Alternative and Renewable Energy - Advanced Materials ...

Spiral 2: 3/28/2011Department of Defense Energy HandbookAlternative and Renewable Energy Options for DoD Facilities and Bases16 ECONOMIC ANALYSIS OF ENERGY PROJECTSAs alternative energy sources are identified for potential use at DoD installations, the economic impactof employing these sources must be assessed. Using life cycle cost (LCC) tools, DoD installationmanagers can assess the present and future costs associated with the implementation of an alternativeenergy source. Life cycle costs are defined as:The sum of present values of investment costs, capital costs, installation costs, energy costs,operating costs, maintenance costs, and disposal costs over the life time of a project. 390Because LCC analysis looks at all costs from construction to disposal, LCC analysis is the standardmethod of evaluation for all Federal Energy Management Program energy-saving investments. 391 Theseresults from an analysis of LCC are even more significant in cases where several alternatives may meetthe required performance level but other variable costs might be different.16.1 Guidance for Life Cycle Cost AnalysisUnderstanding the criteria that the federal government looks at when assessing the financial riskassociated with energy related projects is of vital importance as LCC analysis is required by federal lawfor all energy-related projects. The methodologies and procedures for LCC analysis of energy relatedprojects in federal buildings are defined in Title X of the Code of Federal Regulations, Part 436 (10 CFR436), Subpart A. To provide further guidance on how to perform all aspects of LCC analysis for federalenergy projects, the National Institute of Standards and Technology (NIST) developed the Life-CycleCosting Manual for the Federal Energy Management Program (also known as NIST Handbook 135). Anannual supplement to NIST Handbook 135 entitled: Energy Price Indices and Discount Factors for Life-CycleCost Analysis is published every April, updating the real discount rate and corresponding discount factorsfor all energy and non-energy costs associated with LCC analysis. Additional guidance on LCC analysis offacility energy projects can be found in P-442: Economic Analysis Handbook, developed by the NavalFacilities Engineering Command.In addition, the Office of Management and Budget has published Circular A-94: Guidelines and DiscountRates for Benefit-Cost Analysis of Federal Programs to provide further guidance on how to perform LCCanalysis. The rules in OMB Circular A-94 apply only to non-energy, non-fuel related analysis, howeverthey still provide a good background on how to perform generic life cycle cost analysis.16.2 Performing Life Cycle Cost AnalysisWhen choosing between the current state and any alternatives in an energy-saving project, the presentvalue xcviii of life cycle costs is calculated. The alternative that is the most cost effective is usually chosen.According to 10 CFR 436 Subpart A, a project is deemed cost effective when the candidate projectmeets the evaluation criteria contained in Table 69. 391xcviiiAll costs in LCC analysis must be calculated in the present value319