Life Cycle Analysis To Assess District Energy

Introduction

Life – Cycle Analysis is the method used by individuals working in procurement to assess District Energy. This is done so as to understand the amount needed to create cooling on the site; though this analysis is carried out for the duration of 20 – 40 years and then it is equated with district cooling proposal.

The concept of Life Costing is being widely used because of the productivity associated with it. Practically, mechanical / electrical equipment live short lives, but energy consumption, maintenance and renewal programmes are expenses. Both present and future costs are genuine,

Example, in a rolling maintenance programme for major installations capital comes from the same fund. If these situations can be met then whole-life costing is vital. (Ferry 1964)

Use of Whole – life costing methods within the mechanical and electrical installations s most profitable since the amount of money spent on these is always growing. Variances between expenditure and running cost are constant in evaluation of energy-consuming systems.

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Drawbacks affecting calculations for whole-life costing is unaccountable in building fabric, because, Firstly, running costs of energy-consuming systems equate to considerable sum of the total whole-life costs. Secondly, restrictions on life span of mechanical / electrical installations and since they become obsolete quickly imply these installations should be considered for shorter periods as compared to building fabric. Thirdly, assumptions are held over short period time frames, any hypothesis on cost, interest rates and taxation are possibly more legitimate. (Ferry 1964)

Fig 4.1 displays the proportional values of the various life cycle costs that a building owner would need to consider in order to produce cooling on site. (Damecour 2008)

As can be seen in the above diagram, there are 3 clear parts to manufacture cooling on – site; Natural gas or electricity, Operation and maintenance and Capital.

Capital costs

Capital for equipment is a fraction of the total installation cost. It is critical to consider this when deciding on what amount can be reduced by using district cooling system.

For example in chiller plants, the chiller and cooling towers make up 25% of total cost. [See fig4.2] (Damecour 2008)

Operation and maintenance:

To operate chillers and cooling towers there is a need for well trained staff and budget for wear and tear of machines. Chillers need water and chemicals to work accurately. It is mandatory for the owner to insure all heavy machinery such as boilers, chillers and cooling towers. Besides, heavy machinery is sold with warranty contracts.

Details of Case Study

This case study evaluates the capital connected with a district cooling plant and Air cooled chiller package, but over a time frame of 30 years. The particulars of both are below.

District Cooling Plant

Employer: Emirates Central Cooling Systems Corporation (EMPOWER), Dubai

Engineer for the Works: Ellerbe Becket Inc and Tebodin Middle East Ltd.

Scope of work: The capacity of the job involved supply, installation, testing and commissioning of a central cooling plant. The plant will have a capacity of 56,000 tonnes of refrigeration. The specification of the building is 135 metres long x 40 metres wide and 37 metres high from basement floor level to the top of the parapet wall.

Transgulf Electomechanical LLC, are the contractor on this project and will perform all functions relating to mechanical, electrical, process, civil and architectural components, including supply and installation of machinery. The capacity of work extends towards supply and installation of the instrumentation and controls in two phases for up to 40 ETSs (Energy transfer stations) located in developers buildings around DHCC area and wiring them back to the central plant. It includes engineering as required, procurement and provision of manpower, materials, equipment and two years defect liability period.

Project Time Schedule: In March 2008, the first 18000 tons of refrigeration has been connected to the pipeline network.

The balance load will happen during part II of the work.

The details of the equipment installed are indicated in the Annexure 4.1.

District cooling system model

Firstly, chilled water is scattered between DCS and buildings through a three-level chilled water piping system, which comprises of production loop with constant speed pump. Each chiller has a dedicated production loop pump, and the two are controlled together. Secondly, distribution loop pumps defeat pressure loss, as acquired by chilled water flowing between DCS and the buildings. Distribution is hydraulically separated from production loop by existence of separate bypass pipes between the loops. All distribution loop pumps have changeable speed. Thirdly, secondary loop in each building includes a number of changeable speeds, with variable flow chilled pumps, for distributing chilled water through the airside apparatus in the building. Heat exchangers are built-in to segregate distribution loop of DCS from secondary loop in each building, which keeps system pressure in the distribution loop at a low. Lastly, there are total 4 zones T1, T2, T3 and T4 as indicated in the drawing (Fig 4.3) which shows the location of the ETS stations and the load detail. The load details of Phase I are in Annexure 4.2.

