EPA/600/R-99/100
April 2001
Cost Evaluation Strategies for
Technologies Tested Under the
Environmental Technology Verification
Program
by
Arun Gavaskar
Lydia Gumming
Battelle
Columbus, OH 43201-2693
Contract No. 68-C7-0008
Work Assignment No. 3-16
for
Project Officer, George Moore
Work Assignment Manager, Richard Scharp
NATIONAL RISK MANAGEMENT RESEARCH LABORATORY
OFFICE OF RESEARCH AND DEVELOPMENT
U.S. ENVIRONMENTAL PROTECTION AGENCY
CINCINNATI, OH 45268
M t Printed on Recycled Paper
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Notice
The U.S. Environmental Protection Agency through its Office of Research and
Development funded the research described here under Contract No. 68-C7-
0008, Work Assignment No. 3-16. The work was supported under the U.S.
EPA Environmental Technology Verification (ETV) Program. This cost evalu-
ation strategy report has been subjected to U.S. EPA's peer and administrative
review, and has been approved for publication as an U.S. EPA document.
In no event shall either the United States Government or Battelle have any
responsibility or liability for any consequences of any use, misuse, inability to
use, or reliance on the information contained herein, nor does either warrant or
otherwise represent in any way the accuracy, adequacy, efficacy, or applica-
bility of the contents hereof. Mention of corporation names, trade names, or
commercial products does not constitute endorsement or recommendation for
use of specific products.
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Foreword
The U.S. Environmental Protection Agency is charged by Congress with pro-
tecting the Nation's land, air, and water resources. Under a mandate of national
environmental laws, the Agency strives to formulate and implement actions
leading to a compatible balance between human activities and the ability of
natural systems to support and nurture life. To meet this mandate, EPA's
research program is providing data and technical support for solving environ-
mental problems today and building a science knowledge base necessary to
manage our ecological resources wisely, understand how pollutants affect our
health, and prevent or reduce environmental risks in the future.
The National Risk Management Research Laboratory (NRMRL) is the Agency's
center for investigation of technological and management approaches for pre-
venting and reducing risks from pollution that threaten human health and the
environment. The focus of the Laboratory's research program is on methods
and their cost-effectiveness for prevention and control of pollution to air, land,
water, and subsurface resources: protection of water quality in public water
systems; remediation of contaminated sites, sediments, and ground water; and
prevention and control of indoor air pollution; and restoration of ecosystems.
NRMRL collaborates with both public and private sector partners to foster tech-
nologies that reduce the cost of compliance and to anticipate emerging prob-
lems. NRMRL's research provides solutions to environmental problems by:
developing and promoting technologies that protect and improve the envi-
ronment; advancing scientific and engineering information to support regulatory
and policy decisions; and providing the technical support and information trans-
fer to ensure implementation of environmental regulations and strategies at the
national, state, and community levels.
This publication has been produced as part of the Laboratory's strategic long-
term research plan. It is published and made available by EPA's Office of Re-
search and Development to assist the user community and to link researchers
with their clients.
E. Timothy Oppelt, Director
National Risk Management Research Laboratory
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Abstract
The objective of this document is to provide a general set of guidelines that
may be consistently applied for collecting, evaluating, and reporting the costs of
technologies tested under the Environmental Technology Verification (ETV)
Program. Because of the diverse nature of the technologies and industries
covered in this program, each ETV pilot has the flexibility for any of the follow-
ing options to be used:
No cost evaluation
Itemization of costs
Estimation of capital investment and operation and maintenance
(O&M) costs
Calculation of total annualized cost, simple payback period, or
present value.
The four cost options are incremental; each successive option builds on and
incorporates all of the elements of the previous options to provide a compre-
hensive cost evaluation.
One option for pilots with limited resources or other restrictions is to not evaluate
costs. In the second option, all cost items are identified and quantified, without
assigning monetary (dollar) values. The cost items are reported in two categor-
ies, capital investment and operation and maintenance (O&M) costs.
In the third option, the cost evaluation process is taken one step further. All the
capital and O&M items are identified, quantified, and assigned dollar values. In
the fourth option, the total impact of the technology on the user is calculated.
The fourth option also facilitates the comparison of the ETV technology with a
baseline or competing technology. Assessing the total impact of a technology
typically involves the calculation of either total annualized cost, simple payback
period, or present value.
A comprehensive reporting format, which includes cost evaluation objectives
and data collection methods, estimates of capital investment and O&M costs,
cost analysis, list of assumptions, technical factors affecting costs, and intan-
gible benefits and/or disadvantages of the technology, is recommended.
IV
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Contents
Foreword iii
Abstract iv
Figure vii
Tables vii
Acronyms and Abbreviations viii
1. Introduction 1
1.1 ETV Program Description 1
1.2 Cost Evaluation Strategy 2
1.3 Summary of Cost Evaluation Options 2
1.3.1 No Cost Evaluation 3
1.3.2 Itemization of Costs 4
1.3.3 Estimation of Capital Investment and O&M Costs 4
1.3.4 Calculation of Total Annualized Cost, Simple Payback
Period, or Present Value 4
1.4 Quality Assurance/Quality Control 4
1.5 Reference 4
2. Itemization of Costs 5
2.1 Identifying the Cost Evaluation Objective and Data Collection
Methods 5
2.2 Determining the Design Basis 5
2.3 Identifying and Quantifying Capital Investment and O&M Costs 6
2.3.1 Identifying and Quantifying Capital Items 6
2.3.1.1 Site Preparation 7
2.3.1.2 Buildings and Land 7
2.3.1.3 Purchased Equipment 7
2.3.1.4 Utility Connections/Systems 8
2.3.1.5 Installation 8
2.3.1.6 Startup/Training 8
2.3.1.7 Regulatory Issues/Permitting 8
2.3.1.8 Other 8
2.3.2 Identifying and Quantifying O&M Items 8
2.3.2.1 Materials 8
2.3.2.2 Utilities 8
2.3.2.3 Labor 8
2.3.2.4 Maintenance 8
2.3.2.5 Waste Management 8
2.3.2.6 Regulatory Compliance 8
2.3.2.7 Other 8
2.4 Listing the Assumptions Involved in a Cost Evaluation 8
2.5 Listing the Technical Factors that Impact Costs 9
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2.6 Listing the Intangible Benefits and/or Disadvantages
of a Technology 10
2.7 Preparing a Cost Evaluation Report 10
3. Estimation of Capital Investment and O&M Costs 11
3.1 Estimating Capital Investment 11
3.2 Estimating O&M Costs 11
3.3 Additional Considerations in Estimating Capital Investment
and O&M Costs 11
3.4 Listing the Assumptions 13
3.5 Listing the Technical Factors that Impact Costs 13
3.6 Listing the Intangible Benefits/ Disadvantages of a Technology 13
3.7 Preparing a Cost Evaluation Report 13
3.8 Reference 13
4. Calculation of Total Annualized Cost, Simple Payback Period,
or Present Value 14
4.1 Calculating the Total Annualized Cost 14
4.2 Calculating the Simple Payback Period 14
4.3 Calculating the Present Value of a Technology 15
4.4 Comparing Two Technologies 16
4.5 Preparing a Cost Evaluation Report 17
Appendices
Appendix A: Illustration of Capital Investment/O&M Cost Estimation and
Total Annualized Cost Analysis of a Dual-Stage Filtration
System in a Drinking Water Plant 18
Appendix B: Illustration of Capital Investment/O&M Cost Estimation and
Simple Payback Period Analysis of an Electrodialysis
System 21
Appendix C: Illustration of Capital Investment/O&M Cost Estimation and
Present Value Calculation for an Energy-Efficient Water
Heater 25
AppendixD: Cost Evaluation References 28
Appendix E: Time Value of Money Table 30
Appendix F: Unit Annualized Cost 32
VI
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Figure
Figure 1 -1. Summary of Cost Evaluation Methodology for ETV
Technologies
Tables
Table 1-1. U.S. EPA Project Officers, ETV Partners, and ETV Partner
Contacts for Each ETV Pilot 1
Table 2-1. List of Capital Items 7
Table 2-2. List of O&M Items 7
Table 2-3. List of Intangible Benefits/Disadvantages 10
Table 3-1. Capital Investment fora Hypothetical Water Treatment Unit 11
Table 3-2. Annual O&M Costs for a Hypothetical Nickel Recovery
System 12
VII
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Acronyms and Abbreviations
BTU British thermal units
DOE Department of Energy
DSF dual-stage pressure filtration
ECHOS Environmental Cost Handling Options and Solutions
ETV Environmental Technology Verification
EvTEC Environmental Technology Evaluation Center
FCI fixed capital investment
gpm gallons per minute
kWh kilowatt-hours
NRMRL National Risk Management Research Laboratory
NTU nephelometric turbidity unit(s)
O&M operation and maintenance
ORD Office of Research and Development
PV present value
QA quality assurance
QA/QC quality assurance/quality control
U.S. EPA United States Environmental Protection Agency
VIM
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Acknowledgments
This document was prepared under the direction of George Moore, project offi-
cer, National Risk Management Research Laboratory (NRMRL) in Cincinnati,
Ohio; and Richard Scharp, Work Assignment Manager (WAM), NRMRL. The
authors would like to acknowledge the special efforts of John Abraham,
NRMRL; Jeff Adams, NRMRL; and Lauren Drees, NRMRL, who provided con-
siderable help in reviewing the document and providing guidance and technical
support. Special acknowledgment is given to the ETV pilot managers, who
provided comments and suggestions during the creation of this document.
The authors appreciate the contribution of Penelope Hansen, ETV Program
Director, for recognizing and supporting the need for a uniform cost evaluation
strategy for assessment of ETV technologies.
IX
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1. Introduction
This document contains the general methodology for
estimating application costs for technologies tested
under the United States Environmental Protection Agen-
cy's (U.S. EPA's) Environmental Technology Verification
(ETV) Program.
1.1 ETV Program Description
The U.S. EPA's Office of Research and Development
(ORD) initiated the ETV Program in 1994. The ETV Pro-
gram is designed to accelerate the development and use
of environmentally friendly technologies through objec-
tive verification and reporting of technology performance.
The goal of the program is to provide potential purchas-
ers and regulators with an independent and credible
assessment of what they are buying and permitting. The
ETV Program is implemented through 12 pilot programs.
These pilots are in various stages of development, and
each pilot program (commonly referred to by ETV parti-
cipants as a "pilot") focuses on a specific environmental
area of interest. (The only exception is the Environmen-
tal Technology Evaluation Center [EvTEC] pilot, which is
independent and does not focus on a specific area of
interest.)
Table 1-1 lists the various pilots, U.S. EPA project offi-
cers, ETV partners, and ETV partner managers and
contacts. The U.S. EPA is responsible for auditing and
oversight of these partner organizations, as appropriate,
to ensure the credibility of the verification process and
data. The ETV partners are responsible for evaluating
the performance of the vendors' technologies based on
testing and quality assurance (QA) protocols developed
with input from stakeholders. Stakeholders consist of
representatives of all verification customer groups: buy-
ers and users of technology, developers and vendors,
Table 1-1. U.S. EPA Project Officers, ETV Partners, and ETV Partner Contacts for Each ETV Pilot
ETV Pilot
U.S. EPA Project Officer
ETV Partner
ETV Partner Contacts
Drinking Water Systems Jeff Adams
Site Characterization and Monitoring Eric Koglin
EvTEC Norma Lewis
NSF International
Oak Ridge National Laboratory
Sandia National Laboratory
Civil Engineering
Research Foundation
Bruce Bartley
Roger Jenkins
Amy Dindal
Wayne Einfeld
William Kirksey
Pollution Prevention:
Coatings and Equipment
Indoor Air Products
Pollution Prevention:
Waste Treatment
Air Pollution Control Technologies
Global Climate Change Technologies
Advanced Monitoring Systems
Metal Plating/Finishing
Wet Weather Flow
Source Water Protection
Mike Kosusko
Les Sparks
Norma Lewis
Ted Brna
Dave Kirchgessner
Robert Fuerst
Alva Daniels
Mary Stinson
Ray Frederick
Concurrent Technologies
Research Triangle Institute
California Environmental
Protection Agency
Research Triangle Institute
Southern Research Institute
Battelle
Concurrent Technologies
NSF International
NSF International
Brian Schweitzer
Vikki Miller
David Ensor
Debbie Franke
Greg Williams
Tony Luan
Jack Farmer
Stephen Piccot
Karen Riggs
Jim Voytko
John Schenk
Tom Stevens
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consultants, and state regulators. For some pilots, the
partner's facilities are utilized for technology testing, but
testing is more commonly conducted at other testing
facilities or demonstration sites.
1.2 Cost Evaluation Strategy
An ETV pilot's verification of the technical performance
of a technology is likely to be fairly definitive. However,
technology cost estimates are expected to incorporate
more variability and uncertainty than technical perform-
ance evaluations, so it is useful to clearly differentiate
the terms "cost verification" and "cost estimation."
