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LIFE CYCLE COSTING OF SUSTAINABLE DESIGN
Professor John Kelly Dr Kirsty Hunter
LIFE CYCLE COSTING OF SUSTAINABLE DESIGN
About the authors
Professor John R Kelly BSc MPhil PhD MRICS TVM FHKIVM
Professor Kelly, currently chairman of the consultancy Axoss Ltd and visiting professor at Nottingham Trent University and Hong Kong Polytechnic University, is a chartered surveyor with industrial and academic experience. His quantity surveying career began with a national contractor, moving to a small architects practice and later to an international surveying practice. His academic career began at University of Reading as a research fellow, moving to Heriot-Watt University as a lecturer and later senior lecturer and finally to Glasgow Caledonian University where he held the Chair of Construction Innovation until November 2007. His research into value management and whole life costing began in 1983 and has been well supported by grants from both public and private sector. He has published 4 books and 8 research monographs and technical manuals.
Kirsty Hunter BEng PhD
Following completion of her PhD degree in value management at Glasgow Caledonian University, Kirsty has pursued a career in the NHS and has experience of working in various management roles including project management and research management at Health Facilities Scotland, the Health Protection Agency and University Hospital Birmingham. During her time as a research associate Kirsty worked on a variety of construction related research projects and through the dissemination of her research achieved two best paper awards at international conferences, a highly commended Emerald journal award, and the 2006 Herbert Walton award for best doctoral dissertation in project management.
© RICS – February 2009 ISBN: 978-1-84219-436-2 Published by: RICS, 12 Great George Street, London SW1P 3AD United Kingdom The views expressed by the author(s) are not necessarily those of RICS nor any body connected with RICS. Neither the author(s), nor RICS accept any liability arising from the use of this publication. This project was funded by the RICS Education Trust and RICS Scotland QS and Construction Faculty Board with the aim of developing a methodology for life cycle costing of sustainable design.
LIFE CYCLE COSTING OF SUSTAINABLE DESIGN
Sustainable development presumes a whole systems approach that considers the environmental, social and economic issues of any design decision. Any model or tool which assists decision makers in reaching the best sustainable option must make explicit the complexity of the problem and the trade-offs and potential synergies which exist within these three facets of sustainability. The optimal sustainable development solution is one which balances the total economic cost and social change together with the inevitable environmental consequence but ensures that scarce resources are not squandered, either deliberately or through ignorance. Sustainable development is variously defined but this research relies on the Brundtland definition "Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs”
This research considers only the economic dimension of evaluating a sustainable design. The research project began from the premise that whilst much is said about the economics of sustainable projects there is no standard method of measurement of life cycle cost and currently option appraisals are being carried out with no consistent approach to the parameters of the calculation. This research project focuses on deriving a standardised approach to the life cycle costing of the sustainable design of buildings. The specific aim was to design a method with general applicability to building projects focusing on insulation, controlled ventilation, micro and biomass heating and electricity generation. The methodologies of life cycle costing (LCC) are well understood but the rules of their application in option appraisal are not. The cost of carbon and the issues surrounding embodied energy were investigated without reaching a satisfactory conclusion. The current (October 2008) cost of a carbon offset is approximately £20 per tonne but prices vary according to the scheme supported. There is an important and unanswered question as to whether carbon counting is a valid component of life cycle costing. The approach advocated in this research is to focus on the proper evaluation of efficient design and on-site renewable energy generation. The research highlighted the importance of recognising the two primary reasons for undertaking life cycle costing, namely: • to predict a cash flow of an asset over a fixed period of time for budgeting, cost planning, tendering, cost reconciliation and audit purposes and • to facilitate an option appraisal exercise at any of the six identified levels of study (evolved during this research) in a manner that allows comparison. This will also include benchmarking and tender comparisons. Examples were seen during the research of calculations conducted in different ways using different methodologies, different time scales, and making many different assumptions with regard to particularly fuel inflation.
LIFE CYCLE COSTING OF SUSTAINABLE DESIGN
This report outlines studies of sustainable design, on-site micro energy generation, methods of data gathering and data analysis and the methods of measurement with associated rules and definitions. A draft of these rules and definitions was passed to BSI and BCIS to inform the document “Standardised Method of Life Cycle Costing for Construction: UK supplement to ISO 15686 Part 5 life-cycle costing for buildings and constructed assets” The rules and definitions . governing the approach to LCC should be considered the biggest contribution to surveying made by this research. Whilst generated by research into sustainable energy and design, these rules have general applicability. Finally, it was observed throughout this research that rules of thumb concerning sustainable design and micro energy generation are difficult to evolve. Innovative design solutions have been used to substantially reduce a project’s carbon footprint. These design solutions do not need to cost more; it is a gross over simplification to say that a sustainable design will add 10% or 15% to the cost of the building. This logic comes from addition thinking i.e. here is a designed office building, house or school, how much extra will it cost to modify the design to include for example convection powered ventilation? Design has to be based on a clear briefed concept and a value system dictated by the client; addition thinking is entirely the wrong approach. Also it was observed that on-site, micro energy solutions are difficult to justify on economic grounds. If micro energy benefits are to be measured then a currency other than money has to be used.
Contact John Kelly School of Built and Natural Environment Glasgow Caledonian University Glasgow G4 0BA Scotland email: firstname.lastname@example.org
Acknowledgements This project was funded by the RICS Education Trust and RICS Scotland QS and Construction Faculty Board with the aim of developing a methodology for life cycle costing of sustainable design.
LIFE CYCLE COSTING OF SUSTAINABLE DESIGN
01 Background 1.1 Sustainable development 1.2 Preliminary work 1.3 Aims and objectives 02 Background to life cycle costing 2.1 Costs 2.2 Life 2.3 Data 2.4 Discount rates 2.5 Review of ISO/FDIS 15686-5:2006 (E) 2.6 A review of existing methods and models 2.7 Rules 03 Rules 3.1 Introduction 3.2 General rules 3.3 Formulae 3.4 Purpose of calculation 3.5 Method of measurement of components 3.6 Method of measurement of systems 3.7 Method of measurement of single unit items including energy 04 Checklist for data gathering at component and system levels 05 A methodology for undertaking life cycle costing of sustainability projects 5.1 Introduction 5.2 Step 1 – project identifiers 5.3 Step 2 – study period 5.4 Step 3 – Inflation rate and discount rate 5.5 Step 4 – gather data 5.6 Step 5 – model construction and analysis 5.7 Illustration 1 – component cash flow 5.8 Illustration 2 – system cash flow 5.9 Illustration 3 – option appraisal with a base case 06 Conclusion 6.1 Conclusion to the research project 6.2 Final comments 6.3 Recommendations for further research Appendix 1 – Glossary of terms Appendix 2 – The sustainable design checklist Appendix 3 – Renewable energy technologies References 06 06 06 07 07 07 09 10 11 11 13 14 15 15 15 16 17 17 17 17 18 20 20 20 20 20 20 24 24 25 26 32 32 33 34 35 37 41 51
no text has produced an explicit method of measurement for option appraisal or benchmarking. 1. However. either deliberately or through ignorance. A recurring theme was the lack of a standard methodology for representing costs and benefits. social and economic issues of any design decision. Any model or tool which assists decision makers in reaching the best sustainable option must make explicit the complexity of the problem and the trade-offs and potential synergies which exist within these three facets of sustainability. micro and biomass heating and electricity generation. data management and component life assessment. risk and sensitivity analysis. an RIAS 4 star accredited sustainable design architect and winner of an RICS sustainability award in 2003 for the Glencoe visitor centre. The specific aim was to design a method with general applicability to building projects focusing on insulation. particularly for ventilation. controlled ventilation. challenged the surveying profession to be more explicit with regard to the costs associated with sustainability.06 LIFE CYCLE COSTING OF SUSTAINABLE DESIGN 01 Background 1 Background At the RICS Scotland Quantity Surveying and Construction Faculty Board (QSCFB) conference on 30th September 2005 three speakers addressed the subject of sustainability at both a macro and micro level. Howard Liddell. A subsequent Faculty Board debated the issues raised addressing the topics of the macro – economic implications of the expansion of Scotland’s renewable energy and a life cycle costing approach to project based sustainable design. . heating and electricity generation.1 Sustainable Development Sustainable development presumes a whole systems approach that considers the environmental. The life cycle costing texts are rich in mathematical theory. The methodologies of life cycle costing (LCC) are well understood but the rules of their application in option appraisal are not. This research project focuses on deriving a standardised approach to the life cycle costing of sustainable design in buildings. The optimal sustainable development solution is one which balances the total economic cost and social change together with the inevitable environmental consequence but ensures that scarce resources are not squandered. Sustainable development is variously defined but this research relies on the Brundtland definition "Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs” This research considers only the economic dimension of evaluating a sustainable design. It is the latter topic which was considered to be of immediate importance. The research project began from the premise that whilst much is said about the economics of sustainable projects there is no standard method of measurement of life cycle cost and currently option appraisals were being carried out with no definition of the parameters of the calculation.
4. in a logical fashion. Kelly and Hunter (2005) being an example of most recently published work. However. few deal with sustainability at a project level and none set a life cycle cost methodology suitable for use by surveyors in option appraisal.07 LIFE CYCLE COSTING OF SUSTAINABLE DESIGN Background 1. construction firms and project managers the report includes as appendices case studies and reporting proforma but does not give an option appraisal or life cycle costing methodology. It concludes “in terms of who is best placed to undertake the work involved to produce a set of [sustainability] accounts is open to debate”. Aimed specifically at clients.2 Preliminary work A preliminary literature search confirmed the view of the QSCFB that whilst there are a number of publications which deal with sustainability at a global impact level. 5. To illustrate the method with examples to show the life cycle costs of such installations. A standard method to calculate life cycle costs for sustainable design. ventilation. the data necessary to populate the life cycle cost model. Bourke et al (2005). that defines whole life costing as including the finance and other costs which precede the concept and design stages. The specific aim was to design a method with general applicability to building projects focusing on insulation. etc. Flanagan and Jewell (2005). A checklist to allow surveyors to gather. This paper uses the term life cycle costing following the logic of ISO/FDIS 15686-5:2006(E) Buildings and Constructed Assets – Service Life Planning – Part 5 – Life Cycle Costing. Life cycle cost methodology is well understood if infrequently used. 1. A useful publication at project level is the 2002 CIRIA publication “Sustainability accounting in the construction business”. controlled ventilation. insulation. 3. . although the principles are well described a standard method approach to life cycle costing of sustainable design was not available.3 Aims and Objectives The aim of this research was to produce a standardised approach to the life cycle costing of sustainable design in buildings. To present a commentary on issues such as embodied energy. micro and biomass heating and electricity generation. Boussabaine and Kirkham (2004). This report describes the output of the work undertaken in meeting these objectives. The production of information in a standard form conducive for the client to make an informed cost benefit decision. 2. air tightness. The objectives set at the outset were: 1.
substituting electric resistance heating with gas central heating. What is the total cost commitment of the decision to acquire a particular facility or component over the time horizon being considered? 2. 5. What are the short term running costs associated with the acquisition of a particular facility or component? 3. Discount cash flows to a comparable time base. What are the running costs and performance characteristics of an existing facility . 4.asset? (bringing into play post occupancy evaluation) 5. How can the running costs of an existing facility be reduced? (bringing into play benchmarking) 6. Establish basic assumptions.1 Costs . the discount rate. whole life appraisal and through life costs. data requirements. life cycle costing. A new ISO standard. Ruegg et al outlines five basic steps to making decisions about options: 1. attic insulation and double glazing. For a Build Operate Transfer concession project how can the future cost be estimated at design phase and what is the reliability? 2. In either situation the time value of money is an important element but in this research the focus is on option appraisal.08 LIFE CYCLE COSTING OF SUSTAINABLE DESIGN 02 Background to life-cycle costing Life cycle costing refers to an exercise in which the capital cost of the project and all relevant future costs are made explicit and used either. Compute total life cycle costs. for example. Which of several options has the lowest total life cycle cost? 4. • as the basis for a cash flow prediction over a given period of time or • used in an option appraisal exercise to evaluate various solutions to a given design problem. There are other terms which are in current use. ISO ISO/FDIS (ISO/FDIS 15686-5:2006 (E) Buildings and Constructed Assets – Service Life Planning – Part 5 – Life Cycle Costing) includes an extensive list of definitions of very similar terms. Identify project objectives. cash flows and inflation. 2. options and constraints. Compile data. A glossary of terms is given in appendix 1. cost in use. 3. the level of comprehensiveness. The basic assumptions referred to are related to the period of study. In the context of a standard approach Ruegg et al (1980) states that from the perspective of the investor or decision-maker all costs arising from the investment decision are potentially important to that decision and that those costs are the total whole-life costs and not exclusively the capital costs. solar domestic water heating. Marshall and Ruegg (1981) give recommended practice for measuring benefit-to-cost ratios and savings-toinvestment ratios based on a similar five step process and focusing in their appendix on savings-to-investment ratio evaluations of energy conservation investments as a means to determining between retrofit options for housing including. Flanagan and Jewell (2005) supplement the above by stating that the following questions drive the application of the whole life approach: 1. compare options and make decisions.
