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Home My WebLink Aboutlife cycle cost analysis report (1) Heating System Life Cycle Cost Analysis Revised Final Report October 4, 2008 Haines Assisted Living Facility Haines, Alaska Prepared for: Haines Assisted Living, Inc. St. Lucy's Conference St. Vincent de Paul Society Prepared by: Alaska Energy Engineering LLC 25200 Amalga Harbor Road Tel/Fax: 907.789.1226 Juneau, Alaska 99801 alaskaenergy@earthlink.net Alaska Energy Engineering LLC Life Cycle Cost Analysis 1 Haines Assisted Living Facility Section 1 Introduction INTRODUCTION This report presents a life cycle cost analysis of heating system options for the Haines Assisted Living Facility. The facility, to be constructed in Haines, Alaska, will consist of two similar buildings housing tenant apartments, a kitchen and dining room, laundry room, and administrative offices. The heating system analysis exemplifies a changing energy climate. Fuel oil has historically been the least expensive heating energy source for buildings in Southeast Alaska, even in areas with surplus hydroelectric power. However, recent increases in fuel oil prices have renewed an interest in electric heating. On average, fuel oil prices have risen 31% per year for the past 2-years, 16% per year over the past 5-years, and 6% per year for the last 15-years. Fuel oil prices are projected to be $5.04 per gallon when the facility opens in 2009. In Haines, Alaska, residential electric rates are 18¢ per kWh. At this price, fuel oil is currently the less expensive heating energy. However, if fuel oil inflation continues to exceed electricity inflation, electric heat may be less expensive over the life of the building. This life cycle cost analysis compares a fuel oil heating system with a geothermal ground source heating system. The analysis is performed by Jim Rehfeldt, P.E. of Alaska Energy Engineering, LLC. METHODOLOGY Energy Analysis The energy analysis uses Carrier Corporation’s Hourly Analysis Program (HAP) to develop a computer model of building energy use. The model calculates hourly energy use by the lighting, electrical equipment, and heating, ventilating, and air-conditioning systems. The computer model is based on the design drawings developed by the design team. The most challenging component of predicting energy use is to estimate how the building will be used. Dan Austin, General Manager of St. Vincent de Paul Society, was instrumental in estimating building use. Life Cycle Cost Analysis The life cycle cost analysis method is based on the National Institute of Standards and Technology (NIST) Handbook 135—Life Cycle Cost Analysis. The life cycle cost analysis (LCCA) sums construction, maintenance, and energy costs to compare the life cycle cost of each heating system. The analysis converts costs over a 25-year period into the net present worth of each heating system. Economic factors such as interest and inflation rates and present and future energy costs are used to convert future costs to present value. Alaska Energy Engineering LLC Life Cycle Cost Analysis 2 Haines Assisted Living Facility Economic Criteria The analysis is based on the following economic criteria. • Nominal Discount Rate: This is the nominal rate of return on an investment without regard to inflation. The analysis uses a rate of 5.5% which is the rate St. Vincent de Paul is currently able to borrow money for capital improvements. • Inflation Rate: This is the average inflationary change in cost over time. The analysis uses an inflation rate of 3% which is the average increase in the Consumer Price Index over the past 25 years. • Real Discount Rate: This is the actual rate of return when the inflation rate is considered. The analysis uses a real discount rate of 2.4% which is a calculated value derived from the nominal interest rate and the inflation rate. • Economic Period: This is the period of time in which costs are considered. The analysis is based on a twenty-five year economic period which is the standard period used for