Life Cycle Costing

RESEARCH REPORT FEBRUARY 2009

RICSRESEARCHLIFE CYCLE COSTINGOF SUSTAINABLE DESIGNProfessor John KellyDr Kirsty Hunter

Research

© RICS – February 2009

ISBN: 978-1-84219-436-2

Published by: RICS, 12 Great George Street, London SW1P 3ADUnited Kingdom

The views expressed by the author(s) are not necessarily those of RICS norany body connected with RICS. Neither the author(s), nor RICS accept anyliability arising from the use of this publication.

This project was funded by the RICS Education Trust and RICS Scotland QSand Construction Faculty Board with the aim of developing a methodology forlife cycle costing of sustainable design.

02 LIFE CYCLE COSTING OF SUSTAINABLE DESIGN

About the authors

Professor John R Kelly BSc MPhil PhD MRICS TVM FHKIVM

Professor Kelly, currently chairman of the consultancy Axoss Ltd and visiting professor atNottingham Trent University and Hong Kong Polytechnic University, is a chartered surveyorwith industrial and academic experience. His quantity surveying career began with a nationalcontractor, moving to a small architects practice and later to an international surveyingpractice. His academic career began at University of Reading as a research fellow, movingto Heriot-Watt University as a lecturer and later senior lecturer and finally to GlasgowCaledonian University where he held the Chair of Construction Innovation until November2007. His research into value management and whole life costing began in 1983 and hasbeen well supported by grants from both public and private sector. He has published 4 booksand 8 research monographs and technical manuals.

Kirsty Hunter BEng PhD

Following completion of her PhD degree in value management at Glasgow CaledonianUniversity, Kirsty has pursued a career in the NHS and has experience of working in variousmanagement roles including project management and research management at HealthFacilities Scotland, the Health Protection Agency and University Hospital Birmingham.During her time as a research associate Kirsty worked on a variety of construction relatedresearch projects and through the dissemination of her research achieved two best paperawards at international conferences, a highly commended Emerald journal award, and the2006 Herbert Walton award for best doctoral dissertation in project management.


Executive summary

‘‘Sustainable development presumes a whole systems approach that considers the environmental,social and economic issues of any design decision. Any model or tool which assists decision makersin reaching the best sustainable option must make explicit the complexity of the problem and thetrade-offs and potential synergies which exist within these three facets of sustainability. The optimalsustainable development solution is one which balances the total economic cost and social changetogether with the inevitable environmental consequence but ensures that scarce resources are notsquandered, either deliberately or through ignorance. Sustainable development is variously definedbut this research relies on the Brundtland definition "Sustainable development is development thatmeets the needs of the present without compromising the ability of future generations tomeet their own needs”

This research considers only the economic dimension of evaluating a sustainable design. The researchproject began from the premise that whilst much is said about the economics of sustainable projectsthere is no standard method of measurement of life cycle cost and currently option appraisals are beingcarried out with no consistent approach to the parameters of the calculation. This research projectfocuses on deriving a standardised approach to the life cycle costing of the sustainable design ofbuildings. The specific aim was to design a method with general applicability to building projectsfocusing on insulation, controlled ventilation, micro and biomass heating and electricity generation.The methodologies of life cycle costing (LCC) are well understood but the rules of their application inoption appraisal are not. The cost of carbon and the issues surrounding embodied energy wereinvestigated without reaching a satisfactory conclusion. The current (October 2008) cost of a carbonoffset is approximately £20 per tonne but prices vary according to the scheme supported. There is animportant and unanswered question as to whether carbon counting is a valid component of life cyclecosting. The approach advocated in this research is to focus on the proper evaluation of efficient designand on-site renewable energy generation.

The research highlighted the importance of recognising the two primary reasons for undertaking life cyclecosting, namely:

• to predict a cash flow of an asset over a fixed period of time for budgeting, cost planning, tendering,cost reconciliation and audit purposes and

• to facilitate an option appraisal exercise at any of the six identified levels of study (evolved during this research)in a manner that allows comparison. This will also include benchmarking and tender comparisons.

Examples were seen during the research of calculations conducted in different ways using differentmethodologies, different time scales, and making many different assumptions with regard to particularlyfuel inflation.


Executive summary

This report outlines studies of sustainable design, on-site micro energy generation, methods of data gathering and dataanalysis and the methods of measurement with associated rules and definitions. A draft of these rules and definitionswas passed to BSI and BCIS to inform the document “Standardised Method of Life Cycle Costing for Construction: UKsupplement to ISO 15686 Part 5 life-cycle costing for buildings and constructed assets”. The rules and definitionsgoverning the approach to LCC should be considered the biggest contribution to surveying made by this research.Whilst generated by research into sustainable energy and design, these rules have general applicability.

Finally, it was observed throughout this research that rules of thumb concerning sustainable design and micro energygeneration are difficult to evolve. Innovative design solutions have been used to substantially reduce a project’s carbonfootprint. These design solutions do not need to cost more; it is a gross over simplification to say that a sustainabledesign will add 10% or 15% to the cost of the building. This logic comes from addition thinking i.e. here is a designedoffice building, house or school, how much extra will it cost to modify the design to include for example convectionpowered ventilation? Design has to be based on a clear briefed concept and a value system dictated by the client;addition thinking is entirely the wrong approach. Also it was observed that on-site, micro energy solutions are difficult tojustify on economic grounds. If micro energy benefits are to be measured then a currency other than money has to be used.

Contact

John KellySchool of Built and Natural EnvironmentGlasgow Caledonian UniversityGlasgow G4 0BAScotland

email: [email protected]

Acknowledgements

This project was funded by theRICS Education Trust and RICSScotland QS and Construction FacultyBoard with the aim of developing amethodology for life cycle costing ofsustainable design.

01 Background 06

1.1 Sustainable development 06

1.2 Preliminary work 06

1.3 Aims and objectives 07

02 Background to life cycle costing 07

2.1 Costs 07

2.2 Life 09

2.3 Data 10

2.4 Discount rates 11

2.5 Review of ISO/FDIS 15686-5:2006 (E) 11

2.6 A review of existing methods and models 13

2.7 Rules 14

03 Rules 15

3.1 Introduction 15

3.2 General rules 15

3.3 Formulae 16

3.4 Purpose of calculation 17

3.5 Method of measurement of components 17

3.6 Method of measurement of systems 17

3.7 Method of measurement of single unit items including energy 17

04 Checklist for data gathering at component and system levels 18

05 A methodology for undertaking life cycle costing of sustainability projects 20

5.1 Introduction 20

5.2 Step 1 – project identifiers 20

5.3 Step 2 – study period 20

5.4 Step 3 – Inflation rate and discount rate 20

5.5 Step 4 – gather data 20

5.6 Step 5 – model construction and analysis 24

5.7 Illustration 1 – component cash flow 24

5.8 Illustration 2 – system cash flow 25

5.9 Illustration 3 – option appraisal with a base case 26

06 Conclusion 32

6.1 Conclusion to the research project 32

6.2 Final comments 33

6.3 Recommendations for further research 34

Appendix 1 – Glossary of terms 35

Appendix 2 – The sustainable design checklist 37

Appendix 3 – Renewable energy technologies 41

References 51

Contents


01 Background


1 Background

At the RICS Scotland Quantity Surveying and ConstructionFaculty Board (QSCFB) conference on 30th September2005 three speakers addressed the subject of sustainabilityat both a macro and micro level. A recurring theme wasthe lack of a standard methodology for representing costsand benefits. Howard Liddell, an RIAS 4 star accreditedsustainable design architect and winner of an RICSsustainability award in 2003 for the Glencoe visitor centre,challenged the surveying profession to be more explicitwith regard to the costs associated with sustainability.A subsequent Faculty Board debated the issues raisedaddressing the topics of the macro–economic implicationsof the expansion of Scotland’s renewable energy and alife cycle costing approach to project based sustainabledesign, particularly for ventilation, heating and electricitygeneration. It is the latter topic which was considered tobe of immediate importance.

1.1 Sustainable Development

Sustainable development presumes a whole systemsapproach that considers the environmental, social andeconomic issues of any design decision. Any model ortool which assists decision makers in reaching the bestsustainable option must make explicit the complexityof the problem and the trade-offs and potential synergieswhich exist within these three facets of sustainability.The optimal sustainable development solution is onewhich balances the total economic cost and socialchange together with the inevitable environmentalconsequence but ensures that scarce resources are notsquandered, either deliberately or through ignorance.Sustainable development is variously defined but thisresearch relies on the Brundtland definition "Sustainabledevelopment is development that meets the needs of thepresent without compromising the ability of futuregenerations to meet their own needs”

This research considers only the economic dimensionof evaluating a sustainable design. The research projectbegan from the premise that whilst much is said aboutthe economics of sustainable projects there is nostandard method of measurement of life cycle cost andcurrently option appraisals were being carried out withno definition of the parameters of the calculation. The lifecycle costing texts are rich in mathematical theory, riskand sensitivity analysis, data management andcomponent life assessment. However, no text hasproduced an explicit method of measurement for optionappraisal or benchmarking. This research project focuseson deriving a standardised approach to the life cyclecosting of sustainable design in buildings. The specificaim was to design a method with general applicabilityto building projects focusing on insulation, controlledventilation, micro and biomass heating and electricitygeneration. The methodologies of life cycle costing (LCC)are well understood but the rules of their application inoption appraisal are not.

Background


1.2 Preliminary work

A preliminary literature search confirmed the view of theQSCFB that whilst there are a number of publicationswhich deal with sustainability at a global impact level, fewdeal with sustainability at a project level and none set alife cycle cost methodology suitable for use by surveyorsin option appraisal. A useful publication at project level isthe 2002 CIRIA publication “Sustainability accounting inthe construction business”. Aimed specifically at clients,construction firms and project managers the reportincludes as appendices case studies and reportingproforma but does not give an option appraisal or lifecycle costing methodology. It concludes “in terms ofwho is best placed to undertake the work involved toproduce a set of [sustainability] accounts is open to debate”.

Life cycle cost methodology is well understood ifinfrequently used. Boussabaine and Kirkham (2004),Bourke et al (2005), Flanagan and Jewell (2005), Kellyand Hunter (2005) being an example of most recentlypublished work. However, although the principles arewell described a standard method approach to lifecycle costing of sustainable design was not available.

This paper uses the term life cycle costing followingthe logic of ISO/FDIS 15686-5:2006(E) Buildings andConstructed Assets – Service Life Planning – Part 5 – LifeCycle Costing, that defines whole life costing as includingthe finance and other costs which precede the conceptand design stages.

1.3 Aims and Objectives

The aim of this research was to produce a standardisedapproach to the life cycle costing of sustainable designin buildings. The specific aim was to design a methodwith general applicability to building projects focusingon insulation, controlled ventilation, micro and biomassheating and electricity generation.

The objectives set at the outset were:

1. A standard method to calculate life cycle costs forsustainable design.

2. A checklist to allow surveyors to gather, in a logicalfashion, the data necessary to populate the life cyclecost model.

3. The production of information in a standard formconducive for the client to make an informed cost -benefit decision.

4. To illustrate the method with examples to show thelife cycle costs of such installations.

5. To present a commentary on issues such as embodiedenergy, ventilation, air tightness, insulation, etc.

This report describes the output of the work undertakenin meeting these objectives.

