Efficiency Required for Machine Modification

The answer to your first question is any improvement will render the machine "more economical".

The decision to replace an engine based on the potential savings realized by such a replacement will depend on the industry and accounting practices employed.

3% might be enough savings in power generation, but it might take 10% savings in a tractor.

thanx lynlynch ... that realy things a lot easier

If you do a simple critical analysis of your question you will see that you are not looking at enough information to make a valid choice. The efficiency improvement number is only one piece of information needed to make a sound decision. You need something to compare this against to decide if the change is worth doing. Frequently the other criteria is a form of cost concern. It is wise to set this metric prior to doing any analysis to reduce any biases in influencing the selection of this metric.

Your example shows another flaw in your analysis technique. The output power change of your engine from 95kW to 98kW is almost a 3% improvement in the output power but not necessarily the efficiency of the engine. If the 3% output power improvement came from a 50% additional consumption of fuel then your fuel to power efficiency actually went considerably down for this added power. If instead the efficiency metrics are instead the volume or mass of the motor versus the power output then removing some of the pollution controls can produce a greater than 3% efficiency value for the mass of the motor.

My point is that one must know many aspects of how anything will be used to make an engineering decision.