DOE-2 Reference Manual Version 2.1 - DOE2.com

• Energy use savings• Ratio of total cost savings to investment• Ratio of energy use savings to investment• Discounted payback periodThese quantities are calculated by comparing costs and energy use for theproject under analysis with those input by the user for a baseline case.Baseline data are entered in EDL using the BASELINE instruction.Example runs illustrating the use of the ECONOMICS program may be foundin the User's Guide and in the Sample Run Book.2. Life-cycle Costing Methodology.In this section, a brief description is given of the terminology andmethodology used in the DOE-2 life-cycle cost calculations. Further detailscan be found in Ref. 4.The project lifetime is the period, in years, over which the life-cyclecost analysis is made. In DOE-2 this can be between 1 and 25 years and isspecified in POL. The life-cycle cost is the total cost of an item over theproject lifetime. For a cost that recurs every year, such as energy cost, the1 ife-cycle cost (LCC) isLCCNL C nn=lwhere N is the project lifetime and C n is the cost in the nth year.Rather than use the actual cost in year "n", the program calculates thepresent value of the cost, which is given byC ( i)nn (present value) = C 1 + dwhere C is the cost in current dollars, i is the cost inflation rate(relative to general inflation), and d is the discount rate. For example, ifProject lifetime25 yearsDi scount rate = 10 %Energy inflation rate = 5% (above general inflation)C = ~1000 (annual energy cost in today's dollars),then the present value of the energy cost in year 10, say, would beC 10(present value) = ~1000 (i : g:~6) 10= ~1000~1000= ~ 628.(0.955)10(0.628)VI.2 (Revi sed 5/81)