buildings. Construction of the two buildings will start in 2008 and will be complete in 2010. The analysis has been simplified—with no quantifiable change in the results—by assuming construction costs and occupancy occur in 2009. Electricity Costs Electricity will be supplied by Alaska Power & Telephone (AP&T) under their Rate No. A-3, Bulk Power Rates for Large Customers, which includes charges for both electrical consumption (kWh) and peak electric demand (kW). Electrical consumption is the amount of energy consumed while electric demand is the maximum rate of consumption. The following table lists the current electric charges that are incorporated into the analysis: AP&T Rate No. A-3, Bulk Power Rates for Large Customers Item Charge Energy Charge 15.28¢ per kWh Demand Charge $5.42 per kW Service Charge $134.10 per month An energy analysis of the facility resulted in an effective cost of 17.7¢ per kWh when energy and demand charges and combined. Most of Haines' power comes from the Goat Lake hydroelectric project which supplies the Haines/Skagway service area. In 2006, for the first time since Goat Lake came on-line, supplemental diesel generation was needed to power the communities. AP&T is constructing another hydroelectric project at Kasadaya Creek that will come on-line in 2008. This is a run-of-the-river project that will primarily generate power from April to November, allowing Goat Lake to remain full for winter generation. Once Kasadaya comes on-line, Haines/Skagway will have a surplus of power. AP&T does not have a prediction of how long the surplus will be available because too many factors affect this prediction. In a small service area, a moderate change in load can have a significant impact on future availability. Alaska Energy Engineering LLC Life Cycle Cost Analysis 3 Haines Assisted Living Facility AP&T currently predicts that the cost of buying hydroelectric power will increase over the next 25- years by 0.8% per year and operating and maintenance costs will increase by 1% per year. This results in a combined electric inflation rate of 1.8% per year. No rate increases are anticipated prior to 2009. Fuel Oil Costs Delta Western currently sells No.2 fuel oil in Haines at $4.74 per gallon. The analysis uses a nominal fuel oil inflation rate of 6.3% per year which is the average increase in heating oil costs over the past 15 years. The analysis inflates the current price at a nominal fuel oil inflation rate of 6.3% to derive a 2009 fuel oil cost of $5.04 per gallon. Summary The life cycle cost analysis uses the following economic and energy factors. Economic and Energy Factors Factor Rate or Cost Nominal Discount Rate 5.5% General Inflation Rate 3.0% Real Discount Rate 2.4% Electricity Rate 17.7¢ per kWh Electricity Inflation 1.8% Fuel Oil Cost (2009) $5.04/gal Fuel Oil Inflation 6.3% Alaska Energy Engineering LLC Life Cycle Cost Analysis 4 Haines Assisted Living Facility This page intentionally left blank Alaska Energy Engineering LLC Life Cycle Cost Analysis 5 Haines Assisted Living Facility Section 2 Heating System Analysis INTRODUCTION Fuel oil has traditionally been the lowest cost energy source for heating buildings in Southeast Alaska. However, recent increases in fuel oil costs have spurred interest in renewable energy sources. Geothermal heating has several potential advantages over fuel oil. Over two-thirds of the building heating load will be supplied from the ground over the life of the building. This energy can be obtained with a substantial initial investment in a well field and modest pumping costs over the life of the building. The system will use electricity which is a good long term source in Haines. The local utility is predicting a surplus of power over the life of building, which is likely to continue the recent trend of electricity inflation being substantially lower than fuel oil inflation. In addition, Haines’ hydroelectric power is more environmentally friendly than burning fuel oil and emitting greenhouse gases. DESCRIPTION OF SYSTEMS The analysis determines