This introduces a seventh element to the above list namely the period of study.total cost to the owner of acquiring an item and bringing it to the condition where it is capable of performing its intended function. or an element of a building until the time when it no longer satisfies legal or statutory requirements.the life of a building. etc.10 LIFE CYCLE COSTING OF SUSTAINABLE DESIGN Background to life-cycle costing In 1986 the Quantity Surveyors Division of the RICS produced a guide which listed the costs to be included within a life cycle cost calculation. which are necessary for the building to be used. Functional life . the guide describes residual values as the value of the building when it has reached the end of its life and does not have an alternative use. 4. 3. 5. Excluded are externalities and intangible costs consequential to the design decision but unable to be estimated with certainty. 2. Of relevance to this research. Maintenance costs .a period of occupation which is considered to be the least cost option to satisfy a required functional objective. Financing costs .life of a building or an element until it is no longer technically superior to alternatives. The issues here with regard to life highlights the different elements impacting the study period and reflect a total building life mindset. cleaning. Technological life .2 Life In the RICS guide life is defined as the length of time during which the building satisfies specific requirements described as: 1. 2.life of a building or an element of a building to the time when physical collapse is possible. Flanagan states. Legal life . since there is no reason to believe that they will be equal: for example the recommended period of analysis for federal buildings in the US is 25 years. or has reached the end of its life for its planned purpose but does have an alternative use.total cost to the owner of disposing of an item when it has failed or is no longer required for any reason. Acquisition costs . considerably less than any reasonable building life. . Economic life . 5. Operating costs . Disposal costs . Costs to be included in a life cycle cost calculation are factual costs able to be estimated with a known degree of certainty.costs of for example. 6. energy.life of a building until the time when human desire dictates replacement for reasons other than economic considerations. Occupation costs . building tax. to keep it in good repair and working condition. 6. 3. Physical life . Social life .cost of raising the capital to finance a project. 4. and secondly the period of analysis.costs to perform the functions for which the building is intended. 2. the system or the component.the period until a building ceases to function for the same purpose as that for which it was built.cost of maintaining the building. "it is important when carrying out any form of life cycle costing to differentiate between these two timescales. Flanagan et al (1989) states that two different time scales are involved in life cycle costing: firstly the expected life of the building. All expenditure incurred by a building and during its life were described as: 1.
This reflects the view of the authors that buildings change significantly both functionally and economically within a 30 year period to the extent that the costs and functions known at time zero cannot reflect those costs and functions 30 years hence. suppliers and contractors. 5. The exception may be housing. Where historic data is available it may provide misleading information.10 LIFE CYCLE COSTING OF SUSTAINABLE DESIGN Background to life-cycle costing Ruegg and Marshall (1990) confirm seven study periods namely: 1. Examples are given for retailing which has changed significantly within 30 years and healthcare which is practised entirely differently today from that which was practised in 1978. The multiple lives of options . Flanagan and Jewel state: • Data are often missing. Both Kelly and Hunter and Flanagan and Jewel quote the UK Office of Government Commerce (2003) which states that it is important to focus on future trends rather than compare costs of the past. such as the past mistakes in the industry and focusing on lowest price. predictive calculations from model building and historic data. • Data are often not up to date. Equal to the Investors Time Horizon . 2. 2. Kelly and Hunter (2005) recommend that a life cycle cost calculation should not extend beyond 30 years.recognising that options having exactly the same total costs over one period of time will have different total costs if the cash flows are taken over different periods due to replacement and maintenance occurring at differing points in time. The investor's holding period . • It can be difficult to download data for subsequent analyses and for data sharing by a third party. The quoted building life.the period of interest the investor has in the building. Historic data is best used for budget estimates at whole building or elemental levels. 7. . sometimes for the same item. • Data input is unreliable: the input should be undertaken by those with a vested interest in getting it right.specifically relating to equipment.the time before selling or demolishing. Equal to the longest life of alternatives. • There will be huge variation in the data. All authors highlight the danger associated with data used for life cycle costing. Uneven lives of options . A note is also made of the dangers of using annual equivalent discount models where alternatives have uneven lives. 3. 4. • People often believe they have more data than actually exists.3 Data Kelly and Hunter (2005) and Flanagan and Jewel (2005) cite the same basic data sources as: data from specialist manufacturers.recognising that where alternatives have different lives and cash flows then residual values have to fully compensate particularly over short study timeframes. 6. At the point of option appraisal of systems and components it is always preferable to estimate the cost from first principles and only to use historical cost information as a check. • Data can often be inaccurate. The physical life of the project .
• Strategic level relating to the structure. • Detail level (component level) for example ceiling tiles. etc. services and finishes. solid or framed walls and floors.11 LIFE CYCLE COSTING OF SUSTAINABLE DESIGN Background to life-cycle costing 2. floor coverings. . communications. with appropriate discount rates and taking into account risk. The standard describes life cycle costing as "a valuable technique which is used for predicting and assessing the cost performance of constructed assets". A final point to make is the relevance of value to the life cycle cost equation outlined in Preiser et al. out of 14 listed. are considered the most important in the context of the current project. which is critical in the context of post occupancy evaluation since any valuation has to state explicitly which and whose values are being used in establishing evaluation criteria” In the context of a post occupancy . foundations. ventilation. water capacity. objectives are "make the life cycle costing assessments and the underlying assumptions more transparent and robust" and "provide the framework for consistent life cycle costing predictions and performance assessment which will facilitate more robust levels of comparative analysis and cost benchmarking". • System level (elemental level) relating to floor wall and ceiling finishes. envelope. windows and doors. These three objectives. The evidence from the literature in the context of the research gives support to the development of life cycle costing taking account of all relevant costs. over a given time period for all options being considered. using contemporary data.5 Review of ISO/FDIS 15686-5:2006(E) Buildings and Constructed Assets – Service Life Planning Part 5 Life Cycle Costing The standard. The standard describes three levels of application namely. energy. (1988) which states. 2.4 Discount rates Ruegg and Marshall (1990) consider in detail the discount rates to be used in the context of business discount rates for commercial decisions and public discount rates for public decisions. roofing. has the objective of "to help to improve decision making and evaluation processes. Ruegg and Marshall also introduce the theory of risk adjusted discount rates. electrical and mechanical plant. Boussabaine and Kirkham (2004) take this further and introduce methods of assessing and blending the risk methodology with life cycle cost calculations. at relevant stages of any project" Other key . still in its draft form. evaluation as opposed to life cycle costing it brings into focus that the majority of writers in life cycle costing are focused on cost rather than value. cladding. "the term evaluation contains a form of the word value.
. Although there is a large amount of work to be done at the first three levels in the context of sustainability the focus of attention of this research is at component level. Figure 1 Application of life cycle costing through the project life-cycle Asset Management/ Option Appraisal LCC study 1 Optional Project Appraisal LCC study 2 Element Appraisal LCC study 3 Component Appraisal LCC study 4 Year Zero Retro-fit Component Appraisal LCC study 4 LCC Audits PRE-PROJECT PROJECT POST PROJECT STRATEGIC BRIEF BRIEF OUTLINE DESIGN POST PROJECT EVALULATION . The standard reiterates many of the concepts reviewed and is a useful document if for no other reason that it highlights the application of life cycle costing at the four stages of asset/portfolio management. elements and component levels. Life-cycle costing allows consistent comparisons to be performed between alternatives with different cash flows and different time frames. constructed asset and facility management levels.12 LIFE CYCLE COSTING OF SUSTAINABLE DESIGN Background to life-cycle costing This is a useful categorisation but it ignores the level of asset management which is described elsewhere in the standard as "life-cycle costing is relevant at portfolio/estate management. The analysis takes into account relevant factors throughout the service life. primarily to inform decisionmaking and comparing alternatives. project management. with regard to the clients’ specified brief and project specific service life performance requirements” See Figure 1.
The aim is to minimise life cycle costs through the application. The output is a spend profile over a period of up to 60 years showing the estimated expenditure for each year of the selected period. and facilitate the production of a construction industry maintenance management operating system. and refurbishment. a master calculation sheet and a sensitivity analysis sheet. The program entitled "Life cycle cost Evaluator" is written in Java facilitating flexibility for bespoke applications and in reporting structures at both preliminary and detailed design stages. Data is collected in a user prescribed manner and stored in a database accessed on line. but any structure can easily be created and amended. and has collected data on the occupancy and maintenance costs of buildings from subscribers and other sources. to construction components. The software's flexible input and output systems and novel features reduces the time to estimate life cycle costs by up to 80%. The spreadsheet package is elementally based with three modules comprising. It updates the original document produced by Smith et al (1984).6 A Review of Existing Methods and Models BCIS Running Costs Online BCIS Building Maintenance Information (BMI) has recorded the cost of occupying buildings in the UK for over 30 years. maintenance. the database is effectively constructed in the Job Box. simply by "dragging and dropping". BCIS Running Costs Online has a life cycle costing module that combines the information from the BCIS annual reviews of maintenance and occupancy costs with the data from the bi-annual occupancy cost plans allowing users to compare the running costs of different building types. The entire Job Box can however be easily transferred from project to project. This service has been re-launched as BCIS Building Running Costs Online and as the name suggests is a web based service to professionals involved in facilities management. subscribers receiving a mailing at regular intervals. has launched a web-based element-orientated life cycle costing system based upon the output of an EPSRC funded research project. . University of Dundee Professor Malcolm Horner of Whole Life Consultants Ltd and the Construction Management Research Unit. The programme does not rely on a database. University of Dundee. The tool was developed to enable option appraisals to be undertaken quickly and accurately using present value techniques over study periods of not exceeding 30 years.13 LIFE CYCLE COSTING OF SUSTAINABLE DESIGN Background to life-cycle costing 2. a Job Box in which the components of each element are built up. an intelligent input tool for the input of base data in response to requests on prompt screens and finally completed spreadsheets comprising a record of the input. (Note: Text submitted by Professor Horner). A central database is organised in an elemental format allowing comparative analyses to be undertaken. The default cost breakdown structure is that proposed by BCIS. The service also keeps life expectancy of building components data. Society of Construction and Quantity Surveyors (SCQS) – Framework for whole life costing The SCQS framework document and spreadsheet based LCC package was launched in 2005 and has been used mainly within the local authority arena. The spreadsheet format is familiar to surveyors and can be manually checked at any time during the operation. of the integrated logistic support methodologies used in the aircraft industry. rebased for time and location based upon indices updated monthly. The spreadsheets are completed automatically by the input tool giving confidence in the accuracy of calculations and placement in the correct cell on the spreadsheet. The system is compliant with ISO 15686. The database was paper based.
