ECONOMIC ASPECTS

The aim of life cycle cost calculations is to ensure that investment decisions are not made solely on the basis of a low purchase price, but that the life cycle operating costs are considered in the equation.

The subject of the study can be either a single energy-using device, such as a pump, or an entire ventilation system with all its components. A study fo­cuses on the life cycle of the system or device, and normally is a comparison of two or more alternatives. The goal is to find the most economical solution on the basis of the total costs (investment and operation).

Considering the energy and maintenance costs during the life cycle, the cheapest investment is not always the best. It may, for instance, be profitable to buy a ventilation unit with a heat recovery system, which may increase the unit investment by 50%. The return on the investment in such a case may be in excess of 20%.

Another way to utilize LCC calculations is in support of a purchase. The supplier can offer both the purchase price and an estimate of the present value of the life cycle operating costs At the same time the supplier guarantees the operating cost for some period, for example, 3 years. If these target costs are exceeded, the supplier pays a penalty, and if the operating costs were overesti­mated, the supplier and the customer share the bonus.

Life cycle cost calculations are an application of investment calculations that have been used in planning and design in industry for several decades.1^1

Industrial Ventilation Design Guidebook

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LCA, Environmental impacts, e. g., kg C02, ELUs

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Infrastructural

Economy

Usage

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Production

Life cycle, years

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Investment

Usage

Private economy

LCC, Present value of usage and investment, EUR

FIGURE 16.1 Comparison of life cycle assessment and life cycle cost calculations. The result of LCA is (weighted) emissions and the present value of investment and operating costs, e. g,. in Euros. Note that in LCA calculations the present value coefficient is I, but the present value of LCC is always affected by interest rate and the length of the period.5

In ventilation design, these calculations are used routinely for equipment com­parison. Plans are, however, to include life cycle cost calculations in the terms — of-tender contract.

LCC calculations frequently provide energy-efficient solutions. This gives reduced energy consumption and a reduction in environmental pollu­tion. For example, the installation of a heat recovery system in a ventila­tion system may reduce the energy consumption and emissions by 50 to 80%. Figure 16.1 compares life cycle cost and life cycle assessment calcu­lations.

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