02 Background to life-cycle costing


Life cycle costing refers to an exercise in which the capitalcost of the project and all relevant future costs are madeexplicit and used either;

• as the basis for a cash flow prediction over a givenperiod of time or

• used in an option appraisal exercise to evaluate varioussolutions to a given design problem.

In either situation the time value of money is an importantelement but in this research the focus is on option appraisal.

There are other terms which are in current use, for example,cost in use, life cycle costing, whole life appraisal andthrough life costs. A new ISO standard, ISO ISO/FDIS(ISO/FDIS 15686-5:2006 (E) Buildings and ConstructedAssets – Service Life Planning – Part 5 – Life Cycle Costing)includes an extensive list of definitions of very similar terms.A glossary of terms is given in appendix 1.

In the context of a standard approach Ruegg et al (1980)states that from the perspective of the investor ordecision-maker all costs arising from the investmentdecision are potentially important to that decision andthat those costs are the total whole-life costs and notexclusively the capital costs. Ruegg et al outlines fivebasic steps to making decisions about options:

1. Identify project objectives, options and constraints.

2. Establish basic assumptions.

3. Compile data.

4. Discount cash flows to a comparable time base.

5. Compute total life cycle costs, compare options andmake decisions.

The basic assumptions referred to are related tothe period of study, the discount rate, the level ofcomprehensiveness, data requirements, cash flowsand inflation.

Flanagan and Jewell (2005) supplement the above bystating that the following questions drive the applicationof the whole life approach:

1. What is the total cost commitment of the decision toacquire a particular facility or component over the timehorizon being considered?

2. What are the short term running costs associated withthe acquisition of a particular facility or component?

3. Which of several options has the lowest total lifecycle cost?

4. What are the running costs and performancecharacteristics of an existing facility - asset? (bringinginto play post occupancy evaluation)

5. How can the running costs of an existing facility bereduced? (bringing into play benchmarking)

6. For a Build Operate Transfer concession project howcan the future cost be estimated at design phase andwhat is the reliability?

2.1 Costs

Marshall and Ruegg (1981) give recommended practicefor measuring benefit-to-cost ratios and savings-to-investment ratios based on a similar five step processand focusing in their appendix on savings-to-investmentratio evaluations of energy conservation investments asa means to determining between retrofit options forhousing including; solar domestic water heating,substituting electric resistance heating with gas centralheating, attic insulation and double glazing.

Background to life-cycle costing


In 1986 the Quantity Surveyors Division of the RICSproduced a guide which listed the costs to be includedwithin a life cycle cost calculation. All expenditure incurredby a building and during its life were described as:

1. Acquisition costs - total cost to the owner of acquiringan item and bringing it to the condition where it iscapable of performing its intended function.

2. Disposal costs - total cost to the owner of disposingof an item when it has failed or is no longer requiredfor any reason.

3. Financing costs - cost of raising the capital to financea project.

4. Maintenance costs - cost of maintaining the building,to keep it in good repair and working condition.

5. Occupation costs - costs to perform the functions forwhich the building is intended.

6. Operating costs - costs of for example; building tax,cleaning, energy, etc. which are necessary for thebuilding to be used.

Costs to be included in a life cycle cost calculation arefactual costs able to be estimated with a known degreeof certainty. Excluded are externalities and intangiblecosts consequential to the design decision but unableto be estimated with certainty.

2.2 Life

In the RICS guide life is defined as the length of timeduring which the building satisfies specific requirementsdescribed as:

1. Economic life - a period of occupation which isconsidered to be the least cost option to satisfy arequired functional objective.

2. Functional life - the period until a building ceasesto function for the same purpose as that for whichit was built.

3. Legal life - the life of a building, or an element of abuilding until the time when it no longer satisfies legalor statutory requirements.

4. Physical life - life of a building or an element of abuilding to the time when physical collapse is possible.

5. Social life - life of a building until the time when humandesire dictates replacement for reasons other thaneconomic considerations.

6. Technological life - life of a building or an elementuntil it is no longer technically superior to alternatives.

Of relevance to this research, the guide describes residualvalues as the value of the building when it has reachedthe end of its life and does not have an alternative use;or has reached the end of its life for its planned purposebut does have an alternative use. The issues here withregard to life highlights the different elements impactingthe study period and reflect a total building life mindset.

Flanagan et al (1989) states that two different time scalesare involved in life cycle costing: firstly the expected lifeof the building, the system or the component; andsecondly the period of analysis. Flanagan states; "it isimportant when carrying out any form of life cycle costingto differentiate between these two timescales, since thereis no reason to believe that they will be equal: for examplethe recommended period of analysis for federal buildingsin the US is 25 years, considerably less than anyreasonable building life. This introduces a seventhelement to the above list namely the period of study.



Ruegg and Marshall (1990) confirm seven study periodsnamely:

1. The investor's holding period - the time before sellingor demolishing.

2. The physical life of the project - specifically relating toequipment.

3. The multiple lives of options - recognising that optionshaving exactly the same total costs over one period oftime will have different total costs if the cash flows aretaken over different periods due to replacement andmaintenance occurring at differing points in time.

4. Uneven lives of options - recognising that wherealternatives have different lives and cash flows thenresidual values have to fully compensate particularlyover short study timeframes. A note is also madeof the dangers of using annual equivalent discountmodels where alternatives have uneven lives.

5. Equal to the Investors Time Horizon - the periodof interest the investor has in the building.

6. Equal to the longest life of alternatives.

7. The quoted building life.

Kelly and Hunter (2005) recommend that a life cyclecost calculation should not extend beyond 30 years.This reflects the view of the authors that buildings changesignificantly both functionally and economically withina 30 year period to the extent that the costs andfunctions known at time zero cannot reflect thosecosts and functions 30 years hence. Examples aregiven for retailing which has changed significantlywithin 30 years and healthcare which is practisedentirely differently today from that which waspractised in 1978. The exception may be housing.

2.3 Data

Kelly and Hunter (2005) and Flanagan and Jewel (2005)cite the same basic data sources as: data from specialistmanufacturers, suppliers and contractors, predictivecalculations from model building and historic data.All authors highlight the danger associated with dataused for life cycle costing; Flanagan and Jewel state:

• Data are often missing.

• Data can often be inaccurate.

• People often believe they have more data thanactually exists.

• It can be difficult to download data for subsequentanalyses and for data sharing by a third party.

• There will be huge variation in the data, sometimes forthe same item.

• Data are often not up to date.

• Data input is unreliable: the input should be undertakenby those with a vested interest in getting it right.

Both Kelly and Hunter and Flanagan and Jewel quotethe UK Office of Government Commerce (2003) whichstates that it is important to focus on future trends ratherthan compare costs of the past. Where historic data isavailable it may provide misleading information, such asthe past mistakes in the industry and focusing on lowestprice. Historic data is best used for budget estimates atwhole building or elemental levels. At the point of optionappraisal of systems and components it is alwayspreferable to estimate the cost from first principles andonly to use historical cost information as a check.



2.4 Discount rates

Ruegg and Marshall (1990) consider in detail the discountrates to be used in the context of business discount ratesfor commercial decisions and public discount rates forpublic decisions. Ruegg and Marshall also introduce thetheory of risk adjusted discount rates. Boussabaine andKirkham (2004) take this further and introduce methodsof assessing and blending the risk methodology with lifecycle cost calculations.

A final point to make is the relevance of value to the lifecycle cost equation outlined in Preiser et al. (1988) whichstates; "the term evaluation contains a form of the wordvalue, which is critical in the context of post occupancyevaluation since any valuation has to state explicitlywhich and whose values are being used in establishingevaluation criteria”. In the context of a post occupancyevaluation as opposed to life cycle costing it brings intofocus that the majority of writers in life cycle costing arefocused on cost rather than value.

The evidence from the literature in the context of theresearch gives support to the development of life cyclecosting taking account of all relevant costs, over a giventime period for all options being considered, usingcontemporary data, with appropriate discount ratesand taking into account risk.

2.5 Review of ISO/FDIS 15686-5:2006(E) Buildings andConstructed Assets – Service Life Planning Part 5 LifeCycle Costing

The standard, still in its draft form, has the objective of"to help to improve decision making and evaluationprocesses, at relevant stages of any project". Other keyobjectives are "make the life cycle costing assessmentsand the underlying assumptions more transparent androbust" and "provide the framework for consistent lifecycle costing predictions and performance assessmentwhich will facilitate more robust levels of comparativeanalysis and cost benchmarking". These three objectives,out of 14 listed, are considered the most important in thecontext of the current project. The standard describeslife cycle costing as "a valuable technique which is usedfor predicting and assessing the cost performance ofconstructed assets".

The standard describes three levels of applicationnamely;

• Strategic level relating to the structure, envelope,services and finishes.

• System level (elemental level) relating to floor walland ceiling finishes, energy, ventilation, water capacity,communications, cladding, roofing, windows anddoors, foundations, solid or framed walls and floors.

• Detail level (component level) for example ceiling tiles,floor coverings, electrical and mechanical plant, etc.



This is a useful categorisation but it ignores the levelof asset management which is described elsewherein the standard as "life-cycle costing is relevant atportfolio/estate management, constructed asset andfacility management levels, primarily to inform decision-making and comparing alternatives. Life-cycle costingallows consistent comparisons to be performed betweenalternatives with different cash flows and different timeframes. The analysis takes into account relevant factorsthroughout the service life, with regard to the clients’specified brief and project specific service lifeperformance requirements”. See Figure 1.

The standard reiterates many of the concepts reviewedand is a useful document if for no other reason that ithighlights the application of life cycle costing at thefour stages of asset/portfolio management, projectmanagement, elements and component levels. Althoughthere is a large amount of work to be done at the firstthree levels in the context of sustainability the focusof attention of this research is at component level.

PRE-PROJECT

Asset Management/Option Appraisal

LCC study 1

Optional ProjectAppraisal

LCC study 2

ElementAppraisal

LCC study 3

Retro-fitComponentAppraisal

LCC study 4

YearZero

ComponentAppraisal

LCC study 4 LCC Audits

STRATEGIC BRIEF BRIEFOUTLINEDESIGN

PROJECT POST PROJECT

POST PROJECTEVALULATION

Figure 1 Application of life cycle costing through the project life-cycle



2.6 A Review of Existing Methods and Models

BCIS Running Costs Online

BCIS Building Maintenance Information (BMI) hasrecorded the cost of occupying buildings in the UKfor over 30 years, and has collected data on theoccupancy and maintenance costs of buildings fromsubscribers and other sources. The database was paperbased, subscribers receiving a mailing at regular intervals.This service has been re-launched as BCIS BuildingRunning Costs Online and as the name suggests is aweb based service to professionals involved in facilitiesmanagement, maintenance, and refurbishment. A centraldatabase is organised in an elemental format allowingcomparative analyses to be undertaken, rebased fortime and location based upon indices updated monthly.The service also keeps life expectancy of buildingcomponents data.

BCIS Running Costs Online has a life cycle costingmodule that combines the information from the BCISannual reviews of maintenance and occupancy costswith the data from the bi-annual occupancy cost plansallowing users to compare the running costs of differentbuilding types. The output is a spend profile over aperiod of up to 60 years showing the estimatedexpenditure for each year of the selected period.

