Heating and Air Conditioning I

1
Heating and Air Conditioning I

• Principles of Heating, Ventilating and Air
  Conditioning
• R.H. Howell, H.J. Sauer, and W.J. Coad
• ASHRAE, 2005

basic textbook/reference material For ME 421 John
P. Renie Adjunct Professor Spring 2009
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Chapter 10 Life-Cycle Costs

• General Concepts.
• Properly engineered HVAC system must also be
  economical
• Compromise between performance and economic merit
• Selection due to
• Users needs
• Designers experience
• Local building codes
• First costs
• Most efficiency use of source energy
• Any of these may affect the choice among
  choices given same results system with the
  lowest-life cycle cost not necessarily the
  lowest first-cost
• Overall cost may be divided into two main
  categories
• Owning costs
• Operating costs

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Chapter 10 Life-Cycle Costs

• General Concepts.
• Overall cost may be divided into two main
  categories
• Owning costs
• Operating costs
• See Tables 10-1 and 10-2
• Also Chapter 36 of the ASHRAE Handbook HVAC
  Applications

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Chapter 10 Life-Cycle Costs

• General Concepts.
• See Table 10-1 Owning and Operating Cost Data
  Summary

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Chapter 10 Life-Cycle Costs

• General Concepts.
• See Table 10-1 Owning and Operating Cost Data
  Summary

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Chapter 10 Life-Cycle Costs

• General Concepts.
• See Table 10-1 Owning and Operating Cost Data
  Summary

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Chapter 10 Life-Cycle Costs

• General Concepts.
• See Table 10-2 Initial Cost Checklist

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Chapter 10 Life-Cycle Costs

• General Concepts.
• See Table 10-2 Initial Cost Checklist

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Chapter 10 Life-Cycle Costs

• General Concepts.
• Life-cycle costs consider expenses that are
  experienced over an extended period.
• Economic procedures project long-term costs so
  that comparisons can be made between systems with
  different initial and operating costs.
• Must include all cost factors initial costs,
  service life, interest, energy costs, operating
  expenses, and cost escalation
• Life-cycle cost techniques
• Present worth
• Uniform annual owning and operating costs
• Rate of return
• Rate of return of investment
• Benefit cost analysis
• Years to pay back
• Cash flow more sophisticated analysis need of
  investors/owners

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Chapter 10 Life-Cycle Costs

• Owning Costs.
• Expressed as annual costs that are distributed
  over an extended period or as an equivalent total
  value present worth (includes initial costs,
  salvage value, property taxes, rents, and
  insurance.)
• Initial Costs
• Included construction costs of the system cost
  of design, administration, and raise capital
• Interest money has a true value because it most
  be borrowed, obtained from investors, or diverted
  (cost of borrowed capital, cost of capital, or
  discount rate)
• Time period used by owners and engineers to
  analyze the system defined in the following
  manner
• Depreciation period allocated first cost over
  the estimated useful life (IRS straight-line,
  accelerated procedures such as declining balance
  or sum of the years. )
• Amortization period time over which periodic
  payments of monies are made to discharge a debt

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Chapter 10 Life-Cycle Costs

• Owning Costs.
• Initial Costs
• Service life time value that reflects the
  expected life of the specific component (not
  useful life or the depreciation period used for
  IRS)
• High life is variable depends on maintenance,
  environment, technical advancements of new
  equipment, and personal opinions
• Service life can be used to set amortization
  period or help is decisions of preventive
  maintenance
• See Table 10-3 for Estimates of Service Lives of
  Various Components
• Capital recovery factor (CRF)
• Calculated from the established interest rate and
  the amortization period n that determines the
  uniform annual cost needed to repay a debt or
  initial cost.
• See Table 10-4 (1,000 at 8 percent for 20 years
  CFR 0.10185, or 101.85 per year

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Chapter 10 Life-Cycle Costs

• Owning Costs.
• Initial Costs (Amortization Table)

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Chapter 10 Life-Cycle Costs
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Chapter 10 Life-Cycle Costs
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Chapter 10 Life-Cycle Costs

• Owning Costs.
• Initial Costs
• Present worth initial cash required (or present
  worth) is the current value of monies to be spent
  over the selected amortization period money
  needed today for initial investment and all
  future expenditures.
• Present worth factor, uniform annual series
  (PWuas) given in tables and is used to
  calculate the present worth when given a uniform
  annual cost.
• PW Annual costs x PWuas (or 1/CFR)
• Series compounded amount factor, uniform annual
  series (SCAF) used to determine a future sum of
  money when a uniform annual payment is made.
• Actual sum Annual costs x SCAF
• 1/SCAF is the sinking fund factor (SFF)
• Annual costs Actual sum at end x SFF

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Chapter 10 Life-Cycle Costs

• Owning Costs.
• Present worth factor, single payment (PWFsp)
  used to calculate the present worth of a future
  one-time payment
• Actual cost times this number gives the present
  worth of a one-time cost, such as an overhaul or
  equipment replacement.
• Reciprocal is referred to as the compound amount
  factor, single payment.