Cosf verification is a process that involves firsthand ex-
perience of the cost elements required by the ETV pilot
during the verification project. Thus, the verification pro-
cess actually measures individual cost items, such as
labor (time of operation and labor rate), energy, and
materials. Measuring various cost items may present
different degrees of difficulty based on the length and
comprehensiveness of the testing. If the objective is to
test the technology in the ETV partner's facility, as some
pilots do, then an effort to verify some cost items (such
as installation, operating labor, and operating energy)
could be made for some types of technologies. First-
hand verification of other cost items (such as mainte-
nance) is more difficult if the verification process takes
place over a short period. This is not to diminish the
value of testing technologies in a partner's facility, be-
cause considerable information on the technical perform-
ance and certain cost items (such as operating labor and
energy requirements) can be obtained from a simulated
test in a partner's facility. However, direct verification of
an item such as maintenance cost would require that a
unit be installed in a user's facility for a period of one
year or longer, or for the expected life of the technology.
Cosf estimation, on the other hand, is a process that
involves a combination of direct verification, engineering
judgment by persons knowledgeable with the technol-
ogy and its application, and previous experience with
similar technologies by the ETV partners or vendors.
Given the limitations of the ETV Program's verification
process, directly verifying every cost item for all the tech-
nologies in all the pilots is not feasible. In fact, the num-
ber of cost items that were directly measured or verified
has been limited in every other technology evaluation
program. Ultimately, although the ETV Program directly
verifies the technical performance of a technology under
specified conditions, addressing costs probably will be a
process of cost estimation rather than cost verification.
1.3 Summary of Cost Evaluation Options
After technical performance of a technology, cost is the
most important factor that guides decision-making by
potential users. Cost information is especially useful for
technologies targeted toward small businesses, because
such users are less likely to have the resources to evalu-
ate technology costs. The ETV Program allows each pilot
manager (ETV partners in collaboration with the U.S.
EPA project officers) the flexibility to select a cost evalu-
ation approach that best fits the resources and needs of
the pilot, as well as the type of technology and its applica-
tion. This document describes four different cost evalu-
ation options that an ETV pilot manager could use:
No cost evaluation (see Section 1.3.1)
Itemization of costs (see Section 2)
Estimation of capital investment and operation
and maintenance (O&M) costs (see Section 3)
Calculation of total annualized cost, simple
payback period, or present value (see Section 4).
When using this document, ETV pilot managers decide
either to not address costs, to address costs in a limited
fashion, or to conduct a relatively comprehensive cost
estimation and analysis. Stakeholder input also is taken
into consideration when making this decision. Pilot man-
agers wishing only to itemize relevant costs need not
consider Sections 3 or 4 of this document. Also, each
successive option mentioned in this list builds on the pre-
vious one, so that the fourth option (Calculation of Total
Annualized Cost, Simple Payback Period, or Present
Value) builds on and incorporates all the elements of the
previous three on the list to provide a comprehensive
cost evaluation. Appendices A through C contain illus-
trations of cost evaluation for three technologies.
These four options were first described in the earlier re-
view document Options for Collecting, Evaluating, and
Reporting ETV Technology Costs (Battelle, 1998). The
review showed that at least one of the technologies
tested so far under the ETV Program had been evalu-
ated under the relatively comprehensive fourth option
(Calculation of Total Annualized Cost, Simple Payback
Period, or Present Value).
This document includes a standard cost reporting format
that pilot managers can use in two ways: (1) In the plan-
ning stages of an ETV technology verification test, pilot
managers could use this standard format as a checklist
to ensure that all the required items for the cost evalua-
tion will be tracked during testing. (2) Upon completion
of the ETV technology verification test, the standard for-
mat could be used to ensure that all relevant items are
presented and that potential users can use the reported
costs to evaluate their own application or to compare
competing technologies. Figure 1-1 shows how these
options progressively lead to a comprehensive cost
evaluation.
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Identify and
Quantify
Capital Items
Estimate Capital
Investment
List the Assumptions
Used in Cost Analysis
Define Cost
Objectives and
Data Collection
Methods
Determine the
Design Basis
List the Key
Technical Factors
Impacting Costs
Identify and
Quantify
Operation and
Maintenance Items
Estimate Operation
and Maintenance
Costs
List the Intangible
Benefits and/or
Disadvantages of
the Technology
Calculate Total
Annualized Cost,
Simple Payback Period,
or Present Value
Figure 1 -1. Summary of Cost Evaluation Methodology for ETV Technologies
ETV technologies are diverse enough that not all cost
elements described in this document are appropriate for
every technology. Therefore, cost tables and reporting
formats are presented in this document as examples of
elements to consider when performing a cost eval-
uation, and are not designed to be comprehensive for all
pilots and/or technologies. In general, though, pilot man-
agers should include in their evaluations as much rele-
vant cost data as possible, as well as a description of
the cost data not included in the evaluation.
1.3.1 No Cost Evaluation
One option that pilot managers may use is to not evalu-
ate costs. Reasons why pilots may not address costs
include difficulty or inability in obtaining the required cost
items, lack of vendor or user interest in cost evaluation,
or simply a wish to conserve limited financial resources
for evaluating the technical performance of a technol-
ogy. The rest of this document does not apply to pilots
for which the No Cost Evaluation option is exercised.
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1.3.2 Itemization of Costs
Section 2 of this document is suitable for pilot managers
who want to perform a limited cost evaluation. In this op-
tion, the various cost items that may be applicable to the
technology are identified and quantified, but monetary
(dollar) values are not assigned. This option is suitable
for pilot managers who may find it difficult to assign unit
costs (or prices) for each cost item, either because the
unit costs are likely to be highly variable from user to
user in the affected industry or because the unit costs
are not easily available.
1.3.3 Estimation of Capital Investment
and O&M Costs
Section 3 describes the Estimation of Capital Invest-
ment and O&M Costs option, which builds on the Itemi-
zation of Costs option. In addition to identifying and
quantifying the cost items associated with the ETV tech-
nology, unit costs (prices) are assigned for each item.
Based on the quantity and unit cost of each item, the
total cost of each item can be estimated.
1.3.4 Calculation of Total Annualized Cost,
Simple Payback Period,
or Present Value
Section 4 describes the Calculation of Total Annualized
Cost, Simple Payback Period, or Present Value option,
and is suitable for pilot managers who want to perform a
more detailed cost evaluation of a technology. In this
option, the total impact of an ETV technology on a
potential user is assessed. This option also facilitates
the comparison of the ETV technology with a baseline
or competing technology. Assessing the total impact of
a technology typically involves the calculation of a total
annualized cost, simple payback period, or present
value. This option builds on the Estimation of Capital
Investment and O&M Costs approach, and is the most
comprehensive of the cost evaluation options described
in this document.
1.4 Quality Assurance/Quality Control
The quality assurance/quality control (QA/QC) activities
associated with the data collection for cost evaluation
are similar to those associated with data collection for
technology verification purposes. If cost evaluation is
desired, it should be identified as an objective in the
project planning document. The data that need to be
collected should be identified, along with the required
source (if appropriate) and/or procedures used to collect
the data. Depending on the needs of the project, any
QA/QC requirements for the procedures used to collect
the cost-related data also should be specified in the
planning document.
The option used for cost evaluation also should be doc-
umented in the project report. The source of any data/
information used in cost evaluation should be identified,
and any assumptions used in estimating costs should
be discussed. Also, any deviations from QA/QC require-
ments for measurements used to estimate costs should
be discussed, along with the effect on cost evaluation
results.
1.5 Reference
Battelle. 1998. Options for Collecting, Evaluating, and
Reporting ETV Technology Costs. Prepared for U.S.
EPA's National Risk Management Research Laboratory,
Cincinnati, OH. June.
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2. Itemization of Costs
Costs are incurred when resources (capital) are in-
vested and resources (inputs) are consumed to gener-
ate products (outputs). Depending on the industry, the
product or output could be treated water effluent from a
wastewater treatment plant, recycled solvent from a
machine shop, a new environmentally friendly surface
coating that replaces a conventional chromium coating,
or the numerical result from the analysis of a soil sam-
ple. Inputs required to generate the product may include
labor, materials, and/or energy. The Itemization of Costs
option outlines a systematic way of identifying and
quantifying these resources, without necessarily assign-
ing monetary (dollar) amounts to them.
2.1 Identifying the Cost
Evaluation Objective and
Data Collection Methods
The cost evaluation objective functions to help a poten-
tial user decide whether to buy or not buy an ETV tech-
nology. The three types of cost evaluation objectives
are:
To estimate and compare the cost of the ETV
technology to a "baseline" technology
To estimate and compare the cost of the ETV
technology to a "competing" technology
To estimate the cost of an "add-on" ETV
technology.
Often, a buy/no-buy decision on an ETV technology is
based on a comparison of the cost of that technology
with a baseline or competing technology. A baseline tech-
nology is one that is currently being applied by the user,
and serves as the basis of comparison with the ETV
technology. A competing technology is one that is avail-
able commercially and performs the same function as
the ETV technology, but is not the baseline technology
currently installed in the user's facility. The only case
where a comparison between technologies may not be
possible is when the ETV technology is an add-on (no
replacement of a baseline technology is involved) and
no competing technology is available to fulfill the
technical objectives of the user. Before characterizing
an ETV technology as an add-on, pilot managers should
carefully consider whether or not a baseline technology
or operation is being replaced. For example, a small
coolant recycling unit may be "added on" to a metal-
working plant. Although no existing equipment is being
replaced, the new technology (on-site coolant recycling)
is replacing a baseline technology (off-site coolant dis-
posal). The net impact of adding the recycling unit can
be determined only by comparing its cost to the cost of
the baseline technology, and the resulting impact could
be a net saving or a net cost.
It is important to identify the cost evaluation objective
early in the ETV process so that the relevant cost items
can be tracked during a verification test (see Section 2.6
for a discussion of relevant cost items). For many ETV
technologies, this may involve tracking or estimating the
costs of both ETV and baseline/competing technologies.
The data collection methods used to achieve the cost
evaluation objective also should be identified in the
planning stages and mentioned in the cost report. Many
of the required cost data can be obtained by direct mea-
surement during a verification test. However, it may not
be possible to quantify all cost items through direct mea-
surement. For example, the labor required to operate an
ion exchange unit may be observed and measured dur-
ing a one-week ETV test and extrapolated to one year
of operation in a relatively straightforward fashion. On
the other hand, the maintenance cost item may be
difficult to measure directly during a one-week test. The
quantities and costs of such items may have to be
determined based on the engineering judgment of pilot
managers or based on the experience of the vendor
with previous applications.
2.2 Determining the Design Basis
The design basis refers to the performance specifica-
tions and equipment design requirements of the ETV
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technology. The performance specifications for a tech-
nology may include the desired product features, as well
as features of the inputs, equipment, and operations in-
volved. For example, a wastewater treatment plant may
require that a technology be able to treat 1,000 gal/day
of wastewater and meet an effluent target of no more
than 1 mg/L of chromium. These requirements of prod-
uct quantity and quality are part of the design basis for
the technology. In addition, the plant also may require
that the technology be able to handle wastewater with a
pH of 3 and containing up to 2,000 mg/L of total dis-
solved solids. This limitation on the feed or input quality
is also part of the design basis because it may impact
the materials of construction used in the equipment and
therefore the unit cost (price) of the equipment. It is
important to identify the design basis at the beginning of
the cost evaluation exercise, because once the design
basis is established, the quantity and unit cost (price) of
each individual item (e.g., equipment, labor, mainte-
nance, etc.) of the technology application can be cali-
brated to this basis.
An important aspect of the design basis for cost eval-
uation is the throughput requirement of a technology.
Throughput is the quantity of material processed
through or produced by the ETV or baseline/competing
technology in a specified period (usually, one year) of
operation. Throughput can be measured in terms of the
input (e.g., gallons of wastewater treated per year) or
output (e.g., annual hot water usage with a new energy-
efficient water heater) related to a technology. Although
throughput can be measured for any period, the com-
mon practice is to determine throughput on an annual
basis.
Note that the throughput generally is based on the ex-
pected requirement of a user of the ETV technology.
Therefore, throughput may be different from the capac-
ity of the equipment associated with the technology.
Equipment capacity is the maximum throughput that is
possible given the size of the equipment available or
selected. The design throughput may be set at a value
equal to or less than the capacity of the ETV technology
equipment. If the design throughput is assigned to be
equal to the capacity of the primary ETV technology
equipment, it is essential that all associated equipment
(i.e., pumps, piping, and valves) be designed to handle
the same (or greater) capacity.