Society of Construction and Quantity Surveyors(SCQS) – Framework for whole life costing

The SCQS framework document and spreadsheetbased LCC package was launched in 2005 and hasbeen used mainly within the local authority arena.It updates the original document produced by Smithet al (1984). The spreadsheet package is elementallybased with three modules comprising; a Job Box inwhich the components of each element are built up;an intelligent input tool for the input of base data inresponse to requests on prompt screens and finallycompleted spreadsheets comprising a record of theinput, a master calculation sheet and a sensitivityanalysis sheet. The spreadsheets are completedautomatically by the input tool giving confidence inthe accuracy of calculations and placement in thecorrect cell on the spreadsheet. The spreadsheetformat is familiar to surveyors and can be manuallychecked at any time during the operation.The programme does not rely on a database; the

database is effectively constructed in the Job Box.The entire Job Box can however be easily transferredfrom project to project. The tool was developed to enableoption appraisals to be undertaken quickly and accuratelyusing present value techniques over study periods of notexceeding 30 years.

University of Dundee

Professor Malcolm Horner of Whole Life Consultants Ltdand the Construction Management Research Unit,University of Dundee, has launched a web-basedelement-orientated life cycle costing system basedupon the output of an EPSRC funded research project.The aim is to minimise life cycle costs through theapplication, to construction components, of the integratedlogistic support methodologies used in the aircraftindustry. Data is collected in a user prescribed mannerand stored in a database accessed on line. The programentitled "Life cycle cost Evaluator" is written in Javafacilitating flexibility for bespoke applications and inreporting structures at both preliminary and detaileddesign stages. The system is compliant with ISO 15686.The default cost breakdown structure is that proposedby BCIS, but any structure can easily be created andamended, simply by "dragging and dropping".The software's flexible input and output systems andnovel features reduces the time to estimate life cyclecosts by up to 80%, and facilitate the production ofa construction industry maintenance managementoperating system. (Note: Text submitted byProfessor Horner).



Life cycle cost Forum - LCCF

The LCCF claims to have been set up as the firstconstruction industry initiative to promote the use ofwhole-life costs. It was launched in November 1999with the aim of developing an online comparator tool toremove errors and prevent the reliance on spreadsheets.One of the main objectives was to advance the use of lifecycle costing along the entire length of the supply chain.The tool allows whole-life costs to be compared on alike-for-like basis and works on the basis that the supplieris the best source for information on life cycle costs oftheir own products. There is also a system that providesbenchmarks contained in a central database to allow forcomparisons across similar projects.

LCC comparator - BRE

LCC comparator is a tool developed by BRE to calculatethe life cycle cost of building elements and components.It reduces the amount of time normally spent workingon life cycle cost calculations by minimising the effortrequired. The tool highlights how higher capital costs atthe outset can be more effective over the long term withregard to lower maintenance and operating costs. A noteon the website (January 2008) indicates that the tool isno longer available.

2.7 Rules

A review of the literature and examination of the availablesystems demonstrated that life cycle costing can beundertaken for diverse reasons in many different waysgenerating variable outputs. If a life cycle cost ofsustainable options were to be undertaken then ruleshave to be developed to ensure that options arecompared on an identical basis. For this reason thefollowing rules were developed as a part of this researchand checked through desk studies and third partyanalysis. The rules and methodology make an importantcontribution to surveying.

03 Rules


3.1 Introduction

The following rules were derived from literature andvalidated through the expert analysis of the RICSQuantity Surveying and Construction Faculty. The ruleswere considered a necessary prerequisite for theanalysis of the life cycle cost of sustainable solutionsand particularly for option appraisal.

The purpose of life cycle costing is to provide informationin a form which assists decision-making on capital andthrough life costs. The purpose of this standard approachis to guide the preparation of life cycle cost studies in astandard form which facilitates audit and data exchange.This standard approach acknowledges six levels of study:

• Study at multi asset or portfolio/estate level

• Study at single asset or whole building level

• Study at cluster level (multi-element)

• Study at element level

• Study at system level

• Study at component or detail level

The general rules and the formulae apply to all levelsof study.

There are two primary reasons for undertaking a life cyclecost study

• a study to predict a cash flow(s) over a fixed period oftime for budgeting, cost planning, tendering, costreconciliation and audit.

• a study as part of an option appraisal exercise at anyof the six levels of study in a manner that allowscomparison. The cash flow of the selected option maybe used to generate a cash flow over a fixed period oftime and therefore can be metamorphosed into a studyof the first type.

3.2 General Rules

1. A brief description of the project will be given.

2. The purpose of the study shall be stated.Examples include:

a. Prediction of a single cash flow

b. Option appraisal based on multiple cash flows

c. Comparison of tenders that include a cash flow

d. Audit of single or multiple cash flow(s).

3. The focus of the study shall be stated as one or moreof the following:

a. Study at multi asset or portfolio/estate level

b. Study at single asset or whole building level

c. Study at cluster level (multi-element)

d. Study at element level

e. Study at system level

f. Study at component or detail level

4. The study will state whether the data for the LCCexercise is built up from first principles or whetherparametric data is used.

5. Time zero shall be stated. Time zero is the point intime from which the study period commences.

6. Capital costs are all relevant costs accrued prior totime zero and deemed to include service and productdelivery and installation, finance costs, fees and taxes.

Rules


7. Maintenance costs are all relevant costs necessaryto facilitate the asset’s continuing structure, fabric,services and site performance at the level specifiedat time zero.

8. The study period shall be stated. The study period isthe time from time zero to a given point in time in thefuture and over which the calculations pertain.

9. The units of time shall be stated. The units of timeare the increments to which the calculations referand may be for example; years, months, weeks, days.All factors in the calculations, for example, interestrates will relate to the stated units of time.

10. Assumptions with regard to interest rates shallbe stated.

11. Assumptions with regard to hard FM activities inthe final period of study shall be stated.

12. The method of depreciation shall be stated, forexample a straight line method of depreciation maybe assumed. Where depreciation is not applicable thisshall be stated

13. Assumptions with regard to residual values shall bestated.

14. The method of undertaking sensitivity analysisand/or risk analysis shall be stated.

3.3 Formulae

The following formulae shall be used as applicable:

P = principal or present valuei = interest expressed as a decimaln = number of time periodsA = accumulated amount or future amountR = repayment or regular payment to a sinking fund

1. Compound Interest

2. Present Value

3. Year’s Purchase or Present Value of £1 per Annum

Alternative formula for calculators without –n function

4. Sinking Fund

5. Mortgage

Interest Rate Adjustments

All rates expressed as a decimal

a To adjust an interest baserate t by inflation rate fto give a discount rate i

b To adjust an interest rate perannum (ipa) to an interest rateper month (ipm)

P = R (1-(1+i)-n)i

i(1+i)nP = R ((1+i)n-1)

R =(1+i)n-1

Ai

RR =(1+i)n-1Pi(1+i)n

P =(1+i)n

A

A = P (1+i)n

i = -1(1+f)(1+t)

(1+ipa)ipm = 12( ) -1

Rules


3.4 Purpose of Calculation

The purpose of the calculation shall be stated as oneof the following:

1. A prediction of cash flow over time for a single asset(no discounting and no option appraisal).

2. A prediction of cash flow over time for multiple assets(no discounting and no option appraisal).

3. An option appraisal of cash flows of multiple solutionsto a problem where no “base case” is established.

4. An option appraisal of cash flows of multiple solutionsto a problem where a “base case” is established.

3.5 Method of Measurement of Components

1. The component shall be described either in terms of itsmanufactured part reference or in terms of its physicalcharacteristics and function.

2. The number of identical components shall be stated.

3. Maintenance of the component shall address thefollowing:

a. Requirements for periodic inspection.

b. Periodic and predetermined physical maintenancelisting each different type of maintenance separately.

4. The physical life of the component shall be stated asfollows:

a. The actual life where the component is to bereplaced as a planned activity prior to failure.

b. The estimated physical life where the component isto be replaced upon failure.

5. The capital cost of the installed component shall begiven and stated whether estimated or firm.

6. The estimated maintenance costs shall be stated.

7. The estimated scrap value of the replaced componentshall be stated.

3.6 Method of Measurement of Systems

1. The system shall be described in terms of itscomponents.

2. The rules of measurement for components will apply tothose components comprising a system.

3. Systems will be described under element headings.

3.7 Method of Measurement of Single Unit Itemsincluding Energy

1. Single unit items will be described separately fromcomponents and systems.

2. Single unit items include energy and those servicesrepresented as a single sum per period of time such asmanagement fees, insurances, cleaning, etc.

04 Checklist for data gathering at component and system levels


4.1 Introduction

Following a desk study review of websites includingthe Energy Savings Trust, Scottish Community andHouseholders Renewables Initiative (SCHRI) and theCarbon Trust, the following questionnaire was producedto obtain data from manufacturers and suppliers atcomponent and system levels. The questionnaire waspiloted through consultation interviews withmanufacturers of selected technologies (n=6).

4.2 Questionnaire

The questionnaire is illustrated with answers from afictitious manufacturer of a hot water solar panel withthe trade name of SolarPanPlus. The data is used inthe illustrative calculations later.

1. Give a brief description of the technology:

SolarPanPlus is an evacuated tube solar roof panelthat delivers hot water to a twin coil hot water cylinder.The pump, controls and secondary tank thermostat arepowered by an integral PV unit negating any mainselectrical work.

2. What is the supplied cost of the technology(exc. Works)?

£7050 inclusive of VAT and installation for a 4.2 m2

panel installed on a typical two storey three beddetached house.

3. Approximately what is its installation cost and labourhours?

SolarPanPlus is normally fitted by two skilled operativesin a single day.

4. What are the primary components that will requireservicing and replacement during the life of thetechnology?

Components

• All components have an estimated 20 year lifeexcept for the pump which may need to be replacedat ten years.

• One SolarPanPlus heat collector and PV panel of 4.2 m2

(with cable) for a typical two storey three bed detachedhouse.

• Roof mounting brackets• Pipe, fittings, tees• Pump• Thermometer• Control valve• Control unit• Tank thermostat

Checklist for data gathering at component and system levels


5. Does this component require regular inspection andif so what is the inspection period and the inspectiontime in labour hours?

Included with service, see below.

6. Does this component require regular maintenance andif so what is the maintenance time in labour hours?If more than one type of maintenance e.g. after 1000hours/ after 5000 hours/ etc. please list theseseparately (or attach maintenance schedule withestimation of labour hours)

SolarPanPlus requires inspection at 3 year intervals atwhich point the panel including the integral UV panelwill be cleaned and checked and the antifreezechanged. The inspection takes one operative one dayand is currently charged at £300 including VAT.

7. What is the estimated service life of the componentin years?

20 years.

8. What are its approximate removal and re-installationlabour hours?

The panel can be easily removed. The cost ofre-installation is the same as the supply of a new panel.

9. What is the terminal/scrap value of this component atthe end of its life?

Over 80% of the panel is easily recyclable but the panelhas no terminal value.

10. What factors shorten component life e.g. exposure toUV light, salt laden air, etc.

The panel is resistant to UV light

11. Is there a standard warranty period for thecomponent, if so how long?

5 year warranty. A maintenance contract can bepurchased for £12 per month which extends thewarranty to 20 years and includes regular inspectionand all necessary replacements and maintenance.

