Preparing a Cost Analysis

1
Preparing a Cost Analysis

• March 10, 2009
• John Calcagni

2
Preparing a Cost Analysis

• Overview
• Identify all capital costs necessary to get
  control device operational
• Annualize capital costs
• Identify all annually recurring costs associated
  with control device
• Identify and value any recovered product (energy,
  sulfuric acid, gypsum, etc)

3
Direct Capital Expenses

• Purchased Equipment
• Auxiliary Equipment (including instrumentation
  and ductwork)
• Buildings, foundations and supports
• Site Preparation
• Direct Installation (electrical, piping,
  insulation, painting)
• Sales Tax
• DO NOT INCLUDE LAND

4
Indirect Capital Expenses

• Engineering
• Contractor fees
• Start-up
• Performance testing
• Contingencies

5
Direct Cost Factors for Fabric Filters

• Purchased Equipment As Estimated, A
• Instrumentation 0.10A
• Sales Tax 0.03A
• Freight 0.05A
• Purchased Equipment Cost 1.18A, B

6
Direct Capital Cost Factors for Fabric Filters
(Cont.)

• Direct Installation Costs
• Foundation and Supports 0.04B
• Erection 0.50B
• Electrical 0.08B
• Piping 0.01B
• Insulation for auxiliaries 0.07B
• Painting 0.04B
• Site Prep As estimated
• Buildings As Estimated
• Total Direct Installation Cost 1.74 B SP Bldg.

7
Indirect Capital Cost Factors for Fabric Filters

• Engineering 0.10B
• Construction and Field 0.20B
• Contractor Fees 0.10B
• Start-up 0.01B
• Performance Tests 0.01B
• Contingencies 0.03B
• Total Indirect Capital Cost 0.45B
• Total Capital Investment 2.19B SP Bldg.

8
Direct Equipment Cost Factors for ESP

• Purchased Equipment As Estimated, A
• Instrumentation 0.10A
• Sales Tax 0.03A
• Freight 0.05A
• Total PEC 1.18A, B

9
Direct Capital Cost Factors for ESP (Cont.)

• Direct Installation Costs
• Foundation and Supports 0.04B
• Erection 0.50B
• Electrical 0.08B
• Piping 0.01B
• Insulation for auxiliaries 0.02B
• Painting 0.02B
• Site Prep As estimated
• Buildings As Estimated
• Total Direct Installation Cost 1.67 B SP Bldg.

10
Indirect Capital Cost Factors for ESP

• Engineering 0.20B
• Construction and Field 0.20B
• Contractor Fees 0.10B
• Start-up 0.01B
• Performance Tests 0.01B
• Model Study 0.02B
• Contingencies 0.03B
• Total Indirect Capital Cost 0.57B
• Total Capital Investment 2.24B SP Bldg.

11
Adjusting Purchased Equipment Estimates

• Sometimes Purchased Equipment Cost estimates for
  similar projects are used with adjustment for
  size and/or inflation
• Size - 0.6 power rule
• PEC1PEC2gas flow rate1/gas flow rate20.6
• Inflation Use industrial construction cost
  inflation index such as CEN, Marshall and Swift,
  or Vatavuk index
• Limit adjustments to 20 or 3-4 years

12
Annualizing Capital Costs

• Capital costs need to be annualized to be useful
  in calculating /ton
• Key Parameters
• Useful life 20 years for most equipment.
• DO NOT USE IRS depreciation life for equipment
  (10 -15 years)
• Cost of Capital 7 for large firms, slightly
  higher for smaller firms.
• DO NOT USE company internal expected rates of
  return or hurdle rates (15-20)

13
Annualizing Capital Costs

• Applied like mortgage amortization table
• Multiply Total Capital Investment by appropriate
  amortization rate for time and interest rate
• Examples
• 15 years _at_ 7 0.1098 _at_ 9 0.1241
• 20 years _at_ 7 0.0944 _at_ 9 0.1096
• 25 years _at_ 7 0.0858 _at_ 9 0.1018
• DO NOT ALLOW
• 10 years _at_ 15 0.1993

14
Direct Annual Costs

• Materials
• Operating Labor
• Supervisory Labor
• Maintenance
• Electricity
• Water
• Fuel
• Waste Disposal

15
Indirect Annual Costs

• Property Taxes
• Insurance
• Overhead
• Administrative

16
Estimating Direct Annual Costs for Fabric Filters

• Operating Labor 2-4 hrs/shift
• Supervisory Labor - 15 of Operator
• Materials N/A
• Maintenance
• Labor 1-2 hrs/shift
• Materials 100 of Maintenance Labor

17
Estimating Direct Annual Costs for Fabric Filters
(cont.)

• Replacement Parts filter bag cost depends on
  design
• Cost of replacement bags and labor for
  replacement should be amortized 2-4 yrs
• Utilities local factors based on design and/or
  experience
• Dust Disposal often reused otherwise local
  landfill cost

18
Estimating Indirect Annual Costs for Fabric
Filters

• Overhead 60 of labor costs (operating,
  supervisory, and maintenance)
• Administrative 2 of TCI
• Property Tax 1 of TCI
• Insurance 1 of TCI

19
Estimating Direct Annual Costs for ESP

• Operating Labor 3 hrs/day Coordinator time
• Supervisory Labor - 15 of Operator
• Materials N/A
• Maintenance
• Labor 15 hr/week
• Materials 1 of PEC

20
Estimating Direct Annual Costs for ESP (cont.)

• Utilities local factors based on design and/or
  experience
• Dust Disposal often reused otherwise local
  landfill cost

21
Estimating Indirect Annual Costs for ESP

• Overhead 60 of labor costs (operating,
  supervisory, and maintenance)
• Administrative 2 of TCI
• Property Tax 1 of TCI
• Insurance 1 of TCI

22
Recovery of Product

• Recovered products often have value
• Ash Road Bed Aggregate
• CaSO4 Gypsum/Wallboard, kiln feed
• Metal fines reprocessed
• H2SO4 Saleable product
• Recovered product should be added back at market
  price

23
References

• EPA Cost Manual http//www.epa.gov/ttn/catc/produ
  cts.htmlcccinfo
• Clean Air Technology Center
• http//www.epa.gov/ttn/catc/products.html