel impact and the increase of irreversibilities or the
technical exergy saving of each process unit and also compares (first column)
the malfunction and the fuel impact for each process unit. Three malfunctions in
the plant are shown in the combustor, the compressor and the HRSG. The
largest irreversibilities increase is in the combustor, but the largest fuel impact is
 27

in the compressor. The question that arises is, What causes the irreversibilities
increase and the fuel impact, and how are they related?

80
Fuel Impact
Malfunction
60 Technical Saving

40

20

0
Combustor Compressor Turbine HRSG

Figure 5. Fuel impact and technical saving.

4.1.3. Malfunction and dysfunction analysis

We have shown that there is no direct relationship between the increase of the
irreversibilities and fuel impact. The more advanced the production process is,
the greater the cost of the irreversibility malfunction and, as a consequence, the
greater its fuel impact.
Furthermore, the degradation of a process unit will force other process units to
adapt their behavior in order to maintain their production conditions and modify
their irreversibilities. Figure 6 shows how an increase of the unit consumption of
a process unit will not only increases the irreversibilities on it but also the
irreversibilities of the previous process unit.

∆F1 ∆ I1
I1
∆P 1 ∆F 2 ∆I2
F1 I2
P F2
1 P2
1 2

Figure 6. Malfunction and fuel impact.

The irreversibility increase of a generic system’s process unit is given by:

∆I = ∆K D P 0 + (K D − U D ) ∆P (38)
28

From the above expression, we can distinguish two types of irreversibilities:

Endogenous irreversibility or malfunction produced by an increase of the unit
consumption of the process unit itself:
n
MFi = Pi 0∆ki = ∑ Pi0 ∆κ ji (39)
j =0

Exogenous irreversibility or dysfunction induced in the process unit by the

malfunction of other subsystems, which forces it to consume more local
resources to obtain the additional production required by the other process units:
DFi = ( ki − 1)∆Pi (40)
The malfunction only affects the behavior of the process units; the dysfunction
is a result of how the process units adapt themselves to maintain the total
production. The dysfunction generated by a process unit is defined as:
DIi = ∆Fi – MFi (41)
Table 8 shows the malfunctions, dysfunctions, impact on fuel and increase of
irreversibility of the example analyzed here.

(kW) Combustor Compressor Turbine HRSG Total

DI 0.000 30.699 4.979 22.243 57.921
MF 26.562 28.925 -0.408 20.000 75.079
∆F 26.562 59.624 4.571 42.243 133.000
DF 46.664 6.849 4.408 0.000 57.921
MF 26.562 28.925 -0.408 20.000 75.079
∆I 73.226 35.774 4.000 20.000 133.000
Table 8. Malfunction and dysfunction table in kW.

4.1.4. Intrinsic and induced malfunctions

Using the above method we can identify and quantify malfunction effects. For
example, we found three malfunctions in the gas turbine cycle (Figure 1): one
each in the combustor, compressor and HRSG. But, What are the causes of the
malfunctions? In fact, the actual operation values shown in Table 4 correspond
to a 1% decrease in compressor isoentropic efficiency. This means that HRSG
and combustor efficiencies can be changed by varying compressor efficiency.
 29

