Understanding Whole Life Costing for Renewables

1. Understanding Whole Life Costing for Renewables Brad Bamfield MD The Solution Organisation Chairman The Whole Life Forum b.bamfield@thesolutionorganisation.com 07803 133110

2. Today • Introduction • Sustainability • WLC – short master class • The use of WLC to assess any asset including renewables.

3. Benefits of WLC • What does economic benefit mean? • Is it just £’s or is it more? • Whole life costs / value • Is there a definition of WLC? • Several – Whole Life Cost Forum WLCF • A significant contributor to Sustainability

4. A holistic analysis Sustainability Environment Economics Society

5. The common perception Whole life costs Whole life costs Environment Whole life costs Economics Society Whole life costs

6. Economics Environmental Social Performance WLC Profitability Protection Improvement Stakeholders Improvements Utility Deliver requirement Exceed requirement Sustainability

7. Sustainability • Non financial measures • Utility • Environmental • Social

8. Sustainability • Focusing on one or two aspects • Inefficient • Ineffective • Ultimate failure • It’s all three or failure is inevitable

9. The Madness of Sustainability • Mad • Politicians – just do it. • Rational mad • Environmentalists – sounds true, that will do • Realists • Anyone – let’s look at alternatives and do the best we can with what we have.

10. Short WLC Master Class • WLC is a comparison technique • WLC can incorporate non financial • WLC can indicate the better option • WLC can be manipulated but it’s obvious • WLC can be misused but it’s obvious

11. Financial relationships • Capital Cost 1 • Revenue Cost 5x • Business Cost 200x 1 : 5 : 200

12. Type of WLC • Net Present Value – NPV • Discounted cashflows • Used where cash is measure • Total Whole Life Costs - TWLC • Cashflows but without discounting • Annualised Whole Life Costs – AWLC • Non discounted • Total cashflows divided by life

13. Net Present Value • NPV is the sum of all the future cashflows discounted back to today’s value. • Only used for economic analysis • Has a number of drawbacks

14. Discount rate • What does it do? • How is it established? • What does it tell us? • Discount rate tables: http://www.thesolutionorganisation.com/library.html • How do we use a Discount Rate for non financial indicators?

15. NPV Example

16. WLC & non cash uses • Use non discounted methods • Total Whole Life Costs TWLC • Annualised Whole Life Costs AWLC • Use any measure that works • Tonnes CO2 • KwH

17. TWLC Example

18. WLC in use examples • Bridgewater Report for SWRDA http://www.thesolutionorganisation.com/library.html • Combine Financial and Non Financial analyses together for robust solution. • NPV plus graded 1-5 solutions for conditions important for your project. • Avoid weighting answers.

19. Problems with WLC • Using on the only option • Lack of data • Ask suppliers – and ask again • Use best estimates • Use common data in all options • Don’t worry about what you don’t know • Don’t overstate

20. What can we use to calculate? • Whole Life Cost Forum online tool www.wlcf.org.uk • Spreadsheets • AWLC and TWLC relatively easy • NPV little more complex but use Function • Avoid methods using “weightings” • Use only key determinants

21. The Good • Green roofs • Ground effect heat exchangers • Solar heating of water • Under floor heating/cooling • Solar reflective glazing

22. The bad • Wind turbines • Photo voltaics

23. Conclusion • WLC is very effective as a selection process for comparing competing products, methods or assets. • WLC results are robust and repeatable • Include suppliers • Start with simple examples • Don’t over complicate

24. Summary • Looked at WLC & types • WLC can measure financial and non financial elements • Bridgewater case study • Method to select between options. • Help is available

25. Brad Bamfield b.bamfield@thesolutionorganisation.com 07803 133110 www.thesolutionorganisation.com www.wlcf.org.uk