12. What is the estimated energy generation and/orsavings accrued from using this product

In an average year SolarPanPlus will supply a family’sdomestic hot water requirements (assuming sensibleuse – i.e. short low flow showers, spray taps inbathrooms, etc) during the summer months and 30%of the requirement during the remainder of the year.SolarPanPlus will generate approximately theelectrical equivalent of 25kWh per day in the summer(say 150 days) and 8kWh during the remainder of theyear. If a gas boiler is used for heating water in thesummer then boiler life extension should be taken intoaccount as the boiler should not fire up during thesummer months.

05 A method for undertaking life-cycle costing of sustainability projects


5.1 Introduction

This section outlines a method for undertaking a life cyclecost appraisal of a sustainable project illustrated in part6 by reference to fictitious products. The method is anapplication of the rules in part 3 and follows the logicof the flowchart below. The method is described andillustrated through a number of steps.

5.2 Step 1 – Project Identifiers (rules 1 to 5)

Some description is required to both identify and describethe project including; the basis for the calculationi.e. whether the data is parametric or obtained frommanufacturers/suppliers, and the time zero point forall calculations. The type of life cycle cost calculation,prediction of cash flow or option appraisal (with orwithout a base case), can be included in the generaldescription. This identifies how the data will be used.

5.3 Step 2 – Study Periods (rules 8 and 9)

Determine the length of the study period and also the unitof time (rules 6 and 7). The study period will commenceat time zero which has been previously defined. The unitsof time and the interest rate must correlate i.e. if the unitof time is months then the interest rate must be apercentage rate per month. It may be advantageous toset up any model to calculate over a number of timeperiods so that options can be quickly compared ratherthan running repetitive sensitivity checks.

5.4 Step 3 – Inflation Rate and Discount Rate (rule 10)

The inflation rate only is used when predicting a cash flowof over time for the purposes of budgeting, cost planning,tendering, cost reconciliation and audit.

Discount rates are used when comparing two or moredissimilar options during an option appraisal exercise orwhen comparing tenders which have an FM constituent.The discount rate will be legislated, calculated or given bythe client. Public sector option appraisal calculations tendto use the discount rate issued by HM Treasury which is(January 2008) 3.5%. A calculated discount rate takesa relevant rate of interest e.g. the bank rate, and adjuststhis for inflation. A client nominated discount rate is usedwhen considering options against strict internal rate ofreturn or opportunity cost of capital criteria

5.5 Step 4 – Gather Data

Data will be obtained from parametric sources e.g. BCISRunning Costs Online, or from first principles either bycalculation e.g. energy calculation, or from manufacturersor suppliers. Data gathered from manufacturers or suppliersshould include the detail illustrated in Part 4 above.

A method for undertaking life-cycle costing of sustainability projects


Figure 2 Flowchart of a LCC system

START

TO PAGE 2

Project identifiers:Project name

Brief description of the projectFile name

Anticipated time zero

User identification:User name/password

What type of LCC calculation?1. Prediction of future cash flows only

(for budgeting)2. Option appraisal of future cash flows3. Ditto but with a base case established

What discount rate?1. Legislated (eg. HM Treasury)2. User specified3. Calculated

• How many study periods?• What is the length of time of

each study period?

Page 1




FROM PAGE 1

How many sustainableoptions to be considered?

For each sustainable option and the baseoption if relevant input:

1. Brief description of the sytem

2. Brief description of system components

3. For each component enter:a) current capital cost including installationb) estimated service lifec) scrap value at end of lifed) would the component be replaced in

last year of studye) will the component be inspected or

maintained in the last year of studyf) residual values if NOT straight line methodg) inspection period and cost if relevanth) maintainence period and cost

4. Does the sytem save or generate energy?a) indicate form of energy saved/generatedb) estimated value of energy saved/generatedc) if grants apply give lump sum valued) give estimated value of renewables

obligation certificates if applicablee) value of carbon offsets if applicable

option appraisalcash flowprediction

option appraisal cash flow prediction

TO PAGE 3

Page 2




Calculation based on cash flowsfor each option and the base caseover the study period(s) andevaluated on a net present valuebasis and using the measuresof economic performance.

Calculation based on cash flowsfor each option over the studyperiod(s) and compared on a netpresent value basis.

Calculation based on cash flowsof a single option over the studyperiod(s) accounting for inflationonly.

Has a basecase been established

for optionappraisal?

Yes

No

END

END

END

FROM PAGE 2

Page 3



5.6 Step 5 – Model Construction and Analysis

As discussed in Part 2.6 above there are few commercially available software packages which allow the type ofcalculation described above. Many Quantity Surveying practices have a life cycle cost package developed andused in-house. These are generally spreadsheet based. The illustration below was constructed using a spreadsheet.

5.7 Illustration 1 – Component cash flow

The first illustration is of a cash flow forecast for budgeting purposes of a single component adjusted for inflation only.

LCC cash flow for a gas fired central heating boiler

Inflation rate 2.50%Year Activity Current cost Future cost

0 Purchase 2350.00 2350.00

1 Annual inspection 40.00 41.00




5 Replace pilot light 200.00 226.28



8 Replace burner 500.00 609.20








16 Replace burner 500.00 742.25




20 Replace boiler 2350.00 3850.75






Figure 3 Illustration of cash flow over time for a single asset



5.8 Illustration 2 – System cash flow (Inflation rate 2.50%)

The second illustration is of a cash flow forecast for budgeting purposes of a system adjusted for inflation only.

Current Future Current Future Current Future Current Future Total CashYr Activity Cost Cost Cost Cost Cost Cost Cost Cost Flow

0 Purchase 2350.00 2350.00 400 400.00 1100 1100.00 1600 1600.00 5450.00

1 Annual inspection 40.00 41.00 41.00


3 A insp & antifreeze 40.00 43.08 80 86.15 129.23


5 Replace pilot & pump 200.00 226.28 400 452.56 678.84



8 Replace burner 500.00 609.20 609.20

9 A insp, flush & antifreeze 40.00 49.95 200 249.77 299.73

10 Replace pilot & pump 200.00 256.02 400 512.03 768.05





15 Replace pilot & pump 200.00 289.66 400 579.32 80 115.86 984.84

16 Replace burner 500.00 742.25 742.25


18 A insp, flush & antifreeze 40.00 62.39 200 311.93 374.32


20 Replace boiler, pumpcontrols & radiators 2350.00 3850.75 400 655.45 1100 1802.48 800 1310.89 7619.57





25 Replace pilot & pump 200.00 370.79 400 741.58 80 148.32 1260.68

Figure 4 LCC cash flow for a gas fired central heating system

BOILER PUMP CONTROLS PIPES & RADIATORS



5.9 Illustration 3 – Option appraisal with a base case

Assume a project to retrofit a detached house (50m2 plan area) by increasing roof insulation thickness from 100mmto 250mm ( from u-value including structure approximately 0.36 to approximately 0.16) and/or installing cavity wallinsulation (from u-value 1.00 to 0.55) or fitting a roof mounted solar hot water panel as SolarPanPlus illustrated earlier.

In this illustration the base case is the existing situation.

Application of the rules

This exercise is an option appraisal with a base case. With reference to the rules and the checklist the following data hasbeen obtained.

The project is to retrofit a detached house (50m2 plan area) to significantly reduce gasconsumption. One or more of the following options are being considered within a totalbudget of £7000:

• increasing roof insulation thickness from 100mm to 250mm (from u-value includingstructure approximately 0.36 to approximately 0.16)

• installing cavity wall insulation (from u-value 1.00 to 0.55)• fitting a roof mounted SolarPanPlus solar hot water panel

The purpose of the study is an option appraisal based on multiple cash flows

The study will be conducted at system level

The data for the study is built up from first principles

Time zero is taken from the completion of the installation works when the systemsare ready for use. The target date for time zero is 1st August 2008

The study period reflects the householder’s intention to remain in the dwelling for thenext 15 years. Studies will be conducted over 10, 15 and 20 years to check for timesensitivity in the calculations.

The unit of time is years

The interest rate will be calculated assuming a return on a deposit account of 5% andan inflation rate of 2%.

The maintenance requirements of the options examined apply only to theSolarPanPlus. For the purposes of this example the maintenance contract will notbe used.

Depreciation will not apply and residual values will not be included in the calculation.

Maintenance and replacements will not be accounted for if they occur in the final yearof the study.

Sensitivity checks will be undertaken by including three study periods and by varyingthe discount rate by 2% (increase and decrease).

Rule 1

Rule 2

Rule 3

Rule 4

Rule 5

Rule 8

Rule 9

Rule 10

Rule 11

Rule 12

Rule 13

Rule 14



Basis of the calculation

£7000

5%

2%

10, 15 and 20 years

Initial cost of 64m2 at £7 per m2 installed = £448

Assuming a designed temperature difference of 21oC a U valueimprovement of 0.2 will lead to a reduction of approximately 1000 kWhduring the heating season (2500 degree days). At £0.03 per kWh for gasthis leads to a saving of £30 per annum.

Initial cost of 120m2 wall area = £600

Assuming a designed temperature difference of 21oC a U valueimprovement of 0.45 will lead to a reduction of approximately 4100 kWhduring the heating season (2500 degree days). At £0.03 per kWh for gasthis leads to a saving of £123 per annum.

Initial cost £5875Maintenance at 3 yearly intervals £300Replacement pump year ten £80

150 days at 25kWh per day at £0.03 per kWh (gas) = £112.50215 days at 8kWh per day at £0.03 per kWh (gas) = £51.60Total saving = £164.10 per annum

Available budget

Interest rate on deposits

Inflation rate

Study periods

Roof insulation costs

Roof insulation fuel savings

Cavity wall insulation

Cavity wall fuel savings

SolarPanPlus costs

SolarPanPlus savings



Calculations

The calculations are based upon the rules and the basicdata as indicated above. It should be noted that residualvalues have not been included in the calculation, a factordiscussed further in the report below. As the optionappraisal is referring back to a base case the calculationsinclude measures of economic performance.

Report

Illustration 3 is a relatively common type of optionappraisal but in this case strictly complies with the rulesdeveloped during the research. The option appraisalcompares an upgrade of roof insulation, the installationof cavity wall insulation and the retro fitting of a solarhot-water panel. The option appraisal is typical of a lifecycle costing exercise with a base case. The optionappraisal has been carried out over three study periods,10 years, 15 years and 20 years and has been checkedfor sensitivity to plus and minus two per cent on acalculated discount rate based on a 5% interest rateand a 2% inflation rate.

The least cost option is the upgrade of roof insulation amonetary saving of £30 per annum. This apparently lowlevel of saving is because the roof is already insulatedand therefore only a marginal improvement in the U-valuecan be achieved. The cavity fill option is based on acavity wall complying with the building regulations ofcirca 1980. It should be noted that a better U-valueimprovement can be achieved over a much larger areathan the roof. The cost of the solar panel assumesinstallation on top of the existing roof covering.

With reference to Figure 5 (calculated discount rate) theresults of the calculations demonstrate that based ondiscounted payback:

1. The roof insulation will pay back in year 20. The internalrate of return for increased roof insulation is 2.96%,considerably lower than the interest rate of 5%indicating that £448 is better invested on depositrather than spent on increasing insulation.

2. The cavity fill will pay back in year 6. The cavity filledoption offers the highest value for money with a Savingto Investment Ratio increasing from 1.75 in year 10 to3.07 in year 20. The internal rate of return on cavity fillis almost 20% after 20 years indicating that this is aworthwhile investment.

