Wood-Chip Heating Systems - Biomass Energy Resource Center

WOOD CHIP HEATING SYSTEMS
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APPENDIX E
Sample Life-Cycle Cost Analysis:
Generic Vermont School
This is a sample life-cycle cost analysis of a
conversion from oil heat to a new wood-chip heating
system in an actual 220,000 square foot high school
in Vermont. The National Institute of Standards and
Technology’s (NIST) BLCC5 life-cycle cost analysis
software was used.
a. Conversion Assumptions: Oil Heat to
Wood-Chip Heat
I. CAPITAL COSTS
The wood-chip conversion involves four cost
components:
Wood-chip boiler system . . . .$350,000
Building construction . . . . . . .$150,000
Domestic hot water . . . . . . . . .$30,000
Engineering . . . . . . . . . . . . . . .$60,000
Total project cost . . . . . . . . . . .$590,000
The wood-chip system includes the boiler,
combustor, chimney, all fuel handling and bin
unloading equipment, controls, and the wood
boiler chimney. The building construction includes
constructing a chip storage bin and a boiler room
large enough to hold both the wood chip boiler and a
back-up oil boiler. Engineering costs are for developing
specifi cations and for project management. The
domestic hot water (DHW) line item is for a DHW
storage tank that can be heated by the boilers.
II. FINANCING
While the actual societal cost for this project is
$590,000, the cost born by the school district is the
most important consideration for local decision
makers. Therefore, state aid to education for capital
construction projects was subtracted from the overall
cost and fi nance costs were then calculated on this net
project cost.
In Vermont, where this school is located, the state
Department of Education provides construction aid
to school districts for capital improvement projects.
Each state has different construction state aid rules and
regulations. This analysis assumes a 30% cost share
from the state for all construction costs. The remainder
of the construction costs is assumed to be borrowed by
the school district from the state bond bank. Since the
school receives a 30% construction grant from the state
Department of Education, the school’s share of the cost
is reduced to $413,000. The fi nanced and construction
aid portions of the project’s total cost are:
Total Construction Cost . . . . . . . $590,000
30% State Construction Aid . . . . $177,000
Net Financed Cost . . . . . . . . . . . . $413,000
Financing assumptions, based on the municipal
bond market, are:
Interest rate . . . . . . . . . . . . . . . . . 4.6%
Term . . . . . . . . . . . . . . . . . . . . . . . 20 Years
Annual bond payments were then calculated using
an amortization calculator.
III. ENERGY USE AND COSTS
The energy consumption costs for oil heat were
extracted from a historical analysis of fuel oil bills.
Current fuel oil costs were applied to give a fi rst-year
oil heat cost. Oil consumption was then used to project
wood-chip consumption. Fuel cost and escalation rate
assumptions are given below. All price infl ation rates
in the analysis include a 2.3% annual general infl ation
rate. The analysis uses a 5.6% nominal discount rate.
The life-cycle cost analysis of the wood system
assumes that the wood system supplies 85% of the
school’s heat and the oil backup system 15%.