14 LIFE CYCLE COSTING OF SUSTAINABLE DESIGN Background to life-cycle costing Life cycle cost Forum . A note on the website (January 2008) indicates that the tool is no longer available. If a life cycle cost of sustainable options were to be undertaken then rules have to be developed to ensure that options are compared on an identical basis. .7 Rules A review of the literature and examination of the available systems demonstrated that life cycle costing can be undertaken for diverse reasons in many different ways generating variable outputs. There is also a system that provides benchmarks contained in a central database to allow for comparisons across similar projects. It was launched in November 1999 with the aim of developing an online comparator tool to remove errors and prevent the reliance on spreadsheets. The tool allows whole-life costs to be compared on a like-for-like basis and works on the basis that the supplier is the best source for information on life cycle costs of their own products. It reduces the amount of time normally spent working on life cycle cost calculations by minimising the effort required.LCCF The LCCF claims to have been set up as the first construction industry initiative to promote the use of whole-life costs. One of the main objectives was to advance the use of life cycle costing along the entire length of the supply chain. 2. LCC comparator . For this reason the following rules were developed as a part of this research and checked through desk studies and third party analysis. The rules and methodology make an important contribution to surveying.BRE LCC comparator is a tool developed by BRE to calculate the life cycle cost of building elements and components. The tool highlights how higher capital costs at the outset can be more effective over the long term with regard to lower maintenance and operating costs.
The purpose of life cycle costing is to provide information in a form which assists decision-making on capital and through life costs. Prediction of a single cash flow b. The purpose of the study shall be stated. The focus of the study shall be stated as one or more of the following: a. Study at element level e. This standard approach acknowledges six levels of study: • Study at multi asset or portfolio/estate level • Study at single asset or whole building level • Study at cluster level (multi-element) • Study at element level • Study at system level • Study at component or detail level The general rules and the formulae apply to all levels of study. finance costs.1 Introduction The following rules were derived from literature and validated through the expert analysis of the RICS Quantity Surveying and Construction Faculty. 2. fees and taxes. The rules were considered a necessary prerequisite for the analysis of the life cycle cost of sustainable solutions and particularly for option appraisal. cost planning. . Audit of single or multiple cash flow(s). Study at multi asset or portfolio/estate level b. Study at cluster level (multi-element) d. Examples include: a.2 General Rules 1. Time zero is the point in time from which the study period commences. 6. 3. Option appraisal based on multiple cash flows c. The cash flow of the selected option may be used to generate a cash flow over a fixed period of time and therefore can be metamorphosed into a study of the first type. The study will state whether the data for the LCC exercise is built up from first principles or whether parametric data is used. There are two primary reasons for undertaking a life cycle cost study • a study to predict a cash flow(s) over a fixed period of time for budgeting. Capital costs are all relevant costs accrued prior to time zero and deemed to include service and product delivery and installation. • a study as part of an option appraisal exercise at any of the six levels of study in a manner that allows comparison. Study at single asset or whole building level c. cost reconciliation and audit. A brief description of the project will be given. 5. Study at system level f. 3. Time zero shall be stated. Study at component or detail level 4. tendering. Comparison of tenders that include a cash flow d.15 LIFE CYCLE COSTING OF SUSTAINABLE DESIGN 03 Rules 3. The purpose of this standard approach is to guide the preparation of life cycle cost studies in a standard form which facilitates audit and data exchange.
for example a straight line method of depreciation may be assumed. weeks. Present Value P= A (1+i)n 3. 9. 10. months. 3. Compound Interest A = P (1+i)n b To adjust an interest rate per annum (i pa) to an interest rate per month (i pm) ipm = ( 12 (1+i pa) ) -1 . The units of time are the increments to which the calculations refer and may be for example. years. Assumptions with regard to residual values shall be stated. The method of depreciation shall be stated. services and site performance at the level specified at time zero. Where depreciation is not applicable this shall be stated 13. The study period shall be stated. Year’s Purchase or Present Value of £1 per Annum P= R (1-(1+i)-n) i Alternative formula for calculators without –n function R ((1+i)n-1) P= i(1+i)n 4.3 Formulae The following formulae shall be used as applicable: P i n A R = = = = = principal or present value interest expressed as a decimal number of time periods accumulated amount or future amount repayment or regular payment to a sinking fund Interest Rate Adjustments All rates expressed as a decimal a To adjust an interest base rate t by inflation rate f to give a discount rate i (1+t) -1 (1+f) 2. fabric. The study period is the time from time zero to a given point in time in the future and over which the calculations pertain.16 LIFE CYCLE COSTING OF SUSTAINABLE DESIGN Rules 7. Mortgage Ai (1+i)n-1 R Pi(1+i) R= (1+i)n-1 n i= 1. The method of undertaking sensitivity analysis and/or risk analysis shall be stated. All factors in the calculations. 14. Assumptions with regard to interest rates shall be stated. The units of time shall be stated. 11. Maintenance costs are all relevant costs necessary to facilitate the asset’s continuing structure. interest rates will relate to the stated units of time. Sinking Fund R= 5. 12. Assumptions with regard to hard FM activities in the final period of study shall be stated. days. 8. for example.
6 Method of Measurement of Systems 1. 2.4 Purpose of Calculation The purpose of the calculation shall be stated as one of the following: 1. The estimated scrap value of the replaced component shall be stated. 3. 4. Requirements for periodic inspection. 3. The rules of measurement for components will apply to those components comprising a system. insurances. The number of identical components shall be stated. 2. 2. Systems will be described under element headings. cleaning. An option appraisal of cash flows of multiple solutions to a problem where a “base case” is established. The actual life where the component is to be replaced as a planned activity prior to failure. Maintenance of the component shall address the following: a. The component shall be described either in terms of its manufactured part reference or in terms of its physical characteristics and function. The estimated maintenance costs shall be stated. . Single unit items will be described separately from components and systems.7 Method of Measurement of Single Unit Items including Energy 1. The capital cost of the installed component shall be given and stated whether estimated or firm. etc. Periodic and predetermined physical maintenance listing each different type of maintenance separately. An option appraisal of cash flows of multiple solutions to a problem where no “base case” is established. 3. b. 5. A prediction of cash flow over time for a single asset (no discounting and no option appraisal).17 LIFE CYCLE COSTING OF SUSTAINABLE DESIGN Rules 3. 3. The system shall be described in terms of its components. A prediction of cash flow over time for multiple assets (no discounting and no option appraisal). b. Single unit items include energy and those services represented as a single sum per period of time such as management fees. 6. 7. The physical life of the component shall be stated as follows: a. 4. 2. The estimated physical life where the component is to be replaced upon failure.5 Method of Measurement of Components 1. 3. 3.
1. • One SolarPanPlus heat collector and PV panel of 4. controls and secondary tank thermostat are powered by an integral PV unit negating any mains electrical work. The data is used in the illustrative calculations later. 3. 4.18 LIFE CYCLE COSTING OF SUSTAINABLE DESIGN 04 Checklist for data gathering at component and system levels 4. Approximately what is its installation cost and labour hours? SolarPanPlus is normally fitted by two skilled operatives in a single day. What are the primary components that will require servicing and replacement during the life of the technology? Components • All components have an estimated 20 year life except for the pump which may need to be replaced at ten years. Works)? £7050 inclusive of VAT and installation for a 4. 4. the following questionnaire was produced to obtain data from manufacturers and suppliers at component and system levels. What is the supplied cost of the technology (exc.2 m2 (with cable) for a typical two storey three bed detached house. fittings. The questionnaire was piloted through consultation interviews with manufacturers of selected technologies (n=6).2 Questionnaire The questionnaire is illustrated with answers from a fictitious manufacturer of a hot water solar panel with the trade name of SolarPanPlus. • • • • • • • Roof mounting brackets Pipe. Scottish Community and Householders Renewables Initiative (SCHRI) and the Carbon Trust. The pump.1 Introduction Following a desk study review of websites including the Energy Savings Trust.2 m2 panel installed on a typical two storey three bed detached house. 2. tees Pump Thermometer Control valve Control unit Tank thermostat . Give a brief description of the technology: SolarPanPlus is an evacuated tube solar roof panel that delivers hot water to a twin coil hot water cylinder.
19 LIFE CYCLE COSTING OF SUSTAINABLE DESIGN Checklist for data gathering at component and system levels 5. Is there a standard warranty period for the component. A maintenance contract can be purchased for £12 per month which extends the warranty to 20 years and includes regular inspection and all necessary replacements and maintenance. The cost of re-installation is the same as the supply of a new panel. etc) during the summer months and 30% of the requirement during the remainder of the year. please list these separately (or attach maintenance schedule with estimation of labour hours) SolarPanPlus requires inspection at 3 year intervals at which point the panel including the integral UV panel will be cleaned and checked and the antifreeze changed. salt laden air. What factors shorten component life e. exposure to UV light. spray taps in bathrooms.g. What is the terminal/scrap value of this component at the end of its life? Over 80% of the panel is easily recyclable but the panel has no terminal value. etc. 12. 10. Does this component require regular inspection and if so what is the inspection period and the inspection time in labour hours? Included with service. If a gas boiler is used for heating water in the summer then boiler life extension should be taken into account as the boiler should not fire up during the summer months. 6. 7.e. SolarPanPlus will generate approximately the electrical equivalent of 25kWh per day in the summer (say 150 days) and 8kWh during the remainder of the year. What are its approximate removal and re-installation labour hours? The panel can be easily removed. 8. after 1000 hours/ after 5000 hours/ etc. 9. What is the estimated energy generation and/or savings accrued from using this product In an average year SolarPanPlus will supply a family’s domestic hot water requirements (assuming sensible use – i.g. Does this component require regular maintenance and if so what is the maintenance time in labour hours? If more than one type of maintenance e. What is the estimated service life of the component in years? 20 years. if so how long? 5 year warranty. short low flow showers. The inspection takes one operative one day and is currently charged at £300 including VAT. . see below. The panel is resistant to UV light 11.
g. or from first principles either by calculation e. prediction of cash flow or option appraisal (with or without a base case). or from manufacturers or suppliers.20 LIFE CYCLE COSTING OF SUSTAINABLE DESIGN 05 A method for undertaking life-cycle costing of sustainability projects 5. 5. A client nominated discount rate is used when considering options against strict internal rate of return or opportunity cost of capital criteria 5. . It may be advantageous to set up any model to calculate over a number of time periods so that options can be quickly compared rather than running repetitive sensitivity checks. and the time zero point for all calculations. The units of time and the interest rate must correlate i. and adjusts this for inflation. tendering.e. Public sector option appraisal calculations tend to use the discount rate issued by HM Treasury which is (January 2008) 3. The method is described and illustrated through a number of steps. 5. The method is an application of the rules in part 3 and follows the logic of the flowchart below. cost reconciliation and audit. The discount rate will be legislated. A calculated discount rate takes a relevant rate of interest e. This identifies how the data will be used. can be included in the general description. energy calculation.2 Step 1 – Project Identifiers (rules 1 to 5) Some description is required to both identify and describe the project including.5 Step 4 – Gather Data Data will be obtained from parametric sources e. BCIS Running Costs Online. the basis for the calculation i. whether the data is parametric or obtained from manufacturers/suppliers. if the unit of time is months then the interest rate must be a percentage rate per month. Data gathered from manufacturers or suppliers should include the detail illustrated in Part 4 above. The study period will commence at time zero which has been previously defined. the bank rate.4 Step 3 – Inflation Rate and Discount Rate (rule 10) The inflation rate only is used when predicting a cash flow of over time for the purposes of budgeting.1 Introduction This section outlines a method for undertaking a life cycle cost appraisal of a sustainable project illustrated in part 6 by reference to fictitious products.g.g.5%. cost planning. calculated or given by the client. 5.3 Step 2 – Study Periods (rules 8 and 9) Determine the length of the study period and also the unit of time (rules 6 and 7).e. Discount rates are used when comparing two or more dissimilar options during an option appraisal exercise or when comparing tenders which have an FM constituent. The type of life cycle cost calculation.
Option appraisal of future cash flows 3. Legislated (eg. HM Treasury) 2. User specified 3. Ditto but with a base case established What discount rate? 1. Prediction of future cash flows only (for budgeting) 2.21 LIFE CYCLE COSTING OF SUSTAINABLE DESIGN A method for undertaking life-cycle costing of sustainability projects Figure 2 Flowchart of a LCC system Page 1 START Project identifiers: Project name Brief description of the project File name Anticipated time zero User identification: User name/password What type of LCC calculation? 1. Calculated • How many study periods? • What is the length of time of each study period? TO PAGE 2 .