Air Cooled Chiller Package

Transgulf Electromechanical has provided information on air cooled chiller package for comparison.

Employer : Dubai World Trade Centre

Engineer : RMJM consultants.

Capacity of chiller : 275 TR

Type : Air cooled chiller

Information on machinery, model number and power consumption are in annexure 4.3.

Factors considered for costing

1. The real cooling capacity that a building needs is a much lower number than the chiller capacity. On the basis of the design cooling loads predicted for the twenty one buildings in four building zone the connected load is 18000 TR and the actual load is 15738 TR. Accordingly the district cooling plant is designed for 8 chillers working (8 x 2000 TR = 16000 TR) and 1 standby (2000 TR). The connected load (17796 TR) correlates to sum of fixed capacity of the chiller plants needed by each building if each had a plant, but 16000 TR relates to the cooling capacity required of a DCS to serve 21 ETS stations. Outcome of diversity in cooling load among buildings can be taken advantage of by using district cooling plant to serve groups of buildings. Air cooled chiller packages are in multiples of 275 TR (66 chiller packages) as total load of 18150 TR to be fixed in 21 buildings.

2. Study is based on NPV (present worth value) and EAC (equivalent annual cost); across initial and operating costs. Choice depends on which requires least LCC (life-cycle cost) and can execute the duty for its life span. (Al Daini et al 2002). Comparisons are made only between co-terminated proposals, to guarantee comparable results. Co-termination means, lives of systems involved end at the same time, which is not the case in this work. When alternatives have unequal lives, time span for analysis can be set by common multiples of system lives or a study period ending with disposal of all systems. Common-multiple method is used to accommodate NPV for unequal-life systems.

Like in this case study, least common multiple is 30 years for the district cooling plant. This means the air cooled chilled package has a lifetime of 15 years; and would be substituted once during the analysis period. The total NPV for analysis is derived by adding the NPV of single entity considered, both future single payment (i.e. replacement cost) items and series of equal future payment (i.e. annual operating cost). The value of money is the job of available interest rates and inflation rate. In equivalent annual method, all costs incurred over time are changed to an equal yearly amount. The EAC comparison method is most fitting, especially for systems that comprise of many subsystems with unequal life spans. In this case, there is no need to assume the replacement of a system.

3. Owning Costs: Economic analysis demands derivation of first cost and operational costs for every projected selection. It is significant in correctly assessing to reach a final decision, for overall approach and system choices. Life cycle cost evaluation comprises of first costs, utility costs, maintenance costs, operational costs, utility escalation rates and owner’s cost of money. (Richards et al 2000).

There are four rudiments to calculate annual owning costs: Initial cost, Analysis or study period, Cost of capital and other periodic costs like replacement, refurbishment or disposal fees. These combined with operating costs, equates to economic analysis. (ASHRAE 2003)

Initial costs

A fair ballpark of capital cost of parts has resulted from cost records of installations of similar le design or quotations from manufacturers and contractors or referring market available cost- estimations.

Analysis period

Time span during which an economic analysis is carried out affects the outcome. This is decided by clear objectives, like length of planned ownership or loan repayment period. As the length of time in analysis period grows, the net present value decreases. The time period is not affected by equipment depreciation or service life, though it may be valuable for the study. In this study a single design life of 15 years was used to show a midway point between small and medium capacity equipment range for air cooled chiller package. Smaller equipment has a life span of 10 to 15 years while medium size equipment has 15 to 20 years. (Archibald et al 2002)

In district cooling plants, machinery is all large scale and has a life span of 30 to 40 years as declared by district solution providers (Tabreed 2007). Though, in this analysis 30 years is considered to minimize the intricacy and work.

Interest or discount rate

Borrowed capital has high interest rates, albeit this rate is not apt enough to use in the study. Discount rate instead is used to give the actual value of money. This rate is affected by individual investment and profit, while interest rates are fixed. (ASHRAE 2003)

Most establishments use WACC to calculate costs of capital as organizations can produce capital through debt or equity. Although return required for equity and debt is varied, debt holders have high risk as they access the organizations profits. Hence cost of the capital is calculated by taking a weighted average of both, and the weightings are introduced by level of debt and equity in the company’s asset base, or the company’s “gearing”. (EMA 2002) This estimation is from the hypothesis of cost of capital as 10% (as per break up in Annexure 4.4) to DCS by private sector.