Because the actual throughput is likely to vary from user
to user, the cost report should specify the design
throughput used as the basis for developing estimates
of both the quantities and costs of the individual cost
items and the overall cost of the technology.
2.3 Identifying and Quantifying
Capital Investment and O&M Costs
One distinction that is important to understand for cost
evaluation is the difference between capital investment
and O&M costs. Capital investment refers to the initial
outlay of money required to acquire and install the tech-
nology in a user's facility. It includes all the costs
incurred up to the point that the technology is ready to
perform its desired function in the user's facility. Exam-
ples of capital items are purchased equipment, installa-
tion, and training associated with the ETV technology.
O&M costs are the recurring costs associated with the
continued operation of the technology. Examples of
O&M costs are operating labor, materials, and energy.
Although O&M costs can be estimated for any time
period, this document generally recommends estimating
them on an annual basis.
Tables 2-1 and 2-2 show the main categories of capital
items and O&M items, respectively, that are likely to be
associated with an ETV technology. Not all the items will
be applicable to all the technologies. These tables are
designed to serve as checklists so a pilot manager can
ensure that common capital and O&M items are not
missed during the cost evaluation. Following subsections
of this document describe these cost items in more detail.
2.3.1 Identifying and Quantifying
Capital Items
Table 2-1 lists the common categories of capital items
likely to be encountered for an ETV technology. Not all
items will be applicable to all technologies. The quantity
of each capital item is determined by the design basis of
the user. For example, a user who wants to use a new
ultrafiltration unit for one shift per day may need to train
only one operator. On the other hand, another user who
wants to use the unit continuously over three shifts per
day may need to train three operators. Thus the quantity
of training (one 8-hr day versus three 8-hr days of labor)
and the associated training cost for the technology will
be determined by the operating requirements of the
user. Similarly, a user who has an annual throughput
requirement of 80,000 gal of wastewater per year may
buy an ultrafiltration unit with a rated capacity of
100,000 gal/yr (assuming that this is the next largest
size of equipment available). Another user with a re-
quirement of 180,000 gal/yr may opt for the next largest
size of unit, rated at 200,000 gal/yr, or may buy two
100,000-gal/yr rated units. The design basis for the cost
evaluation should be clearly stated in the ETV cost report.
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Table 2-1. List of Capital Items
Table 2-2. List of O&M Items
Site Preparation
Q In-house (labor, materials)
Q Demolition/clearing, grading/landscaping
Q Old equipment/rubbish disposal
Q Equipment rental
Q Vendor/contractor services, including fees
Buildings and Land
Q Equipment housing
Q Plant expansion
Purchased Equipment
Q Primary equipment
Q Associated equipment (storage and materials
handling equipment)
Q Monitoring/control equipment
Q Laboratory/analytical equipment
Q Safety/protective equipment
Q Freight/shipping and handling
Q Licensing and/or warranty
Utility Connections/Systems
Q Energy (electricity, fuel)
Q Steam
Q Process water and/or process air
Q Sewer
Installation
a
a
a
a
a
In-house (labor, materials)
Piping, electrical, instrumentation, insulation, and painting
Contractor/vendor/consultant services, including fees
Construction supplies and support
Equipment rental
Startup/Training
Q In-house (labor, materials)
Q Process adjustments
Q Report writing
Q Process/equipment testing, training
Q Safety/environmental training
Q Vendor/contractor services
Regulatory Issues/Permitting
Q In-house (labor, materials)
Q Permit fees
Q Contractor/consultant services
Other
Q Contingency
Q Any other items
2.3.1.1 Site Preparation
This subcategory of cost items is used to account for
expenses that may be incurred prior to the acquisition of
an ETV technology. It is usually more relevant for large
"system" technologies, and could include items such as
in-house labor, demolition and clearing, grading and land-
scaping, equipment rental, and vendor/contractor serv-
ice charges. In-house labor and materials may be re-
quired for activities, such as engineering (e.g., to design
Materials (purchase, delivery, storage)
Q Raw materials
Q Chemicals
Q Catalysts
Q Operating supplies
Utilities
Q Water
Q Sewage
Q Energy (i.e., electricity, oil, gas, and/or steam)
Labor
Q Operating
Q Supervision
Q Clerical
Maintenance
Q Maintenance labor
G Materials
Q Replacement parts (minor system components)
Waste Management (labor, materials)
Q On-site handling
Q Storage
Q Treatment of waste
Q Hauling
Q Off-site treatment/disposal
Q Generator fees
Q Labeling
Q Manifesting
Regulatory Compliance (labor, materials)
Q Permitting
Q Training
Q Monitoring/inspections/testing
Q Record-keeping/reporting
Other
Q Any other items
peripheral piping and instrumentation) or for building/
plant modifications to house the equipment.
2.3.1.2 Buildings and Land
This subcategory includes the space requirements and
housing for the technology. It may include items such as
building/plant modifications, facilities expansion, and con-
struction of a special shelter to house the equipment.
2.3.1.3 Purchased Equipment
This subcategory is the core of most ETV cost evalua-
tions. It is the purchase cost of the primary technology
equipment and associated equipment (such as pumps,
hoppers, etc.). This item may include equipment licens-
ing and freight; monitoring/control equipment, laboratory
equipment, and safety equipment also are included.
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2.3.1.4 Utility Connections/Systems
This subcategory includes the cost of connecting the
technology and associated equipment to providers of
utilities such as electricity, water, and sewer.
2.3.1.5 Installation
Installation generally consists of labor and materials.
Materials may consist of piping, structures, instrumen-
tation, insulation, painting, and miscellaneous items. In-
house labor may involve engineer, technician or skilled
worker, and/or a supervisor. In addition to "in house"
labor, contractor or vendor service charges may be
applicable, as well as the contractor's construction sup-
plies and support. Equipment rental during installation is
also included in this subcategory.
2.3.1.6 Startup/Training
Startup costs are extra operating costs incurred be-
tween the completion of installation and beginning of
normal operations. It includes training, equipment tests,
process adjustments, salaries and travel expenses of
staff and consultants, report writing, and vendor fees.
2.3.1.7 Regulatory Issues/Permitting
This is the cost associated with obtaining the required
permits to acquire and operate the technology. Permit-
ting may include in-house labor, permit fees, and vendor
and/or consultant charges.
2.3.1.8 Other
Any items that have not been included in Table 2-1 but
are applicable should be listed in this subcategory. For
example, "contingency" is a cost that may be added to
an estimate to allow for any omissions and unforeseen
costs; 10 to 15% is a typical range used to account for
uncertainties.
2.3.2 Identifying and Quantifying
O&M Items
Table 2-2 lists the common categories of O&M items
likely to be encountered for an ETV technology. Not all
items will be applicable to all technologies. The quantity
of many O&M items generally is determined based on a
user's annual throughput requirement. For example, the
quantities of labor, materials, and energy required to
treat 180,000 gal/yr of wastewater are likely to be much
higher compared to the quantities required to treat
80,000 gal/yr. The annual throughput assumed for the
cost evaluation should be stated clearly in the ETV cost
report.
2.3.2.1 Materials
This subcategory is used to account for materials that
are consumed during the operation of the ETV technol-
ogy. It includes items such as raw materials, chemicals,
catalysts, and operating supplies.
2.3.2.2 Utilities
Utilities include water, sewage, and energy (i.e., electric-
ity, oil, gas, and/or steam) required to operate the ETV
technology and associated equipment.
2.3.2.3 Labor
This subcategory is used to account for the labor (salary
or wages) required to operate the ETV technology and
includes operating labor, supervisory labor, and clerical
labor, as applicable.
2.3.2.4 Maintenance
This subcategory includes the labor and material costs
of keeping the technology in good working condition. If
maintenance labor is expected to be minimal, it may be
difficult or unnecessary to distinguish it from operating
labor. The materials could include items such as lubri-
cants or filters.
2.3.2.5 Waste Management
Waste management includes the labor, materials, ener-
gy, or service charges/fees required for the handling,
storage, and treatment (or off-site disposal) of any
wastestream generated by the technology.
2.3.2.6 Regulatory Compliance
Regulatory compliance and environmental health and
safety costs associated with the technology can include
the labor and materials for permitting, training, monitor-
ing, and record-keeping.
2.3.2.7 Other
Any items that are applicable to the ETV technology but
are not included in Table 2-2 should be listed in this
subcategory.
2.4 Listing the Assumptions Involved
in a Cost Evaluation
Often, there are limitations in measuring actual quanti-
ties and costs of the inputs and outputs involved in a
technology application. Working assumptions must be
made based on the engineering judgement of the ETV
pilot managers or on information provided by vendors.
These assumptions should be mentioned in the ETV
cost report so that potential users of the technology can
-------
assess the basis and limitations of the cost evaluation.
Common assumptions may involve the following:
Expected life of the technology: One technology
feature that is often required for cost evaluation is
the life of a technology. The life of a technology is
important because it determines the total period
over which the cost evaluation is applicable. For
example, if a new catalytic oxidizer is expected to
last for 7 years, then another catalytic oxidizer (or
similar technology) will have to be purchased
after 7 years, and a new cost cycle will begin. The
life of a technology generally refers to the useful
life of the primary equipment involved. For exam-
ple, for a solvent recycling technology, the distil-
lation still is the primary piece of equipment and
may be expected to last for 10 years. Although
some associated pieces of equipment (e.g.,
pumps) may wear out earlier, replacement of
peripheral equipment may be handled as an O&M
item (i.e., maintenance) as long as the primary
equipment lasts. The expected life of the primary
equipment generally can be determined on the
basis of prior experience with similar equipment
in the industry. The technology vendor also can
provide some guidance on how long a particular
piece of equipment may be expected to last.
Cost items that are not relevant in the cost
evaluation: Any assumptions regarding the exclu-
sion of certain cost items from the evaluation
should be mentioned. For example, some pilot
managers may exclude the capital item "Buildings
and Land" if it is not relevant to the cost
evaluation.
Cost items that are relevant but not included in
the cost evaluation: In some cases, certain cost
items may be relevant to the cost evaluation, but
may not be obtainable for some reason. Such
items should be mentioned in the list of assump-
tions. Some pilot managers have indicated that
they may exclude portions of the capital invest-
ment category because vendors in their industry
generally are reluctant to divulge the cost of
capital items.
Capital and O&M costs: Assumptions regarding
the quantities of capital and O&M items assumed
for the evaluation should be mentioned, especi-
ally when an extrapolation is involved in estimat-
ing annual quantities from shorter-duration ETV
tests. When quantities are determined from
sources other than direct measurements taken
during the ETV test, the source of these data
should be mentioned.
Other: Any other assumptions that may affect the
interpretation of the reported costs should be
mentioned.
2.5 Listing the Technical Factors
that Impact Costs
A single technology may be applicable under a variety
of operating conditions, some of which may be different
from the test conditions used during the ETV process.
Some of this variability may be within the capacity of the
technology to handle; some may not. Therefore, it is
important not only to specify the conditions of the ETV
test, but also to indicate which factors might significantly
impact the overall cost of the technology. Examination
of the design basis may provide an indication of the
technical factors that impact costs.
For example, a catalytic oxidation unit may require con-
siderably more energy (and higher O&M cost) to treat a
feed airstream containing 30% humidity than a feed air-
stream with 10% humidity. Therefore, humidity should be
listed as a factor impacting the cost of the technology.
The volatile organic content of the airstream may affect
the frequency with which the catalyst must be replaced
or regenerated (a maintenance item). Therefore, the level
of organics in the airstream should be listed as a factor
affecting maintenance cost. Whether or not the effect of
these factors is quantified depends on the level of cost
evaluation desired by the individual pilot managers.
Quantifying how much more energy and how much more
maintenance (and the associated higher costs) may be
required for the full range of these factors (humidity and
level of organics) is a level of detail that would have to
be a part of the technical verification of the technology,
and would involve one or more of the following steps:
Testing the technology under multiple test condi-
tions (that is, with various input and operating
characteristics).
Using the informed engineering judgment of the
pilot managers. In many cases, past experience
with similar technologies can serve as a guide for
identifying technical factors impacting costs. For
example, even if ETV testing of a new energy-
efficient residential water heater does not include
testing at different inlet water temperatures, pilot
managers may be able to predict that the energy
requirement (and therefore the O&M cost) of the
water heater is likely to be higher when the input
water is cooler and lower when the input water is
warmer. In this example, the inlet water tempera-
ture (which depends on the location of the user) is
a technical factor impacting annual energy cost.
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Acquiring data from the technology vendor
regarding previous applications of the ETV or
similar technologies.
Although quantifying these impacts may be difficult, pilot
managers at a minimum should identify and list the fac-
tors likely to significantly affect any of the relevant cost
items. If such impacts can be quantified, pilot managers
could provide a range of quantities instead of a single
number. For example, instead of reporting the energy
requirement of an energy-efficient water heater as
22,000 kBTU/yr, pilot managers could report it as
20,000-24,000 kBTU/yr, to cover the expected range of
energy consumption based on average inlet water tem-
peratures in different geographical regions, or on water
usage, or on other variables.