the life cycle cost of a fuel oil heating scheme and a ground source heat pump heating scheme. The attached drawings provides schematic layouts of both schemes. The same ventilation system is used for both schemes and consists of: • Building Ventilation: Each building is ventilated by a heat recovery unit (HRU). The HRU continuously supplies tempered outside air to each regularly occupied area and exhausts air from the bathrooms, janitors closet, laundry room and kitchen/dining area. Heat is recovered from the exhaust air and transferred to the supply air. • Kitchen Exhaust Hood: The kitchen hood is exhausted by an exhaust fan. Tempered makeup air is supplied by makeup air fan. Heating Systems Fuel Oil Boiler Heating System This system is the traditional method of heating buildings. Each building is heated by two fuel oil boilers supplying 80-120°F water for in-floor radiant heat and tempering ventilation air. Domestic hot water is produced and stored in indirect domestic hot water heaters. Ground Source Heat Pump System This system uses heat pumps to extract heat from the ground to heat the buildings. Each building has two water-to-water heat pumps coupled to a ground loop consisting of closed vertical wells. The heat pumps extract heat from the ground and supply it to hydronic heating tank. A hydronic heating distribution loop is coupled to the hydronic heating tank and supplies heating coils in ventilation systems and in-floor radiant heating manifolds. Alaska Energy Engineering LLC Life Cycle Cost Analysis 6 Haines Assisted Living Facility Each building has a domestic hot water heat pump that is also coupled to the ground loop and supply two electric hot water heaters. The hot water heaters supplement the heat pumps during periods of high water demand or extremely cold outside temperatures. Supplementing with electric hot water heaters allows downsizing of the well field by 21%, yet the heat pumps will supply 94% of the facilities heating and domestic hot water loads. LIFE CYCLE COST ANALYSIS The life cycle cost comparison of a fuel oil heating system and a ground source heat pump system determined that the ground source heat pump system has a significantly lower life cycle cost. The following table shows the life cycle cost comparison. Life Cycle Cost Comparison, $K Cost Fuel Oil Boilers Heat Pumps Construction $1,030K $ 2,190K Maintenance 130K 250K Energy 2,340K 740K Total Cost $ 3,500K $ 3,200K The ground source heat pump system has a 9% lower life cycle cost. In today’s dollars, an added initial investment of $1.2M will result in $1.5M in savings, providing a 5.5% return on the investment plus an additional $300K over the 25-year economic period. The following points are relevant to the findings. • Construction Costs: The higher capital costs of the ground source heat pump system are due to the cost of coupling to the ground. • Maintenance Costs: The higher maintenance costs of the ground source heat pump system are due to heat pump replacement at 20 years of the 25-year economic period. • Energy Costs: The lower energy costs of the ground source heat pump system result because the system is 210% efficient at converting purchased energy into heat. The fuel oil plant has an efficiency of 78.7%. Alaska Energy Engineering LLC Life Cycle Cost Analysis 7 Haines Assisted Living Facility Summary The ground source heat pump system uses a mature technology. These systems are growing in popularity in SE Alaska and are likely to be the system of choice in the future. It is less of a known commodity than the other systems because a subsurface investigation has not been performed. For this analysis, the cost of the system was estimated based on the cost to install a comparable system in Juneau, Alaska. A site investigation is needed to finalize the system configuration and cost estimate. This will be performed during the design phase of the project. The investigation will establish the following: • The site has sufficient area for a vertical well field. The actual layout of the field will be