3. The solar panel will never pay back: indeed the savingson the solar panel are only marginally higher than thecost of maintenance and replacements meaning thatafter 20 years, the expected “end of life” ofthe solar panel, the savings are a little over £1,000.In monetary terms this is a poor investment.

The sensitivity checks indicate (figures 6 and 7) very littlechange from the facts reported above.

One factor which has not been included is residualvalues. The logic for not including residual values is thatthe roof insulation and the solar panel are likely to needreplacing in their entirety after a 20 year period. This isan important observation as it demonstrates that takinga residual value, based on a straight line method ofdepreciation, is only valid when a pay back is madebefore the end of component life. If the residual valueequation were to be strictly interpreted then the Savingsto Investment Ratio would be higher in year 10 than itwould be any at the end of the components life whichis illogical. In this type of option appraisal exercisetherefore residual values must be treated with great care.

The final point to emphasise here is that the aboveanalysis is solely from an economic perspective. If thecalculations included facets of value then the result couldbe different.



Figure 5 Results of a calculation for a comparative LCC using a calculated discount rate

Discount Rate CalcInterest rateInflation rateDiscount rate

Initial capital costSaving per annum

MaintenanceReplacement

Report Year 10

Initial capital costNet savings

Savings to Investment RatioDiscounted payback

Internal Rate of Return

Report Year 15




Report Year 20




0.050.020.029

Option 1Roof Insulation

£448.00£30.00

£448.00-£191.320.57n/an/a

£448.00-£88.330.80n/a0.06%

£448.00£0.761.00year 202.96%

Option 2Cavity Fill

£600.00£123.00

£600.00£452.371.75year 615.75%

£600.00£874.632.46year 618.99%

£600.00£1,239.923.07year 619.96%

per 3 yrsper 10 yrs

Option 3SolarPanPlus

£5,875.00£164.10£300.00£80.00

£5,875.00-£5,289.080.11n/an/a

£5,875.00-£5,131.800.14n/an/a

£5,875.00-£4,822.490.19n/an/a



Figure 6 Sensitivity check on Figure 5 using a discount rate of 5%

0.050


£448.00£30.00

£448.00-£216.350.52n/an/a

£448.00-£136.610.70n/a0.06%

£448.00-£74.130.83n/a2.96%

Option 2Cavity Fill

£600.00£123.00

£600.00£349.771.58year 615.75%

£600.00£676.702.13year 618.99%

£600.00£932.852.55year 619.96%

per 3 yrsper 10 yrs


£5,875.00£164.10£300.00£80.00

£5,875.00-£5,333.370.10n/an/a

£5,875.00-£5,208.570.12n/an/a

£5,875.00-£4,991.480.16n/an/a

Discount Rate Calc

Discount rate



Report Year 10




Report Year 15




Report Year 20






Figure 7 Sensitivity check on Figure 5 using a discount rate of 1%

0.010


£448.00£30.00

£448.00-£163.860.63n/an/a

£448.00-£32.050.93n/a0.06%

£448.00£93.371.21year 172.96%

Option 2Cavity Fill

£600.00£123.00

£600.00£564.971.94year 515.75%

£600.00£1,105.402.84year 518.99%

£600.00£1,619.603.70year 519.96%

per 3 yrsper 10 yrs


£5,875.00£164.10£300.00£80.00

£5,875.00-£5,241.270.12n/an/a

£5,875.00-£5,044.900.15n/an/a

£5,875.00-£4,609.690.22n/an/a

Discount Rate Calc

Discount rate



Report Year 10




Report Year 15




Report Year 20




06 Conclusion


6.1 Conclusion to the research project

This research project set out with a number of objectives:

1. A standard method to calculate life cycle costs ofsustainable design.

2. A checklist to allow surveyors to gather, in a logicalfashion, the data necessary to populate the life cyclecost model.

3. The production of information in a standard formconducive for the client to make an informed cost -benefit decision.

4. To illustrate the method with examples to show thelife cycle costs of such installations.

5. To present a commentary on issues as embodiedenergy, ventilation, air tightness, insulation, etc.

At beginning of the research it became apparent thatwhilst there were a number of papers and texts referringto life cycle costing methodologies and definitions noneproposed a set of rules to be strictly applied in cases ofoption appraisal. This research has generated thoserules and related definitions and tested them in expertgatherings. A draft of these rules and definitions hasbeen passed to BSI and BCIS to inform the document“Standardised Method of Life Cycle Costing forConstruction: UK supplement to ISO 15686 Part 5life-cycle costing for buildings and constructed assets”.The rules and definitions governing the approach toLCC should be considered the biggest contribution tosurveying made by this research.

The research highlighted the importance of recognisingthe two primary reasons for undertaking life cycle costing,namely:

• to predict a cash flow of an asset over a fixed periodof time for budgeting, cost planning, tendering, costreconciliation and audit purposes and

• to facilitate an option appraisal exercise at any of thesix identified levels of study in a manner that allowscomparison. This will also include benchmarking andtender comparisons.

Examples were seen during the research of calculationsconducted in different ways using different methodologies,different time scales, and making many differentassumptions particularly with regard to fuel inflation.

The research findings also demonstrated the need fora standardised approach to data gathering at componentlevel and this is illustrated in part 4 of this report.The questionnaire described in part 4 was tested andrefined with a number of suppliers manufacturers.

Checklists have been developed for both sustainabledesign and sustainable energy solutions, and these areincluded in appendices 2 and 3 and a standardisedapproach to the prediction of a cash flow and an optionappraisal is presented.

It is recommended that the standardised approach isadopted by surveyors advising clients based upon lifecycle cost calculations.

Conclusion


6.2 Final Comments

The study described has taken the researchers far andwide in the field of sustainability and it would be remiss ifthis report did not include some personal observations ofthe researchers:

1. Sustainable Design.

The genesis of this study was a challenge laid downby Howard Liddell, (an RIAS 4 star accredited sustainabledesign architect and winner of an RICS sustainabilityaward in 2003 for the Glencoe visitor centre) to be moreexplicit with regard to the costs associated withsustainability. This research has made significantprogress towards a standardised methodology andsome of the work has been incorporated into theBSI/BCIS publication mentioned above. However, rulesof thumb are difficult to evolve except to say that on-site,micro energy solutions are difficult to justify on economicgrounds. On the other hand many innovative designsolutions have been used to substantially reduce aproject’s carbon footprint. These design solutions do notneed to cost more; it is a gross oversimplification to saythat a sustainable design will add 10% or 15% to the costof the building. This logic comes from ‘addition thinking’i.e. here is a designed office building, house or school,how much extra will it cost to modify the design toinclude for example convection powered ventilation?Design has to be based on a clear briefed concept anda value system dictated by the client; ‘addition thinking’is entirely the wrong approach.

Examples reflecting sustainable value in design wereseen at Arup’s Solihull Campus, at Gaia’s Glencoe visitorcentre for the National Trust for Scotland, at King ShawAssociates’ Innovate Green office project at Thorpe ParkLeeds and at Keppie’s design for Great Glen House,Inverness, the headquarters building for Scottish NaturalHeritage. These three examples demonstrate asustainable design solution to a clear brief backed by anexplicit value system. The cost of these solutions has tobe viewed from a value for money perspective calculatedon LCC principles. Comparisons with design solutionswhere sustainable design was not a feature of the client’svalue system could in theory be made but the calculationsand logic are complex.

Conclusion


2. Embodied energy

This was initially an objective of the original researchproposal but has proved too difficult to accurately model.It was unfortunate in some ways to focus on aluminiumproducts as a trial study. Bauxite is mined in a number ofcountries worldwide and transported to smelters. Whilstaluminium requires huge amounts of energy in thesmelting process a significant proportion (83% in thecase of Alcan) of this electricity is sourced from localhydro schemes. The carbon footprint of this smeltingprocess is very small. Finally, the carbon cost of transportand fabrication, further transport and the installation ofthe final product became so product and site specific thatgeneralisations were completely invalid. Added to thiswas the maturity (in relation to many other materials) ofthe aluminium recycling industry. These facts resultedin the embodied energy objective being abandoned.However, the lesson learned was the importance ofundertaking specific case studies at least to clarify theaccuracy of the perception of a number of designersthat for example, metal is bad and wood is good.

3. Micro energy

A lengthy study of micro-energy was undertaken whichis reflected in the findings in appendix 3. There are manysources of information and some of these have beenreferenced. At the end of the study the researchersconcluded that although many micro energy productsare sold based upon economic advantages, some ofwhich are reported in appendix 3, that the benefit ofmicro energy has to be based upon a value judgement.Currently, a properly undertaken option appraisal studyusing the rules advocated by this research is unlikely toprove any economic benefit from a micro energy solutioneven with the current levels of government grants andcurrent prices paid by electricity companies for surplusgenerated electricity.

Conclusion


On-site generated micro energy is difficult to store,hot water less so than electricity. Three approachesare available for dealing with electricity generated inexcess of the domestic requirements at the time ofgeneration; dumping waste energy (usually as heat),installing batteries and an inverter for on-site storageor connection to the electricity grid. Batteries are a lowdemand supplier of electricity suitable for example forlow wattage lighting but unsuitable for sustained highdemand required for example by an electric oven.Selling surplus electricity back to the energy supplieris an effective way of dealing with excess generation.Electricity companies will buy such electricity at about3p per unit (Jan 2008).

Economic benefits from grid connected exported microelectricity generation accrue to electricity companies fromsale of the electricity and sale of Renewable ObligationCertificates (ROCs). ROCs are awarded to accreditedgenerators of eligible renewable electricity producedwithin the UK – solar energy (including photovoltaics),hydro, wave power, tidal energy, geothermal energy,biofuels (including energy crops) and on and offshorewind. ROC’s are traded amongst electricity generatingcompanies such that those companies which fall belowtheir renewables obligation can buy from those companieswho have exceeded their renewables obligation.

ROCs are not to be confused with international greencertificate trading. The latter is an offsetting devicewhereby those who wish for various reasons to presentthemselves as zero carbon can purchase green certificateoffsets. The current price of green certificate offsets isapproximately £20 per tonne of CO2.

In summary therefore investing in micro energy generationis done for reasons other than any economic advantage.

4. New technology products:

It is difficult for manufacturers to predict the longevity ofinnovative products and their components. Additionally,many of the innovative products are produced by newcompanies which are more prone to failure, takeover, etcand these companies have difficulty offering credible longterm guarantees that parts will be continue to be availableover the estimated life of the product. Even in fairlyestablished technologies such as wind generators,installation in a new environment can lead to problems forexample, in 2007 it was reported that 12 out of 36 turbinesoff Herne Bay, on the Kentish Flats suffered major failuresafter one year in service.

Conclusion


6.3 Recommendations for further research

Demands for cost planning, budgeting, tender evaluationand audit on a life cycle cost basis are increasing. Thereis a necessity for rules and guidance on best practicewhich this research has addressed in part. ISO 15686gives clarity to applications and definitions and theBSI/BCIS publication is expected to influence rules andmethodology. This work has majored on rules andmethodology using sustainability as the subject. Theresearch has uncovered many different approaches in theevaluation of sustainable options on a life cycle costbasis. This current situation is unacceptable. There arethree significant pieces of work which are required underthe sustainability banner,

1. Case study research is required to illustrate insome detail a proper approach to embodied energy.Existing theories of embodied energy need to berobustly examined and tested and an explicit methoddeveloped for the measurement of embodied energyin construction components.

