Fundamentals of Sustainable Engineering Module 11: Life Cycle ...

lumpysteerΛογισμικό & κατασκευή λογ/κού

2 Δεκ 2013 (πριν από 3 χρόνια και 6 μήνες)

54 εμφανίσεις

Fundamentals of
Sustainable Engineering


Module 11

Life Cycle Cost/Benefit
Assessment


Richard N. Wright, Dist.M.ASCE


11.1

11.
2

Learning Outcomes


Learn techniques for life cycle cost and benefit
assessments


Learn about advanced techniques for
probabilistic and sensitivity analyses, benefit
-
to
-
cost ratios, and comparing incommensurate
benefits and costs


Learn how to access information sources on the
methods and data for such assessments

11.
3

Acknowledgement


This presentation is based in part on work of:


Barbara Lippiatt, Economist


Building and Fire Research Laboratory


National Institute of Standards and Technology




11.
4

Outline

1.
Rationale for Life Cycle Cost/Benefit
Assessments

2.
The Life Cycle Cost/Benefit Methodology

3.
Advanced Topics in Assessment




11.
5

Life
-
Cycle Cost Analysis


A method of economic analysis that sums all
relevant
project costs over a given
study period

in
present
-
value

terms


Most relevant when selecting among
mutually
exclusive project alternatives

that meet
minimum functional performance requirements
but have different initial costs, OM&R costs,
and/or expected lives

11.
6

Types of Decisions


Accept/Reject Projects/Alternatives


Optimal System Size


Optimal Combination of Interdependent Systems


Ranking Independent Projects


11.
7

Outline

1.
Rationale for Life Cycle Cost/Benefit
Assessments

2.
The Life Cycle Cost/Benefit Methodology

3.
Advanced Topics in Assessment


11.
8

LCC Analysis Method


Evaluates costs of acquisition, ownership &
disposal


Compares initial investment with future savings


Includes financing costs


Consistent with ASTM Standard E917, “Standard
Practice for Measuring Life
-
Cycle Costs of
Buildings and Building Systems”

Search for E917 at
www.astm.org

11.
9

Relevant Project Costs


Investment
-
related


First costs


Replacement costs


Residual value


Operation
-
related


Operation, maintenance, and repair costs


Energy and water costs


Contract
-
related costs (for financed projects)

11.
10

Project Costs


LCC Analysis requires


Dollar amounts as of today


No sunk costs


Non
-
tangibles in narrative form



Generally, only amounts that are different need
to be considered when comparing mutually
exclusive alternatives

11.
11

Study Period


Length of time over which an investment is
analyzed


Study period must be equal for all alternatives,

depending on


The expected life of the project and/or


The investor’s time horizon


Base Year: analysis date to which all cash flows
are discounted


Base Case: alternative with lowest first cost

11.
12

Study Period


Key dates



Base Date: beginning of study period



Service Date: beginning of operational period



End Date: end of study period


Planning/Construction/Implementation Period


Contract Period

11.
13

Present Value & Discounting


Present
-
Value amount
is the equivalent value
to an investor, as of the Base Year, of a cash
amount paid (received) at a future date


Present
-
Value of a Future amount
is found
by discounting


Discounting
adjusts for the investor’s time
-
value of money

11.
14

Discount Rate


The interest rate that makes an investor
indifferent between cash amounts paid
(received) at different points in time


Set by the federal government for its projects


Set by or agreed to by owners for other
projects

11.
15

Discounting Investment Costs



Replacement

Replacement

Residual Value

First Cost

Annual Operating Costs

Study
Period

PV

Investment

Costs

Replacement

Replacement

Residual Value

11.
16

Discounting Operating Costs



PV
Operating

Costs

PV

Investment

Costs

Annual Operating Costs

Study Period

11.
17

Discount Formula

PV = C
t

x



1



(1 + d)
t

LCC =



C
t



(1 + d)
t


n




t=0

where
C
t
=

cost at time t, d = decimal discount
rate,
n = length of study period, and t = time
of cost occurrence

11.
18

Present Value Factors


Single future amount (year t)


PV = Ft x SPV (t,d)



Recurring annual amount (over n years)


PV = Ao x UPV(n,d)



Constantly escalating annual amount (over
n years) PV = Ao x UPV*(n,d,e)

11.
19

Inflation Adjustments


Inflation


Rate of increase of the general level of prices



Escalation


Rate of differential increase in the price of a particular
commodity


11.
20

Inflation Adjustments

Two Approaches to dealing with inflation:



Constant
dollars (excluding inflation)


a real discount rate


a real escalation rate



Current
dollars (including inflation)


a nominal discount rate


a nominal escalation rate


11.
21

Constant vs. Current Dollars

Given:
Real Discount rate: 3.0% Base Date amount: $500





Inflation rate: 1.75%

Time period: 1 year



Constant dollars,
with
real discount rate
:





$500



PV =

(1+0.030) = $485.44



Current dollars
, with
nominal discount rate
:




$500 (1+0.0175)


PV = (1+0.030) (1+0.0175) = $485.44


11.
22

Differential Escalation Rate


Difference between the rate of a good’s annual
price change and general inflation


Due to causes other than loss of purchasing
power of the dollar


Relevant to energy pricing

11.
23

Heating & Cooling System


Base Case:




Alternative:
Heat Pump


Location: Maryland


Base Date: January 2009


Discount Rate: 3.0 %
real
; 4.9 %
nominal


Study Period: 15 years


Existing Baseboard Heating

System with Window AC

11.
24

Base Case Data


Baseboard Heat / Window AC


Initial investment: $0


Expected Life: 15 years


Electricity: 16,000 kWh $0.10/kWh, commercial


Annual O&M: $80


AC repair:

$400 in year 8


11.
25

Cash
-
Flow Diagram

Base Case


$0

Residual Value

Base Date

O&M

Electricity


$80 annually

$1,600

annually



$0

Initial Inv.


