Modular Plant Engineering: Evaluation Methods for Flexible Investment Decisions

Modular plant engineering has reached a level of technological maturity that enables large-scale implementation. The necessary standards, interfaces, and providers for all relevant modules are available. Nevertheless, in practice, implementation beyond pilot and demonstration projects has been cautious. The main reason for this is the difficulty of reflecting the specific advantages of modular concepts in traditional investment calculations.

A fundamental problem is that the process- and location-dependent advantages of modular systems are not directly reflected in the calculations. This evaluation gap proves to be a hindrance, particularly in the chemical industry, where product life cycles are becoming shorter and flexibility requirements are increasing. In order to enable well-founded investment decisions, a number of different approaches have been developed that allow for the proper comparison of different plant concepts.

Three Concepts Compared

Conventional plant construction – referred to as ‘stick-built’ – takes place step by step at the future location. From infrastructure and buildings to plant components, all elements are erected on site one after the other. This approach requires considerable space and long construction times, but allows for adjustments during the construction process. The concept reaches its limits, especially in existing production complexes in the chemical industry or with limited construction site infrastructure.

Modular prefabricated plants are often based on standard transport sizes such as shipping containers. Centralised prefabrication and subsequent assembly at the destination significantly reduces local effort. Dividing production across different regions also enables cost optimisation in terms of labour costs. Manufacturing steps that can be carried out in parallel significantly shorten the overall project duration.

Modular flexible plants are based on standardised functionalities with defined automation interfaces in the form of Module Type Packages (MTP). The automation fits seamlessly into higher-level process architectures. Components and modules can be exchanged, rearranged and reused at other locations. This flexibility enables rapid conversions between different product variants and prevents lock-in effects – a significant advantage in the manufacture of speciality chemicals with fluctuating market demand.

Evaluation methods for investment decisions

The economic consideration of modular plant engineering requires a weighing of capex (investment costs) and opex (operating costs) over the entire plant life cycle. Conventional plants often incur lower construction costs and can be optimally tailored to specific processes – advantageous for long operating periods without process changes, such as in basic chemistry.

Modular, flexible systems demonstrate their strengths when time-to-market requirements are short and frequent adjustments are necessary, as is the case in specialty chemicals or in the production of intermediates. The possibility of reusing individual modules at a later date has a significant impact on the overall calculation, especially for products with a limited market life.

The chemical industry faces the challenge of responding to volatile market conditions, new regulatory requirements and changing customer specifications. Static evaluation methods prove insufficient for this complex decision-making process. Even net present value calculations, which take the time factor into account, do not adequately reflect uncertainties and flexibility options.

Scenario calculations and sensitivity analyses allow for a more differentiated assessment of future developments and decision impacts. Modular plant construction can become an important factor here. Monte Carlo simulations – in which various possible developments are played out through repeated random calculations – allow different influencing parameters to be considered simultaneously instead of examining them individually.

Decision trees define specific decision points and take into account the fact that new decisions are continuously required over the lifetime of the plant – for example, in the event of product changes or capacity adjustments. Real option analysis is particularly suitable for situations involving a high degree of uncertainty and flexibility – case studies demonstrate its successful application to modular plant concepts in chemical production.

Non-quantifiable parameters such as strategic positioning, market access or risk minimisation can be recorded and weighted in scoring models. These provide a structured overview, but are sensitive to different assessments. Involving several people in model development increases the reliability of the evaluation.

The choice of the appropriate evaluation method – or combination of methods – depends on the specific nature of the project. With the increasing availability of modular concepts and growing flexibility requirements in the chemical industry, reliable evaluation models are becoming increasingly important for sound investment decisions.

Source for the topic ‘Modular plant engineering’: Trade journal ‘Chemie Technik’

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