2. Sustainability needs its own currency. Whilst energyremains relatively inexpensive evaluation solely oneconomic grounds will tend to favour the status quo.A suggestion for further research is the developmentof a shadow “taxation” system. The research wouldanswer the question, how high must taxation be onexisting carbon based technologies before a tippingpoint is reached and sustainable design andsustainable energy become the preferred option.A parallel situation exists currently in the innovationsin site waste disposal to avoid landfill tax.

3. Finally, a method needs to be established for theexplicit statement of value for money in the contextof sustainability. It can be anticipated that in the nottoo distant future tenders will be judged on value formoney where a major part of the value equation willbe sustainability. How will this value for money becredibly calculated?

07 Appendix 1 - Glossary of terms


The following terms, used in life cycle costing, arearranged under the following subheadings:• Core definitions• Cost and value• Interest rates and discount rates• Levels of study• Time

Core definitions

Base case – the existing situation against whichimprovement options can be compared or a specificsolution selected as the benchmark against which otheroptions can be compared

Mortgage – strictly, the conveyance of an asset by adebtor to a creditor as security for a debt. In the contextof life cycle costing the mortgage is the amount to bepaid at regular intervals at a given interest-rate to repaya debt.

Sinking funds - funds accumulated by equal paymentsmade at regular time periods into an account whichattracts a given interest-rate to accumulate a requiredsum of money established prior to undertaking thesinking fund calculations.

Whole Life Appraisal is the systematic consideration ofall relevant costs, revenues and performance associatedwith the acquisition and ownership of an asset.

Life cycle costing - the quantification of the total costof an enterprise for input into a decision making orevaluation process.

Cost and values

Acquisition cost - all costs, including capital costs,incurred prior to time zero in acquiring an asset.

Annual equivalent - the present value of a series ofdiscounted cash flows expressed as a constantannual amount.

Capital cost - initial cost of the asset.

Cost – the total paid for labour, materials, plant andequipment, overheads and profit.

Depreciation - the distribution of the monetary value ofan asset over a period of time commonly related to itsproductive or useful life.

Discounted cost - the result of discounting a costto be incurred in the future at a given interest rate

Disposal cost - the costs associated with the disposalof an asset at the end of its life cycle.

External costs - costs associated with an asset notreflected in the transaction costs of the acquisition.

Hard facilities management cost - the cost ofnecessary replacement, redecoration, repair andcorrective, responsive and preventative maintenancenecessary for the continued specified functionalperformance of the asset.

Net present value - the total present day worth of afuture cash flow discounted at a given interest-rate.

Nominal cost - the estimated future amount to be paid,including the estimated changes in price due to inflation,deflation, technological advances, etc.

Present value - the present day worth of a future costdiscounted at a given interest-rate. It can be consideredto be the amount to be invested in a bank today at agiven interest rate to accrue a required amount at a givenpoint in the future.

Real – adjusted for changes in the value of money.(present orientation)

Real Opportunity Cost of Capital – the interest ratereflecting the earnings possible from an activity other thanthat being studied.

Residual value - the value assigned to an asset at theend of the period of analysis

Soft facilities management cost - all costs incurred inrunning and managing the facility including administrationsupport services, cleaning, security, rent, rates,insurances, energy, local taxes and charges.

Single unit items - include energy and those softfacilities management services represented as a singlesum per period of time such as management fees,insurances, cleaning, etc.

Sunk costs - costs of goods and services alreadyincurred or irrevocably committed.

Appendix 1 - Glossary of terms


Terminal value - the scrap value of a component or assetat the point of its replacement..

Treasury Discount Rate – the rate specified as thediscount rate by the Government Treasury to be usedas the discount rate in public sector life cycle costcalculations.

Interest rates and discount rates

Base rate – the interest rate selected as the basis of thediscount rate. This could be the current bank base rateor the client’s opportunity cost of capital. The base ratecan be used, adjusted by the inflation rate, to give thediscount rate.

Discount rate – the interest rate used for bringing futurecosts to a comparable time base (time zero).

Inflation/deflation - a sustained and measurableincrease/decrease in the general price level.

Internal rate of return - the discount rate that whenapplied to a cash flow containing positive and negativeamounts gives a net present value of zero.

Nominal interest rate – the actual interest rate appliednot adjusted for inflation. Note Fisher equation (realinterest rate = nominal interest rate – inflation).

Real interest rate – the rate adjusted for inflation.

Treasury Discount Rate – the rate specified as thediscount rate by the Government Treasury to beused as the discount rate in public sector life cyclecost calculations.

Levels of Study

Cluster – a number of elements combined on the basisof a common function or combined on the basis of a workpackage for contracting purposes.

Component – a single manufactured product installedin a single operation which can be described by itsmanufactured part number or by its physicalcharacteristics and function.

Element – a part of construction which performs thesame function irrespective of the components from whichit is made.

System – a number of identified discrete componentscombined to form a mechanism to perform a singlefunction or a number of functions of a similar nature.

Time

Period of analysis/period of study – the length of timeover which the life cycle cost assessment is analysed.

Physical life of a component – the time at which acomponent fails to meet the performance criteria requiredof it and has to be removed and replaced.

Residual life – when applied to an asset is that remainingat the end of the study period

Time zero – the point in time from which the studyperiod commences. All relevant costs accrued prior totime zero are deemed to be capital costs.

Unit of time – The time interval used in life cycle costcalculations. It may be any unit of time measurement(day, week, month, year). However, in the calculationsthe time period and interest rate per time period must besynchronised.

07 Appendix 2 - The sustainable design checklist


Introduction

The following checklist is not intended to be a completeguide to sustainable design but rather indicative of thosefactors which should be considered in meeting theclient’s and community's desire for more environmentallysympathetic buildings. The data for this section hasbeen drawn through consultation with establishedarchitects working in the sustainability field and througha desk study of sustainable design guides and checklists.Discussions with architects highlighted that undertakingsustainable design at the very earliest project stages wasfundamental to the achievement of a successfulsustainable building. Design considerations such asbuilding orientation, materials, insulation, ventilationand waste water management all impact the building’ssustainability and should be factored in to the designprior to consideration of “add on” energy efficiency andenergy generating technologies.

The objectives of sustainable design are to minimisepollution, reduce the consumption of natural resources,reduce energy during material production, constructionand use; and create a healthy comfortable space to workand or live.

Site Location

Master planning has the greatest impact on sustainabilityas this activity affords the opportunity to locate andorientate individual buildings and minimise pedestriantravel to; public transport, cycle paths, local shops andother amenities. Master planning also affords theopportunity to be sympathetic to the local environment,maximises the re-use of brownfield sites and theavoidance of flood plains.

Building Design, Layout And Orientation

Buildings should be designed to be in sympathy withtheir local environment and where possible should beorientated such that passive solar gain, shelter, shadingand natural lighting are all considered. Specifically thefollowing should be considered:

• Minimise overshadowing.

• Limit glazing in north facing walls to minimise heat loss.

• Include draught lobbies to act as a thermal buffer.

• Consider passive rather than mechanical solutionsto heating and ventilation (see heating andventilation below)

• Design for internal and external noise control at theoutset by identifying noise sensitive areas and locatingthese away from noise and/or vibration producingareas. Consider the impact on neighbours of noisegenerating activities.

• Consider the use of the building over time and designappropriate flexibility to allow adaptation and extensionto meet the future needs of building users. Facilitatefuture expansion and adaptation by:

• Positioning the building on the site so that expansionis not compromised.

• Considering the location of service equipment andplant rooms.

• Planning circulation to maintain efficiency in anenlarged building.

• Considering the design of the structure to facilitateupward expansion with the minimum of structuralintervention.

• Consider, at the time of the initial construction,installing foundations to facilitate future expansion.

• Providing easy access to site services andcommunications infrastructure heating, cooling,power, water, sewerage, communications to allowfor future expansion of services

Appendix 2 - The sustainable design checklist


Insulation, Heating and Ventilation

There are two factors to consider in minimising heatloss from buildings; firstly, insulation and secondly airtightness. The general rules are to:

1. Insulate walls, roofs, windows and external doorsto the highest level possible, above the minimumstandards set by the building regulations.

2. Build tight with no anticipated loss of internal air.

3. The final variable in the equation is correct ventilation(build tight, ventilate right).

There are many ways to satisfy the three general rulesfor example:

• The use of dynamic insulation to draw air into a building.This relies on a constant air flow through a membranecaused by the pressure difference across it. Dynamicinsulation acts as a buffer against rapid changes inmoisture that can lead to mould and condensation.

• Controlled natural ventilation through the design ofcontrolled convection currents and monitoring throughthe use of CO2 sensors.

• Create sun spaces on south facing facades to facilitateventilation by convection and to heat the structuralmass as a heat sink during periods of cold weather

• Structural mass can also be used as a heat sink to coolthe building during hot weather by cooling throughcontrolled overnight purging.

• If air conditioning is necessary analyse the answer tothe question “why is it necessary?”

Lighting

Bring maximum daylight into all rooms at high-level toreduce brightness levels and glare on work bases andconsider the following:

• Light pipe distribution for buildings that have difficultyof access, a high security requirement or internalenvironment concerns.

• Control of glare and heat gained from direct sunlight byallowing daylight but limiting sun using external louvres.

• Install energy-efficient lamps and fixtures.

• Consider a switching regime which maximises theopportunity for lighting to supplement day lighting.

• Consider the use of occupancy sensors.

Building Materials

The use of prefabricated units and modular pods tendto the minimise waste and facilitate modern methods ofconstruction (MMC). However, consideration should begiven, as with all building materials, to the energyconsumed in manufacture and transportation andpreference should always be given to locally-produced,low embodied energy materials.



The three R’s (Reduce, Re-use, Recycle) is a helpfulmnemonic in material selection.

Reduce – Material reduction through careful geometricplanning is the first approach.

Re-use – The second strategy is to incorporatepreviously used materials and equipment. In addition tobase material sourced from the demolition of masonryand concrete structures there is a small but embryoindustry refurbishing materials and equipment sourcedfrom demolition and refurbishment projects. Certified andapproved refurbished materials and plant, particularlyservices equipment such as chillers and pumps, shouldbe considered as an economical alternative to new.Care should be taken not to reject such alternatives outof hand through prescriptive specification.

Recycle – A number of issues are addressed under theheading of recycling:

• Materials should be selected to have good recyclingcharacteristics such as pure metals, e.g. steel,aluminium, copper, etc. (About half of steel currentlyavailable is from recycled material). uPVC can also beprocessed and recycled.

• Packaging should be carefully controlled and returnedto the manufacturer wherever possible.

• Wherever possible material from sustainably managedsources should be sourced, for example, wood fromsustainably managed forests as certified by the ForestryStewardship Council (FSC) or equivalent.

• An appraisal of maximising recycling of materialsfrom demolition should make use of ICE’s demolitionprotocol before demolition.http://www.aggregain.org.uk/demolition/the_ice_demolition_protocol/index.html

• Liaise with local authorities in the provision of on-siterecycling facilities.

Water and Waste Water Management

There are an number of on-site water recyclingopportunities which should be considered in any design:

• Rainwater harvesting to reduce the use of potablewater for activities such as toilet flushing, irrigation orvehicle washing.

• Disinfected grey water can also be used for non potableactivities such as toilet flushing.

• Water efficient fixtures and appliances are available forexample waterless urinals, spray taps, low flow showerheads, etc.

