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Life

Cycle Analysis
NATIONAL ANNUAL ENERGY EFFICIENCY CONFERENCE 12 June 2012 Melany Tedja C0-Team Leader of EINCOPS Melany.Tedja@gmail.com

Types of Financial Decision Investment


Buying/ Upgrading Equipments/Process Buying/Upgrading EE Equipments/Process

No Investment

Deciding Financing of Project (1)


COST

VS

PROFIT
Energy Saving

Cost & Benet Analysis


Can Avoided Cost be considered Prot?

Cost of Operation & Maintenance Cost of Equipment

Water Saving Inprove Productivity

Deciding Financing of Project (2)


COST OF ACTION

VS

COST OF INACTION
O&M

Opportunity Cost Analysis


Operational Costs will be incurred anyway

Electricity Costs Acquisition Cost

Electricity Costs Replacement of Equipment

Life Cycle Analysis

All Costs Period of Time

Present Value

All Costs
Investment Related Costs Operational Related Costs

Acquisition Costs Replacement Costs Residual Value

Operation, Maintenance and Repair Utility Costs Contract Related/M&V Costs

Study Period
Base Date? Service Date?

Present Value
Discounted?

How To Calculate Present Value


Single Present Value: One Time & Non-Annual

How To Calculate Present Value


Uniform Present Value: Uniform Annual Amounts

How To Calculate Present Value


Modied Uniform Present Value

How To Calculate Present Value

Sample Case
Old Refrigerator New Refrigerator

Sample Case: All Costs


Discount rate: 3.3% Ination: 2%
No Cost Last for 10 more years Fixed Rp300,000/yr 800 watt in R2 house (Rp 787/kwh) Operating at average 60% capacity 24hrs x 7 days

New Refrigerator

Old Refrigerator

Rp10,000,000 Last for 25 years Salvage Value after 3 years in 70% of the original cost Fixed Rp120,000/yr 200 watt in R2 house (Rp 787/kwh) Operating at average 60% capacity 24hrs x 7 days

Sample Case: Study Period


Base Date & Service Date: Purchase time (this year) Investment Horizon: 10 years Project Expected Life: 25 years

How To Calculate Present Value


Single Present Value where i= 3.3% and n=10: 0.723

How To Calculate Present Value


Uniform Present Value where i= 3.3% and n=10: 8.4

How To Calculate Present Value


Modied Uniform Present Value where i= 0.33 and n=10 and e=2% :9.33

LCC of Base Sample Case


No Acquisition Cost (Already in Present Value) Yearly O&M Costs of Rp300,000 (MUPV) Yearly Electricity Cost of Rp 3,309,177 (MUPV) (60% x 800w x 24h x 365 d x 0.001kwh x Rp 787)

Old Refrigerator

No Cost Last for 3 more years Fixed Rp300,000/yr 800 watt in R2 house (Rp 787/kwh) Operating at average 60% capacity 24hrs x 7 days

LCC of Sample Upgrade Case


Acquisition Cost: Rp 10,000,000 (present value) Yearly O&M Costs of Rp 120,000 (MUPV) Salvage Value after 10 years: Rp minus 5,000,000 (SPV) Yearly Electricity Cost of Rp 827,294 (MUPV) (60% x 200w x 24h x 365 d x 0.001kwh x Rp 787)

New Refrigerator

Rp10,000,000 Last for 25 years Salvage Value after 10 years in 50% of the original cost Fixed Rp120,000/yr 200 watt in R2 house (Rp 787/kwh) Operating at average 60% capacity 24hrs x 7 days

Sample Case: LCC Comparison


Discount rate: 3.3% Ination: 2% Study Period 10 years
Acquisition Cost: 0 PV of O&M Costs: Rp 2,799,000 (9.33 x 300,000) PV of Electricity Costs : Rp 30,874,621 (9.33 x 3,309,177)

New Refrigerator

Old Refrigerator

Acquisition Cost Rp10,000,000 PV of Salvage Value after 10 years: - Rp 3,615,000 (0.723 x 5,000,000) PV of O&M Costs: Rp 1,119,600 (9.33 x 120,000) PV of Electricity Costs : Rp 7,718,653 (9.33 x 827,294)

TOTAL: Rp 33,673,621

TOTAL: Rp 15,223,253

Sample Case: LCC Comparison


Old Refrigerator New Refrigerator

More Expensive TOTAL LCC: 33,673,621 TOTAL LCC: 15,223,253

Net Savings
Old Refrigerator New Refrigerator

Net Savings is the margin between LCC of base case and upgrade case
TOTAL LCC: 33,673,621

TOTAL LCC: 15,223,253

In this case the Net Savings is: Rp 18,450,368

Savings-to-Investment Ratio
Old Refrigerator New Refrigerator

Operational Cost = 33,673,621

_ _

Operational Cost = Rp 8,838,253 (1,119,600 + 7,718,653 ) Investment Cost = 6,385,000 (10,000,000 3,615,000)

Rp 24,835,368 Rp 6,385,000

= 3.9

Investment Cost = 0

Adjusted Internal Rate of Return

AIRR indicates the performance of investment through the percentage yield The AIRR in this case is: {(1+0.033) x 3.9 1/10} - 1 = 18%

CONCLUSION
Study Period All Costs

Study Period

All Costs

Study Period

All Costs

Present Value

Present Value

Present Value

LIFE CYCLE COST Ov Assessment of Project Costs Status Quo

LIFE CYCLE LIFE CYCLE COST COST Ov Assessment of Ov Assessment Project Costs of Project Costs Regular Equipment EE Equipment

Conclusion (2)
All costs Study period Present Value

LCC Base Case LCC Upgrade EE LCC Upgrade Regular

Net Savings / SIR / AIRR

Data and Assumptions

Comparisons

Information

Melany Tedja EINCOPS Melany.Tedja@gmail.com

THANK YOU

Low Energy Oce: Jl Rasuna Said Blok X2 Kav 07-08 Kuningan

www.konservasienergiindonesia.info www.energyeciencyindonesia.info @EECCHI

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