2.6 Listing the Intangible Benefits
and/or Disadvantages
of a Technology
Intangible benefits/disadvantages of an ETV technology
are those features that cannot be quantified by the mon-
etary cost evaluation, but nevertheless are relevant to the
buyer's decision. Although they are difficult (or impossi-
ble) to quantify, the intangible benefits and/or disadvan-
tages of a technology can outweigh the results of the
tangible cost evaluation, thus affecting the buy/no-buy
decision of potential users.
For example, potential users may find it beneficial to
implement the ETV technology even if it costs more
than the baseline technology. Table 2-3 is a checklist of
possible ETV technology benefits and disadvantages.
Given the wide variety of technologies involved in the
ETV Program, this is by no means a comprehensive list;
however, it may be used as a guide to identify and list
relevant benefits/disadvantages.
Table 2-3. List of Intangible Benefits/Disadvantages
Benefits
Q Energy conservation
Q Water conservation
Q Reduced ozone depletion
Q Reduced future liability
Q Reduced global warming
Q Reduced Toxics Release Inventory
Q Promotion of positive public relations
[_) Increased plant safety
[_) Increased ease of use
[_) Superior product or unique service provided
Q Other (state here)
Disadvantages
[_l Higher maintenance requirements
[_l Increased energy consumption
U Other (state here)
2.7 Preparing a Cost Evaluation Report
The recommended reporting format for the Itemization
of Costs option includes the following elements:
Cost evaluation objective and data collection
methods
Design basis
Table of capital items
- Include the description and quantity of each
capital item
Table of O&M items
- Include the description and quantity of each
O&M item
List of assumptions
List of technical factors that impact costs
List of intangible benefits/disadvantages.
10
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3. Estimation of Capital Investment and O&M Costs
In this section, cost evaluation is taken a step further
than the process described in Section 2 for itemizing
costs. To estimate the monetary (dollar) costs of the
capital and O&M items described in Section 2, unit costs
(or prices) of the various items need to be determined
and multiplied by the quantities of each item. This pro-
cess of monetizing relevant cost items allows pilot man-
agers to combine costs and thereby to obtain a more
comprehensive perspective of the technology. The im-
pact of various cost items (e.g., labor and materials) can
be combined only when they are quantified with a com-
mon measure, and monetizing the cost items provides
this common measure. For example, the electricity con-
sumption (measured in kWh) and the labor requirement
(measured in hours) of a technology can be combined
only when they are converted to dollar amounts.
3.1 Estimating Capital Investment
Section 2.3.1 describes the various capital items that
may be encountered when evaluating the cost of an ETV
technology. In the Itemization of Costs option described
in Section 2, the quantity of each capital item required to
fulfill the design basis of the user is identified and listed.
To estimate the dollar value of a capital investment, the
unit cost (or price) of each capital item needs to be
obtained and listed as shown in Table 3-1. The quantity
of each capital item is multiplied by its unit cost to obtain
the dollar value of each item. All of the items then can
be added to obtain the total capital investment.
3.2 Estimating O&M Costs
Section 2.3.2 describes the various O&M cost items
likely to be encountered by ETV pilot managers. The
unit costs (prices) of these items are required in order to
convert the quantities of these items to dollar costs. As
shown in Table 3-2, the cost of each O&M item is esti-
mated by multiplying the quantity of an item with its unit
cost.
Table 3-1. Capital Investment for a Hypothetical
Water Treatment Unit
Water Treatment Unit
Item
Buildings and Land
Prefabricated steel structure
Purchased Equipment
Water treatment package plant
Upgrades to standard package plant
Chemical feed for well supply
Air compressor
Chlorine monitor
Flowmeter package
Telemetry system and software
Underground waste storage system
Freight
Installation
Technician
Engineer
Startup/Training
Vendor startup services
Total Capital Investment
Quantity*
1
1
1
1
1
1
1
1
1
100hr
100hr
1
Unit Cost
$5,000
$21 ,625
$1 ,000
$1 ,000
$3,225
$2,600
$2,220
$6,845
$900
$35/hr
$60/hr
$4,000
Cost
$5,000
$21 ,625
$1 ,000
$1 ,000
$3,225
$2,600
$2,220
$6,845
$900
$3,500
$6,000
$4,000
$57,915
* For the design basis described in the illustrative example in
Appendix A.
3.3 Additional Considerations in
Estimating Capital Investment
and O&M Costs
A few issues may be important to note while estimating
capital investment and O&M costs. One issue to note is
the purchase price of the primary ETV technology
equipment (for example the filtration unit for an ultra-
filtration technology), because this price is often a signif-
icant part of the capital investment and is a unit cost that
needs to be obtained from the vendor. However, when
large customized pieces of equipment are involved,
vendors sometimes are reluctant to divulge their prices.
In this case, pilot managers may have no choice but to
exclude the cost of the primary equipment from the cost
evaluation.
11
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Table 3-2. Annual O&M Costs for a Hypothetical Nickel Recovery System
Electrodialysis System
Item
Materials
Makeup water
Chemicals, NiSO4 used
Chemicals, NiSO4 recycled
UOIities
Steam
Electricity
Maintenance
Service contract
Carbon change
Evaporator cleaning
Miscellaneous upkeep
Annual Quantity*
15,000 gal
1 80,000 Ib
-171 ,000 Ib
4.9 x 108BTU
78,600 kWh
4 visits
6 events
1 2 events
1
Unit Cost
$4.1 9/1 ,000 gal
$1/lb
$1/lb
$6/106BTU
$0.118/kWh
$3,000/visit
$1 ,020/event
$1 20/event
$1 ,000
Total Annual O&M Cost
* For the design basis described
in the illustrative example
in Appendix B.
Annual Cost
$63
$180,000
-$171,000
$2,940
$9,275
$12,000
$6,120
$1 ,440
$1 ,000
$41,838
On the other hand, pilot managers generally are not de-
pendent on technology vendors for the costs of other
capital items, such as site preparation and installation.
The quantity and unit costs of these capital items can
either be determined during the technology verification
part of the ETV test or estimated from other sources.
For example, pilot managers may determine during the
ETV test that installation of an ultrafiltration unit requires
40 hours of labor at $50/hour and 30 ft of pipe at $2/ft.
The installation cost of the ultrafiltration unit can be cal-
culated from these data. Other sources for estimating
the costs of these capital items includes the engineering
judgement of pilot managers or vendors (based on exper-
ience with other similar equipment) or published refer-
ences that list costs or cost factors for these items. These
references are described in Appendix D. Cost factors are
rule-of-thumb cost estimates for certain items based on
the cost of other associated items. For example, based
on the information compiled in such references, pilot
managers may estimate that "installation" cost is 20% of
the "purchased equipment" cost of a technology. If these
alternative estimation sources are used, then they should
be identified in the list of assumptions.
Another issue that needs to be noted is that the unit
costs (prices) of various capital and O&M items are
likely to vary from user to user and from technology to
technology. To handle this variability, it is important to
clearly state the unit cost numbers in the ETV cost
evaluation report. A stated list of unit cost numbers (as
shown in Table 3-1) permits individual users to see how
their own unit costs differ from the unit costs applied in
the ETV cost evaluation. Users can thereby assess the
impact of these differences on the overall cost of a tech-
nology. Representative unit costs of several capital items
associated with environmental technologies can be
obtained from cost references such as the Environmen-
tal Remediation Cost DataUnit Price handbook (R.S.
Means Company, Inc., and Talisman Partners, Ltd.,
2001). This handbook provides representative unit costs
for a variety of associated equipment, such as pumps,
piping, and valves, along with the cost of their installation.
Another issue relates to the procedure for handling the
potential income from use of certain pollution prevention
technologies. Some pollution prevention or recycling tech-
nologies can generate income for the user from the ability
to market or reuse a recycled product. In this document,
the recommended way of dealing with this income is to
show it as an O&M cost with a negative sign. This nega-
tive number serves to reduce the annual O&M cost of the
ETV technology. For the nickel recovery system example
presented in Table 3-2, 171,000 Ib of nickel sulfate are
recovered and reused in the electroplating operation. The
value of this recycled nickel (as nickel sulfate) is entered
in the table as a negative number. The recycled nickel
serves to reduce the amount of nickel sulfate that the
plant needs to purchase annually. The value of the recy-
cled nickel is therefore credited toward the annual O&M
cost of the electrodialysis technology. A more detailed
cost analysis that compares the annual operating cost of
the nickel recovery system and the baseline operation is
presented as an example in Appendix B.
Several of the cost items in Tables 3-1 and 3-2 involve
in-house labor, which is an item that may be repre-
sented in terms of the salaries or wages paid to person-
nel conducting the work. If any other associated costs
are included in the in-house labor item, they should be
stated in the list of assumptions (see Section 2.4). Costs
associated with labor could include fringe benefits (e.g.,
vacation or sick leave) and other overhead items, and
these costs are sometimes factored in the labor rate.
Because many of these associated costs are likely to
vary from user to user, it may be simpler to estimate
labor costs in terms of just salaries or wages.
12
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3.4 Listing the Assumptions
Any assumptions made regarding the unit costs (prices)
for the capital and O&M items should be mentioned, so
that users can compare them with their own unit costs.
For further details on listing assumptions, see Section 2.4.
3.5 Listing the Technical Factors
that Impact Costs
See the discussion in Section 2.5.
3.6 Listing the Intangible Benefits/
Disadvantages of a Technology
See the discussion in Section 2.6.
3.7 Preparing a Cost
Evaluation Report
The recommended reporting format for the Estimation of
Capital Investment and O&M Costs option includes the
following elements:
Cost evaluation objective and data collection
methods
Design basis
Table of capital investment
- Include the quantity and unit cost (price) of each
capital item
Table of O&M costs
- Include the quantity and unit cost (price) of each
O&M item
List of assumptions
List of technical factors that impact costs
List of intangible benefits/disadvantages.
3.8 Reference
R.S. Means Company, Inc., and Talisman Partners, Ltd.
2001. Environmental Remediation Cost DataUnit Price,
7th ed.
13
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4. Calculation of Total Annualized Cost, Simple Payback Period,
or Present Value
Sections 2 and 3 describe how to quantify capital and
O&M items and how to estimate the costs of these
items. A cost analysis serves to assess the total impact
of the ETV technology on a potential user and also
facilitates the comparison of the ETV technology with a
baseline or competing technology. The total user impact
of a technology can be assessed by combining capital
investment and O&M costs into an overall technology
cost involving one of the following measures:
Total annualized cost
Simple payback period
Present value (PV) of a technology.
4.1 Calculating the Total
Annualized Cost
Calculating the total annualized cost of a technology
involves combining the capital investment and annual
O&M cost. Because O&M costs are measured on an
annual basis ($/year), the capital investment must be
annualized in order to combine these costs. In the fol-
lowing equation, the annual O&M costs are added to an
annualized capital investment term to obtain a total
annualized cost for the technology:
(4-1)
The annualized capital investment term can be inter-
preted as a fixed annual payment that a user would have
to make every year over the life of the technology. The
annualized capital investment can be estimated using
the following equation, which shows how the capital in-
vestment can be annualized based on a discount rate, r:
Total
annualized
cost
Annualized
capital
investment
+
AnnuaF
O&M
cost
Annualized
capital
investment
Capital investment
t=n
I-
1
(4-2)
The discount rate accounts for the return (or interest)
that the money assigned for capital investment would
earn if the capital items were paid for over several years,
at the end of each year (time, t = 1, 2, 3, ..., n). The
appropriate discount rate will vary from industry to in-
dustry and pilot managers need to select a rate accord-
ingly. The values of the denominator of Equation 4-2
have been documented for various values of r and n;
these denominator values are presented in Appendix E,
and can be used in Equation 4-2 to facilitate the calcu-
lation.
Appendix A provides an example calculation of total an-
nualized cost for a dual-stage filtration system installed
in a drinking water plant.
Total annualized cost also can be represented on the
basis of each unit of throughput to obtain a unit annual-
ized cost for a technology, as shown in Appendix F. Unit
annualized cost numbers (e.g., $0.25 per gallon of water
treated) obtained from total annualized cost estimates
can be misleading because the unit cost of a technology
is dependent on the design basis, particularly the annual
throughput. Therefore, different users may experience
different unit costs for the same technology, depending
on their throughputs. However, unit costs often are used
in some industries for comparing technologies.