• Sustainable urban drainage systems (SUDS) use porouspaving in outdoor hard surfaced areas such asplaygrounds and car parks to allow surface water todrain naturally reducing the load on utilities.

• Reed beds can be incorporated into the landscaping foron-site purification.

Landscaping and Ecology

The geographic and biodiversity of site and vegetationshould be assessed for preservation during and afterconstruction. Landscape management should beintroduced once the construction is complete with useof native trees, shrubs and plants that do not requireirrigation in the summer. Vegetation can be sited toprotect the building by disrupting and reducing thespeed of the prevailing wind in winter thereby reducingthe cooling of the external facade. Water featuresshould incorporate closed systems for recycling.

Transport

A transport plan, considered at the design stage,should include the use of public transport, electricpoints for charging electric cars, facilities for cyclistsincluding showers, lockers and secure bicycle storage.The transport plan may also include facilities for workingat home including telecommunications strategies.

Secure By Design

Incorporate passive surveillance of streets, open publicspaces, parking and servicing areas. Identify a strongdemarcation between public and private space, andensure that public areas are well lit and that landscapingand vegetation does not obscure views. Ensure that thebuilding design does not include recesses or publiclyaccessible passageways. Incorporate vandal resistanceand deterrence strategies.



References

Sustainable Housing Forum (October 2003) Building Sustainably: How to Plan and Construct New Housing for the 21stCentury. TCPA/WWF (http://www.wwf.org.uk/filelibrary/pdf/esbuildingsustainably.pdf)

Constructing Excellence (July 2003). Demonstrations of Sustainability, The Rethinking Construction Demonstrations andhow they have Addressed Sustainability.Constructing Excellence.

Keppie Design (2006). Great Glen House. Keppie Design.

Stevenson, F and Williams, N (2007). Sustainable Housing Design Guide for Scotland. Communities Scotland.

Public Technology Inc., US Green Building Council (1996). Sustainable Building Technical Manual Green Building Design,Construction, and Operations. Public Technology Inc.

Dundee City Council - Architectural Services Division (undated). Sustainability Checklists. Dundee City Council.

Checklist SouthEast: http://southeast.sustainability-checklist.co.uk/

Mayor of London (2006). Sustainable Design and Construction: London Plan Supplementary Planning Guidance. GreaterLondon Authority.

07 Appendix 3 - Renewable energy technologies


Introduction

Renewable energy technologies provide renewable formsof energy without the reliance on nuclear or fossil fuels.The following technologies have been identified througha desk study review of websites including the EnergySavings Trust, Scottish Community and HouseholdersRenewables Initiative (SCHRI) and the Carbon Trust.The desk study generated the questionnaire includedin Part 4. The questionnaire was piloted throughconsultation interviews with manufacturers of selectedtechnologies (n=6). This appendix provides an outlineof each of the technologies identified, their components,costs, maintenance information and the issuesassociated with the technology. It should be noted thatthe technologies may be used in combination.

Surplus electricity from grid connected electricitygenerating technologies can be sold to an energysupplier. This also gives rise to a Renewable ObligationCertificate (ROCs) which have a market value. One ROCis equivalent to approximately 1,000 kilowatt hours (kWh)of renewable electricity. Exemption can also be obtainedfrom the Climate Change Levy for businesses that haveinstalled green technologies.

While every effort was made to ensure accuracy of thedata (costs, capacity, power output, etc) at the timeof this stage of the research (Summer 2007), it shouldbe recognised that these technologies are undercontinual development.

Appendix 3 - Renewable energy technologies


Wind Turbines

Outline of Technology

Wind is a renewable source which can be captured togenerate electricity by converting the power withinmoving air into rotating shaft power: the wind turbine.Variations in wind speed affect the potential output.

Wind turbines vary in size and power output, rangingfrom a few hundred watts to 2-3 megawatts. Smallturbines may be used to supply energy for batterycharging systems such as on boats or in homes (theaverage size of wind turbine for a three bed house is1.5-3kW). Large turbines grouped on wind farms supplyelectricity to the national grid.

Components

The following components make up a typical wind turbine:

• The turbine is the generator turned by the blades.

• The mast is the support structure for the turbine.

• Systems that are off-grid require battery storage and aninverter to convert to alternating current. The size of thebattery dictates the amount of time appliances can berun when there is no wind. The size of the inverterdetermines the number of appliances that can be runat the same time from the stored electricity.

• A controller is required to ensure batteries are notover or under-charged and can divert power toanother source.

• Backup power supply is required for periods of no wind.

• Grid connected systems do not require a battery orinverter but will require a controller and an “export” meter.

Costs

• Small scale systems up to 1kW cost around £3000.

• Larger scale systems in the region of 1.5kW to 6kWcost between £4,000 - £18,000 including installation.

Maintenance

• The life expectancy for a wind turbine is up to 20 yearsand includes service checks every few years to ensureefficient operation. On some turbines the blades mayneed to be replaced.

• The typical battery life for storage systems isapproximately 6-10 years, depending on the type.

Outline of Issues / Considerations

• At 2007, use tends to focus on large scale applications.

• Installation cost is high.

• Turbines require sufficient wind resource to generate anadequate amount of power.

• The site for a wind turbine(s) requires clear exposure,without turbulence from obstructions such as trees,houses or other buildings. An appropriate wind site willproduce an average output of 30% of the capacityrated for the turbine. For example, a 3kW wind turbinegenerates the equivalent to rated power for 30 per centof the year. It will generate 3 x 0.3 x 8,760 (24hrs x 365days) = 7,884 kWh per year.

• A site inspection and analysis is required beforeinstallation of a wind turbine(s) to determine the poweroutput from installing such a device.

• Planning permission from the local authority is usuallyrequired and issues such as noise, visual impact, andconservation issues also have to be considered.

• The size of the battery bank (in off-grid systems)determines the time appliances can be run if there isno wind.

• The pay back period is variable and has been reportedas 3-5 years in some cases and in others 20-30 years.



Biomass Heaters


Energy from biomass is produced from organic matterexcluding fossil fuels. Energy from biomass results inwhat is known as a carbon neutral process when the CO2released during the generation of energy from biomass isequal to the CO2 absorbed during the fuel’s production.The performance of wood boilers is increasing, withemissions being reduced and efficiency equivalent to oilor gas boilers.

There are two main methods of using biomass to heata domestic property. Stoves can be fuelled by logs orpellets and generally have an output of 6-12kW.Or, boilers connected to central heating and hot watersystems which usually have an output larger than 15kW.

Components and Boiler Selection

The following components make up a typical biomassheater:

• A stove or boiler.

• An integral hot water energy storage tank oraccumulator tank that stores water up to 90°C.

• Automatic boilers are available in various capacitiesfrom 50 to 500kW and include various componentsdepending on type:

• Underfeed burner components: Auger feed, primary airintake, secondary air intake, combustion chamber, heatexchanger, flue gas de-dusting, ash discharge.

• Boilers with grate feed (more expensive but are alsosuitable for wood fuels with a high moisture and ashcontent): Auger feed, moving grate, primary air intake,secondary air intake, combustion chamber, heatexchanger, flue gas de-dusting, ash discharge.

• Compact units (larger versions of household pelletboilers which include automatic cleaning, electricignition and high reliability): burner head, primary airintake, ash pan, sensor, ring for secondary air intake,heat exchanger, automatic heat exchanger cleaner,flue connection, lambda sensor (exhaust gasoxygen sensor).

Costs

• The capital cost for installing a biomass heater is highercompared to oil and gas systems. However, fuel costsshould be lower.

• Stoves generally cost £1,500 - £3,000 includinginstallation.

• The costs for boilers vary depending on the systemchosen and the fuel choice; a typical 15kW (averagesize required for a typical three bed house) pellet boilercould cost from £4,000 - £12,000 installed including thecost of the flue and commissioning. Manual log feedsystems tend to be slightly cheaper.

• Fuel costs are influenced by the distance from thefuel supplier.

Maintenance

The maintenance involved in an automatic biomassheater depends on various factors, such as whether theboiler has an automatic cleaner for the heat exchangerand automatic ash discharge; whether remote monitoringof the system is possible, and whether chips or pelletsare used.

The time required maintaining a biomass heaterdepends on the size of the system and fuel consumption.For compact, fully automatic boilers for large buildings,the maintenance work for boilers using pellets or highquality chips does not exceed 30 minutes a week.

To reduce the amount of maintenance work associatedwith a biomass heater consideration should be given toheaters that have features which include automatic ashdischarge and automatic heat exchanger cleaning.It is critical to agree on a maintenance contract with theboiler manufacturer to ensure the long term operationof the boiler.




• Selecting the fuel type (pellets or chips, or pellets andchips) is a significant consideration as both types havevarious advantages and disadvantages:

- Chips tend to be available locally and therefore aregood for the local economy plus they tend to becheaper than pellets. However, a large storage areais essential for this type of fuel, a high quality of chipis required and maintenance is more demanding.

- Pellets are more standardised and therefore havegreater reliability. A smaller fuel store is required andthere is less maintenance work. The disadvantage ishigher fuel costs.

• A reliable source of pellets or chips from a local sourceis required.

• More space is required for a wood heating systemthan for a gas fired system. Space is required toaccommodate the boiler and the fuel storage as wellas access for regular maintenance, specifically cleaningand ash disposal.

• Fuel stores must be moisture free and well ventilated.

• The size of the fuel store depends on: anticipated fuelrequirements, fuel type, reliability of deliveries, spaceavailable, delivery vehicle capacity, etc.

• Access and enough space for the delivery vehicle tomanoeuvre to be incorporated into the design.

• Dust emissions and noise occur during unloading ofpellets or chips.

• Noise from air and flue gas fans and the fuel feedsystem must be appreciated in the design.



Ground Source Heat Pumps (GSHP)


In the UK, a constant temperature of about 11-12°C ismaintained from depths from approximately two metresbelow ground throughout the year. The ground has a highthermal mass and therefore it can store heat from the sunduring the summer. Ground source heat pumps (GSHPs)transfer heat from the ground into a building to providespace heating and domestic hot water. The use of GSHPsis most common in new build projects particularly for thesupply of under-floor heating. A GSHP will operate witha seasonal efficiency of at least 300%, an air source heatpump has a seasonal efficiency of about 250%.This means that a GSHP will deliver more kW in heatthan the energy required to run the pump.

Components

The following components make up a typical groundsource heat pump:

• Ground heat exchanger – comprises lengths of pipeburied in the ground, either in a borehole or a horizontaltrench (there are different types of GSHPs, a slinky coilembedded in a trench of about 10m length will provideabout 1kW of heating load).

• Heat pump – a heat pump has four main components;evaporator, compressor, condenser and expansion valve.

• Heat distribution system – consists of under-floorheating or radiators for space heating or water storagefor hot water supply.

Costs

• Costs of a GSHP are dependent on the energydemands of the building and the ground conditions.

• The installed cost of a GSHP ranges from about£600-£1000 per kW of peak heat output for a trenchsystem and £800-1250 for a borehole system. Thesecosts exclude the cost of the distribution system.The price per kW gets lower as the systems get larger.The initial capital costs tend not to be lower than thecost of a conventional boiler.

• Setting up costs (design, equipment mobilisation andcommissioning) are a significant part of the total costtherefore the capital cost measured in £/m of borehole/trench will fall as the collector size increases.