Brief description of system components 3.22 LIFE CYCLE COSTING OF SUSTAINABLE DESIGN A method for undertaking life-cycle costing of sustainability projects Figure 2 Flowchart of a LCC system Page 2 FROM PAGE 1 How many sustainable options to be considered? For each sustainable option and the base option if relevant input: 1. For each component enter: a) current capital cost including installation b) estimated service life c) scrap value at end of life d) would the component be replaced in last year of study e) will the component be inspected or maintained in the last year of study f) residual values if NOT straight line method g) inspection period and cost if relevant h) maintainence period and cost 4. Brief description of the sytem 2. Does the sytem save or generate energy? a) indicate form of energy saved/generated b) estimated value of energy saved/generated c) if grants apply give lump sum value d) give estimated value of renewables obligation certificates if applicable e) value of carbon offsets if applicable option appraisal option appraisal cash flow prediction cash flow prediction TO PAGE 3 .
23 LIFE CYCLE COSTING OF SUSTAINABLE DESIGN A method for undertaking life-cycle costing of sustainability projects Figure 2 Flowchart of a LCC system Page 3 FROM PAGE 2 Has a base case been established for option appraisal? No Calculation based on cash flows of a single option over the study period(s) accounting for inflation only. END Yes Calculation based on cash flows for each option over the study period(s) and compared on a net present value basis. END END . Calculation based on cash flows for each option and the base case over the study period(s) and evaluated on a net present value basis and using the measures of economic performance.
Figure 3 Illustration of cash flow over time for a single asset LCC cash flow for a gas fired central heating boiler Year 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Inflation rate 2. 5.00 200.00 40.00 40.86 70.00 2350.00 40.79 .86 62. Many Quantity Surveying practices have a life cycle cost package developed and used in-house.00 200.00 41.39 63.95 256.24 LIFE CYCLE COSTING OF SUSTAINABLE DESIGN A method for undertaking life-cycle costing of sustainability projects 5. These are generally spreadsheet based.00 40. The illustration below was constructed using a spreadsheet.80 55.00 200.00 500.00 40.55 609.00 40.52 289.20 49.50% Activity Purchase Annual inspection Annual inspection Annual inspection Annual inspection Replace pilot light Annual inspection Annual inspection Replace burner Annual inspection Replace pilot light Annual inspection Annual inspection Annual inspection Annual inspection Replace pilot light Replace burner Annual inspection Annual inspection Annual inspection Replace boiler Annual inspection Annual inspection Annual inspection Annual inspection Replace pilot light Current cost 2350.75 67.00 40.00 Future cost 2350.00 42.00 40.14 56.6 above there are few commercially available software packages which allow the type of calculation described above.7 Illustration 1 – Component cash flow The first illustration is of a cash flow forecast for budgeting purposes of a single component adjusted for inflation only.00 40.00 40.6 Step 5 – Model Construction and Analysis As discussed in Part 2.18 68.66 742.08 44.00 40.00 500.25 60.00 40.15 226.00 40.39 47.00 40.48 53.58 72.28 46.00 200.00 40.00 40.35 370.03 43.02 52.95 3850.00 40.00 40.
25 60.68 .00 40.00 42.02 52.84 139.00 40.00 40.00 3850.00 40. pump controls & radiators Annual inspection Annual inspection A insp & antifreeze Annual inspection Replace pilot & pump Current Cost 2350.79 400 655.32 63.00 40.03 129.45 1100 1802.16 47.86 21 22 23 24 25 80 141.15 226.20 49.00 200.80 55.00 Future Cost 2350.03 200 249.00 Total Cash Flow 5450.35 400 741.32 80 115.00 40.48 53.00 41.48 800 1310.25 LIFE CYCLE COSTING OF SUSTAINABLE DESIGN A method for undertaking life-cycle costing of sustainability projects 5.05 52.28 46.00 40.00 200.39 47.00 40.58 72.18 68.58 80 148.75 67.52 289.55 609.15 678.00 40.48 161.59 400 512.17 211.73 768. flush & antifreeze Annual inspection Replace boiler.50%) The second illustration is of a cash flow forecast for budgeting purposes of a system adjusted for inflation only.00 41.86 80 107.95 2350.00 200.89 7619.03 43.00 40. Figure 4 LCC cash flow for a gas fired central heating system BOILER Yr 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Activity Purchase Annual inspection Annual inspection A insp & antifreeze Annual inspection Replace pilot & pump A insp & antifreeze Annual inspection Replace burner A insp.66 742.00 40.14 56.00 40.39 55.18 68.00 PIPES & RADIATORS Current Cost 1600 Future Cost 1600.25 60.00 500.93 400 579. flush & antifreeze Replace pilot & pump Annual inspection A insp & antifreeze Annual inspection Annual inspection Replace pilot & pump Replace burner Annual inspection A insp.35 370.86 62.00 42.00 40.14 56.32 1260.00 40.39 63.78 80 86.77 400 452.00 200.20 299.00 500.86 374.08 44.00 40.86 70.57 67.8 Illustration 2 – System cash flow (Inflation rate 2.52 984.00 40.95 200 311.56 80 92.15 PUMP Current Cost 400 Future Cost 400.23 44.95 256.84 742.75 72.00 CONTROLS Current Cost 1100 Future Cost 1100.00 40.55 609.00 40.
55) • fitting a roof mounted SolarPanPlus solar hot water panel The purpose of the study is an option appraisal based on multiple cash flows The study will be conducted at system level The data for the study is built up from first principles Time zero is taken from the completion of the installation works when the systems are ready for use.36 to approximately 0.16) • installing cavity wall insulation (from u-value 1.00 to 0.16) and/or installing cavity wall insulation (from u-value 1. The target date for time zero is 1st August 2008 The study period reflects the householder’s intention to remain in the dwelling for the next 15 years. Application of the rules This exercise is an option appraisal with a base case. One or more of the following options are being considered within a total budget of £7000: • increasing roof insulation thickness from 100mm to 250mm (from u-value including structure approximately 0. The maintenance requirements of the options examined apply only to the SolarPanPlus.26 LIFE CYCLE COSTING OF SUSTAINABLE DESIGN A method for undertaking life-cycle costing of sustainability projects 5.55) or fitting a roof mounted solar hot water panel as SolarPanPlus illustrated earlier. Studies will be conducted over 10. In this illustration the base case is the existing situation. Maintenance and replacements will not be accounted for if they occur in the final year of the study.36 to approximately 0. 15 and 20 years to check for time sensitivity in the calculations. Depreciation will not apply and residual values will not be included in the calculation. Sensitivity checks will be undertaken by including three study periods and by varying the discount rate by 2% (increase and decrease).9 Illustration 3 – Option appraisal with a base case Assume a project to retrofit a detached house (50m2 plan area) by increasing roof insulation thickness from 100mm to 250mm ( from u-value including structure approximately 0. With reference to the rules and the checklist the following data has been obtained. For the purposes of this example the maintenance contract will not be used. Rule 1 The project is to retrofit a detached house (50m2 plan area) to significantly reduce gas consumption. Rule 2 Rule 3 Rule 4 Rule 5 Rule 8 Rule 9 Rule 10 Rule 11 Rule 12 Rule 13 Rule 14 .00 to 0. The unit of time is years The interest rate will be calculated assuming a return on a deposit account of 5% and an inflation rate of 2%.
2 will lead to a reduction of approximately 1000 kWh during the heating season (2500 degree days).03 per kWh for gas this leads to a saving of £30 per annum. Initial cost of 120m2 wall area = £600 Assuming a designed temperature difference of 21oC a U value improvement of 0. 15 and 20 years Initial cost of 64m2 at £7 per m2 installed = £448 Assuming a designed temperature difference of 21oC a U value improvement of 0. At £0.10 per annum Cavity wall insulation Cavity wall fuel savings SolarPanPlus costs SolarPanPlus savings . Initial cost £5875 Maintenance at 3 yearly intervals £300 Replacement pump year ten £80 150 days at 25kWh per day at £0.03 per kWh (gas) = £112.45 will lead to a reduction of approximately 4100 kWh during the heating season (2500 degree days). At £0.03 per kWh (gas) = £51.60 Total saving = £164.27 LIFE CYCLE COSTING OF SUSTAINABLE DESIGN A method for undertaking life-cycle costing of sustainability projects Basis of the calculation Available budget Interest rate on deposits Inflation rate Study periods Roof insulation costs Roof insulation fuel savings £7000 5% 2% 10.03 per kWh for gas this leads to a saving of £123 per annum.50 215 days at 8kWh per day at £0.
considerably lower than the interest rate of 5% indicating that £448 is better invested on deposit rather than spent on increasing insulation. The internal rate of return on cavity fill is almost 20% after 20 years indicating that this is a worthwhile investment.07 in year 20. 10 years.96%. The cavity fill option is based on a cavity wall complying with the building regulations of circa 1980. In monetary terms this is a poor investment. The option appraisal compares an upgrade of roof insulation. The roof insulation will pay back in year 20.000. As the option appraisal is referring back to a base case the calculations include measures of economic performance. In this type of option appraisal exercise therefore residual values must be treated with great care. The option appraisal has been carried out over three study periods. It should be noted that residual values have not been included in the calculation. Report Illustration 3 is a relatively common type of option appraisal but in this case strictly complies with the rules developed during the research. This apparently low level of saving is because the roof is already insulated and therefore only a marginal improvement in the U-value can be achieved. The final point to emphasise here is that the above analysis is solely from an economic perspective. If the residual value equation were to be strictly interpreted then the Savings to Investment Ratio would be higher in year 10 than it would be any at the end of the components life which is illogical. a factor discussed further in the report below. It should be noted that a better U-value improvement can be achieved over a much larger area than the roof. the expected “end of life” of the solar panel. If the calculations included facets of value then the result could be different. The logic for not including residual values is that the roof insulation and the solar panel are likely to need replacing in their entirety after a 20 year period. With reference to Figure 5 (calculated discount rate) the results of the calculations demonstrate that based on discounted payback: 1. The cavity fill will pay back in year 6. The option appraisal is typical of a life cycle costing exercise with a base case. based on a straight line method of depreciation. the installation of cavity wall insulation and the retro fitting of a solar hot-water panel. The solar panel will never pay back: indeed the savings on the solar panel are only marginally higher than the cost of maintenance and replacements meaning that after 20 years. 15 years and 20 years and has been checked for sensitivity to plus and minus two per cent on a calculated discount rate based on a 5% interest rate and a 2% inflation rate. The cost of the solar panel assumes installation on top of the existing roof covering. 2. The internal rate of return for increased roof insulation is 2. the savings are a little over £1.28 LIFE CYCLE COSTING OF SUSTAINABLE DESIGN A method for undertaking life-cycle costing of sustainability projects Calculations The calculations are based upon the rules and the basic data as indicated above. 3. The sensitivity checks indicate (figures 6 and 7) very little change from the facts reported above. One factor which has not been included is residual values.75 in year 10 to 3. The least cost option is the upgrade of roof insulation a monetary saving of £30 per annum. This is an important observation as it demonstrates that taking a residual value. is only valid when a pay back is made before the end of component life. . The cavity filled option offers the highest value for money with a Saving to Investment Ratio increasing from 1.
76 1.75% £5.00 £452.46 year 6 18.00 year 20 2.00 £164.875.06% £600.289.00 £0.131.00 £80.00 -£88.00 £1.75 year 6 15.57 n/a n/a £600.05 0.11 n/a n/a £448.80 0.63 2.00 £123.19 n/a n/a .14 n/a n/a £448.92 3.32 0.96% £600.96% £5.00 £874.49 0.07 year 6 19.00 £30.37 1.10 £300.029 Option 1 Roof Insulation Option 2 Cavity Fill £600.00 -£191.00 -£4.99% £5.822.00 per 3 yrs per 10 yrs Option 3 SolarPanPlus £5.80 n/a 0.00 Initial capital cost Saving per annum Maintenance Replacement Report Year 10 Initial capital cost Net savings Savings to Investment Ratio Discounted payback Internal Rate of Return Report Year 15 Initial capital cost Net savings Savings to Investment Ratio Discounted payback Internal Rate of Return Report Year 20 Initial capital cost Net savings Savings to Investment Ratio Discounted payback Internal Rate of Return £448.239.875.00 £448.33 0.08 0.875.02 0.00 -£5.29 LIFE CYCLE COSTING OF SUSTAINABLE DESIGN A method for undertaking life-cycle costing of sustainability projects Figure 5 Results of a calculation for a comparative LCC using a calculated discount rate Discount Rate Calc Interest rate Inflation rate Discount rate 0.00 -£5.875.
