Understanding Whole Life Costing for Renewables

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Understanding Whole Life Costing for Renewables

• Brad Bamfield
• MD The Solution Organisation
• Chairman The Whole Life Forum
• b.bamfield_at_thesolutionorganisation.com
• 07803 133110

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Today

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

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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

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A holistic analysis
Sustainability
Environment
Society
Economics
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The common perception
Whole life costs
Whole life costs
Environment
Whole life costs
Society
Economics
Whole life costs
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Sustainability

• Economics
• Environmental
• Social
• Performance

• WLC
• Profitability
• Protection
• Improvement
• Stakeholders
• Improvements
• Utility
• Deliver requirement
• Exceed requirement

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Sustainability

• Non financial measures
• Utility
• Environmental
• Social

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Sustainability

• Focusing on one or two aspects
• Inefficient
• Ineffective
• Ultimate failure
• Its all three or failure is inevitable

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The Madness of Sustainability

• Mad
• Politicians just do it.
• Rational mad
• Environmentalists sounds true, that will do
• Realists
• Anyone lets look at alternatives and do the
  best we can with what we have.

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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 its obvious
• WLC can be misused but its obvious

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Financial relationships
1
5
200

• Capital Cost 1
• Revenue Cost 5x
• Business Cost 200x

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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

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Net Present Value

• NPV is the sum of all the future cashflows
  discounted back to todays value.
• Only used for economic analysis
• Has a number of drawbacks

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Discount rate

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

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NPV Example
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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

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TWLC Example
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WLC in use examples

• Bridgewater Report for SWRDA
• http//www.thesolutionorganisation.com/library.htm
  l
• 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.

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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
• Dont worry about what you dont know
• Dont overstate

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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

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The Good

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

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The bad

• Wind turbines
• Photo voltaics

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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
• Dont over complicate

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Summary

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

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Brad Bamfield
b.bamfield_at_thesolutionorganisation.com 07803
133110 www.thesolutionorganisation.com www.wlcf.o
rg.uk