4.2 Calculating the
Simple Payback Period
The simple payback period is defined as the time period
over which the net O&M income and/or savings become
equal to the initial capital investment. Calculating the
simple payback period for a technology is a method of
assessing the overall cost impact of a technology by
estimating the time it would take to recover the initial
capital investment. The simple payback period method
is based on the assumption that implementing the ETV
technology will generate measurable annual O&M sav-
ings or income for the user. Net O&M income and/or
savings from implementing the new technology can
14
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arise in two possible ways. First, the ETV technology
could generate a product or byproduct that has a mar-
ketable value greater than the O&M cost for operating
the technology. This could happen, for example, when a
solvent recycling technology generates recycled solvent
that can be sold (or reused) to generate significant in-
come. Second, net O&M savings could occur when the
O&M costs of the ETV technology are lower than the
O&M costs of the baseline technology that it replaces.
This could happen, for example, when a conventional
water heater is replaced with an energy-efficient heater.
The reduction in energy usage (an O&M item) would
lead to a reduction in O&M costs; the resulting savings
could offset the initial capital investment overtime.
Equation 4-3 can be used to calculate simple payback
period when the annual O&M savings are constant
every year, which is often the case. The discount rate or
the rate of return that is forgone on the capital invest-
ment is ignored in this simplified equation. Therefore,
this equation is useful as a quick analytical tool for
assessing the attractiveness of the technology. The
denominator in Equation 4-3 is the net annual O&M
after-tax savings, which can be calculated as shown in
Equation 4-4. In this equation, net annual O&M savings
is the difference between the annual O&M cost of the
baseline/competing technology and the annual O&M
cost of the ETV technology. To estimate the net savings
on an after-tax basis, Equation 4-4 includes a factor
based on the corporate income tax rate.
Simple
payback
period
(years)
Capital investment
for the ETV technology
Net annual O&M]
after-tax savings]
(4-3)
Section 4.3 offers a method for calculating discounted
payback period that accounts for the rate of return, as
well as for cases when annual O&M costs vary from
year to year. Appendix B offers an example calculation
of simple payback period for a nickel recovery system
for treating waste water from a metal-plating operation.
4.3
(4-4)
Net annual
O&M
after -tax
savings
=
Net annual
O&M
savings
X
[Corporate]
1-j income I
[ tax rate j
Calculating the Present Value
of a Technology
The present value (or life cycle cost) of an ETV tech-
nology is defined as the value of all the costs incurred
over the useful life of a technology discounted to the
base time (time of acquisition of the technology). These
costs include the initial capital investment, which gener-
ally is incurred as soon as the new technology is
acquired, and annual O&M costs and/or savings, which
occur over several years as the technology is used. In
order to combine present and future cash flows, any
estimation of total lifetime cost must incorporate the
effects of time on these cash flows. The most common
way to account for the effects of time is by calculating
the PV of all costs (capital investment and O&M costs)
incurred in the present and future.
In general, a technology user usually needs enough
cash today to pay for the full amount of the capital
investment. However, O&M cash flows that are sched-
uled to occur in the future tend to free up money for
productive uses in the present. Using PV calculations, a
user can determine how much money he/she could set
aside (i.e., invest in productive uses) today in order to
grow the money to an amount equal to these future
O&M costs. For example, if a user wanted to invest
enough money today to pay for O&M costs that are
likely to occur over the next three years, he/she would
use the PV equations described in the following sub-
sections to calculate PV where time t = 3.
Generally, cash flows for an ETV technology are mea-
sured on an annual basis. The PV of a series of cash
flows (CFt) that may occur at different points in time (t)
over a total time period (n) may be estimated using the
following general equation:
t=n
PV of cash flows = V
CF,
(4-5)
Time t = 0 represents the present or the time when the
technology is first acquired; also, all cash flows that
occur in a given year are assumed to occur at the end of
the year, so fractional values oft are avoided.
If all cash flows are estimated in real dollars or constant
dollars, then r is the real discount rate, a rate which dis-
counts future real cash flows to the present. The real
discount rate reflects the real earning power of money
over time. This approach is easier for cost analysis be-
cause it is easier to estimate costs in constant dollars,
and it automatically accounts for any inflation that may
occur. Therefore, the real discount rate (r) is based on
the user's expectation of the real return on his/her pru-
dent investment, and this expectation may vary from
industry to industry. It is important to mention clearly the
real discount rate assumed in the ETV cost analysis.
PVof
cash
flows
CFn
CF,
CF,
(1 + r)1 (1 +
where, for many technologies:
CFn
1 + r)n
(4-6)
15
-------
n =
CF0
CFi,CF2, ...CFn =
life of the equipment in years
capital investment
annual O&M costs in
Years 1,2, ..., n.
For most ETV technologies, the capital investment will
result in a cash outflow at time t = 0, and all future cash
flows will result from O&M costs. Also for many ETV
technologies, the annual O&M costs are likely to be the
same every year. In this case, Equation 4-5 can be sim-
plified as:
pv=T Capital
[investment]
(0&Mcost)x
(4-7)
The values of the factors in braces {} have been docu-
mented for different values of r and n, and are listed in
Appendix E. Equation 4-7 is a simplified way of calcu-
lating the PV of an ETV technology when the O&M
costs are the same every year. However, if O&M costs
are likely to vary from year to year, Equation 4-5 or 4-6
must be used. Equation 4-5 or 4-6 also can be repre-
sented in a spreadsheet for ease of calculation. Appen-
dix C provides an example spreadsheet calculation of
PV for an energy-efficient water heater and a competing
technology.
A PV spreadsheet also allows an easier determination
of the discounted payback period. Section 4.2 describes
a simple payback period calculation that does not take
into account the time value of money. A discounted
payback period is defined as the time (in number of
years) that it takes to recover the initial capital invest-
ment in the ETV technology, given a discount rate (r). In
a PV spreadsheet, the discounted payback period is the
year in which the cumulative PV of the ETV technology
becomes equal to the cumulative PV of the baseline
technology. An example of a discounted payback period
estimation based on a PV spreadsheet is shown in
Appendix C.
An important consideration when comparing the ETV
technology with a baseline technology is that the capital
investment in the baseline technology should be exclud-
ed from the cost evaluation. The capital investment in
the baseline technology has already occurred in the past
and is irrelevant to today's decision on whether or not to
buy the ETV technology. Therefore, only the ongoing
O&M costs of the baseline technology need to be consid-
ered, along with the capital investment and O&M costs of
the ETV technology. On the other hand, both capital
investment and O&M costs need to be considered when
the comparison involves two competing technologies,
because both the ETV technology and the competing
technology require a fresh capital investment.
If the baseline technology equipment has significant sal-
vage value, it may be included in the PV of the ETV
technology as a cash inflow or income at time t = 0,
which will serve to offset the capital investment required
for the ETV technology. For simplicity, the salvage value
of capital equipment can be excluded from present
value calculations. The salvage value is difficult to
estimate and is often less than the cost of recovering
the equipment. If salvage value is significant, but not in-
cluded, then it should be explained in the list of assump-
tions that the analysis does not include salvage value.
An advantage of the PV analysis is that technologies
with different lifetimes can be compared. In this case,
the PV should be calculated for a period equal to the
lowest common multiple of the two lifetimes. For exam-
ple, if Technology A has a life of 5 years and Technol-
ogy B has a life of 3 years, a second capital investment
will be required in Technology B at the end of Year 3. In
real dollars, the second capital investment may be the
same or lower than the first capital investment; some
capital items, such as training and permitting, may not
have to be reincurred. Equation 4-6 can be used to
determine the PV cost of the technologies. In this case,
the PV analysis should be done for each technology
over a period of 15 years. For Technology B, the cash
flow in Years 3, 6, 9, and 12 (CF3, CF6, CF9, and CF12)
will include, in addition to the O&M cost for the full
15 years, the capital investment required to replace the
primary equipment. A spreadsheet may be used to facil-
itate calculation of PV when the time period of the analy-
sis is very large.
4.4 Comparing Two Technologies
Often, the cost of an ETV technology will be evaluated
against the cost of a baseline technology or a competing
technology. The total annualized cost, simple payback
period, or PV may be calculated separately (using an
equivalent design basis) for each of the technologies in-
volved in the comparison. The technology with the lower
total annualized cost, simple payback period, or PV may
be expected to provide a better return on investment or
generate lower overall costs.
The intangible benefits and/or disadvantages of the ETV
technology should also be considered a part of the tech-
nology comparison. Even if an ETV technology has a
higher overall cost, the intangible benefits of using an
environmentally friendly technology may be attractive
enough to affect the decision of a potential user.
16
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4.5 Preparing a Cost Table of O&M costs
Evaluation Report ~ Include the quantity and unit cost (price) of each
O&M item
The recommended reporting format for the Calculation 0 yst ^ assumDtions
of Total Anualized Cost, Simple Payback Period, or
Present Value approach includes the following elements: - Expected life of the technology used for the cost
evaluation
Cost evaluation objectives and data collection - The discount rate used
methods - Other assumptions
Design basis List of technical factors that impact costs
Table of capital investment List of intangible benefits/disadvantages
- Include the quantity and unit cost (price) of each . Totg| annua|ized cost si |e back iod or
capital item
17
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Appendix A
Illustration of Capital Investment/O&M Cost Estimation and
Total Annualized Cost Analysis of a Dual-Stage Filtration System in a
Drinking Water Plant
This example cost evaluation incorporates the eight bul-
leted elements listed in Section 4.5 and calculates the
total annualized cost of a hypothetical dual-stage pres-
sure filtration (DSF) unit.
The technology used in this illustration is a prepackaged
filtration technology for a community drinking water sys-
tem designed to reduce turbidity and iron to new regu-
latory target levels in the treated water. The technology
consists of a prepackaged DSF unit.
A.1 Defining the Cost Evaluation Objective
and Data Collection Methods
The first element is to define the objective of the cost
evaluation and to describe the methods used to accom-
plish the objectives. The objective of the evaluation was
to estimate the cost of the DSF application for a typical
community drinking water treatment plant and compare
it to a competing technology. The competing technology
is a conventional coagulation/filtration unit. In this exam-
ple, the cost analysis includes an estimation of the total
annualized cost of the DSF unit.
For the verification test, the DSF unit was installed at an
existing small community water treatment site. The test
site was selected because of the nature of its water
quality, high turbidity, and elevated iron levels. Perform-
ance and cost data were gathered for one year. Capital
investment and O&M costs were tracked during the test;
however, site-specific factors can contribute to wide
variations in the costs a system incurs for treatment.
The cost of the competing (conventional) technology
was estimated by a combination of reported costs from
existing plants and engineering judgment.
A.2 Describing the Design Basis
The next element is to describe the design basis of the
technology. The DSF unit is designed to operate auto-
matically with off-site monitoring through a telemetry
system by the operator. Daily turbidity levels in ground-
water averaged 5 to 30 nephelometric turbidity units
(NTU). The system was required to achieve 0.5 NTU in
95% of the samples collected, reduce iron to improve
taste and odor, and supply water to 35 connections and
100 persons. The system operated an average of 300
hrs per month, the service flowrate averaged 10 gpm,
and 2.16 million gallons of water were produced during
one year. The design basis is summarized in Table A-1.
Table A-1. Design Basis for the DSF Unit
DSF Unit
Service flow, gpm: 10
Annual throughput (drinking water produced), gal/yr: 2.16 million
Number of connections: 35
Average turbidity levels: 5 to 30 NTU
Turbidity removal: 95% 0.5 NTU
A.3 Estimating Capital Investment
The next element is to determine the capital investment
for the DSF unit. Table 2-1 in Section 2 of this document
provides a checklist of capital items. For this example,
the relevant capital items that apply include the cost of
buildings and land, purchased equipment, installation,
and startup/training. Regulatory/permitting and contin-
gency items were not included in this estimate because
no permits were involved for the demonstration. Also,
because actual (and not budgeted) installation costs were
available, no contingency was included. The source of
18
-------
the cost data is provided so that the user can verify the
information or compare the data with other cost esti-
mates. For this illustration, costs incurred during the pur-
chase, installation, and startup of the technology were
tracked during the verification test. The vendor provided
the purchase price of the prepackaged equipment.
Items such as upgrades that were not a part of the
standard package are included in the purchase price,
whereas items that were added for the purpose of
demonstration (such as extra monitoring equipment) are
excluded. Table A-2 summarizes the capital investment
required for the DSF unit.
Table A-2. Capital Investment for the DSF Unit
Item
Buildings and Land
Prefabricated steel structure
Purchased Equipment
DSF Package
Upgrades to standard package plant
Chemical feed for well supply
Air compressor
Chlorine monitor
Flowmeter package
Telemetry system and software
Underground waste storage system
Freight
Installation
Technician
Engineer
Startup/Training
Vendor startup services
Total Capital Investment
Quantity*
1
1
1
1
1
1
1
1
1
100hr
100hr
1
DSF Unit
Unit
Cost
$5,000
$21 ,625
$1 ,000
$1 ,000
$3,225
$2,600
$2,220
$6,845
$900
$35/hr
$60/hr
$4,000
Cost
$5,000
$21 ,625
$1 ,000
$1 ,000
$3,225
$2,600
$2,220
$6,845
$900
$3,500
$6,000
$4,000
$57,915
Refer to Table A-1 for the design basis.
