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

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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 Data—Unit 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 Data—Unit 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

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          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

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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

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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

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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  2001—Unit 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



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                                          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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