Operating costs

Operating costs comprises of; cost of electricity, wages of employees, supplies, water, materials, chemicals and annual frequent costs associated with functioning of the system. For the vapor compression system, operating costs are subject to electricity needed to work the compressor. Extra electricity is needed to work the condenser water pump and cooling tower fans. This has been regarded in the calculation. DEWA tariff has also been considered. Wages are as per current UAE market rate.

Maintenance Costs

Maintenance cost is equal to final cost estimated for air-conditioning systems. Most frequently used maintenance towards building HVAC services are run-to-failure (unsuitable for the hospital), preventive, and predictive maintenance. Run to failure, capital is not spent until the machinery gives way. Preventive maintenance is planned by run time or calendar. Predictive maintenance is done by supervising machinery and using condition and performance indices to increase repair intervals.

HVAC&R maintenance and utility costs form a high percentage of operating cost, hence it is critical to reduce cost on maintenance by managing the process well. Maintenance cost is hard to measure as it is liable on many variables like local labor rates, experience, age of the system, length of time of operation, etc. Although a fair prediction is derived from quotations for repairs and Annual maintenance contracts.

Sensitivity analysis

Most whole-life cost calculation includes a lot of suppositions and it is not probable to get the effect of change in these practically. One method of testing results attained from whole life cost calculation is to repeat the calculations in a methodical way, changing the value of a single variable (i.e. assumption) each time, and then one can see how sensitive results are to changes in the variable under consideration. Results if seen on a graph can show when; example, one component becomes more attractive than another. (Ferry 1964) Consequently, sensitivity analysis was done to learn the effect of change in DEWA tariff rate on life costs by keeping all parameters same and results are reflected in Figure I and Figure IV. Also the same was done by changing hours of operation; results are seen in Figure III and Figure VI.

Explanatory notes to the costing

Capital costs

Air cooled chiller package

275 TR chiller package is used for contrast study as data of cost and power usage are accessible for a recent project completed in 2007 (Dubai World trade centre)

Design fees are taken @ 4 % as per market trend in contracting business in Dubai.

Total load requirement as per ETS integrator data is 18,000 TR which needs 66 number of 275 TR air cooled chiller packages. Hence cost as per 66 chiller packages was noted.

District cooling plant

The capital cost figures shown are for a recently executed project (Phase I completed in March 2008) at Dubai Health care city.

Architect/Consultant fees are taken @ 8% as per market trend in contracting business in Dubai.

Plant is constructed for 56,000 TR capacity. Civil cost should be allocated to 56,000 TR . Though this difference was not made in capital cost.

Chiller cost is 18,000 TR (2000 TR x 9nos) in line with phase I ETS load.

Land cost is taken from Dubai rent prices in 2006 in the Dubai Health care city. (UAE property trends 2006)

Economic calculation requires consideration towards the space for the cooling machine which will be vacated for other purposes since the consumer is connected to the DC network (Soderman 2007). Although this was not considered in the calculation.

Operating costs

District cooling plant

Power consumption for the plant is from SCADA reports as per annexure 4.5.

The power consumption charges are assumed at 20 fils/kwh as per DEWA tariff rates from May2008. Sensitivity analysis by changing the rate to 33 fils/kwh is also done to learn the influence of revised rates from DEWA since June2008.

Dubai health care city has residential, hospital buildings and office buildings and so has different running hours. Running hours are assumed as 4800 hrs per year (16 hours /day x 300 days working) and all calculations are based on 4800 hrs of operation. Results for operating at 3200 hrs and 6000 hrs are evaluated.

Water costs are assumed as 4 fils/gallon as per DEWA tariff and run hours are 4800 hrs as per above.

Air cooled package

Power consumption is assumed as 20 fils/kwh as per DEWA tariff rate from May 2008. Since the start of slab tariff, consumption charges for each chiller package will be 20 fils/kwh as total consumption would not exceed the slab. Water and chemical requirements are not applicable for air cooled chiller package, since cooling tower is removed and chilled water system being a closed system the makeup water requirements are irrelevant to consider in costing. Life cycle costs are from budget costing figures formulated from basic equipment sizes, not detailed design solutions. This is supposed to be precise for comparison.