The capital investment required for a similar-sized con-
ventional coagulation/filtration unit was reported by other
drinking water plants to be $75,680 (adjusted based on
engineering judgment).
A.4 Estimating O&M Costs
The next element is to determine the relevant O&M
costs. For this illustration, Table 2-2 in Section 2 of this
document was used as a guide; O&M items include
materials (chemicals), utilities (energy and telephone),
labor (operating, maintenance), and regulatory compli-
ance (monitoring), all of which are considered relevant.
The unit cost and amount required for each component
were estimated based upon the observations made dur-
ing the test and discussions with the vendor. Some
minor system components associated with the DSF unit
will require replacement approximately every 5 years.
The periodic replacement cost (maintenance cost item)
was determined as an annual O&M cost by dividing the
replacement cost by the expected life, as shown in
Table A-3. The vendor provided information regarding
the expected life of the minor system components.
Annual O&M costs are summarized in Table A-4.
Table A-3. Estimation of Annual Replacement Costs
for the DSF Unit
Item
Annual Cost
Anthracite $300
Feed pumps $2,000
Raw water pump $2,000
Backwash pump $2,200
Turbidimeter $4,500
Chlorine monitor $3,000
Total Replacement Cost $14,000
Expected Life 5 years
Annual Replacement Cost* $2,800/year
* Part of maintenance cost item.
Table A-4. Annual O&M Costs for the DSF Unit
DSF Unit
Item
Materials
Coagulant
Chlorine
Utilities
Electricity
Telephone
Annual
Quantity*
60 gal
48 gal
12 months
12 months
Unit Cost
$9/gal
$1 .6/gal
$120/month
$80/month
Annual
Cost
$540
$76.8
$1 ,440
$960
12 samples $20/sample
4 samples $30/sample
$240
$120
Labor
Operating labor (includes
maintenance) 96 nrs $35/nr $3]36o
Regulatory Compliance
Monthly microbiological sampling
Quarterly tests for iron
Maintenance
Labor (included in operating labor
as itemized above) - -
Materials Misc. $400
Replacement of filter media and
equipment (annualized) 1 $2,800
Total Annual O&M Cost
$400
$2,800
$9,937
* Refer to Table A-1 for the design basis.
The annual O&M cost of the similarly sized conventional
technology was estimated to be $18,900. This estimate
was based on the costs reported by other plants and the
engineering judgment of the cost engineer.
19
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A.5 Listing the Assumptions
The next element is very important because it allows
users to verify and compare the cost data with other cost
estimates. The following key assumptions that impact
the cost analysis, such as operating parameters, also
should be included:
The expected life of the DSF unit is 20 years. The
time period of the cost analysis is 20 years. The
same assumptions were made for the conven-
tional technology.
Costs are in real (constant 2001) dollars.
The real discount rate used is 6%.
Cash flows occur at end of the year.
The maintenance cost is based on the vendor's
recommendation on replacement of filter media
and associate pumps and meters every 5 years.
The replacement cost of the filter media and asso-
ciated equipment is $14,000. The annual replace-
ment cost ($2,800) was calculated by dividing the
replacement cost by the expected life.
Extra capital investment and O&M items, such as
labor, were required for the verification testing.
The testing-related effort and costs have been
deducted to reflect the cost of routine operation.
Costs associated with regulatory/permitting
activities and contingency are not included in
the estimate.
A.6 Listing Key Technical Factors
that Impact Costs
Another important element is to identify key technical
factors that impact costs. For the DSF unit, the technical
factors affecting cost are:
If the feed water contains high levels of colloidal
solids, filters may have to be replaced more
frequently, thus increasing maintenance cost.
A filter aid may be necessary.
High levels of total organic carbon in the feed
water may increase chlorine demand and
increase O&M costs.
A.7 Listing the Intangible
Benefits/Disadvantages
The intangible benefits and disadvantages of the tech-
nology should be described, using Table 2-3 of Section 2
as a guideline. Good public relations achieved by the
plant due to the improved drinking water supply was the
main intangible benefit of the DSF system.
A.8 Calculating Total Annualized Cost
To calculate the total annualized cost of the DSF sys-
tem, the following equations were used:
(A-1)
(A-2)
Total
annualized
cost
Annualized
capital
investment
+
Annual
O&M
cost
Annualized
capital
investment
Capital investment
t=n
1
57,915
11.46992
= $5,049
(A-3)
(A-4)
Total annualized cost = $5,049 + $9,937 = $14,986.
Here, r is the real discount rate (assumed as 6% for this
cost evaluation). The estimated life (n) of the technology
is 20 years. For r = 6% and n = 20, the denominator in
Equation A-2 is 11.46992 (from Appendix E). The cap-
ital investment ($57,915) and annual O&M costs
($9,937) are obtained from Tables A-2 and A-4, respec-
tively. The total annualized cost based on Equation A-1
is $14,986/year.
In the same way, based on a capital investment of
$75,680 and an annual O&M cost of $18,900, the total
annualized cost of the conventional coagulation/filtration
technology was calculated as $25,498/year. A discount
rate of 6% and a life of 20 years was assumed for the
conventional unit.
The total annualized cost of the DSF unit ($14,986/year)
is lower than the total annualized cost of the conven-
tional unit ($25,498/year). The DSF unit is therefore more
economical.
20
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Appendix B
Illustration of Capital Investment/O&M Cost Estimation and
Simple Payback Period Analysis of an Electrodialysis System
This cost evaluation report for an electrodialysis system
incorporates the eight bulleted elements listed in Sec-
tion 4.5 and calculates a simple payback period.
The technology used in this illustration is an electro-
dialysis system that recovers nickel (as nickel sulfate)
and removes other dissolved solids from rinsewater,
allowing the recovered water to be reused as rinsewater
in the nickel electroplating line. The technology elimi-
nates the generation of wastewater requiring treatment
and off-site disposal of sludge containing hazardous lev-
els of nickel. It also allows the recovered nickel sulfate
to be reused in the electroplating bath. The cost analy-
sis will estimate the years to pay back the cost of pur-
chasing and installing the electrodialysis system based
on the annual savings realized.
B.1 Defining the Cost Objectives and
Data Collection Methods
The first element is to define the objectives of the cost
analysis and to describe the methods used to accom-
plish the objectives, as well as the limitations of the test-
ing. In this example, the objective of the cost analysis is
to estimate the cost of the electrodialysis treatment and
compare it with the baseline option. The baseline option
is treating rinsewater in the on-site wastewater treat-
ment plant, discharging the treated effluent to a sewer,
and disposing of sludge at an off-site permitted facility.
The cost analysis will estimate the time (years) required
to pay back the cost of purchasing and installing the
electrodialysis system, based on the annual O&M sav-
ings realized.
For this test, the electrodialysis system was operated in
a user's plant for three months to generate performance
and cost data. The plant's historical records were used
to estimate the wastewater treatment costs, fresh water
supply, and chemical costs prior to the installation of the
electrodialysis system. Process water makeup, energy
costs and maintenance costs were monitored during the
test.
The short-term nature of testing limits the direct obser-
vation of long-term maintenance costs, which may be
significant due to relatively high maintenance require-
ments. Also, the testing was conducted at one nickel-
plating operation; costs incurred during installation and
O&M savings may differ between users operating the
electrodialysis system at other facilities.
B.2 Describing the Design Basis
The next element is to describe the design basis of the
technology. The equipment specifications and operating
parameters for the electrodialysis system and the base-
line plating operation are presented in Table B-1.
B.3 Estimating Capital Investment
The next element is to determine the capital investment
for the electrodialysis system. Table 2-1 in Section 2 of
this document provides a checklist of capital items. For
this example, the relevant capital items that apply include
the cost of the purchased equipment (electrodialysis unit
and associated pumps), installation (labor, materials),
and startup/training (labor, materials). The source of the
cost data should be provided so that the user can verify
the information or compare the data with other cost esti-
mates. For this case study, costs incurred during the
purchase, installation, and startup of the technology were
tracked for the demonstration. Labor unit costs were pro-
vided by the nickel-plating operating facility. Site prepa-
ration, utility connections/systems, and buildings/land are
not applicable for this cost analysis. Regulatory/permit-
ting costs are relevant for the baseline option, but were
not included in the analysis, because they could not be
determined from plant records. Contingency costs
21
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Table B-1. Design Basis for the Electrodialysis System and Baseline (Plating) Operation
Electrodialysis System Baseline (Plating) Operation (No Rinsewater Recovery)
Annual throughput (rinsewater passing through the electrodialysis
unit): 1,077,500 gal/yr
Makeup (fresh) water: 15,000 gal/yr
Nickel recovered from rinsewater: 171,000 Ibs/yr (as nickel sulfate)
Operating parameters:
Two 8-hr shifts/day
5 days/week
50 weeks/year
Annual throughput (rinsewater required in the plant): 1,077,500 gal/yr
Fresh water supply: 1,077,500 gal/yr
Nickel sulfate lost to sludge: 180,000 Ibs/yr
Operating parameters: Two 8-hr shifts/day
5 days/week
50 weeks/year
were not included because the actual (versus budgeted)
capital investment estimate was available from plant
records. Table B-2 summarizes the capital investment.
B.4 Estimating O&M Costs
Using Table 2-2 in Section 2 as a guide, the relevant
O&M costs were determined. Table B-3 summarizes the
annual O&M cost. For this illustration, O&M items that
are considered relevant include materials (nickel sul-
fate), utilities (water, electricity, steam), labor (mainte-
nance), and waste management (labor, treatment of
waste, and disposal). Therefore, items such as materi-
als (other than nickel sulfate), utilities, labor, insurance
associated with the normal functions of the plating oper-
ation is not included in the estimate. Regulatory compli-
ance associated with the generation of waste is not
included, although it can be significant. Although the unit
was operated for three months, the costs were extrapo-
lated to obtain an annual cost. The unit cost and amount
required for each component were estimated based
upon the observations made during the pilot test, discus-
sions with the vendor, and from historical plant records.
The estimate for wastewater treatment cost at the plant
is shown in Table B-4. The volume of makeup water
required for electrodialysis was determined by measur-
ing level changes in the associated tanks. The electrical
requirements were determined by the power require-
ments of the associated pumps and blowers.
B.5 Listing the Assumptions
This element is very important because it allows users
to verify and compare the cost data with other cost esti-
mates. Key assumptions that impact the cost analysis,
such as operating parameters, also should be included.
The following assumptions were used in the case study:
All costs are in real (constant 2001) dollars.
Discount rate is not used.
Life of unit is 10 years.
Labor benefits are not included in the labor unit
cost.
Cost of regulatory compliance associated with the
hazardous nickel sludge generation of the base-
line operation is not included.
Electricity costs were estimated based on power
requirements of the individual components. Some
Table B-2. Capital Investment for Electrodialysis System
Electrodialysis System
Item
Purchased Equipment
Electrodialysis membrane unit
(including evaporator)
Installation
Engineering Labor
Technician Labor
Materials (pumps, piping, valves, gauges, etc.)
Startup/Training
Engineering Labor
Technician Labor
Total Capital Investment
Quantity
1
50 hrs
1 00 hrs
1
25 hrs
200 hrs
Unit Cost
$83,500
$60/hr
$30/hr
$14,000
$60/hr
$25/hr
Cost*
$83,500
$3,000
$3,000
$14,000
$1 ,500
$5,000
$110,000
' For the design basis described in Table B-1.
22
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Table B-3. Annual O&M Cost for Electrodialysis System and Baseline (Plating) Operation
Electrodialysis System
Baseline Operation
Item
Materials
Makeup water
Chemicals, NiSO4 purchased
Chemicals, NiSO4 recycled
Utilities
Water
Steam
Electricity
Waste Management
Wastewater treatment
Maintenance
Service contract
Carbon change
Evaporator cleaning
Miscellaneous upkeep
Total Annual O&M Cost
Annual Quantity*
15,000 gal
1 80,000 Ib
-171,000lb
4.9 x 108BTU
78,600 kWh
_
4 visits
6 events
1 2 events
1
Unit Cost
$4.1 9/1 ,000 gal
$1/lb
$1/lb
$6/106BTU
$0.118/kWh
_
$3,000/visit
$1 ,020/event
$1 20/event
$1 ,000
Annual
Cost
$63
$180,000
-$171,000
$2,940
$9,275
_
$12,000
$6,120
$1 ,440
$1 ,000
$41,838
Annual
Annual Quantity* Unit Cost Cost
1 80,000 Ibs $1.00/lb $180,000
1,077,500 gal $4.19/1,000 gal $4,515
1,077,500 gal** $14/1,000 gal*** $15,085
- -
$199,600
For the design basis described in Table B-1.