96% £5.37 0.00 £30.00 -£4.00 £932.06% £600.61 0.875.991.00 -£136.77 1.35 0.00 £349.208.050 Option 1 Roof Insulation Option 2 Cavity Fill £600.875.00 -£5.75% £5.83 n/a 2.00 £676.10 £300.00 Initial capital cost Saving per annum Maintenance Replacement Report Year 10 Initial capital cost Net savings Savings to Investment Ratio Discounted payback Internal Rate of Return Report Year 15 Initial capital cost Net savings Savings to Investment Ratio Discounted payback Internal Rate of Return Report Year 20 Initial capital cost Net savings Savings to Investment Ratio Discounted payback Internal Rate of Return £448.00 £80.00 £164.00 £448.55 year 6 19.00 -£5.30 LIFE CYCLE COSTING OF SUSTAINABLE DESIGN A method for undertaking life-cycle costing of sustainability projects Figure 6 Sensitivity check on Figure 5 using a discount rate of 5% Discount Rate Calc Discount rate 0.16 n/a n/a .58 year 6 15.85 2.875.96% £600.99% £5.12 n/a n/a £448.13 year 6 18.00 -£74.52 n/a n/a £600.70 n/a 0.00 £123.333.00 -£216.48 0.57 0.13 0.00 per 3 yrs per 10 yrs Option 3 SolarPanPlus £5.70 2.10 n/a n/a £448.875.
044.37 1.96% £5.99% £5.00 £1.75% £5.06% £600.90 0.60 3.12 n/a n/a £448.05 0.00 -£5.84 year 5 18.00 £1.22 n/a n/a .010 Option 1 Roof Insulation Option 2 Cavity Fill £600.31 LIFE CYCLE COSTING OF SUSTAINABLE DESIGN A method for undertaking life-cycle costing of sustainability projects Figure 7 Sensitivity check on Figure 5 using a discount rate of 1% Discount Rate Calc Discount rate 0.875.15 n/a n/a £448.00 £448.86 0.69 0.00 per 3 yrs per 10 yrs Option 3 SolarPanPlus £5.93 n/a 0.00 £30.70 year 5 19.00 £564.21 year 17 2.27 0.619.97 1.241.00 £80.96% £600.00 £123.00 -£4.00 £164.10 £300.63 n/a n/a £600.40 2.875.00 £93.00 -£163.00 -£5.00 -£32.609.105.94 year 5 15.875.00 Initial capital cost Saving per annum Maintenance Replacement Report Year 10 Initial capital cost Net savings Savings to Investment Ratio Discounted payback Internal Rate of Return Report Year 15 Initial capital cost Net savings Savings to Investment Ratio Discounted payback Internal Rate of Return Report Year 20 Initial capital cost Net savings Savings to Investment Ratio Discounted payback Internal Rate of Return £448.875.
To illustrate the method with examples to show the life cycle costs of such installations. The research highlighted the importance of recognising the two primary reasons for undertaking life cycle costing.1 Conclusion to the research project This research project set out with a number of objectives: 1. This research has generated those rules and related definitions and tested them in expert gatherings. 5. To present a commentary on issues as embodied energy. A checklist to allow surveyors to gather. At beginning of the research it became apparent that whilst there were a number of papers and texts referring to life cycle costing methodologies and definitions none proposed a set of rules to be strictly applied in cases of option appraisal. cost reconciliation and audit purposes and • to facilitate an option appraisal exercise at any of the six identified levels of study in a manner that allows comparison. cost planning. in a logical fashion. It is recommended that the standardised approach is adopted by surveyors advising clients based upon life cycle cost calculations. the data necessary to populate the life cycle cost model. and these are included in appendices 2 and 3 and a standardised approach to the prediction of a cash flow and an option appraisal is presented. Examples were seen during the research of calculations conducted in different ways using different methodologies. insulation. different time scales. and making many different assumptions particularly with regard to fuel inflation. A draft of these rules and definitions has been passed to BSI and BCIS to inform the document “Standardised Method of Life Cycle Costing for Construction: UK supplement to ISO 15686 Part 5 life-cycle costing for buildings and constructed assets”. tendering. The production of information in a standard form conducive for the client to make an informed cost benefit decision. ventilation. The rules and definitions governing the approach to LCC should be considered the biggest contribution to surveying made by this research. 3. 4. 2. The questionnaire described in part 4 was tested and refined with a number of suppliers manufacturers.32 LIFE CYCLE COSTING OF SUSTAINABLE DESIGN 06 Conclusion 6. . air tightness. etc. A standard method to calculate life cycle costs of sustainable design. The research findings also demonstrated the need for a standardised approach to data gathering at component level and this is illustrated in part 4 of this report. namely: • to predict a cash flow of an asset over a fixed period of time for budgeting. Checklists have been developed for both sustainable design and sustainable energy solutions. This will also include benchmarking and tender comparisons.
rules of thumb are difficult to evolve except to say that on-site. it is a gross oversimplification to say that a sustainable design will add 10% or 15% to the cost of the building. This logic comes from ‘addition thinking’ i.e. here is a designed office building. Comparisons with design solutions where sustainable design was not a feature of the client’s value system could in theory be made but the calculations and logic are complex. These three examples demonstrate a sustainable design solution to a clear brief backed by an explicit value system. (an RIAS 4 star accredited sustainable design architect and winner of an RICS sustainability award in 2003 for the Glencoe visitor centre) to be more explicit with regard to the costs associated with sustainability.33 LIFE CYCLE COSTING OF SUSTAINABLE DESIGN Conclusion 6. These design solutions do not need to cost more. The cost of these solutions has to be viewed from a value for money perspective calculated on LCC principles. the headquarters building for Scottish Natural Heritage. . ‘addition thinking’ is entirely the wrong approach. This research has made significant progress towards a standardised methodology and some of the work has been incorporated into the BSI/BCIS publication mentioned above. Sustainable Design. The genesis of this study was a challenge laid down by Howard Liddell. how much extra will it cost to modify the design to include for example convection powered ventilation? Design has to be based on a clear briefed concept and a value system dictated by the client. On the other hand many innovative design solutions have been used to substantially reduce a project’s carbon footprint. However. micro energy solutions are difficult to justify on economic grounds. at Gaia’s Glencoe visitor centre for the National Trust for Scotland. house or school. Inverness. Examples reflecting sustainable value in design were seen at Arup’s Solihull Campus.2 Final Comments The study described has taken the researchers far and wide in the field of sustainability and it would be remiss if this report did not include some personal observations of the researchers: 1. at King Shaw Associates’ Innovate Green office project at Thorpe Park Leeds and at Keppie’s design for Great Glen House.
further transport and the installation of the final product became so product and site specific that generalisations were completely invalid. metal is bad and wood is good. At the end of the study the researchers concluded that although many micro energy products are sold based upon economic advantages. These facts resulted in the embodied energy objective being abandoned. the carbon cost of transport and fabrication. that the benefit of micro energy has to be based upon a value judgement. However. . a properly undertaken option appraisal study using the rules advocated by this research is unlikely to prove any economic benefit from a micro energy solution even with the current levels of government grants and current prices paid by electricity companies for surplus generated electricity. Micro energy A lengthy study of micro-energy was undertaken which is reflected in the findings in appendix 3. Bauxite is mined in a number of countries worldwide and transported to smelters. 3. The carbon footprint of this smelting process is very small. It was unfortunate in some ways to focus on aluminium products as a trial study. some of which are reported in appendix 3. Whilst aluminium requires huge amounts of energy in the smelting process a significant proportion (83% in the case of Alcan) of this electricity is sourced from local hydro schemes. Currently. Finally. Embodied energy This was initially an objective of the original research proposal but has proved too difficult to accurately model. the lesson learned was the importance of undertaking specific case studies at least to clarify the accuracy of the perception of a number of designers that for example. Added to this was the maturity (in relation to many other materials) of the aluminium recycling industry. There are many sources of information and some of these have been referenced.34 LIFE CYCLE COSTING OF SUSTAINABLE DESIGN Conclusion 2.
geothermal energy. ROC’s are traded amongst electricity generating companies such that those companies which fall below their renewables obligation can buy from those companies who have exceeded their renewables obligation. installing batteries and an inverter for on-site storage or connection to the electricity grid. Selling surplus electricity back to the energy supplier is an effective way of dealing with excess generation. In summary therefore investing in micro energy generation is done for reasons other than any economic advantage. The latter is an offsetting device whereby those who wish for various reasons to present themselves as zero carbon can purchase green certificate offsets. hydro. New technology products: It is difficult for manufacturers to predict the longevity of innovative products and their components. biofuels (including energy crops) and on and offshore wind. Batteries are a low demand supplier of electricity suitable for example for low wattage lighting but unsuitable for sustained high demand required for example by an electric oven. wave power. hot water less so than electricity. Electricity companies will buy such electricity at about 3p per unit (Jan 2008). ROCs are not to be confused with international green certificate trading. on the Kentish Flats suffered major failures after one year in service. tidal energy. Even in fairly established technologies such as wind generators. The current price of green certificate offsets is approximately £20 per tonne of CO2. installation in a new environment can lead to problems for example. ROCs are awarded to accredited generators of eligible renewable electricity produced within the UK – solar energy (including photovoltaics). takeover. 4. Three approaches are available for dealing with electricity generated in excess of the domestic requirements at the time of generation.35 LIFE CYCLE COSTING OF SUSTAINABLE DESIGN Conclusion On-site generated micro energy is difficult to store. Economic benefits from grid connected exported micro electricity generation accrue to electricity companies from sale of the electricity and sale of Renewable Obligation Certificates (ROCs). dumping waste energy (usually as heat). in 2007 it was reported that 12 out of 36 turbines off Herne Bay. . etc and these companies have difficulty offering credible long term guarantees that parts will be continue to be available over the estimated life of the product. many of the innovative products are produced by new companies which are more prone to failure. Additionally.
It can be anticipated that in the not too distant future tenders will be judged on value for money where a major part of the value equation will be sustainability. a method needs to be established for the explicit statement of value for money in the context of sustainability. budgeting. The research would answer the question. tender evaluation and audit on a life cycle cost basis are increasing. There is a necessity for rules and guidance on best practice which this research has addressed in part. A parallel situation exists currently in the innovations in site waste disposal to avoid landfill tax. Case study research is required to illustrate in some detail a proper approach to embodied energy.3 Recommendations for further research Demands for cost planning. A suggestion for further research is the development of a shadow “taxation” system. This work has majored on rules and methodology using sustainability as the subject.36 LIFE CYCLE COSTING OF SUSTAINABLE DESIGN Conclusion 6. Finally. Existing theories of embodied energy need to be robustly examined and tested and an explicit method developed for the measurement of embodied energy in construction components. Whilst energy remains relatively inexpensive evaluation solely on economic grounds will tend to favour the status quo. The research has uncovered many different approaches in the evaluation of sustainable options on a life cycle cost basis. 3. 2. There are three significant pieces of work which are required under the sustainability banner. This current situation is unacceptable. ISO 15686 gives clarity to applications and definitions and the BSI/BCIS publication is expected to influence rules and methodology. How will this value for money be credibly calculated? . how high must taxation be on existing carbon based technologies before a tipping point is reached and sustainable design and sustainable energy become the preferred option. Sustainability needs its own currency. 1.
