Consulting-Specifying Engineer - January 2008 - (Page 29) Equipment Lifecycles Selecting a chiller for life Chilled water systems are a major investment in a building’s lifecycle costs. Designers should consider how chillers integrate, exist, and perform in a building for years to come, and must include the owner’s economic objectives. BY RANDY SCHRECENGOST, PE The evaluation criteria used to select a chiller involve the owning costs and the operating costs. The owning costs include acquisition, installation, and replacement costs; salvage value; discount rate and financing method; and fixed or periodic costs such as insurance and property taxes. These costs are exclusive of costs associated with operating the chiller. The performance characteristics of the selected equipment, its predicted useful service life, its hours of operation, and the loads applied, affect operating costs. Capital investment costs are firm and have an immediate effect on the project finances. Predictions of future costs and usage estimate operating costs are subject to variations depending on economic conditions. Owners and engineers tend to emphasize first-cost differences and place less significance on operating cost differences. There are several economic analysis techniques available for a chiller purchase, but the recommended evaluation procedure, accounting for the time-value of money, is to determine estimated lifecycle costs on a “present-worth” basis. The net present value (NPV) method is superior, as it discounts all cash flows at the owner’s required rate of return when evaluating mutually exclusive purchases given chiller size Identifying the cost Determine client needs (pre-design) Identify all utility rate/demand costs, rebates, etc. Identify interest rate, finance method, fixed cost, amortization period Select chiller type, size, and all components Identify all owner costs, including controls, safeties, auxiliaries (purge units), etc. Identify all operating costs: periodic, annual, and non-annual recurring O&M costs Complete NPV calculations, including salvage value; obtain present worth Evaporator cleaning Controls calibrations Energy costs Chiller loads and run hours Operating hours Service life predicted Operating pressure drops O&M labor, parts, and materials Interpretation of evaluated costs: perform sensitivity analysis Equipment selection (or perform more evaluation) Evaluation of bids minus operating costs equals equivalent capital penalty or credit price adjustment Source: Stanley Consultants Several factors must be considered when considering up-front and long-term costs of a chilled water system. Consulting-Specifying Engineer • JANUARY 2008 29
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