How do we approach this problem? The relationship between operation and

efficiency of the process units could be analyzed using a simulator. If all the
plant process units were isolated, the efficiencies of those process units would
be independent variables (Lozano et al., 1996). So we will assume that there is
an operating parameter xr affecting the efficiency of the i-th process unit of the
plant and thus, in most cases, also indirectly affecting the efficiencies of the
other plant process units.
Once the relationship between unit exergy consumption and the operating
parameters is known, the above methodology can be applied to distinguish the
effect of an operating parameter on the internal economy of a process unit, i.e.
its malfunction and the cost of its malfunction.
Plant operating parameters could be classified according to their effect on the
efficiency of the process units of the system:
Local variables: They mainly affect the behavior of the process unit related to
the variable, e.g, the isoentropic efficiency of a turbine. From a practical point of
view, a variable is considered local and therefore related to a subsystem. The
total fuel impact due to its perturbation is basically located in this process unit.
Global and/or zonal variables: This is the case when an operating parameter
cannot be associated with a specific process unit. We must identify them as
operating set points, environmental parameters and the production load or fuel
quality.
In this lecture we will focus our analysis on local variables and how they affect
additional fuel consumption and the other plant process units. This analysis is, in
fact, the next step in the thermoeconomic diagnosis.
Unfortunately the problem of locating causality of losses in a structure is rather
more complex than locating malfunctions and dysfunctions.
When a plant unit deteriorates (when its behavior is degraded) its physical
variables are modified, its efficiency is decreased and its unit exergy
consumption increases.
The unit exergy consumption increase of each process unit, due to the variation
of an operating parameter xr, is:

∆κ ijr = κ ij (x 0 + ∆xr ) − κ ij (x 0 ) (42)

Therefore, it will be possible to approximate the malfunction of a process unit as

the sum of the contributions of each operating parameter:
30

n
MFi ≅ ∑ ∑ ∆κ rji Pi 0 (43)
r j =1

According to the classification of operating parameters, the intrinsic

malfunction is that part of the process unit malfunction due to the
degradation/improvement of the process unit itself, which is, in turn, due to
variation of local operating parameters:
n
MFi L ≡ ∑ ∑ ∆κ rji Pi 0 (44)
r∈Li j =1

A system malfunction or improvement does not only have consequences

upstream (by trying to see the variation in consumption of used resources) but
also downstream. Clearly the degradation or improvement of a system’s flow
entry conditions will affect its efficiency to a greater or lesser extent. This will
modify the production and affect the next process unit.
Not only are there dysfunctions when there is an intrinsic malfunction. There are
also induced malfunctions, that can decisively affect the system's behavior. For
example, using the throttle valve in a power plant can destroy a small additional
amount of exergy but the downstream effects on turbine efficiencies can be
quite serious.
Thus, the difference between total process unit malfunction and intrinsic
malfunction is called induced malfunction. It is due to the degradation of other
plant process units which provoke a variation in the unit consumption of that
process unit:

MFiG = MFi − MFi L (45)

This phenomenon is not foreseen in classic linear thermoeconomic theory. The
average cost obtained from the most rigorous disaggregation analysis can never
predict induced malfunctions and dysfunctions will only be predicted in cases
where the hypothesis of linearity and continuity holds.

4.2. Thermoeconomic optimization

Many thermal systems are very complex due to the number of process units
and/or its strong interdependence. This complexity makes difficult the
optimization of the system design and operation. The knowledge of the costs of
a system, which in the final instance give an economic meaning to the structural
interactions between subsystems, allows us to formulate problems related to
their optimization and also to solve these problems, under certain conditions, in a
 31

very symple way. This possibility allows us in turn to assume that with the
appropiate calculation strategy the problem of the global optimization of the plant
could be reduced to a sequence of subsystem to subsystem optimization. Here
we describe strategies for optimizing complex systems as proposed by Lozano et
al. (1996). They are based on sequential optimization from process unit to
process unit using the Thermoeconomic Isolation Principle (Evans (1980)). In
this section, we see how the cost of the resources consumed by the system
varies when the unit of the cost of the resources consumed, the technical
production coefficients of the productive structure and/or external demand of
products vary. Once we know the relationship between the technical production
coefficients and the design free variables the chain rule of derivation can be
applied to distinguish the effect of a design free variable on the internal economy
of subsystems.
A process unit of a thermal system is thermoeconomically isolated from the rest
of the system if the product of the unit and the unit cost of its resources (internal
product and/or external resources) are constant and known quantities. If a unit
of a thermal system is thermoeconomically isolated, the unit may be optimized by
itself (without considering the modifications of other variables of the rest of the
system) and the optimun solution obtained for the unit coincides with the
optimum solution for the whole system.
Of course, T.I. (Thermoeconomic Isolation) is an ideal condition which cannot
be achieved in most of the real systems: Pj and k *P,i change when design
variables of other process units change ,due to feedback. But the more constant
Pj and k *P,i are, the closer to T.I. conditions and the fewer iteration loops
needed to achieve the optimal solution for the whole system. Thus, the goal is
not to achieve T.I. but to approach it as much as possible in order to obtain
maximum advantages, which include:
(1) Improvements and optimal design of individual units in highly interdependent
complex systems are greatly facilitated, as well as of whole systems.
(2) The designers can be specialized and their efforts concentrated on
designing the variables of single units, while resting assured that these
efforts yield optimum design and/or improve the overall system
(3) The convergence of the solution is faster.
To optimize individual units, the objective function of the cost of product of the
process unit –j– could be defined as:
 n 
Min  ∑ k ij k *P ,i  P j (46)
k  i=0 
k
32