incurred prior to time zero in acquiring an asset.all costs incurred in running and managing the facility including administration support services. Nominal cost . repair and corrective. security.initial cost of the asset. including capital costs. responsive and preventative maintenance necessary for the continued specified functional performance of the asset. etc.the total present day worth of a future cash flow discounted at a given interest-rate. redecoration. Sinking funds . Cost – the total paid for labour. Life cycle costing . Annual equivalent . Single unit items . Hard facilities management cost . Sunk costs . Capital cost . the conveyance of an asset by a debtor to a creditor as security for a debt.the costs associated with the disposal of an asset at the end of its life cycle.funds accumulated by equal payments made at regular time periods into an account which attracts a given interest-rate to accumulate a required sum of money established prior to undertaking the sinking fund calculations. rates.the present value of a series of discounted cash flows expressed as a constant annual amount. Residual value . External costs . Net present value . including the estimated changes in price due to inflation. Whole Life Appraisal is the systematic consideration of all relevant costs. plant and equipment. Cost and values Acquisition cost . cleaning.the estimated future amount to be paid. energy. technological advances. insurances. Real – adjusted for changes in the value of money. rent. deflation. cleaning. materials.include energy and those soft facilities management services represented as a single sum per period of time such as management fees.the distribution of the monetary value of an asset over a period of time commonly related to its productive or useful life. Depreciation .costs of goods and services already incurred or irrevocably committed. local taxes and charges. Core definitions Base case – the existing situation against which improvement options can be compared or a specific solution selected as the benchmark against which other options can be compared Mortgage – strictly.all costs. In the context of life cycle costing the mortgage is the amount to be paid at regular intervals at a given interest-rate to repay a debt. overheads and profit. It can be considered to be the amount to be invested in a bank today at a given interest rate to accrue a required amount at a given point in the future.Glossary of terms The following terms.the value assigned to an asset at the end of the period of analysis Soft facilities management cost .the result of discounting a cost to be incurred in the future at a given interest rate Disposal cost .the present day worth of a future cost discounted at a given interest-rate. used in life cycle costing. (present orientation) Real Opportunity Cost of Capital – the interest rate reflecting the earnings possible from an activity other than that being studied. are arranged under the following subheadings: • Core definitions • Cost and value • Interest rates and discount rates • Levels of study • Time Discounted cost .the quantification of the total cost of an enterprise for input into a decision making or evaluation process.costs associated with an asset not reflected in the transaction costs of the acquisition. revenues and performance associated with the acquisition and ownership of an asset.37 LIFE CYCLE COSTING OF SUSTAINABLE DESIGN 07 Appendix 1 .the cost of necessary replacement. . Present value . etc. insurances.
Internal rate of return .. Discount rate – the interest rate used for bringing future costs to a comparable time base (time zero).38 LIFE CYCLE COSTING OF SUSTAINABLE DESIGN Appendix 1 . week. . to give the discount rate. Time Period of analysis/period of study – the length of time over which the life cycle cost assessment is analysed. Element – a part of construction which performs the same function irrespective of the components from which it is made. adjusted by the inflation rate. All relevant costs accrued prior to time zero are deemed to be capital costs. Interest rates and discount rates Base rate – the interest rate selected as the basis of the discount rate. Component – a single manufactured product installed in a single operation which can be described by its manufactured part number or by its physical characteristics and function.the scrap value of a component or asset at the point of its replacement. Nominal interest rate – the actual interest rate applied not adjusted for inflation.a sustained and measurable increase/decrease in the general price level. Note Fisher equation (real interest rate = nominal interest rate – inflation). It may be any unit of time measurement (day. Unit of time – The time interval used in life cycle cost calculations.the discount rate that when applied to a cash flow containing positive and negative amounts gives a net present value of zero. The base rate can be used. Treasury Discount Rate – the rate specified as the discount rate by the Government Treasury to be used as the discount rate in public sector life cycle cost calculations.Glossary of terms Terminal value . year). This could be the current bank base rate or the client’s opportunity cost of capital. Residual life – when applied to an asset is that remaining at the end of the study period Time zero – the point in time from which the study period commences. System – a number of identified discrete components combined to form a mechanism to perform a single function or a number of functions of a similar nature. However. Inflation/deflation . Levels of Study Cluster – a number of elements combined on the basis of a common function or combined on the basis of a work package for contracting purposes. Treasury Discount Rate – the rate specified as the discount rate by the Government Treasury to be used as the discount rate in public sector life cycle cost calculations. Real interest rate – the rate adjusted for inflation. month. in the calculations the time period and interest rate per time period must be synchronised. Physical life of a component – the time at which a component fails to meet the performance criteria required of it and has to be removed and replaced.
shelter. communications to allow for future expansion of services . Discussions with architects highlighted that undertaking sustainable design at the very earliest project stages was fundamental to the achievement of a successful sustainable building. construction and use. at the time of the initial construction. cooling. Site Location Master planning has the greatest impact on sustainability as this activity affords the opportunity to locate and orientate individual buildings and minimise pedestrian travel to. water. shading and natural lighting are all considered. Building Design. • Consider the use of the building over time and design appropriate flexibility to allow adaptation and extension to meet the future needs of building users. reduce energy during material production. and create a healthy comfortable space to work and or live. cycle paths. Layout And Orientation Buildings should be designed to be in sympathy with their local environment and where possible should be orientated such that passive solar gain. • Planning circulation to maintain efficiency in an enlarged building.The sustainable design checklist Introduction The following checklist is not intended to be a complete guide to sustainable design but rather indicative of those factors which should be considered in meeting the client’s and community's desire for more environmentally sympathetic buildings. • Providing easy access to site services and communications infrastructure heating. • Limit glazing in north facing walls to minimise heat loss. • Consider passive rather than mechanical solutions to heating and ventilation (see heating and ventilation below) • Design for internal and external noise control at the outset by identifying noise sensitive areas and locating these away from noise and/or vibration producing areas. materials. insulation. ventilation and waste water management all impact the building’s sustainability and should be factored in to the design prior to consideration of “add on” energy efficiency and energy generating technologies. installing foundations to facilitate future expansion. Design considerations such as building orientation. Master planning also affords the opportunity to be sympathetic to the local environment. maximises the re-use of brownfield sites and the avoidance of flood plains. The data for this section has been drawn through consultation with established architects working in the sustainability field and through a desk study of sustainable design guides and checklists.39 LIFE CYCLE COSTING OF SUSTAINABLE DESIGN 07 Appendix 2 . reduce the consumption of natural resources. Facilitate future expansion and adaptation by: • Positioning the building on the site so that expansion is not compromised. Specifically the following should be considered: • Minimise overshadowing. • Consider. local shops and other amenities. • Considering the location of service equipment and plant rooms. • Include draught lobbies to act as a thermal buffer. Consider the impact on neighbours of noise generating activities. The objectives of sustainable design are to minimise pollution. public transport. • Considering the design of the structure to facilitate upward expansion with the minimum of structural intervention. power. sewerage.
as with all building materials. low embodied energy materials. • If air conditioning is necessary analyse the answer to the question “why is it necessary?” Lighting Bring maximum daylight into all rooms at high-level to reduce brightness levels and glare on work bases and consider the following: • Light pipe distribution for buildings that have difﬁculty of access. • Install energy-efﬁcient lamps and ﬁxtures. insulation and secondly air tightness. ventilate right). ﬁrstly. consideration should be given. There are many ways to satisfy the three general rules for example: • The use of dynamic insulation to draw air into a building. to the energy consumed in manufacture and transportation and preference should always be given to locally-produced. • Consider a switching regime which maximises the opportunity for lighting to supplement day lighting. .The sustainable design checklist Insulation.40 LIFE CYCLE COSTING OF SUSTAINABLE DESIGN Appendix 2 . • Controlled natural ventilation through the design of controlled convection currents and monitoring through the use of CO2 sensors. This relies on a constant air ﬂow through a membrane caused by the pressure difference across it. The ﬁnal variable in the equation is correct ventilation (build tight. 3. • Create sun spaces on south facing facades to facilitate ventilation by convection and to heat the structural mass as a heat sink during periods of cold weather • Structural mass can also be used as a heat sink to cool the building during hot weather by cooling through controlled overnight purging. windows and external doors to the highest level possible. Build tight with no anticipated loss of internal air. roofs. above the minimum standards set by the building regulations. Building Materials The use of prefabricated units and modular pods tend to the minimise waste and facilitate modern methods of construction (MMC). • Consider the use of occupancy sensors. 2. Heating and Ventilation There are two factors to consider in minimising heat loss from buildings. The general rules are to: 1. a high security requirement or internal environment concerns. However. Insulate walls. Dynamic insulation acts as a buffer against rapid changes in moisture that can lead to mould and condensation. • Control of glare and heat gained from direct sunlight by allowing daylight but limiting sun using external louvres.
Care should be taken not to reject such alternatives out of hand through prescriptive speciﬁcation. spray taps. parking and servicing areas. The transport plan may also include facilities for working at home including telecommunications strategies. aluminium. e. • Reed beds can be incorporated into the landscaping for on-site puriﬁcation. facilities for cyclists including showers. Landscape management should be introduced once the construction is complete with use of native trees. open public spaces. Re-use – The second strategy is to incorporate previously used materials and equipment. electric points for charging electric cars. copper. low ﬂow shower heads. Vegetation can be sited to protect the building by disrupting and reducing the speed of the prevailing wind in winter thereby reducing the cooling of the external facade. • Water efﬁcient ﬁxtures and appliances are available for example waterless urinals. Incorporate vandal resistance and deterrence strategies. considered at the design stage. • An appraisal of maximising recycling of materials from demolition should make use of ICE’s demolition protocol before demolition. Recycle – A number of issues are addressed under the heading of recycling: • Materials should be selected to have good recycling characteristics such as pure metals. Water and Waste Water Management There are an number of on-site water recycling opportunities which should be considered in any design: • Rainwater harvesting to reduce the use of potable water for activities such as toilet ﬂushing. In addition to base material sourced from the demolition of masonry and concrete structures there is a small but embryo industry refurbishing materials and equipment sourced from demolition and refurbishment projects. (About half of steel currently available is from recycled material). • Sustainable urban drainage systems (SUDS) use porous paving in outdoor hard surfaced areas such as playgrounds and car parks to allow surface water to drain naturally reducing the load on utilities. etc. particularly services equipment such as chillers and pumps. Identify a strong demarcation between public and private space. http://www. irrigation or vehicle washing. etc. Transport A transport plan. Re-use. wood from sustainably managed forests as certiﬁed by the Forestry Stewardship Council (FSC) or equivalent. Water features should incorporate closed systems for recycling. Recycle) is a helpful mnemonic in material selection. steel. should be considered as an economical alternative to new. shrubs and plants that do not require irrigation in the summer. Reduce – Material reduction through careful geometric planning is the ﬁrst approach.org. • Wherever possible material from sustainably managed sources should be sourced.uk/demolition/the_ice_demoli tion_protocol/index. for example. Secure By Design Incorporate passive surveillance of streets. and ensure that public areas are well lit and that landscaping and vegetation does not obscure views.html • Liaise with local authorities in the provision of on-site recycling facilities.41 LIFE CYCLE COSTING OF SUSTAINABLE DESIGN Appendix 2 . • Disinfected grey water can also be used for non potable activities such as toilet ﬂushing. Landscaping and Ecology The geographic and biodiversity of site and vegetation should be assessed for preservation during and after construction.aggregain. should include the use of public transport. • Packaging should be carefully controlled and returned to the manufacturer wherever possible. lockers and secure bicycle storage. Ensure that the building design does not include recesses or publicly accessible passageways. uPVC can also be processed and recycled. .The sustainable design checklist The three R’s (Reduce.g. Certiﬁed and approved refurbished materials and plant.
uk/ Mayor of London (2006).org.Architectural Services Division (undated). Keppie Design (2006). F and Williams. Greater London Authority. Communities Scotland. The Rethinking Construction Demonstrations and how they have Addressed Sustainability. .sustainability-checklist. Dundee City Council.co.wwf. TCPA/WWF (http://www. Stevenson. Great Glen House. Sustainability Checklists.42 LIFE CYCLE COSTING OF SUSTAINABLE DESIGN Appendix 2 . Keppie Design.pdf) Constructing Excellence (July 2003).The sustainable design checklist References Sustainable Housing Forum (October 2003) Building Sustainably: How to Plan and Construct New Housing for the 21st Century. N (2007). Public Technology Inc. Public Technology Inc. Sustainable Design and Construction: London Plan Supplementary Planning Guidance. Demonstrations of Sustainability.uk/ﬁlelibrary/pdf/esbuildingsustainably.. Sustainable Building Technical Manual Green Building Design. and Operations. Sustainable Housing Design Guide for Scotland. Construction. US Green Building Council (1996). Dundee City Council . Checklist SouthEast: http://southeast. Constructing Excellence.