determined during the investigation. • The analysis assumed that the site has a 150’ layer of silt/clay over bedrock. This was derived from subsurface drilling performed in the vicinity of the site in the 1960s. Test borings are required to confirm this assumption. • The analysis assumed the well field will require 250 feet of well per ton of heating. This is considered the likely thermal conductivity of the soils, but will need to be confirmed during the site investigation. CONCLUSION It is recommended that the building be heated by a ground source heat pump system. The system has the lowest life cycle cost as well as the lowest annual operating costs. Investment in the system will minimize the risk of high future energy inflation by extracting “free” heat from the ground. A site investigation is needed at the outset of design to verify the conservative assumptions that were used in the analysis. The investigation may allow additional optimization of the system that will reduce construction and life cycle costs. Alaska Engineering & Energy Consultants, LLC Life Cycle Cost Analysis 25200 Amalga Harbor Road Tel/Fax: 907-789-1226 Juneau, Alaska 99801 Email: jim.aeec@earthlink.net Haines Assisted Living Facility Fuel Oil Boiler Heating System Basis 25 Study Period (years) 3.0% General Inflation 5.5% Nominal Discount Rate 6.0% Fuel Oil Inflation 2.4% Real Discount Rate 2.0% Electricity Inflation Construction Costs Item Qty Unit Base Cost Year 0 Cost Hydronic Heating System Heating Plant Fuel Oil System Buried fuel oil tank 2 ea 20,700.00 41,400 Fuel oil piping and appurtenances to boilers 4 ea 1,300.00 5,200 Containment piping 60 lnft 47.00 2,820 Connections 4 ea 100.00 400 Trenching 20 cuyd 15.00 300 Primary Loop 0 October 20, 2006 Year 0 0 0 0 Primary Loop Fuel oil boilers 4 ea 11,000.00 44,000 Boiler stacks 4 ea 3,700.00 14,800 Boiler control panel 2 ea 3,700.00 7,400 Primary piping, pumps, and appurtenances 4 ea 9,700.00 38,800 Secondary loop Secondary pumps 4 ea 4,700.00 18,800 Secondary piping and appurtenances (boiler room) 2 lot 13,800.00 27,600 Building Loop Hydronic piping loop 2 lot 52,000.00 104,000 Radiant heat zone valves and manifolds 26 ea 1,300.00 33,800 Radiant slab piping 26,120 lnft 3.00 78,360 HRV heating coil branch 2 lot 9,200.00 18,400 Kitchen Makeup air fan heating coil branch 2 lot 9,200.00 18,400 Domestic Hot Water System 120 gallon indirect HW heater, hw pump, piping, etc. 4 ea 4,800.00 19,200 Completion Test, balance, and commission 1 job 22,000.00 22,000 Control system 1 job 25,000.00 25,000 Contingencies Subcontractor overhead and profit 16% 83,309 General requirements, general contractor overhead & profit 42% 253,675 Estimator's contingency and volatile market 15% 128,650 Escalation to 2009 4% 39,453 Total Construction Costs $1,026,000 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Page 1 Alaska Engineering & Energy Consultants, LLC Life Cycle Cost Analysis 25200 Amalga Harbor Road Tel/Fax: 907-789-1226 Juneau, Alaska 99801 Email: jim.aeec@earthlink.net Haines Assisted Living Facility Fuel Oil Boiler Heating System October 20, 2006 Maintenance and Replacement Costs Qty Unit Base Cost Present Value Maintenance Costs Boiler maintenance: 8 hrs per boiler 1 - 25 32 hrs 104.00 60,344 Pump maintenance: $200 per pump 1 - 25 8 ea 200.00 29,011 Hot water tank maintenance: 2 hrs per yr 1 - 25 8 hrs 104.00 15,086 Hydronic system maintenance 1 - 25 10 hrs 104.00 18,857 Parts 1 - 25 1 lot 500.00 9,066 Total Annual Costs $132,000 Energy Costs Qty Unit Base Cost Present Value Fuel oil 1 - 25 16,604 gal 5.02 2,216,384 Electricity 1 - 25 9,410 kWh 0.1770 27,648 Total Energy Costs $2,244,000 Years Years $3,402,000Total Present Worth Page 2 Alaska Energy Engineering LLC Life Cycle Cost Analysis 25200 Amalga Harbor Road Tel/Fax: 907.789.1226 Juneau, Alaska 99801 alaskaenergy@earthlink.net Haines Assisted Living Facility Ground Source Heat Pump Heating System Basis 25 Study Period (years) 3.0% General Inflation 5.5% Nominal Discount Rate 6.0% Fuel Oil Inflation 2.4% Real Discount