life cycle cost analysis
TRANSCRIPT
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Life Cycle Cost Analysis
Presented by:Jamie Fox, PE, LEED APThe Engineering Enterprise
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Design Considerations
Sustainability
Human Balance Environment
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Design ConsiderationsExample:
The 5-year investment in a CFL bulb to replace a high use incandescent will provide a 500% return (ROI), and will outperform the stock market over 5 years, guaranteed.Yet, only 1 in 10 California sockets have a CFL bulb. http://apps1.eere.energy.gov/buildings/publications/pdfs/ssl/cfls_july_lessons.pdf
*** Top Hedge Fund Manger: ***Jim Simmons: 80% ROI in 2008Annual Salary: 2.5 billion dollars!!http://www.iimagazine.com/Alpha/Article.aspx?ArticleID=2165639
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Life Cycle Cost Analysis
Presented by:Jamie Fox, PE, LEED APThe Engineering Enterprise
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The Age of Invention
1909
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The Age of Intervention
2009
Occupant Safety Worker Safety Sustainability
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Free Markets & Regulation
1776
Free Market:Consumer is allowed to choose freely
what to buy and each producer is allowed to choose freely what to sell.
Regulation:Find the right balance between the market, government, and non-profit
organizations.
2006
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First Costs for Technology
Technology
FirstCost
Code Minimum
30 Year Payback
No Payback
Free Market + Incentives
Research / Development
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2009 California Budget Crisis
The “Governator”: “From each crisis we learn”“The taxpayers must receive a return (on investment)”9/26/08 Commonwealth Club
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Return on Investment (with transparency)
“Finally, something everyone can agree on” - JF
$35,000
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Return on Investment $20,000 (Adjusted for Inflation)
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Return on Investment
Time Value of Money:$10,000 = Investment
+ 6.5% = Discount Rate- 3% = Inflation
20 = Years$20,000 = 2.0 Growth Factor
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Cash Flow Diagram
$10,000
$20,000
0 20
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Present Worth of Future Amount
??
$20,000
0 20
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Present Worth of Future Amount
Future Amount (1 + Discount Rate – Inflation)#ofYears
$20,000(1 + 0.065 - 0.03)20
$10,000=
=
=
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Present Worth of Future Amount
Present Worth = $10,000
$20,000
0 20
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Present Worth of Annual Amount
$1,000 each year
0 51 2 3 4
??
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Present Worth of Annual Amount
Annual Cost * (R)(R) #ofYears – 1 (R-1)
where R = (1+Inflation)(1+ Discount Rate)
= – 1 )(
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Present Worth of Annual Amount
$1,000 * (.967)(.967)5 – 1(.967 -1)
$4,500
=
R = 1.03 1.065
= (.967)
– 1
=
( )
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Present Worth of Annual Amount
$1,000 each year
0 51 2 3 4
$4500 = Present Worth
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Future Replacement Cost
$60,000
0 10
?? = Replacement
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Future Replacement Cost
= Today’s Cost * (1 - Inflation + Escalation)#ofYears
= $60,000 * (1 – 0.03 + 0.06)10
= $80,000
Differential Escalation:Over time, a product’s escalation generally equals inflation, but items that are “energy intensive” often escalate faster than the rate of inflation.
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Future Replacement Cost
$60,000
0 10
$80,000 = Replacement
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Summary of Variables
Discount Rate (3 to 15%) (6.5%)Inflation Rate (0 to 5%) (3%)Diff. Escalation Rate (0 to 10%) (1%)Time (1 to 40 yrs) (30 yr)First Costs ($ today)Replacement Costs ($ today + diff esc.) Annual Costs ($ per year + diff esc.)
Calculate Net Present Worth
Typical Values: Example:
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What discount rate should I use?
0%
10%
10 P/E 25 P/E
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What energy rate should I use?
15 ¢
8 ¢
¢ / kWh
12pm
$ / kW$ 13
$ 26pm
Winter
Summer
$ 8
May Oct
8am 9pm
+ Demand Charges
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Energy Rates
http://www.pge.com/tariffs/ERS.SHTML#ERS
Google: “PG&E Tariffs”
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Energy Rates -
PG&E Summary Table
“Average Total Rate”
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Energy Rates –
The Future
May Oct
2010: Critical Peak Day Pricing (PDP) or (CDP)12 days / year
¢ / kWh “Opt Out”:
Time of Use (TOU)
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San Francisco International Airport
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Charles de Gaulle Airport -
Paris, France
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Private Office Daylight Control?
Stanford Law School, Polshek Parternship Architects
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Private Office Daylight Control?
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Private Office Daylight Control? Option #1 Manual Dual Level Control
Ballast Replacement40,000 hours
Option #2 Automatic Daylight Dimming Control
First cost$4.0/sf office space (does not include Utility rebates)$1.0/sf savings for HVAC & Conf Rm. Integration
Energy saved 0.5 w/sf during day, 12.5 cents/kwh
Ballasts Replacement40,000 hours
30% below T24 target
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Manual Dual Level Control
0 3015
$16,000BallastReplacement
-$9,500 Net Present Worth
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Automatic Daylight Dimming
$8,000 / year
0 3015
$150,000
$38,000
- $ 150,000 First Cost+ $ 150,000 Energy- $ 23,000 Ballast- $ 23,000 NPW
-$23,000 Net Present Worth
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Automatic Daylight Dimming
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Electricity Rate Differential Escalation
Between 0.5% to 1.2% to 2030Did they consider global warming legislation?
http://www.eia.doe.gov/oiaf/aeo/electricity.html
US Department of Energy :
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Differential Escalation MatrixDifferential Escalation = 1.2%
Cumulative Present Value
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Automatic Daylight Dimming –
Payback with 1.2% Energy Rate Diff. Escalation
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Solar Power -
Analysis DataLife Cycle Cost Assumptions
$6.5/watt installed cost 250kW system = $1,650,000 first cost30% Federal Tax Credit 5-year Asset Depreciation (MACRS) applies to 85% of install cost.California Solar Initiative = 17 cents/kwh for first 5 years (program reduces with time)
Energy SavingsLocated in Bay Area10 degree fixed panels340,000 kWh / year calculated with PVwatts online programAt 12.5 cents / kWh = $42,500 annual savings
Maintenance 250kW inverter replaced at year 17 = $150,000
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Solar Power –
Payback Analysis
Payback: 13 to 17 years
Variables:• 3.5% time value of money (6.5% - 3%)
• 1.2% Electric Rate Diff. Escalation
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Life Cycle Cost Analysis
Presented by:Jamie Fox, PE, LEED APThe Engineering Enterprise
Q&A?