* See Table B-4 for the estimation of this unit cost number at this plant.
** Wastewater generated by the targeted baseline (plating) operation only. This wastewater volume is just a fraction of the total volume
treated annually by the plant.
Table B-4. Estimation of Wastewater Treatment Unit
Cost at the Plant
Item
Sludge disposal
Strip disposal
Misc. disposal
Labor
Chemicals
Maintenance
Total wastewater treatment costs
at the plant
Wastewater volume treated per year
at the plant
Unit cost of water treatment/gal
Annual Cost
$72,000
$60,000
$16,000
$120,000
$113,000
$53,800
$434,800
31 .300.000 gal*
$14/1,000 gal
Includes wastewater from the baseline (plating) operation,
as wells as from all other operations at this plant.
components, such as recirculating pumps, oper-
ate for a fraction of the time the entire recovery
unit is in operation and have been adjusted
appropriately.
Steam costs were estimated from a requirement
of 1,500 BTU of steam per pound of water evapo-
rated. Observations during testing of the electro-
dialysis unit show 78 gal (550 Ib) of water were
lost to evaporation in one shift. This evaporative
loss is included in the makeup water usage listed
in Table B-3.
B.6 Listing Key Technical Factors
that Impact Costs
Another important element is to identify key technical
factors that impact costs. Technical factors impacting
costs in this case study include the following:
Water supply used during the testing was rela-
tively low in hardness (calcium and magnesium
content). In regions where water hardness is
higher, evaporator cleaning (maintenance) may
be required more frequently, with the associated
higher cost.
The plant in which the electrodialysis unit was
tested had enough extra space to accommodate
the electrodialysis equipment. In smaller plants,
additional space (about 20 ft x 30 ft x 15 ft) may
have to be created.
B.7 Listing the Intangible
Benefits/Disadvantages
The intangible benefits or disadvantages of the tech-
nology are described, using Table 2-3 in Section 2 as a
guideline. One intangible benefit is that the plant no
longer has the potential liability associated with storage
and transport of hazardous (nickel) sludge to a landfill.
One disadvantage is that close monitoring of the elec-
trodialysis unit is necessary because the system has a
23
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tendency to foul. Also, the energy consumption of the The capital investment estimate ($110,000) is obtained
electrodialysis system is relatively high compared to the from Table B-2. The annual savings ($157,762) in opera-
baseline operation. tional costs are calculated by subtracting the annual O&M
cost of the electrodialysis system from the annual O&M
B.8 Calculating Simple Payback Period cost of the base nickel-plating operation (Table B-3). The
payback period for the $110,000 system is approximately
To calculate the simple payback of the electrodialysis ^ year-
system, the following equation was used:
Simple
payback
period
(years)
Capital investment I
for the ETV technology]
Net annual O&M
after-tax savings
(B-1)
24
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Appendix C
Illustration of Capital Investment/O&M Cost Estimation and
Present Value Calculation for an Energy-Efficient Water Heater
A cost evaluation report for an energy-efficient water
heater should incorporate the eight bulleted elements
listed in Section 4.5. A PV is calculated for the energy-
efficient water heater and compared with the PV of a
conventional water heater.
The technology used in this illustration is an energy-
efficient water heater for residential hot water generation.
C.1 Defining the Cost Objective and
Data Collection Methods
In this example, the cost evaluation objective is to esti-
mate the PV (i.e., life cycle) cost of the energy-efficient
water heater, compare it with the PV of a conventional
water heater (competing technology) in a residential set-
ting, and estimate the savings (if any). Although the resi-
dential user was previously using a conventional water
heater, the conventional heater is not considered a
baseline technology because users are not expected to
buy the energy-efficient heater until the life of his/her
existing conventional heater is over. Therefore, the buy-
er's decision depends on a comparison of the two types
of water heaters as competing technologies. The capital
investment required for the conventional heater is there-
fore a relevant cost in this evaluation.
To generate performance and cost data, the energy-
efficient unit was operated at a residential home for one
week and compared to a conventional heater (compet-
ing technology) operated under the same conditions.
Natural gas usage, recovery efficiency, and gallons of
water used per day were measured during the test.
However, the short-term nature of testing does not allow
direct observation of the expected life of the new water
heater. The test was conducted under specific operating
conditions; savings obtained may differ among users
operating the new water heater under different condi-
tions.
C.2 Determining the Design Basis
The next element is to describe the design basis of the
technology. The equipment specifications and operating
parameters for the energy-efficient water heater and the
conventional water heater are presented in Table C-1.
Table C-1. Design Basis for the Energy-Efficient Water Heater and the Conventional
(Competing) Water Heater
Energy-Efficient Water Heater
(40 gal, 2" water-blown insulation)
Heat-recovery efficiency: 79.9%
Burner rate: 39,550 BTU/hr
Pilot burner rate: 450 BTU/hr
Setpoint temperature: 135.0°F
Water usage: 50 gal/day
Annual throughput (water usage): 18,250 gal/yr
Annual natural gas use (mBTU/yr): 21.314
Air temperature in vicinity of task: 67.5°F
Water inlet temperature: 58°F
Conventional Water Heater
(40 gal, 1.31 inches water-blown insulation)
Heat-recovery efficiency: 71.9%
Burner rate: 39,550 BTU/hr
Pilot burner rate: 450 BTU/hr
Setpoint temperature: 135.0°F
Water usage: 50 gal/day
Annual throughput (water usage): 18,250 gal/yr
Annual natural gas use (mBTU/yr): 23.919
Air temperature in vicinity of task: 67.5°F
Water inlet temperature: 58°F
25
-------
C.3 Estimating Capital Investment
The next element is to determine the capital investment
for the energy-efficient water heater and the convention-
al water heater. Table 2-1 in Section 2 of this document
provides a checklist of capital items. For this example,
the relevant capital items that apply include the cost of
the purchased equipment (the water heater) and instal-
lation (labor and materials). The source of the cost data
should be provided so that a user can verify the infor-
mation or compare the data with other cost estimates.
For this case study, a reasonable purchase price was
used, that was based on information provided by the
vendor. The actual purchase price will vary depending
on where the user buys the water heater, local sales
taxes, etc. The installation cost is the same for both
heaters and is not included in the analysis. Site prepa-
ration, utility connections/systems, startup/training, regu-
latory/permitting, contingency, and buildings and land
are not relevant and are not included in this cost analy-
sis. Table C-2 summarizes the capital investment for the
two technologies.
C.4 Estimating O&M Cost
The next element is to determine the relevant O&M
costs of the two technologies, as described in Table 2-2
in Section 2. The relevant O&M items for this case study
only include utilities (natural gas). Materials, labor, waste
management, regulatory compliance, and insurance are
not relevant, and are not included in this cost analysis. It
is recommended that O&M costs be reported on an
annual basis, regardless of the length of the verification
test. The annual natural gas use is 21.314 mBTU/yr and
23.919 mBTU/yr for the energy-efficient water heater and
the conventional water heater, respectively (Table C-3).
For simplicity, the unit cost for natural gas in this case
study was estimated based on the U.S. Department of
Energy's (DOE) Annual Energy Outlook, which fore-
casts the cost of natural gas (in 1998 dollars) through
the year 2020 (DOE, 2000). Assuming a unit of cost of
$6.214/mBTU, the annual cost of natural gas usage is
$132.45 for the efficient water heater and $148.64 for
the conventional heater. Table C-3 summarizes the
annual O&M cost.
C.5 Listing the Assumptions
This element is very important because it allows users
to verify and compare the cost data with other cost esti-
mates. Key assumptions that should be clearly stated
when calculating net present value, annualized costs, or
discounted payback period include: whether constant or
nominal dollars are used (typically, constant dollars are
recommended), the real discount rate, and when cash
flows occur (typically at the end of the year). Other
assumptions that impact the cost analysis, such as the
expected life of the major equipment, also are included.
The assumptions used in the case study are as follows:
Total years of analysis is 9 years, based on the
expected life of 9 years for both types of heater.
All costs are in constant (real) 1998 dollars.
The real discount rate (r) used is 6%.
Cash flows occur at the end of each year.
Table C-2. Capital Investment for Case Study
Energy-Efficient Water Heater
Item
Purchased equipment
Delivery of new water heater
Total Capital Investment
Quantity
1
Unit
Cost
$261
Cost*
$261 .00
$261.00
Conventional Water
Quantity
1
Unit Cost
$235.00
Heater
Cost*
$235.00
$235.00
* Refer to the design basis in Table C-1.
Table C-3. Annual O&M Cost for the Energy-Efficient and the Conventional Water Heaters
Energy-Efficient Water Heater
Item
Utilities
Natural Gas, mBTU
Total Annual O&M Cost
Annual
Quantity
21.314
21.314
Annual O&M
Unit Cost Cost*
$6.214 $132.45
$132.45
Conventional Water Heater
Annual
Quantity
23.919
23.919
Annual O&M
Unit Cost Cost*
$6.214 $148.64
$148.64
Refer to the design basis in Table C-1.
26
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The expected fuel cost over the next 9 years of
$6.214/mBTU is based on DOE (2000). Actual
savings will vary from user to user depending on
the actual unit cost (price) of natural gas. The
higher the unit cost of natural gas for the user, the
greater the difference in PVs of the two heaters
and the greater the savings realized.
C.6 Listing Key Technical Factors
that Impact Costs
Another important element is to identify key technical
factors that impact costs.
The natural gas requirement is based on an
average inlet water temperature of 58°F and an
ambient temperature of 67.5°F. The actual inlet
temperature of the water will vary seasonally
through the year, and geographically for various
users. Users who live in regions where the aver-
age water supply temperature is lower will incur
higher heating requirements, and therefore,
higher natural gas usage and cost. Air temper-
ature in the vicinity of the water heater also will
affect its efficiency.
Users with an annual water usage greater than
the 18,250 gal assumed here will experience
greater savings; similarly, users with a lower
annual water usage will experience lesser
savings.
C.7 Listing the Intangible
Benefits/Disadvantages
The intangible benefits or disadvantages of the technol-
ogy should be described, using Table 2-3 of Section 2
as a guideline. The intangible benefit for this technology
is a cleaner environment due to reduced carbon dioxide
(greenhouse gas) emissions and reduction in the small
amounts of NOX and SO2 emissions. Also, savings in
total energy consumed nationally reduce dependence
on imported fuel (assuming saved natural gas can re-
duce oil imports).
C.8 Calculating Present Value
The PV of the capital investment and annual O&M costs
is estimated for each year for each technology using the
following equations in a spreadsheet format.
t=n
P V of cash f lows = V
CF,
PVof
cash
flows
CFn
CF,
(1 + r)1 (1 + r)2
CFn
(1 + r)n
(C-1)
(C-2)
Table C-4 presents the spreadsheet results of the PV
analysis. By subtracting the PV cost of the efficient water
heater ($1,161.88) from the PV cost of the conventional
water heater ($1,246.01), the PV of the savings realized
over the life of the water heater is $84.13. The dis-
counted payback period is 2 years. The discounted pay-
back period is the year in which the PV (cumulative) of
the energy-efficient water heater becomes lower than
the PV (cumulative) of the conventional water heater. As
shown in Table C-4, this happens in Year 2.
C.9 Reference
U.S. Department of Energy. 2000. Annual Energy Out-
look, DOE-E1A-0383. Washington, DC.
Table C-4. Spreadsheet Results of the Cost Analysis: PV of the Energy-Efficient and
Conventional Water Heaters
Year (t)
0
1
2
3
4
5
6
7
8
9
Energy-Efficient Water Heater
Capital Investment ($)
Annual O&M Cost ($)
Present Value ($)
Cumulative PV ($)
261.00
-
261.00
261.00
0.00
132.45
124.95
385.95
0.00
132.45
117.88
503.83
0.00
132.45
111.21
615.04
0.00
132.45
104.91
719.95
0.00
132.45
98.97
818.92
0.00
132.45
93.37
912.30
0.00
132.45
88.09
1,000.38
0.00
132.45
83.10
1 ,083.48
0.00
132.45
78.40
1,161.88
Conventional Water Heater
Capital Investment ($)
Annual O&M Cost ($)
Present Value ($)
Cumulative PV ($)
235.00
-
235.00
235.00
0.00
148.64
140.23
375.23
0.00
148.64
132.29
507.52
0.00
148.64
124.80
632.32
0.00
148.64
117.74
750.05
0.00
148.64
111.07
861.13
0.00
148.64
104.79
965.91
0.00
148.64
98.85
1 ,064.77
0.00
148.64
93.26
1,158.03
0.00
148.64
87.98
1,246.01
27
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Appendix D
Cost Evaluation References
If certain cost elements for a technology application are
not available for an ETV pilot manager, some refer-
ences are available that provide typical costs or cost
guidance to help fill in the data gaps. Three common
and useful references in the environmental, chemical,
and process industries are a series of unit cost books:
Plant Design and Economics for Chemical Engineers by
Peters and Timmerhaus (1991); The Richardson Rapid
System for Process Plant Construction, Richardson
Engineering Services, Inc.; and the Environmental Cost
Handling Options and Solutions (ECHOS) books pub-
lished jointly by R.S. Means Company, Inc. and
Talisman Partners, Ltd. When ETV testing is unable to
measure certain cost elements (e.g., maintenance or
installation costs) directly, these references can provide
cost ranges based on broad industry experience. The
texts referenced in this appendix do not represent a full
literature review; other industry-specific standard refer-
ences may be used.
