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LIFE CYCLE COST (LCC) FOR SUSTAINABLE BUILDING
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  • The projects have the same scale. Why are the two approaches yielding different rankings? (They are both discounted cash flow approaches, but they must be time-weighting the cash flows slightly differently to yield different rankings)

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  • 1. LIFE CYCLE COST (LCC) FOR SUSTAINABLE BUILDING RUSDY HARTUNGI, CHRIS PYE School of Built and Natural Environment University of Central Lancashire, (UCLan) Preston PR1 2HE, Lancashire, UK Email: [email_address]
  • 2. Agenda/ Structure of Presentation
    • Background/ Historical Development of LCC
    • Key Features of LCC
    • Cost Components of LCC
    • Example of LCC Application
    • Discussions and Conclusions
  • 3. LCC in Sustainable Building (ISO 15686 Part 5)
    • “ Economic assessment considering all agreed project significant and relevant cost flows over a period of analysis expressed in monetary value .
    • The projected costs are those needed to achieve defined levels of performance , including reliability, safety and availability ”.
  • 4. History of LCC
    • 1933 - Comptroller of the U.S. Government
        • factored maintenance costs in bids for tractor acquisition
    • 1940 - WW II
        • Shortage of materials and labor .
        • Lawrence D. Miles ( General Electric Inc.) created Value Engineering Model for substitute materials and procedures.
  • 5. LCC applied to buildings
    • 1970’s - U.S. General Accounting Office applied LCC to hospital facilities.
        • Operation and Maintenance costs equal initial investment costs in 1-3 years.
    • 1980 - American Society for Testing and Materials (ASTM) Produce Set a series of standards for building economics
    • 2005 – ISO 15686 Part 5: the service life of a building component, building or other constructed work
  • 6.
    • Sustainable Technology in Building is commonly known as more expensive then their Traditional counterparts (e.g. Traditional Ltg Vs Daylighting and Daylighting Harvesting Technology, Manual Control Vs. BMS, ABS/IBS, Others: Solar Panel / PV, GSHP, etc.
    • HOWEVER
    • They are more Energy Efficient/Save Energy , Lower Operation and Maintenance Cost (O&M).
    • The Energy Saving, O&M feature occur over The Life-time of the Building  (Benefits accrue over the life of the building)
    • THEREFORE
    • It is essential to use the analysis which recognizes the cost saving which spread over the life-time - the Life Cycle Cost (LCC) analysis
    Why LCC is Matter in Sustainable Building
  • 7. Illustration: An Office building Office building: 1: 5 : 200 * 1 = Construction Cost 5 = Maintenance and Building Operating Costs 200 = Business Operating Costs *source: The Royal Academy of Engineering
  • 8.
    • It is based on the “ Economics ” concept
    • A technique that account for the total cost of ownership that addresses all the elements of the anticipated non-recurring and recurring costs and/or cash flow over the Building system life-span.
    • It takes into account time value Money ( discount/compounding factors) and cash flow during the entirely life-span of the Building.
    • Key of accuracy in LCC : Understanding the Cost Behaviour (Cash Flows) during the Building. system life-span.
    • It might include Tangible and Intangible (Health, productivity, etc) as long as it could be converted into monetary Units.
    Key Features of LCC in Building ( ISO 15686 – 5: 2006)
  • 9. Cash Flow Investment £ 1.,000 £ 10,000 Project A (Traditional Building ) Investment Project B (Sustainable Technology in Building) etc 1 2 3 20 £ 1.,100 £ 1.,200 Cash Flow £ 500 £ 20,000 1 2 3 20 £ 500 £ 500 etc Illustration of LCC in Lighting
  • 10. Cost component in Sustainable Building
    • Initial Investment Costs:
    • Operation Costs: Utilities Bills, energy consumption, Taxes, Insurance etc
    • Maintenance Costs: Replacing the fixtures, components, Annual Cleaning, Inspection. The cost include the cost of technician to do the technical job.
    • Replacement Costs: Anticipated Major replacement of components
    • Residual, Disposal / Demolition Cost.
  • 11. LCC in Building : Initial Investment Costs
    • Occur prior to the use of the Building facility
    • For energy efficient technology e.g.: BMS , automatic lighting control system is operated for longer life during their life span, the initial cost is normally not the major cost of the Building System life cycle
  • 12. LCC in Building : Operation Costs
    • Involved in the operation during the life cycle.
    • Annual costs, Excluding Maintenance and Repair Costs
    • EXAMPLE
    • Utilities Bills, Energy Consumption, Taxes, Insurance etc
  • 13. LCC in Building : Maintenance Costs
    • It is a scheduled costs associated with the upkeep of the system to maintain it in good working order
    • Expenditures, required to prolong the life of a Building system without replacing the system
    • EXAMPLE
      • Replacing the fixture components of Building System
      • The cost of technician to do the work Repair Costs, Inspection, Cleaning
      • Annual Inspection
      • Annual Cleaning Cost
  • 14. LCC in Building : Replacement Costs
    • Replacement costs are anticipated expenditures to major components required to maintain the operation of the Building system.