4.5 Inferences from cost comparison

Figure I & Figure IV

District cooling plant has huge initial capital cost, though in the long term it is more advantageous. According to present worth method, district cooling is advantageous from 13th year when present worth becomes lower than air cooled chiller package, which is even before replacement of the chiller package. As operating and maintenance costs are sizably less with the same tariff for electricity as per before May 2008.

Since the start of slab tariff rates for electricity from May 2008, air cooled chiller package NPV is lower than district cooling. As increase in operating costs of district cooling because of higher tariff (33 fils/kwh) when compared to air-cooled chiller package (20 fils/kwh) neutralises the advantage of less power consumption per unit of cooling produced by district cooling as compared to air cooled chiller package. Thus the massive disparity in capital costs of district cooling makes it not worth.

Figure II

In district cooling, capital cost is 56% while operation and maintenance is 44% of the cost. Compared to air cooled chiller package, initial capital investment is 30% while operation and maintenance is 70%. Hence throughout a life cycle of 30 years, O&M costs for air cooled chiller package are much higher than the benefit of low capital investment.

With equivalent annual cost method, district cooling plant is beneficial when weighed against air-cooled chiller package.

Figure III and Figure VI

1. Operating hours of a cooling plant differ widely with use, example the chiller plant in typically HVAC equipment in commercial buildings run for a portion of 2,500 to 3,500 hours that the building is occupied. But in the industrial sector, commercial cooling systems are expanded to comprise of process cooling and function on two shifts or around the clock. Here it is possible to note that the plant runs for 8,000 hours per year. (Archibald et al 2002)

Cost differentiation shows as operating hours lessen, differences in present worth between the DCP and ACC reduces. As hours of operation lessen, O&M costs lessen and DCP loses the advantage to ACC. Although with more operating hours DCP becomes much more attractive than ACC.

2. As per the present worth method, DCP becomes productive from 15th year, the present worth becomes less than ACC because of substituting of the chiller package with 3600 hours of operation, in the 13th year with 4800 hours of operation and in 9th year of operation with 6000 hours of operation. Here it is visible how costs; except initial capital costs; can influence decisions.

Figure V

Comparison of DCP and ACC considering inflation is shown. Rates supposed for inflation the difference in costs of ACC and DCP over 30 years increases as compared to the cost comparison without inflation.

District cooling system considerations and benefits.

High cooling load demand and density are predominant reasons to select District Cooling. It is most commonly seen in universities, government facilities and hospitals, or in office and industrial complexes and high- rise urban districts. A high load density means a less extensive distribution system, which is very expensive. Shorter runs also minimize thermal and pressure losses and maintenance costs. A desirable companion to high load density is a favorable load factor. Means that the aggregate load over time tends to approach the peak block load condition.

This analysis considers both factors, thus making DCP a better option.

Infrastructure Requirements

District Cooling Scheme needs a central plant and a central pipeline network to function. Consideration of these site necessities for district cooling facilities in planning and programming process for Strategic New Development areas in the beginning stage is priority to hold the master plans and certain easy execution of District Cooling Scheme. (Parsons 2003) Due to fast paced construction process any changes to the master plans and infrastructure corridors, can severely impact the completion of the district cooling project.

Traffic Impact Review

Since some of the pipelines laying works need to be on busy roads it is important to have an extensive Traffic Impact Assessment. For Dubai health care city careful notification was provided to the stakeholders to guarantee no inconvenience was caused due to pipeline installation.

Under Ground Congestion

These are higher than anticipated costs since there may be unexpected costs relating to congestion in underground services. These need to be overcome primarily in the planning process. (IDEA 2007)

Chilled Water Temperature Differential

Low chilled water temperature differential (Δ T) is a major district cooling weakness. Poor Δ T performance at cooling coils means lost cooling capacity, wasted energy, extra cost and added complexity for a thermal utility, its chilled water customers, or both. Health care city district cooling plant has power consumption of 1.12 kw/tr which is more than the desired consumption of less than 1 kw/tr due to low chilled water temperature difference. This increases operating costs. To encourage customers to invest in technology to improve Δ T performance in their buildings, an increasing number of utilities have established chilled water rates that vary inversely with Δ T . Figure 4.4 is an example of rates charged to customers from one prominent university in the United States. As can be seen, the lower the Δ T, the greater the rate. Conversely, customers that minimize their flow rate per ton cooling are rewarded. (Moe 2005)

Risks and Uncertainties Faced By District Cooling Customers

There is no bargaining power with the District Cooling Services Provider once a building is connected to District Cooling Scheme and Uncertainties over future tariffs.