where the unit cost of the input resources k *P,i and the production Pj are known
and constant.
In real world optimization problems, the design free variables do not necessarily
coincide with the technical production coefficients. In practice there will be a
function of the actual design free variables which can be named –x–
We say that a free variable x is a local variable of a subsystem –j– when the
production coefficients κij of this subsystem only depend on x. When a design
variable is attached to several subsystems, the previous expression must be
extended to all concerned subsystems.
To determine whether a design free variable is local or not and which process
units are involved, the cost resource impact of the design variables to each
process unit can be computed:

 n ∂ κ ij ∂z P , j 
AC0x, j =  ∑ k*P ,i + P ∆x
 (47)
 i=0 ∂x ∂x 
and the ratio calculated:
∆C0x, j
ε =
x
j n (48)
∑ ∆C
i =1
x
0, i

If this ratio is equal (or close) to 1, the design variable is local for process unit –
j–, if it is equal (or close) to zero, the design variable is independent of the
referred j process unit. In other cases the design variable involves several
process units.
These ideas could be used to design a strategy for global optimization problems:
(0) Determine which variables are local and which are regional (involve several
process units)
(1) Determine a sequence for local optimization of each process unit
(2) Take an initial value of the design variables
(3) Calculate technical production coefficients and unit product cost
(4) Find optimum values for local variables
(5) Find optimum values for global variables
 33

Iterate from (3) to convergence when design variables or unit product cost do
not vary in the next iteration. In each iteration the unit cost of total product must
decrease.

NOMENCLATURE
LATIN SYMBOLS
k*: Exergy unit cost.
B: Exergy flow (kW).
F: Fuel (kW).
P: Product (kW).
I: Irreversibility (kW).
k: Unit exergy consumption.
g: Characteristic function.
Z: Capital cost of a process unit ($).
T: Temperature (º C).
f: Function.
r: Exergy ratio.
MF: Malfunction generated in a component (kW).
DF: Dysfunction generated in a component (kW).
DI: Dysfunction generated by a component (kW).
C: Total economic cost ($/s).
X: Variable.

GREEK SYMBOLS
η: Exergetic efficiency.
ω: Total system product.
λ: Lagrange multiplier.
κ: Technical production coefficients.
α: Coefficient in the Cobb-Douglas function.
34

∆: Difference.
ε: Ratio (thermoeconomic optimization).

MATRICES AND VECTORS

x: Set of internal parameters
P: Product vector.
PS: Final product vector.
|P〉: Product matrix operator.
〈KP〉: Matrix of unit exergy consumption.
I: Irreversibility vector.
|I〉: Irreversibility matrix operator.
UD: Identity matrix.
KD: Diagonal matrix with the unit exergy consumption.

SUBSCRIPTS
o: outlet
i,j: index.
e: external (inlet).
t: total.
n: stage.
t: tubes.

SUPERSCRIPTS
-1: Inverse.
t: Transpose.
0: Design conditions.
L: Local.
G: Induced.
 35

r: Operating parameter.
36

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Thermal Design and Optimization. John Wiley and Sons Inc. New York,
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