    • EXAMPLE
    • The replacement expenditure from some of light fixtures
    • Understanding fixture characteristics is the key feature to understand the O&M and Replacement cost behaviour.
  • 15. LCC in Building : Residual Value/Disposal Cost
    • RESIDUAL VALUE (RV) : the net worth of a lighting system at the end of LCC analysis study period. In general RV of Lighting system is sometimes less important as the net worth value at the end of LCC analysis is ignorable or can not be materialized. BUT Some fixture components, Lighting Control Component could still be sold on the market in exchange for the newest generation.
    • DISPOSAL COSTS (DC) : the cost of disposing of the fixture or lighting components when it has failed EXAMPLE : Compact fluorescence lamps ( CFL ) and High Intensity Discharge Lamp ( HID ), for instance, due to the mercury content of the gas inside lamp that might contaminate groundwater and toxin build-up in the soil , it must be disposed of properly at a hazardous waste site. disposal cost of lighting is important when evaluating the lighting solution that might have different life expectancies.
  • 16.
    • Total LCC = Investment Cost + Operation Costs + Maintenance + Replacement Cost + Disposal Cost - Salvage Value
    • All of the cost need to be converted into time value money
    Total LCC
  • 17.
    • GENERAL
    • Energy Rate (GBP/kWh)
    • Labour Rate (GBP/hr)
    • Electricity Increase Rate
    • Interest Rate (%)
    • Time to install each lamp (hour)
    • Time to install each lamp/ Ballast/Control Gear (hour)
    • SPECIFIC TO FIXTURES
    • Heating & Cooling Load Added (BTU)
    • Lamp/Ballast/Control Gear Life: [hr]
    • Annual Relamp Rate per Year
    • Lamps/Fixture Housing Cost/etc:
    • Relamp Per (per Year)
    • Ballast Replacement Rate per Year
    • Replacement Cost for Ballast/Control Gear
    VARIABLES
  • 18.
    • INCANDESCENT
    • CFL
    LED HALOGEN LCC of 4 Types of Lighting
  • 19.
    • GENERAL
    • Energy Rate (GBP/kWh)
    • Labour Rate (GBP/hr)
    • Electricity Increase Rate
    • Interest Rate (%)
    • Time to install each lamp (hour)
    • Time to install each lamp/ Ballast/Control Gear (hour)
    • SPECIFIC TO FIXTURES
    • Heating & Cooling Load Added (BTU)
    • Lamp/Ballast/Control Gear Life: [hr]
    • Annual Relamp Rate per Year
    • Lamps/Fixture Housing Cost/etc:
    • Relamp Per (per Year)
    • Ballast Replacement Rate per Year
    • Replacement Cost for Ballast/Control Gear
    VARIABLES
  • 20.
    • The result showed that in term of the initial investment cost, LED lighting system is the most expensive solution , among any other alternatives, reaching approximately 186% in comparison to the investment cost of tungsten incandescent lighting
    • BUT in year 20 (end of life Cycle): the LED achieved the lowest total life cycle cost
    • In Fact: In term of Pay Back Period (PBP)
    • Tungsten Incandescent Vs ( Halogen, CFL, LED): 3.10, 1.42, 1,33 years
    RESULTS
  • 21.
    • LCC is about economic assessment , to some extent is a useful tool as people purchasing behaviours is mainly driven by the Price .  Environment , Social come the second.
    • BUT a good M&E System is NOT just about finding the most economics/cost effective or energy efficient solution .
    • In Lighting for Instance: There are still some other factors such as technical, aesthetic, mood, visual comforts, health and well being that are difficult to quantify in term of cost
    DISCUSSION OF RESULT
  • 22. Other LCC Uncertainties
    • Input data
      • Estimating ( LCC deals with future costs)
      • assumptions
    • Parameters
      • Discount rate
      • Useful life/ study period
      • Future prices
  • 23. LCC Uncertainties (Continued)
    • Variability from predicted values or assumptions e.g.
    • – Capital costs (actual v predicted)
    • – Operational costs (annual expenditure provision v actual life cycle replacement plans)
    • – Energy consumption and price
    • – Costs of refurbishment / upgrades
    • – Technology obsolescence
    • – Environmental targets (e.g. new legislation)
    • – Labour wages (impacting on labour and material costs)
    • – Service lives predictions
    • – Availability and robustness of cost and performance data
  • 24.
    • Technical issue: There are still other factors such as Colour Correlated Temperature ( CCT ), Colour Rendering Index ( CRI ).
    • LED for instance is the most energy efficient lighting. In the above case LCC will recommend the use of LED
    • Typical LED : High CCT, low CRI - Not really wanted in visual comfort. In the above case it is acceptable (e.g. along the corridor).
    • Environmental: Energy Efficient Lighting Save energy/cost  Save environment, But how many % is this impact, is still difficult to quantify
    DISCUSSION & CONCLUSION (2)
  • 25.
    • THANK YOU FOR YOUR ATTENTION
    • Q & A ?