Life cycle cost analysis
One of the most important considerations for investors in energy saving or green building projects is whether and when the investment will pay off. To attract investors, there must be guarantees that your investment will be profitable. Investors, owners, and project managers employ various tools to assess fiscal viability, and one of the most effective means of evaluating total cost is Life Cycle Cost Analysis (LCCA).
LCCA is an evaluation method that takes into account tax aspects in the acquisition, ownership and disposal of construction projects. Project managers can also apply it to rule out alternative possibilities and focus on achieving project performance goals. When comparing two or more design alternatives, the Energy Life Cycle Cost Analysis (ELCCA) method can be used. ELCCA is a computer model that accurately quantifies different design alternatives.
Federal requirements
LCCA makes use of systematic appraisals and comparisons of available building design alternatives to determine the best options in terms of total profitability, including the ownership, operations and maintenance of a particular building. It follows a set of life cycle cost methodologies and procedures under the Code of Federal Regulations (CFR) and is part of the Federal Energy Planning and Management Program. The LCCA rules conform to the requirements of energy conservation legislation, including the requirements defined by the NECPA and Executive Order 13423, also known as the Federal Environmental, Energy, and Transportation Management Strengthening Act.
Purpose of LCCA
In green building projects, several costs can be identified that will eventually determine the total total cost of ownership of the project. These include: initial purchase, acquisition and construction costs; operation, maintenance and repair costs; replacement costs; disposal costs; energy costs; finance charges or interest payments; and other non-monetary costs that a project may incur.
In summary, LCCA is used as a tool to determine the overall cost of each design alternative in order to identify the option that will provide the lowest TCA (total cost of ownership) without compromising quality and functionality. When performed in the early stages of a project, particularly during the design process, project managers can select which alternative will result in the lowest life cycle cost.
LCCA benefits
LCCA is applicable not only to green building project initiatives, but also to capital investment decision making. It is very useful in identifying which construction alternatives will provide the most profitable long-term design. This establishes LCCA as a better tool for identifying total cost of ownership compared to other methods that focus on upfront costs or short-term costs related solely to operations.
To illustrate the benefits of using LCCA, we could determine if using a high-performance glazing or HVAC system is more cost-effective in the long run. A critical part of this process is considering both short-term and long-term costs as they relate to ROI. It is often assumed that the high upfront costs may outweigh the long-term benefits. This is not always true and can be proven using the LCCA methodology. It is also useful to note that LCCA can be applied at various levels of complexity in the life cycle of a project, from inception to phase out.
LCCA and Green Building
By considering energy use in cooling, heating, boiling, lighting, and other operations, ELCCA can be an effective analysis and decision-making tool to select the most cost-effective system options. The report generated by the ELCCA model identifies and recommends the best and most cost-effective design alternatives for green buildings in terms of energy efficiency, comfort, productivity and occupant health.
ELCCA is performed as a non-static process and is continually refined and adjusted each time new alternatives are identified and adopted. The final design can be a combination of many decisions based on the identification and selection process defined by the ELCCA. These comparisons and decisions are duly documented with the corresponding results in the ELCCA’s final report.