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Chapter 10 Life-Cycle Costs

• Owning Costs.
• Property Tax
• Included as an owning tax and is a percentage of
  the market value of the buildings
• Engineer needs to assess whether appreciation or
  depreciate of property values will occur.
• Incentives for energy conservation may be an
  important consideration in determining
  justifiable long-term investment
• Insurance
• Means by which a property owner can be reimbursed
  for a financial loss from property damage that
  requires repair or replacement
• Financial recovery also from loss of income,
  rents, or profits resulting from the property
  damage
• State-wide regulation (premium, liabilities,
  deductibles, etc.)
• Salvage Value
• Terminal value of the equipment at the end of the
  life or amortization period often assumed to be
  zero

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Chapter 10 Life-Cycle Costs

• Operating Costs.
• Energy
• Utility costs require monthly calculation
  considering energy consumption and peak demands.
• Most reliable are hourly procedures each
  component as a function of weather, internal
  loads, building heat gains and losses and
  ventilation
• Cost escalation loss of purchasing power due to
  inflation
• Real return difference between interest and
  inflation (1 to 5)
• Present worth of an annual cost over a selected
  time period, n, using an interest of money, I,
  and a cost escalation, j, is the present worth
  escalation factor (PWEF) when interest and fuel
  cost rises are not equal use

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Chapter 10 Life-Cycle Costs

• Operating Costs.
• Energy costs

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Chapter 10 Life-Cycle Costs

• Operating Costs.
• Energy costs

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Chapter 10 Life-Cycle Costs

• Operating Costs.
• Maintenance
• Expenses for labor and material necessary to make
  repairs, as well as for cleaning, painting,
  inspection, testing, etc.
• Usually operation engineer handles routine
  maintenance
• Extraordinary repairs covered by maintenance
  divisions
• Technique for estimating building HVAC
  maintenance cost for various equipment
  combinations (Dohrmann and Alereza 1986)
• Assume that the base HVAC system consists of
  fire-tube boilers for heating equipment,
  centrifugal chillers for cooling,
  variable-air-volume (VAV) distribution.
• Costs are 0.3338 per square foot with adjustment
  from Table 10-5 to account for building age and
  various types of HVAC equipment.

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Chapter 10 Life-Cycle Costs

• Operating Costs.
• Maintenance (Table 10-5)

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Chapter 10 Life-Cycle Costs

• Operating Costs.
• Labor for Operations
• System operators are often necessary due to scope
  of facility or local regulation
• Water Costs
• Heat can be rejected either through purchased
  water or cooling towers
• Water conservation
• Water Treatment
• Income Tax
• Can be considered as an operating cost
• Tax rate is the marginal rate next dollar
• Allowances for depreciation and other deductions
  strongly influence investments by reducing
  life-cycle costs
• Significant tax-credits should be included in
  life-cycle costs.

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Chapter 10 Life-Cycle Costs

• Life-Cycle Cost Techniques.
• Present Worth
• Most common technique comparing the equivalent
  cash needed on hand to own and operate over an
  entire selected time. single investment dollar
  amount.

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Chapter 10 Life-Cycle Costs

• Life-Cycle Cost Techniques.
• Uniform Annual Owning and Operating Costs
• Compares the cost of both investment and annual
  costs on an annual base spread the costs of
  owning the building spread over the full
  amortization period
• Consider the additional costs at some particular
  point in its life due to replacements or major
  overhauls.
• Rate of Return
• The average annual net benefit/original cost x
  100.

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Chapter 10 Life-Cycle Costs

• Life-Cycle Cost Techniques.
• Rate of Return
• The average annual net benefit/original cost x
  100.

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Chapter 10 Life-Cycle Costs

• Life-Cycle Cost Techniques.
• Benefit/Cost Analysis
• Comparative procedure that provides the engineer
  and owner the ratio of cost versus savings
  after both have been converted to present worth.

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Chapter 10 Life-Cycle Costs

• Life-Cycle Cost Techniques.
• Years to Payback
• Similar to benefit cost analysis in that it does
  not look for system cost comparisons at a
  specific life agreement between engineer and
  owner that YTP is reasonable and less than life
  expectancy
• Years required for the present worth of the
  investment is equal to the savings.

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Chapter 10 Life-Cycle Costs

• Life-Cycle Cost Techniques.
• Years to Payback

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Chapter 10 Life-Cycle Costs

• Life-Cycle Cost Techniques.
• Cash Flow
• A discounted cash flow approach provides the
  owner with a technique to incorporate variable
  annual outlays and taxes, with the amount and
  year of the cash income.
• To account for interest and time, net cash flows
  are converted to single-payment present worths
  the interest at which the summations of present
  worth of net cash flow is zero gives the rate of
  return.
• If acceptable to the investor proposal should
  be approved.
• Another way would be to obtain an investment
  value at a given rate of return by adding the
  present worth of the net cash flows, but not
  including the investment costs.

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Chapter 10 Life-Cycle Costs

• Household Energy Use

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Chapter 10 Life-Cycle Costs

• Household Energy Use
• (from Energy and the Environment, 2nd
  Edition, Ristinen and Kraushaar, 2006, John Wiley)