Risks and Uncertainties Faced By District Cooling Investors

Demand is unpredictable, Uncertainty in dealing with building owners on District Cooling Supply Agreement (negotiations can be time consuming), Unpredictability relating to land costs for District Cooling plant room and distribution pipelines and High initial capital investments with long payback periods. (Parsons 2003)

Strategic Environmental Assessment

Noise

The central chiller plant and pumps of the district cooling scheme are housed in underground plant rooms, this reduces the noise. As buildings connecting to District Cooling Scheme do not need to have their own chiller plant, the district cooling user building will have no noise. Appropriate techniques can be implemented to reduce the noise during construction stage of district cooling scheme. (Parsons 2003)

Air Quality

District cooling reduces electricity energy thus minimising carbon dioxide emission and will help improve air quality. Based on the case study for 4800 hours of operation the energy saving by using district cooling would be (1.91 -1.12)kw/ton x 4800 hrs x 18000 tons i.e. 68,256,000 KWh , which is equivalent to 104,772,960 lbs of CO2 (Electricity carbon emission factor 1.535 lbs CO2/KWh).(EPA 2006)

Benefits of district cooling for project owners:

A highly efficient solution: Given that this region has extreme heat, air conditioning can account for as much as 70% of the energy consumption in a typical building. Moving this load from individual houses to a central plant, the housing electric load is reduced considerably and along with it the number of electric substations and length and sizes of electric cables. District cooling requires far less electric power than multiple plant rooms or ducted splits. Also the plant room can house the electric substation, enormously reducing the electric works.

Significant capital and O & M cost reduction:

Removing in-building or on-premise chiller plants by using district cooling schemes; means that availability of free land for other use. Also project owners do not need to buy more land to operate and maintain complex central air conditioning plants. They also need not have to replace expensive equipment. The industry has a two part tariff structure which is complex to understand. It is based on an Annual Capacity or Connection Charge for every ton committed to a property and also a Consumption Charge for the energy used measured through an energy meter installed for every end user. Palm district cooling has developed a new form of tariff structure that maintains the consumption charge but replaces the annual capacity charge or connection charge with a One Time Service Connection Charge (AED/sq ft) of the property. (Prashant 2007)

Benefits of this tariff structure:

Developer need not pay advance cost for DC, Developer does not need to pay for any air-conditioning chiller units during construction stage. The tenant or property owner contributes to the cost of the DC system at the time of purchasing his property [as he would do with conventional AC equipment]. When district cooling is an option, the building owner can invest capital towards amenities for tenants.

Reduced project complexity means faster project completion:

Dedicated experienced professionals take over the complex task of providing the cooling needs of the project, simplifying and expediting the project development cycle and expediting move-in dates and income generation

Improved ROI numbers:

Reduced initial up-front capital outlays for developers, faster move-in dates, reduced O&M costs and the elimination of costs related to technical staff all translate into less financial risk for project owners, with improved return on investment and better project economies overall for developers and owners.

No idle expensive capacity:

District Cooling Solutions allow project owners to buy the capacity they need when they need it.

Improved reliability and ease of operation:

Economies of scale allow for sophisticated redundant systems resulting in superior 100% up-time performance and ease of operation for project owners. Units used are high-tech and industrial which dramatically decreases the failure frequency compared to commercial equipment. District cooling reliability is in excess of 99.94%. (Source: IDEA). (Papadopoulos et al 2006) The central chiller plant concept, almost by definition, is more flexible and more reliable and possesses a greater degree of redundancy than the concept involving individual cooling packages.

Greater flexibility in design:

Architects have more creative leeway due to the elimination of heavy machinery.

Ecologically friendly:

It provides for a noise free, clean environment for the tenants. The absence of tall towers allows for a clean environment.