Payback and LCCA – DON’T BE MISLED
Often, in our industry, we are requested to complete a Life Cycle Cost Analysis sheet or provide a payback estimate for new boiler-room equipment or efficiency boosting upgrades. We pride ourselves on being as accurate as possible with these estimates – one of our Core Values is Integrity Over Profit. You’re using these estimates to make and justify big decisions, they should be accurate and honest! From time-to-time, we see estimates that are, to say the least, inaccurate.
So, how do you know if something is amiss? The goal of this short article is to give you some information to look for and questions to ask to understand validity of LCCA’s and Payback Estimates. As always, each boiler room and its equipment is different – if you would like another set of eyes on these forms, please reach out to us.
Some key assumptions that must be made, for any LCCA or Payback Estimate are;
- Operating Hours per year
- Operating Load Profile
- Accurate information, regarding existing equipment efficiency
- Current Fuel Costs
- Electrical Costs
- Realistic estimates at the improved efficiency
- Accurate cost of the new equipment, installation, maintenance, etc.
These are all critical to get as close to reality as possible, when reviewing your equipment and upgrade options. These have a tremendous impact on what equipment and upgrade might be worthwhile for you and your operation. For example: Boiler Economizers (aka Feedwater Heaters), will provide a higher return on investment (higher BTU recovery) on heavily loaded boilers that run year-round, versus boilers that live most of their lives at low-fire. Variable Frequency Drives won’t do much for you, as far as electrical savings, if your boiler runs at high-fire all of the time – but there are other benefits to using a VFD that should be considered. The same is true for other means of boiler rooms savings, controls upgrades, oxygen trim, burner upgrades, blowdown heat recovery, etc.
As a quick check, do you notice your boiler is operating at low-fire most of the time? If so, the estimate you receive should not have the majority of operating hours at or near 100% of boiler rate. Does your boiler cycle a lot? That should be reflected in the payback estimate.
Does the fuel cost used on the estimate ($’s per therm or dekatherm) match what you actually pay? If you have good fuel use and cost records for your boiler(s), you can use this to compare estimates current fuel usage/cost to reality – they should be close.
How is your existing equipment efficiency represented? Was a flue gas analysis performed? If not, do you have records from your most recent maintenance visit? These combustion reports give you a valuable metric to help measure the Payback or LCCA estimate. For example, if the flue gas analysis showed 83% efficiency at high fire, why does the Payback estimate show only 80%. Or, why is the estimated flue gas temp or stack O2 much higher than your most recent combustion report? Why are they showing a higher stack O2 at High Fire (this would be atypical, as stack O2 rises with reduced firing rate, typically)? We have seen these sorts of numbers on estimates – these would, falsely, show a faster payback.
Do the estimated electrical costs match what you actually pay? How do they show the Variable Frequency Drive speed being scaled to the estimated load? There are practical limits to how fast and how far you can reduce fan speed. Are they promising high payback to add a VFD to a feedwater pump? This may or may not be possible, depending on your system – due to affinity laws and code requirements for boiler feed pump’s flow and pressure.
How are the estimates for the increased efficiency or reduced fuel consumption arrived at? Is a flat estimate of more than 2-3% annual savings is being used, for an upgrade to parallel positioning, for example? That savings would be exceptional, in our experience – not out of the question, versus a poorly tuned system, but it should be justified. How is the efficiency increase/fuel cost reduction being justified?
Finally are the correct related cost fully accounted for in the cost of the equipment? Are there increased maintenance cost? Do any of the new components require periodic replacement or increase maintenance (oxygen cells, for example)? Side note; is you facility and personnel ready for any additional complexities? Is training included?
The above is a brief primer on things to look for and questions to ask. Our boiler experts have experience in reviewing systems and putting together realistic pictures of what is possible – we’re here to support you. If you have questions regarding anything in your boiler room, please call us at 336-299-3035, email at email@example.com, and visit our website at wcrouse.com