Year

09 10 11 12 13 14 15 16 17 18 23





AC Repair


$400

11.
26

Alternative System Data


Heat Pump Initial investment: $3,000


Expected Life: 20 years


Residual Value: $750 (25 % of initial cost)


Electricity: 10,100 kWh $0.10/kWh, commercial


Annual O&M: $100


Compressor repair: $600 in year 8


11.
27

Cash
-
Flow Diagram

Heat Pump Alternative


$750

Residual Value

Base Date

O&M

Electricity


$100 annually

$1010 annually



$3,000

Initial Inv.


Year
09 10 11 12 13 14 15 16 17 18 23



Compressor Repair


$600

11.
28

LCC Calculation

Cost

Item

(1)

Base
Date
Cost

(2)

Year of
Occurrence
(3)

Disco
unt
Factor

(4)

Present
Value

(5) = (2)X(4)

Initial
Investment

$ 0

Base date

Alread
y PV

$ 0

Electricity

$ 1,600

Annual

UPV*
15
11.64

$ 18,624

O&M Cost

$ 80

Annual

UPV
15
11.94

$ 955

AC Repair

$ 400

8

SPV
8
0.789

$ 316

Total PV LCC costs = $19,895

11.
29

LCC Calculation

Cost Items

(1)

Base Date
Cost (2)

Year of
Occurrence
(3)

Discount Factor
(4)

Present Value

(5) = (2)X(4)

Initial Cost


$ 3,000

Base date

Already PV

$ 3,000

Residual Value

-
$ 750

15

SPV
15
0.642

-
$ 482

Electricity


$1010

Annual

UPV*
15
11.64

$11,756

O&M Cost


$ 100

Annual

UPV
15
11.94

$ 1,194

Comp. Repair


$ 600

8

SPV
8
0.789

$ 473

Total PV LCC costs = $15,942

11.
30

Lowest LCC


Base Case: LCCBB = $19,895


Alternative: LCCHP = $15,942

11.
31

Steps in an LCC Analysis


Identify feasible project alternatives


Establish common assumptions


Base Year


Study period


Discount rate (real vs. nominal)


Inflation assumption (constant $ vs. current $)


Identify relevant project costs


Convert all $
-
amounts to present value


Compute and compare LCCs of alternatives


Interpret results

11.
32

Discussion Questions


What assumptions must be the same for all
alternatives?


Does a lower discount rate favor the base case?


How can one deal with uncertainties on future
costs and values?




11.
33

Outline

1.
Rationale for Life Cycle Cost/Benefit
Assessments

2.
The Life Cycle Cost/Benefit Methodology

3.
Advanced Topics in Assessment


11.
34

Uncertainty and Risk

Techniques are available to assess the sensitivity
of LCC analysis results. See ASTM Standard
E1369
Guide for Selecting Techniques for
Treatment of Uncertainty and Risk in the Economic
Evaluation of Buildings and Building Systems.




An example of such analysis for highway bridges is given in:

www.bfrl.nist.gov/bridgelcc/overview/html



11.
35

Benefit/Cost Analysis


The Present Value of Benefits spread over the


study period (LCB) is computed just like the


costs


The Return on Investment (ROI) is the discount


rate at which LCC=LCB

11.
36

ASTM Standards for ROI


E1185 Standard Guide for Selecting Economic Methods for
Evaluating Investments in Buildings and Building Systems


E1121 Standard Practice for Measuring Payback for
Investments in Buildings and Building Systems


E964 Standard Practice for Measuring Benefit
-
to
-
Cost and
Savings
-
to
-
Investment Ratios for Buildings and Building
Systems


E1057 Standard Practice for Measuring Internal Rate of
Return and Adjusted Internal Rate of Return for Investments
in Buildings and Building Systems

11.
37

Evaluating Incommensurate
Qualities


Alternatives often have different economic,


environmental and social impacts


Economic is all dollars, but how can different
environmental qualities such as storm water
discharge and GHG emissions be compared?


Monetization of environmental and social impacts
allows use of LCC techniques, but the
monetization is itself questionable or arbitrary

11.
38

Analytic Hierarchy Process


Saaty,
The Analytic Hierarchy Process, McGraw Hill, 1980,
provides a systematic process for pairwise comparison of
alternatives


ASTM E1765,
Standard Practice for Applying Analytic
Hierarchy Process (AHP) to Multiattribute Decision Analysis
for Investments Related to Buildings and Building Systems,
provides guidance and tools for analyses


Lippiatt
, Building for Environmental and Economic
Sustainability,
provides methodology and tools for
selecting environmentally and economically preferable
alternatives for building products and building systems, see
www.bfrl.nist.gov/oae/software/bees
. These techniques
have been applied to whole buildings and are applicable to
infrastructure systems, too

11.
39

Federal Principles and
Guidelines


Updated Principles and Guidelines for Water and
Land Related Resources Implementation Studies



Require bases in sound science with
consideration of both monetary and non
-
monetary benefits

http://www.whitehouse.gov/administration/eop/ceq/initiatives/PandG

11.
40

References


Building Life Cycle Cost (BLCC), associated


programs and user guides:

www.eere.energy.gov/femp/program/lifecycle.html


Whole Building Design Guide of the National


Institute of Building Sciences:
www.wbdg.org/resources/lcca.php