• The running costs for a GSHP system are dependent onthe associated electricity cost and usual rates apply,although some suppliers offer a special heat pump rate.

Maintenance

Maintenance for GSHPs is minimal. There is norequirement for an annual safety inspection as thereis for combustion equipment. In terms of replacement,the circulation pumps have the shortest lifetime andare unlikely to be guaranteed for more than one year.The location of pumps should be designed for easyaccess and replacement. The compressor life is upto 15 years and often guaranteed for up to 3 years.The ground loop has a long life (over thirty years for acopper ground coil providing the ground is non acidicand over 50 years for polyethylene pipe) and requiresno maintenance.




• Space for installation and site access for equipmentshould not be underestimated e.g. digger/drilling rig.

• The ground material must be suitable for digging atrench or borehole. This includes the depth of soilcover, the type of soil or rock and the groundtemperature. The deeper the loop the more stablethe ground temperatures and the higher the collectionefficiency but the installation costs will go up.

• The size of the heat pump and ground loop will dependon the heating requirements. Factors to consider whendesigning the ground heat exchanger are pipe length,diameter, configuration etc. Oversizing will increase theinstalled cost for little operational saving particularlyduring periods when the heat pump is under part load.Undersizing may require the use of top-up heating.

• A back up heating / cooling system may be required.

• Noise from the heat pump must be appreciated in thedesign.

• GSHPs work more efficiently for low temperature heatdistribution systems such as underfloor heating.

• The compressor and pump can be powered byinstalling solar PV or some other form of on-siterenewable electricity generating system. It should berecognised that four times the CO2 is produced perkWh using mains electricity generated from fossil fuel,than the CO2 generated to produce the equivalent heatoutput using mains gas. Therefore unless renewableelectricity is used there is no CO2 saving in generatingheat from GSHP rather than from a conventionalefficient gas boiler.

• Retain a detailed plan of the GSHP which shows thelocation of the ground heat exchanger, details of thecirculating fluid, pressure tests, warranties etc.



Hydroelectricity


Hydro power systems convert potential energy stored inwater held at height to kinetic energy to turn a turbine toproduce electricity. Small-scale hydro power is a provenand mature technology. The basic theory for a smallturbine is no different to that of a large turbine.

The energy available in a body of water depends onthe amount of water flowing per second, and the height(or head) that the water falls. The power available isproportional to the product of head and flow rate.The scheme’s actual output will depend on how efficientlyit converts the power of the water into electrical power.

Components

The following components make up a typical hydropower system:

• A weir and intake (or leat) to divert the flow from thewater course to carry water to the forebay tank.

• A forebay tank for water to pass through a settlingtank or ‘forebay’ in which the water is slowed downsufficiently for particles to settle out. The forebay isusually protected by a rack of metal bars (screens)which filters out debris.

• A penstock pipe / channel to carry the water from theintake / forebay tank to the turbine (pipe must be ofsufficient diameter to minimise ‘head loss’).

• A spillway for drainage of excess water.

• A powerhouse which contains the turbine, controlequipment and generator to convert the power of thewater into electricity.

• An outflow / tailrace through which the water is releasedback to the river or stream.

• Underground cables, or overhead lines to transmitelectricity to its point of use (these must be of asufficient size to minimise efficiency losses in the cable).

Costs

• The costs for hydro can be broken down into fourareas: machinery, civil works, electrical works andexternal costs.

• The cost of machinery for high head schemes isgenerally lower than for low head schemes of the samepower as high head schemes are smaller as they passless water, they run faster and can usually be connecteddirectly to the generator without add-ons such as agearbox or belts.

• The cost of the civil works relate to the nature of thesite. The biggest cost on high head sites is the pipelineand on low head heights most of the expense is on thewater intake, screens and channel.

• The cost of the electrical works includes the controlsystem, wiring, a transformer and the connection costto the electricity network which relates to the poweroutput of the system.

• External costs includes consultant fees for design ofthe system, managing the system once in operationand the costs for planning permission etc.

• For low head systems (excluding the civil works),costs may be in the region of £4,000 per kW installedup to about 10kW. The price would decrease per kWfor larger schemes.

• For medium heads (excluding the civil works), thereis generally a fixed cost of approximately £10,000,and this increases approximately £2,500 per kW upto around 10kW (a typical 5kW domestic schememight cost £20,000 - £25,000). Unit costs decreasefor larger schemes.

• The total capital costs (including machinery, civilworks, electrical works and external costs) for a 100kWsmall hydro installation are £115,000 - £280,000 for alow head system and £85,000 – £200,000 for a highhead system.

• Operating costs include leasing the land, metering,business rates, maintenance and servicing, andinsurance.

• Metering for larger schemes presently has to bemonitored by an independent meter-reading company.There is an annual charge for this service, currently inthe range £350 - £1000 per year.



• There are business rates on hydro schemes operatingas a business.

• Annual maintenance and servicing costs areapproximately 1-2% of the capital cost of the scheme.After 10 years or so extra costs may include thereplacement of seals and bearings, a new generator,refurbished sluice gates, etc.

• Insurance costs cover repairing damage to the workscaused by fire, flooding, explosions, storms, impact andvandalism.

• Electricity generated through hydropower may be soldto the grid at £0.02 to £0.03/kWh.

Maintenance

Hydropower is a mature technology and small scalesystems tend to have a life span of 50 years with lowmaintenance costs. Regular maintenance of modernautomated schemes includes clearing screens and oilingthe generating equipment.


• The site must have a suitable waterfall or weir with aconsistent flow of water at a usable head and spacefor a turbine site.

• Viability is determined by the potential energy resource.

• There must be suitable site access for constructionequipment to complete the civil works and install theequipment.

• There should be a local demand for electricity close tothe water source, or the possibility of connecting to thenational grid.

• The social and environmental impact on the local areashould be considered.

• The appearance of the scheme should be consideredparticularly the location of the powerhouse.

• The potential noise impacts on nearby residents can bedesigned to be minimal.

• The construction phase may cause a disturbance tolocal residents and traffic.

• This technology is more site specific than other energyefficient technologies.

• Seasonal variations in water flow can affect the amountof electricity generated.

• The construction and civil works involved is more intensethan other technologies. The typical lead in time for aturbine, from placing an order to delivery on site, isbetween 5 and 9 months.

• It is important to maintain the river’s ecology byrestricting the proportion of the total flow divertedthrough the turbine.

• Hydro-installations on rivers populated by migratingspecies of fish, such as salmon or trout, are subject tospecial requirements as defined in the Salmon andFreshwater Fisheries Act.

• Most operating problems occur with the screens andtheir careful design is vital.

• The selection of the type of turbine (impulse or reaction)depends upon the site characteristics, principally thehead and flow available, plus the desired running speedof the generator and whether the turbine will beexpected to operate in reduced flow conditions.



Solar Photovoltaics


Solar Photovoltaic (PV) panels are comprised of cellswhich converts light (solar radiation) directly intoelectricity. PV requires only daylight (not direct sunlight)to generate electricity. The PV cell consists of one or twolayers of a semi-conducting material. An electric field iscreated when light shines on the cells which causeelectricity to flow. The flow of electricity is greater whenlight intensity is greatest.

Typical systems that cover 10-15m² of roof space havethe potential to generate around 1.5-2kWp (kWp is thepeak output equivalent of kWh). Solar PV can be fairlysimply integrated into any new or existing building designas a roofing or cladding material.

Components

The following components make up a typical solar PVsystem:

• Photovoltaic panels / modules are comprised of cellsmade of a semi-conducting material such as silicon.

• Solar PV comes in an increasingly wide range of roofingand building materials. The three main types of solarcells are:

- Monocrystalline: made from thin slices cut from asingle crystal of silicon (typical efficiency of 15%).

- Polycrystalline: made from thin slices cut from a blockof silicon crystals (typical efficiency of around 12%).

- Thin Film: made from a thin layer of semiconductoratoms which are made up on a glass or metal base(typical efficiency of 7%).

• A battery if not connected to the national grid.

• An inverter to convert to alternating current.

• An export meter and an import meter (componentrequired in a grid connected PV system)

Costs

• The lifetime of a PV system is generally 25-30 years.

• Prices for PV systems vary and depend on the size ofthe system to be installed to meet the demand, the typeof PV cell used and the nature of the building on whichthe PV is mounted. As a guide, PV rainscreen claddingis approximately £600/m², PV integrated curtain wallingis approximately £780/m² and PV roof systems is in therange of £350-£400/m².

• For the average domestic system, costs can range from£4,000-£9,000 per kWp installed with most domesticsystems usually between 1.5 and 2 kWp.

• Solar tiles cost more than conventional panels andpanels that are integrated into a roof are moreexpensive than those that sit on top.

• If major roof repairs are to be carried out it may beworth exploring PV tiles as they can offset the cost ofroof tiles.

Maintenance

Cleaning the panels and ensuring they remain out of theshade from trees etc. is the biggest maintenance factor.Solar PV systems connected to the national grid requirelittle maintenance; however, panels not connected to thegrid may require maintenance of components such asbatteries. Occasional checking of wiring and variouscomponents of the system should also be conducted.


• Output of solar PV systems is decreased if buildings ortrees overshadow the panels.

• The ability of the roof structure to support the weight ofthe panels must be considered particularly if the panelsare to be mounted on the existing tiles.



Solar Water Heating


Solar water heating systems have been available inthe UK since the 1970s and the technology is now welldeveloped with a large choice of equipment to suitvarious applications. Solar water heating systemsfunction by collecting energy radiated by the sun andconverting the energy into heat in the form of hot water.Solar water heating systems work alongside conventionalwater heaters to provide hot water.

Components

The following components make up a typical solar waterheater:

• Solar panels / collectors retain heat from the sun’s raysand transfer this heat to a fluid. There are two types ofsolar collectors:

- Flat plates with tubes carrying the water to be heatedare the cheapest but least efficient.

- Evacuated tubes using a heat pipe to carry the heatto a heat exchanger are more expensive but mostefficient.

• A hot water cylinder stores the hot water that is heatedduring the day and supplies it for use later.

• A plumbing system consisting of simple pipingand occasionally a pump to transport fluid aroundthe system.

Costs

• Costs depend on a range of factors which include thesize of the collector required, the nature of the rooftype, the existing hot water system, and location.

• A flat plate collector installation costs in the range of£2,000 - £3,000 and an evacuated tube systems costsin the range of £3,500 - £5,000.

Maintenance

Little maintenance is required for solar water heatingsystems and often come with a 5 year warranty.A detailed inspection every 3-5 years should be all thatis required to ensure the efficient operation of the system.


• An integrated solar heating system should beconsidered in the planning stages of the buildingproject to achieve savings on installation costs.

• Solar systems may be installed as a substitute for theroof resulting in a better visual appearance than a solarsystem that is mounted on top of the roof tiles and isalso more economical.

• Orientation of the solar collectors should face south(2-5m² of roof space that is southeast to southwest andreceives minimal shading during the day is required fortypical domestic consumption). For maximum efficiency,the angle of the collectors should be 30-45 degrees.

• Not suitable for use with combination boilers withoutadditional equipment and an additional water cylinder.

• Solar water heaters should be sized to supply 100%of domestic hot water during the summer and thereforeapproximately 50% during the rest of the year.

• Frost protection of the collectors must be consideredduring the winter months this may include usinganti-freeze fluid or using a system with rubber tubingwhich is frost tolerant.

08 References


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