Plant Design and Economics for Chemical
Engineers, by Peters and Timmerhaus (1991)
This book is a widely used reference in the chemical
industry and discusses the economic and engineering
principles involved in the design and application of pro-
cessing equipment. Because environmental technolo-
gies generally involve physical-chemical or biological
processes for removing pollutants from a feed stream or
for chemically characterizing soil, water, or air matrices,
the principles in this book are generally applicable.
Although the level of discussion in this book is probably
too thorough for most ETV applications, there are some
interesting rules of thumb in this book.
In the subsection titled "Purchased-Equipment Installa-
tion," there is a table that provides typical installation
costs for different types of equipment as a percentage of
the purchased-equipment cost. For example, typical
costs for installing pumps range from 25 to 60% of the
purchase price of the pump; for metal tanks the installa-
tion cost is 30 to 60% of the price of the tank. If the
nature of the testing or resources does not allow the
ETV pilot to directly measure these numbers, these
rules of thumb based on chemical industry experience
can be used to estimate installation costs. In addition,
these typical ranges, developed through broad industry
experience, can serve as benchmarks to verify esti-
mates developed by the ETV pilot manager.
In the absence of direct measurements, an ETV pilot
manager can use some of the other rules of thumb for
estimating the amount and cost of peripheral equipment
(such as piping and electrical connections) required for
various types of equipment, estimating the maintenance
requirements for typical equipment, and for scaling up
equipment based on capacity. For example, for estimat-
ing maintenance costs, industry experience suggests
that typical annual maintenance costs range from 2 to
6% of fixed capital investment (FCI) for simple chemical
processes, 5 to 9% of FCI for average processes under
normal conditions, and 7 to 11% of FCI for complicated
processes under severe operating conditions (e.g., cor-
rosive environment or high temperatures).
The Richardson Rapid System for Process Plant
Construction, by Richardson Engineering
Services, Inc.
Another common cost estimating reference is The
Richardson Rapid Estimating System for Process Plant
Construction, which includes process plant construction
estimating standards. It is similar to the cost data books
produced by R.S. Means, Inc. and can be used to accu-
rately estimate the cost of labor, materials, and equip-
ment required for the installation and operation of ETV
technologies. This reference is particularly applicable for
technologies associated with chemical plants, manufac-
turing facilities, and water treatment plants, as well as
general construction projects.
Estimates can be made quickly by using the estimating
standards, which presents the worker-hours, composite
28
-------
unit costs, and detailed line-item data developed for
major areas such as Site Work, Mechanical and Elec-
trical Construction, and Process Equipment. Estimating
forms and procedures to adjust the standard estimates
for site-specific conditions are included with each set of
standards.
ECHOS Books by R.S. Means Company, Inc.
and Talisman Partners, Ltd.
Sometimes, the ETV testing setup may not incorporate
all the peripheral items required for installation and
operation of the technology. For example, during the
ETV test, a technician may measure and add chemicals
to the process manually because it is convenient for the
two-week period of the test and it may not be worthwhile
investing in transfer pumps, metering instruments, and
piping to add chemicals on a continuous basis. How-
ever, during actual operation in a user's facility, the user
typically may be expected to install an automated chem-
ical feed system. In this case, the cost of the technology
should represent the typical use scenario. The ECHOS
volumes Environmental Remediation Cost Data 2001
Assemblies Cost Book and Environmental Remediation
Cost Data 2001Unit Cost Book published by R.S.
Means Company, Inc., with Talisman Partners, Ltd., are
good references for supplementing the cost data col-
lected during the ETV demonstration for items such as
pumps, piping, instruments, and tanks. These volumes
contain detailed unit price estimates of more than 4,000
assembly cost elements for labor, site demolition, site
preparation, site improvement, site civil/mechanical util-
ities, site electrical utilities, and environmental restora-
tion activities.
Other cost data books published solely by R.S. Means
Company that pilots may find helpful include:
Means Building Construction Cost Data 2001
Means Electrical Cost Data 2001
Means Facilities Construction Cost Data 2001
Means Mechanical Cost Data 2001
Means Plumbing Cost Data 2001.
These cost guides can be used by pilot managers to
save time in researching the cost of many of the periph-
eral equipment and materials needed for the installation
and operation of the technology by a typical user. The
prices of materials, labor, and equipment within these
databases have been compiled based on a large num-
ber of quotes from different manufacturers and can be
used in the absence of direct quotes from the manufac-
turers of such peripherals.
Other Cost Estimation References
Waste Treatment Technologies
United States Environmental Protection Agency. 1995.
Detailed Costing Document for the Centralized Waste
Treatment Industry. Office of Water. EPA-821-R-95-002.
January.
Air Pollution Control
United States Environmental Protection Agency. 1996.
OAQPS Control Cost Manual, Fifth Edition Office of Air
Quality Planning and Standards, Research Triangle
Park, NC. EPA-453-B-96-001. February.
Process and Utility Industries
American Association of Cost Engineers (AACE, Inc.).
1990. AACE Recommended Practices and Standards
for Cost Estimation, Cost Control, Planning and Sched-
uling, and Project Management. November.
29
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Appendix E
Time Value of Money Table
30
-------
Table E-1. Present Value of Annuity Factors* Calculated for Different Discount Rates (r) and Number of Years (n)
Discount Rate (r)
Number of
Years (n)
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
22
24
26
28
30
0.5%
0.99502
1.98510
2.97025
3.95050
4.92587
5.89638
6.86207
7.82296
8.77906
9.73041
10.67703
11.61893
12.55615
13.48871
14.41662
15.33993
16.25863
17.17277
18.08236
18.98742
20.78406
22.56287
24.32402
26.06769
27.79405
The numbers in this
1%
0.99010
1 .97040
2.94099
3.90197
4.85343
5.79548
6.72819
7.65168
8.56602
9.47130
10.36763
1 1 .25508
12.13374
13.00370
13.86505
14.71787
15.56225
16.39827
17.22601
18.04555
19.66038
21 .24339
22.79520
24.31 644
25.80771
1.5%
0.98522
1 .95588
2.91220
3.85438
4.78264
5.69719
6.59821
7.48593
8.36052
9.22218
10.07112
10.90751
11.73153
12.54338
13.34323
14.13126
14.90765
15.67256
16.42617
17.16864
18.62082
20.03041
21 .39863
22.72672
24.01584
table represent the
2%
0.98039
1.94156
2.88388
3.80773
4.71346
5.60143
6.47199
7.32548
8.16224
8.98259
9.78685
10.57534
1 1 .34837
12.10625
12.84926
13.57771
14.29187
14.99203
15.67846
16.35143
17.65805
18.91393
20.12104
21.28127
22.39646
values
3%
0.97087
1.91347
2.82861
3.71710
4.57971
5.41719
6.23028
7.01969
7.7861 1
8.53020
9.25262
9.95400
10.63496
1 1 .29607
1 1 .93794
12.56110
13.16612
13.75351
14.32380
14.87747
15.93692
16.93554
17.87684
18.76411
19.60044
n ,.
Of V
/
4%
0.96154
1 .88609
2.77509
3.62990
4.45182
5.24214
6.00205
6.73274
7.43533
8.11090
8.76048
9.38507
9.98565
10.56312
11.11839
1 1 .65230
12.16567
12.65930
13.13394
13.59033
14.45112
15.24696
15.98277
16.66306
17.29203
5%
0.95238
1 .85941
2.72325
3.54595
4.32948
5.07569
5.78637
6.46321
7.10782
7.72173
8.30641
8.86325
9.39357
9.89864
10.37966
10.83777
1 1 .27407
1 1 .68959
12.08532
12.46221
13.16300
13.79864
14.37519
14.89813
15.37245
6%
0.94340
1 .83339
2.67301
3.4651 1
4.21236
4.91732
5.58238
6.20979
6.80169
7.36009
7.88687
8.38384
8.85268
9.29498
9.71225
10.10590
10.47726
10.82760
11.15812
1 1 .46992
12.04158
12.55036
13.00317
13.40616
13.76483
7%
0.93458
1 .80802
2.62432
3.38721
4.10020
4.76654
5.38929
5.97130
6.51523
7.02358
7.49867
7.94269
8.35765
8.74547
9.10791
9.44665
9.76322
10.05909
10.33560
10.59401
11.06124
1 1 .46933
1 1 .82578
12.13711
12.40904
8%
0.92593
1 .78326
2.57710
3.31213
3.99271
4.62288
5.20637
5.74664
6.24689
6.71008
7.13896
7.53608
7.90378
8.24424
8.55948
8.85137
9.12164
9.37189
9.60360
9.81815
10.20074
10.52876
10.80998
11.05108
1 1 .25778
10%
0.90909
1 .73554
2.48685
3.16987
3.79079
4.35526
4.86842
5.33493
5.75902
6.14457
6.49506
6.81369
7.10336
7.36669
7.60608
7.82371
8.02155
8.20141
8.36492
8.51356
8.77154
8.98474
9.16095
9.30657
9.42691
12%
0.89286
1 .69005
2.40183
3.03735
3.60478
4.11141
4.56376
4.96764
5.32825
5.65022
5.93770
6.19437
6.42355
6.62817
6.81086
6.97399
7.11963
7.24967
7.36578
7.46944
7.64465
7.78432
7.89566
7.98442
8.05518
15% 20% 25%
0.86957 0.83333 0.80000
1 .62571 1 .52778 1 .44000
2.28323 2.10648 1.95200
2.85498 2.58873 2.36160
3.35216 2.99061 2.68928
3.78448 3.32551 2.95142
4.16042 3.60459 3.16114
4.48732 3.83716 3.32891
4.77158 4.03097 3.46313
5.01877 4.19247 3.57050
5.23371 4.32706 3.65640
5.42062 4.43922 3.7251 2
5.58315 4.53268 3.78010
5.72448 4.61057 3.82408
5.84737 4.67547 3.85926
5.95423 4.72956 3.88741
6.0471 6 4.77463 3.90993
6.12797 4.81219 3.92794
6.19823 4.84350 3.94235
6.25933 4.86958 3.95388
6.35866 4.90943 3.97049
6.43377 4.93710 3.98111
6.49056 4.95632 3.98791
6.53351 4.96967 3.99226
6.56598 4.97894 3.99505
-------
Appendix F
Unit Annualized Cost
The unit annualized cost is calculated by dividing the
total annualized cost by the annual throughput (Equa-
tion F-1). As described in Section 4.1, the total annual-
ized cost of a technology application is calculated by
summing the annualized capital investment and the
annual O&M costs associated with a technology for a
given design basis.
Unit annualized cost=
Total annualized cost
Annual throughput
(F-1)
The annual throughput could be the gallons of waste-
water treated, the number of samples analyzed, etc.
Unit annualized cost is easy to understand and provides
a quick way of comparing several technologies. For
example, in the case of a new field characterization tool,
potential users could quickly compare the cost per sam-
ple for the new field screening tool with the cost per
sample incurred by sending samples to an off-site labor-
atory for analysis. However, because unit annualized
cost depends on the design basis (i.e., equipment ca-
pacity, annual throughput), unit annualized cost also is
the most likely to be misinterpreted. For example, a new
water treatment unit may claim to treat water at a unit
cost of $0.50/gal. But this may be based on the assump-
tion that the new equipment will be sized and applied to
a plant that treats 1,000,000 gal of water per year. For
smaller users, who do not have the benefits of such
economies of scale, the unit costs could be much higher.
If the unit annualized costs of the two technologies are
being compared, the pilot managers should ensure that
estimates for both technologies were prepared on the
same design basis.
Potential users may take the unit annualized cost num-
ber presented for the ETV technology and extrapolate it
in a proportionate (linear) fashion to various levels of
throughput. One way to avoid this misinterpretation is to
present a graph of unit annualized cost versus through-
put. Instead of presenting a single unit cost number, this
graph allows potential users to estimate costs and com-
pare technologies based on their anticipated throughput.
Figure F-1 is an illustration of unit annualized cost ver-
sus throughput.
Capacity of System
500 1,000 1,500
Throughput (gal/day)
2,000
Figure F-1. Illustration of Unit Annualized Cost
versus Throughput
32
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