Rate 2.0% Electricity Inflation Construction Costs Item Qty Unit Base Cost Year 0 Cost SITE WORK Closed loop vertical well field Vertical ground exchange wells Mob/Demob to/from barge lines 1 rt 4,000.00 4,000 Shipping 1 lot 12,000.00 12,000 Drill rig transportation and down time from Juneau 2 days 5,000.00 10,000 Per Diem; 3 people, 90 days 270 days 175.00 47,250 Drill cased hole, install 1" HDPE loop, remove casing, backfill 17,750 lnft 26.00 461,500 Grout plug at surface 142 holes 100 00 14 200 October 7, 2008 Year 0 0 0 0 0 0Grout plug at surface 142 holes 100.00 14,200 Exterior piping Excavate and backfill trench and wells 2,400 cuyd 11.00 26,400 Install 3" HDPE, SDR 11 mains in trench 1,800 lnft 13.50 24,300 Install 2-1/2" HDPE, SDR 11 in trench 1,000 lnft 12.00 12,000 Install 2" HDPE, SDR 11 in trench 600 lnft 10.00 6,000 Install 1-1/2" HDPE, SDR 11 in trench 400 lnft 7.60 3,040 Install 1" HDPE, SDR 11 in trench 4,500 lnft 6.10 27,450 Connect supply and return to well 292 ea 125.00 36,500 Fill hole with thermo conductive grout 100 ea 161.80 16,180 Contingencies Subcontractor overhead and profit 16% 112,131 Estimator's contingency and volatile market 15% 121,943 Escalation to 2009 4% 37,396 Site Construction Subtotal $972,290 BUILDING Hydronic Ground Source System Source manifold 6" HDPE SDR 11 manifold 80 lnft 55.70 4,456 3" HDPE SDR 11 ground loop piping 60 lnft 37.20 2,232 Manifold valves, gauges, appurtenances 2 ea 3,500.00 7,000 Source pump, 175 gpm @ 77' head, 7.5 HP 4 ea 5,000.00 20,000 Expansion tank, separator, glycol mixing tank 2 job 4,500.00 9,000 Insulated hydronic HDPE piping, supports, seismic 150 lnft 35.00 5,250 Hydronic Heating System Heating water-to-water heat pump: 210 MBH 4 ea 26,000.00 104,000 Manifold piping, valves and gauges 4 ea 2,750.00 11,000 Load pumps, 35 gpm @ 35' head, 3/4 HP 4 ea 2,500.00 10,000 Electric hot water heater, 200 gallons 2 ea 6,500.00 13,000 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 Page 3 Alaska Energy Engineering LLC Life Cycle Cost Analysis 25200 Amalga Harbor Road Tel/Fax: 907.789.1226 Juneau, Alaska 99801 alaskaenergy@earthlink.net Haines Assisted Living Facility Ground Source Heat Pump Heating System October 7, 2008 Construction Costs Item Qty Unit Base Cost Year 0 Cost Building Loop Building pumps, 20 gpm @ 40' head, 1/2 HP, VFD 4 ea 2,500.00 10,000 Hydronic piping loop 2 lot 52,000.00 104,000 Radiant heat zone valves and manifolds 26 ea 1,300.00 33,800 Radiant slab piping 26,120 lnft 3.00 78,360 HRV heating coil branch 2 lot 9,200.00 18,400 Kitchen Makeup air fan heating coil branch 2 lot 9,200.00 18,400 Domestic Hot Water System DHW water-to-water heat pump: 210 MBH 2 ea 26,000.00 52,000 HW pumps, 35 gpm @ 20' head, 1/2 HP 4 ea 2,500.00 10,000 Manifold piping, valves and gauges, HW pumps 2 ea 4,000.00 8,000 120 gallon electric HW tank 4 lot 7,500.00 30,000 Completion Test, balance, and commission 1 job 26,000.00 26,000 Control system 1 job 35 000 00 35 000 Year 0 0 0 0 0 0 0 0 0 0 0 0 Control system 1 job 35,000.00 35,000 Electrical Increase electrical service 2 ea 5,000.00 10,000 Contingencies Subcontractor overhead and profit 16% 99,184 General requirements, general contractor overhead & profit 42% 302,014 Estimator's contingency and volatile market 15% 153,164 Escalation to 2009 4% 46,970 Building Construction Subtotal $1,221,231 Total Construction Costs $2,193,520 Maintenance and Replacement Costs Qty Unit Base Cost Present Value Replacement Costs Water-to-water heat pump 6 ea 26,000 96,512 Maintenance Costs Pump maintenance: $200 per pump 1 - 25 14 ea 200.00 50,770 Hot water tank maintenance: 2 hrs per yr 1 - 25 8 hrs 104.00 15,086 Hydronic system maintenance 1 - 25 10 hrs 104.00 18,857 Heat pumps: 4 hrs per year 1 - 25 24 hrs 104.00 45,258 Parts 1 - 25 1 lot 1,000.00 18,132 Total Annual Costs $245,000 Energy Costs Qty Unit Base Cost Present Value Fuel oil 1 - 25 0 gal 5.02 0 Electricity 1 - 25 258,000 kWh 0.1770 758,047 Total Energy Costs $758,000 $3,196,520 0 0 Years 1 Years 20 0 0 0 Total Present Worth Page 4