One ROC is equivalent to approximately 1. power output. costs. The following technologies have been identiﬁed through a desk study review of websites including the Energy Savings Trust. It should be noted that the technologies may be used in combination. This appendix provides an outline of each of the technologies identiﬁed. While every effort was made to ensure accuracy of the data (costs. etc) at the time of this stage of the research (Summer 2007). Scottish Community and Householders Renewables Initiative (SCHRI) and the Carbon Trust. The questionnaire was piloted through consultation interviews with manufacturers of selected technologies (n=6). This also gives rise to a Renewable Obligation Certiﬁcate (ROCs) which have a market value. The desk study generated the questionnaire included in Part 4.Renewable energy technologies Introduction Renewable energy technologies provide renewable forms of energy without the reliance on nuclear or fossil fuels.43 LIFE CYCLE COSTING OF SUSTAINABLE DESIGN 07 Appendix 3 . Exemption can also be obtained from the Climate Change Levy for businesses that have installed green technologies. their components. maintenance information and the issues associated with the technology.000 kilowatt hours (kWh) of renewable electricity. . capacity. Surplus electricity from grid connected electricity generating technologies can be sold to an energy supplier. it should be recognised that these technologies are under continual development.
000 including installation. ranging from a few hundred watts to 2-3 megawatts.Renewable energy technologies Wind Turbines Outline of Technology Wind is a renewable source which can be captured to generate electricity by converting the power within moving air into rotating shaft power: the wind turbine. • The mast is the support structure for the turbine. It will generate 3 x 0.000 .884 kWh per year. visual impact. • Backup power supply is required for periods of no wind. • Turbines require sufﬁcient wind resource to generate an adequate amount of power. Outline of Issues / Considerations . Maintenance • The life expectancy for a wind turbine is up to 20 years and includes service checks every few years to ensure efﬁcient operation. • The pay back period is variable and has been reported as 3-5 years in some cases and in others 20-30 years. Components • At 2007. Wind turbines vary in size and power output.5kW to 6kW cost between £4. • The size of the battery bank (in off-grid systems) determines the time appliances can be run if there is no wind. • Systems that are off-grid require battery storage and an inverter to convert to alternating current. The following components make up a typical wind turbine: • Installation cost is high. without turbulence from obstructions such as trees.£18. Costs • Small scale systems up to 1kW cost around £3000. An appropriate wind site will produce an average output of 30% of the capacity rated for the turbine. • The typical battery life for storage systems is approximately 6-10 years. • The turbine is the generator turned by the blades. • A controller is required to ensure batteries are not over or under-charged and can divert power to another source. The size of the inverter determines the number of appliances that can be run at the same time from the stored electricity. Variations in wind speed affect the potential output. a 3kW wind turbine generates the equivalent to rated power for 30 per cent of the year. • Larger scale systems in the region of 1. depending on the type.3 x 8. and conservation issues also have to be considered. • The site for a wind turbine(s) requires clear exposure. houses or other buildings. use tends to focus on large scale applications. Large turbines grouped on wind farms supply electricity to the national grid. On some turbines the blades may need to be replaced. • A site inspection and analysis is required before installation of a wind turbine(s) to determine the power output from installing such a device. • Grid connected systems do not require a battery or inverter but will require a controller and an “export” meter. • Planning permission from the local authority is usually required and issues such as noise.5-3kW).44 LIFE CYCLE COSTING OF SUSTAINABLE DESIGN Appendix 3 . For example. The size of the battery dictates the amount of time appliances can be run when there is no wind.760 (24hrs x 365 days) = 7. Small turbines may be used to supply energy for battery charging systems such as on boats or in homes (the average size of wind turbine for a three bed house is 1.
fully automatic boilers for large buildings. such as whether the boiler has an automatic cleaner for the heat exchanger and automatic ash discharge. ﬂue connection. electric ignition and high reliability): burner head. lambda sensor (exhaust gas oxygen sensor). The performance of wood boilers is increasing. fuel costs should be lower. The time required maintaining a biomass heater depends on the size of the system and fuel consumption. • An integral hot water energy storage tank or accumulator tank that stores water up to 90°C. with emissions being reduced and efﬁciency equivalent to oil or gas boilers. primary air intake.500 . ring for secondary air intake. ash discharge. heat exchanger. combustion chamber. It is critical to agree on a maintenance contract with the boiler manufacturer to ensure the long term operation of the boiler. sensor. Or. Costs • The capital cost for installing a biomass heater is higher compared to oil and gas systems. the maintenance work for boilers using pellets or high quality chips does not exceed 30 minutes a week. heat exchanger.Renewable energy technologies Biomass Heaters Outline of Technology Energy from biomass is produced from organic matter excluding fossil fuels. heat exchanger. • Automatic boilers are available in various capacities from 50 to 500kW and include various components depending on type: • Underfeed burner components: Auger feed. a typical 15kW (average size required for a typical three bed house) pellet boiler could cost from £4. Manual log feed systems tend to be slightly cheaper. • Fuel costs are inﬂuenced by the distance from the fuel supplier. combustion chamber. • Boilers with grate feed (more expensive but are also suitable for wood fuels with a high moisture and ash content): Auger feed. .£12. • Compact units (larger versions of household pellet boilers which include automatic cleaning. and whether chips or pellets are used. primary air intake. secondary air intake. • Stoves generally cost £1. • The costs for boilers vary depending on the system chosen and the fuel choice.45 LIFE CYCLE COSTING OF SUSTAINABLE DESIGN Appendix 3 . ﬂue gas de-dusting. whether remote monitoring of the system is possible.000 . boilers connected to central heating and hot water systems which usually have an output larger than 15kW. moving grate. Maintenance The maintenance involved in an automatic biomass heater depends on various factors. For compact. Components and Boiler Selection The following components make up a typical biomass heater: • A stove or boiler. secondary air intake. However. ﬂue gas de-dusting. Stoves can be fuelled by logs or pellets and generally have an output of 6-12kW.£3. ash pan. ash discharge.000 installed including the cost of the ﬂue and commissioning. To reduce the amount of maintenance work associated with a biomass heater consideration should be given to heaters that have features which include automatic ash discharge and automatic heat exchanger cleaning. There are two main methods of using biomass to heat a domestic property. automatic heat exchanger cleaner.000 including installation. primary air intake. Energy from biomass results in what is known as a carbon neutral process when the CO2 released during the generation of energy from biomass is equal to the CO2 absorbed during the fuel’s production.
Renewable energy technologies Outline of Issues / Considerations • Selecting the fuel type (pellets or chips.46 LIFE CYCLE COSTING OF SUSTAINABLE DESIGN Appendix 3 . • Access and enough space for the delivery vehicle to manoeuvre to be incorporated into the design. .Pellets are more standardised and therefore have greater reliability. • The size of the fuel store depends on: anticipated fuel requirements. speciﬁcally cleaning and ash disposal. a large storage area is essential for this type of fuel. space available. reliability of deliveries.Chips tend to be available locally and therefore are good for the local economy plus they tend to be cheaper than pellets. A smaller fuel store is required and there is less maintenance work. fuel type. delivery vehicle capacity. Space is required to accommodate the boiler and the fuel storage as well as access for regular maintenance. . The disadvantage is higher fuel costs. a high quality of chip is required and maintenance is more demanding. • More space is required for a wood heating system than for a gas ﬁred system. • Noise from air and ﬂue gas fans and the fuel feed system must be appreciated in the design. • Dust emissions and noise occur during unloading of pellets or chips. However. • A reliable source of pellets or chips from a local source is required. etc. • Fuel stores must be moisture free and well ventilated. or pellets and chips) is a signiﬁcant consideration as both types have various advantages and disadvantages: .
although some suppliers offer a special heat pump rate. This means that a GSHP will deliver more kW in heat than the energy required to run the pump. an air source heat pump has a seasonal efﬁciency of about 250%. • Setting up costs (design. .47 LIFE CYCLE COSTING OF SUSTAINABLE DESIGN Appendix 3 . condenser and expansion valve. a constant temperature of about 11-12°C is maintained from depths from approximately two metres below ground throughout the year. a slinky coil embedded in a trench of about 10m length will provide about 1kW of heating load). equipment mobilisation and commissioning) are a signiﬁcant part of the total cost therefore the capital cost measured in £/m of borehole/ trench will fall as the collector size increases. The ground loop has a long life (over thirty years for a copper ground coil providing the ground is non acidic and over 50 years for polyethylene pipe) and requires no maintenance. The initial capital costs tend not to be lower than the cost of a conventional boiler. • The installed cost of a GSHP ranges from about £600-£1000 per kW of peak heat output for a trench system and £800-1250 for a borehole system. Ground source heat pumps (GSHPs) transfer heat from the ground into a building to provide space heating and domestic hot water. The location of pumps should be designed for easy access and replacement. The ground has a high thermal mass and therefore it can store heat from the sun during the summer. These costs exclude the cost of the distribution system. Costs • Costs of a GSHP are dependent on the energy demands of the building and the ground conditions. In terms of replacement. compressor. • Heat distribution system – consists of under-ﬂoor heating or radiators for space heating or water storage for hot water supply. There is no requirement for an annual safety inspection as there is for combustion equipment. • The running costs for a GSHP system are dependent on the associated electricity cost and usual rates apply. the circulation pumps have the shortest lifetime and are unlikely to be guaranteed for more than one year. The price per kW gets lower as the systems get larger. • Heat pump – a heat pump has four main components. either in a borehole or a horizontal trench (there are different types of GSHPs. The use of GSHPs is most common in new build projects particularly for the supply of under-ﬂoor heating. Components The following components make up a typical ground source heat pump: • Ground heat exchanger – comprises lengths of pipe buried in the ground. A GSHP will operate with a seasonal efﬁciency of at least 300%.Renewable energy technologies Ground Source Heat Pumps (GSHP) Outline of Technology In the UK. Maintenance Maintenance for GSHPs is minimal. evaporator. The compressor life is up to 15 years and often guaranteed for up to 3 years.
conﬁguration etc. • The ground material must be suitable for digging a trench or borehole. Oversizing will increase the installed cost for little operational saving particularly during periods when the heat pump is under part load. • Noise from the heat pump must be appreciated in the design. • GSHPs work more efﬁciently for low temperature heat distribution systems such as underﬂoor heating.Renewable energy technologies Outline of Issues / Considerations • Space for installation and site access for equipment should not be underestimated e. This includes the depth of soil cover. digger/drilling rig. details of the circulating ﬂuid. diameter.48 LIFE CYCLE COSTING OF SUSTAINABLE DESIGN Appendix 3 . Factors to consider when designing the ground heat exchanger are pipe length. pressure tests. • Retain a detailed plan of the GSHP which shows the location of the ground heat exchanger. • The compressor and pump can be powered by installing solar PV or some other form of on-site renewable electricity generating system. than the CO2 generated to produce the equivalent heat output using mains gas. It should be recognised that four times the CO2 is produced per kWh using mains electricity generated from fossil fuel. Undersizing may require the use of top-up heating. . The deeper the loop the more stable the ground temperatures and the higher the collection efﬁciency but the installation costs will go up. warranties etc. the type of soil or rock and the ground temperature.g. Therefore unless renewable electricity is used there is no CO2 saving in generating heat from GSHP rather than from a conventional efﬁcient gas boiler. • A back up heating / cooling system may be required. • The size of the heat pump and ground loop will depend on the heating requirements.
