Making decisions using LCCA

The design team agreed that the investment decision of whether to build an on-site plant or use the local energy options should be determined using LCCA.


Table 1: The LCCA is calculated for both building a new central plant and for using the district energy system option. The central plant option turned out to be the most economically viable alternative. Courtesy: Kohler RonanIn this example, an institutional client was trying to determine if it should install a central chiller and boilerplant on-site or purchase chilled water and steam from a local district energy system (DES base case). Itwas clear that installing an on-site plant would add significant upfront cost and additional maintenancecost; however, future operating costs would be substantially higher if energy was purchased through theDES supplier. The design team decided that the investment decision should be determined using LCCA.

  • Figure 3: The design team agreed that the investment decision of whether to build an on-site plant or use the local energy options should be determined using LCCA.If the client decided to take advantage of the DES, over a 30-year period the client would avoid approximately $1 million worth of initial construction, future equipment maintenance, and replacement costs. However, over a 30-year period, energy costs through the DES would likely total $8.6 million in net present value
  • Although installation of an on-site central plant would increase initial investment and future capital costs by approximately $1 million, compared to the DES alternative the central plant option would save the client approximately $2.4 million in energy expenditures over 30 years
  • Based on total cost of ownership during the 30-year analysis period, the central plant option is the most economically viable alternative. Initial investment costs are likely to be recovered within a 9-yearperiod (discounted payback period); over a 30-year period the central plant would likely provide theclient with $1.4 million net savings (NS) compared to the DES alternative.

David J. MacKay is an associate with Kohler Ronan LLC in the New York City office. MacKay's expertise includes building performance modeling, building commissioning, energy auditing, energy reduction plan development and energy procurement consulting.

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