49 LIFE CYCLE COSTING OF SUSTAINABLE DESIGN Appendix 3 . Small-scale hydro power is a proven and mature technology. maintenance and servicing. The scheme’s actual output will depend on how efﬁciently it converts the power of the water into electrical power. Costs • The costs for hydro can be broken down into four areas: machinery.000 . The price would decrease per kW for larger schemes.000).000 per kW installed up to about 10kW. wiring. . There is an annual charge for this service. • Underground cables. electrical works and external costs) for a 100kW small hydro installation are £115. civil works. Components The following components make up a typical hydro power system: • A weir and intake (or leat) to divert the ﬂow from the water course to carry water to the forebay tank.000 . The biggest cost on high head sites is the pipeline and on low head heights most of the expense is on the water intake. a transformer and the connection cost to the electricity network which relates to the power output of the system. • An outﬂow / tailrace through which the water is released back to the river or stream. • For medium heads (excluding the civil works). • Metering for larger schemes presently has to be monitored by an independent meter-reading company.000 for a high head system.£1000 per year. costs may be in the region of £4. currently in the range £350 . Unit costs decrease for larger schemes.000 for a low head system and £85. The power available is proportional to the product of head and flow rate.£25. The energy available in a body of water depends on the amount of water ﬂowing per second. and this increases approximately £2. • The total capital costs (including machinery. • External costs includes consultant fees for design of the system. and insurance.000 – £200. • A spillway for drainage of excess water. they run faster and can usually be connected directly to the generator without add-ons such as a gearbox or belts.Renewable energy technologies Hydroelectricity Outline of Technology Hydro power systems convert potential energy stored in water held at height to kinetic energy to turn a turbine to produce electricity. • A forebay tank for water to pass through a settling tank or ‘forebay’ in which the water is slowed down sufﬁciently for particles to settle out. • The cost of the civil works relate to the nature of the site. • A penstock pipe / channel to carry the water from the intake / forebay tank to the turbine (pipe must be of sufﬁcient diameter to minimise ‘head loss’). metering. business rates. there is generally a ﬁxed cost of approximately £10. • The cost of the electrical works includes the control system. • The cost of machinery for high head schemes is generally lower than for low head schemes of the same power as high head schemes are smaller as they pass less water. electrical works and external costs. screens and channel.500 per kW up to around 10kW (a typical 5kW domestic scheme might cost £20.000. civil works. The basic theory for a small turbine is no different to that of a large turbine. and the height (or head) that the water falls. • For low head systems (excluding the civil works). • Operating costs include leasing the land. or overhead lines to transmit electricity to its point of use (these must be of a sufﬁcient size to minimise efﬁciency losses in the cable). control equipment and generator to convert the power of the water into electricity. managing the system once in operation and the costs for planning permission etc. • A powerhouse which contains the turbine. The forebay is usually protected by a rack of metal bars (screens) which ﬁlters out debris.£280.
• There must be suitable site access for construction equipment to complete the civil works and install the equipment. Maintenance Hydropower is a mature technology and small scale systems tend to have a life span of 50 years with low maintenance costs. • The appearance of the scheme should be considered particularly the location of the powerhouse. • Hydro-installations on rivers populated by migrating species of ﬁsh. • The selection of the type of turbine (impulse or reaction) depends upon the site characteristics. principally the head and ﬂow available. • The social and environmental impact on the local area should be considered. The typical lead in time for a turbine. • This technology is more site speciﬁc than other energy efﬁcient technologies. • There should be a local demand for electricity close to the water source. refurbished sluice gates. is between 5 and 9 months. plus the desired running speed of the generator and whether the turbine will be expected to operate in reduced ﬂow conditions. • Electricity generated through hydropower may be sold to the grid at £0. such as salmon or trout. • Viability is determined by the potential energy resource. • Seasonal variations in water ﬂow can affect the amount of electricity generated. storms. explosions. from placing an order to delivery on site. impact and vandalism. • The construction and civil works involved is more intense than other technologies. are subject to special requirements as deﬁned in the Salmon and Freshwater Fisheries Act. • The potential noise impacts on nearby residents can be designed to be minimal.Renewable energy technologies • There are business rates on hydro schemes operating as a business. • The construction phase may cause a disturbance to local residents and trafﬁc. • Annual maintenance and servicing costs are approximately 1-2% of the capital cost of the scheme.03/kWh. ﬂooding. or the possibility of connecting to the national grid. etc.50 LIFE CYCLE COSTING OF SUSTAINABLE DESIGN Appendix 3 . • It is important to maintain the river’s ecology by restricting the proportion of the total ﬂow diverted through the turbine. a new generator. Regular maintenance of modern automated schemes includes clearing screens and oiling the generating equipment. After 10 years or so extra costs may include the replacement of seals and bearings. . Outline of Issues / Considerations • The site must have a suitable waterfall or weir with a consistent ﬂow of water at a usable head and space for a turbine site. • Most operating problems occur with the screens and their careful design is vital. • Insurance costs cover repairing damage to the works caused by ﬁre.02 to £0.
5 and 2 kWp. Solar PV can be fairly simply integrated into any new or existing building design as a rooﬁng or cladding material. • Solar tiles cost more than conventional panels and panels that are integrated into a roof are more expensive than those that sit on top. . • A battery if not connected to the national grid.Thin Film: made from a thin layer of semiconductor atoms which are made up on a glass or metal base (typical efﬁciency of 7%).5-2kWp (kWp is the peak output equivalent of kWh). . • An inverter to convert to alternating current.000 per kWp installed with most domestic systems usually between 1. . is the biggest maintenance factor. however. panels not connected to the grid may require maintenance of components such as batteries. • The ability of the roof structure to support the weight of the panels must be considered particularly if the panels are to be mounted on the existing tiles.000-£9.Monocrystalline: made from thin slices cut from a single crystal of silicon (typical efﬁciency of 15%). PV rainscreen cladding is approximately £600/m². PV requires only daylight (not direct sunlight) to generate electricity. PV integrated curtain walling is approximately £780/m² and PV roof systems is in the range of £350-£400/m².Renewable energy technologies Solar Photovoltaics Outline of Technology Solar Photovoltaic (PV) panels are comprised of cells which converts light (solar radiation) directly into electricity.Polycrystalline: made from thin slices cut from a block of silicon crystals (typical efﬁciency of around 12%). Typical systems that cover 10-15m² of roof space have the potential to generate around 1. The three main types of solar cells are: . • If major roof repairs are to be carried out it may be worth exploring PV tiles as they can offset the cost of roof tiles. • An export meter and an import meter (component required in a grid connected PV system) Costs • The lifetime of a PV system is generally 25-30 years.51 LIFE CYCLE COSTING OF SUSTAINABLE DESIGN Appendix 3 . The PV cell consists of one or two layers of a semi-conducting material. • For the average domestic system. • Solar PV comes in an increasingly wide range of rooﬁng and building materials. Occasional checking of wiring and various components of the system should also be conducted. An electric ﬁeld is created when light shines on the cells which cause electricity to ﬂow. Outline of Issues / Considerations • Output of solar PV systems is decreased if buildings or trees overshadow the panels. Components The following components make up a typical solar PV system: • Photovoltaic panels / modules are comprised of cells made of a semi-conducting material such as silicon. Solar PV systems connected to the national grid require little maintenance. costs can range from £4. • Prices for PV systems vary and depend on the size of the system to be installed to meet the demand. As a guide. Maintenance Cleaning the panels and ensuring they remain out of the shade from trees etc. the type of PV cell used and the nature of the building on which the PV is mounted. The ﬂow of electricity is greater when light intensity is greatest.
Components The following components make up a typical solar water heater: • Solar panels / collectors retain heat from the sun’s rays and transfer this heat to a ﬂuid.Renewable energy technologies Solar Water Heating Outline of Technology Solar water heating systems have been available in the UK since the 1970s and the technology is now well developed with a large choice of equipment to suit various applications. For maximum efﬁciency.£3. and location. Outline of Issues / Considerations • An integrated solar heating system should be considered in the planning stages of the building project to achieve savings on installation costs. • A ﬂat plate collector installation costs in the range of £2.£5. • Not suitable for use with combination boilers without additional equipment and an additional water cylinder. • Orientation of the solar collectors should face south (2-5m² of roof space that is southeast to southwest and receives minimal shading during the day is required for typical domestic consumption). Solar water heating systems function by collecting energy radiated by the sun and converting the energy into heat in the form of hot water. . • Solar systems may be installed as a substitute for the roof resulting in a better visual appearance than a solar system that is mounted on top of the roof tiles and is also more economical. There are two types of solar collectors: . . the nature of the roof type.52 LIFE CYCLE COSTING OF SUSTAINABLE DESIGN Appendix 3 . • Solar water heaters should be sized to supply 100% of domestic hot water during the summer and therefore approximately 50% during the rest of the year. • A hot water cylinder stores the hot water that is heated during the day and supplies it for use later. the existing hot water system.Flat plates with tubes carrying the water to be heated are the cheapest but least efﬁcient. the angle of the collectors should be 30-45 degrees. A detailed inspection every 3-5 years should be all that is required to ensure the efﬁcient operation of the system. • Frost protection of the collectors must be considered during the winter months this may include using anti-freeze ﬂuid or using a system with rubber tubing which is frost tolerant. Costs • Costs depend on a range of factors which include the size of the collector required. Maintenance Little maintenance is required for solar water heating systems and often come with a 5 year warranty. • A plumbing system consisting of simple piping and occasionally a pump to transport ﬂuid around the system.000.000 .500 .000 and an evacuated tube systems costs in the range of £3. Solar water heating systems work alongside conventional water heaters to provide hot water.Evacuated tubes using a heat pipe to carry the heat to a heat exchanger are more expensive but most efﬁcient.
accessed May 2006. Solar Trade Association (STA). accessed August 2007. Norman G. accessed August 2007. Oxford. SCQS. published December 2005 (Solar Photovoltaic Factsheet). Energy Savings Trust.greenenergy. Energy Savings Trust.uk/sta. The Heat Pump Association. Kelly J and Hunter K (2005) A Framework for Life cycle costing. http://www.feta. Energy Savings Trust. Royal Institution of Chartered Surveyors. R. accessed August 2007. D. Meadows J and Robinson G. http://www. Marshall HE and Ruegg RT (1981) Recommended Practice for Measuring Beneﬁt/Cost and Savings-to-Investment Ratios for Buildings and Building Systems. Achieving Excellence in Construction.british-hydro.theory and practice.energysavingtrust. US Dept of Commerce.energysavingtrust. accessed August 2007.org. Flanagan R. published December 2005 (Solar Water Heating Factsheet). (1986) A guide to life cycle costing for construction. 1989. Energy Savings Trust. published December 2005 (Wind Energy Factsheet).co. OGC (2003). Neville. http://www. Basic Information for Project Planners.uk/. London. (1984).uk. http://www. Domestic Ground Source Heat Pumps: Design and Installation of ClosedLoop Systems.org. National Bureau of Standards. 2003.com.org. http://www. Society of Chief Quantity Surveyors in Local Government. G. http://www. Preiser WFE. B. http://www. Jervis. published December 2005 (Ground Source Heat Pump Factsheet). Smith.org. and Tegerdine.org. accessed May 2006. accessed May 2006. accessed August 2007. Surveyors Publications. The IEA Heat Pump Centre. Green fuels http://greenfuels. www.uk. accessed May 2006. accessed August 2007. CIRIA.bwea.org.energysavingtrust.nef. Flanagan R and Jewel C (2005) Whole Life Appraisal for Construction.html. . BSP Professional Books.uk. Forum for the Future.gov. Energy Savings Trust. British Hydropower Association.2. (1988) Post Occupancy Evaluation. British Hydropower Association. and White ET. January 2005. Solar PV and Your Business.53 LIFE CYCLE COSTING OF SUSTAINABLE DESIGN 08 References Boussabaine A and Kirkham R (2004) Whole Life-cycle Costing: risk and risk responses. Energy Savings Trust.. Whole-life Costing and Cost Management.uk. PV-UK (the trade association of the UK PV industry). Life cycle costing . http://www. A Guide to UK Mini-Hydro Developments.org.uk. Carillion plc (2002) Sustainability Accounting in the Construction Industry.heatpumpcentre. Blackwell. accessed August 2007. Rabinowitz HZ. Procurement Guide Number 7.uk/pvuk2. accessed August 2007. The Log Pile Website (information on wood fuel. Heating Large Buildings with Wood Fuels. http://www.uk. Casella Stanger. accessed August 2007. system suppliers and local fuel suppliers). DTI renewables site.org.dti. http://www. M.energysavingtrust. Blackwell. published December 2005 (Biomass Factsheet).greenenergy. Energy Efﬁciency Best Practice in Housing. Version 1.org.. Oxford.uk/energy/sources/renewables/index..org. Van Nostrand Reinhold. http://www.co. March 2004. accessed May 2006. January 2006. Life Cycle Cost Planning. British Wind Energy Association website. Hoar. Energy Savings Trust. SWS Group.energysavingtrust.uk/logpile. http://www.
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