Heating System Life Cycle Cost Analysis Revised Final Report October 4, 2008

Haines Assisted Living Facility Haines, Alaska

Prepared for:

Haines Assisted Living, Inc. St. Lucy's Conference St. Vincent de Paul Society

Prepared by:

A la ska E ne rg y E n g in ee r in g L LC 25200 Amalga Harbor Road Tel/Fax: 907.789.1226 Juneau, Alaska 99801 [email protected]

Alaska Energy Engineering LLC

Section 1

Introduction INTRODUCTION This report presents a life cycle cost analysis of heating system options for the Haines Assisted Living Facility. The facility, to be constructed in Haines, Alaska, will consist of two similar buildings housing tenant apartments, a kitchen and dining room, laundry room, and administrative offices. The heating system analysis exemplifies a changing energy climate. Fuel oil has historically been the least expensive heating energy source for buildings in Southeast Alaska, even in areas with surplus hydroelectric power. However, recent increases in fuel oil prices have renewed an interest in electric heating. On average, fuel oil prices have risen 31% per year for the past 2-years, 16% per year over the past 5-years, and 6% per year for the last 15-years. Fuel oil prices are projected to be $5.04 per gallon when the facility opens in 2009. In Haines, Alaska, residential electric rates are 18¢ per kWh. At this price, fuel oil is currently the less expensive heating energy. However, if fuel oil inflation continues to exceed electricity inflation, electric heat may be less expensive over the life of the building. This life cycle cost analysis compares a fuel oil heating system with a geothermal ground source heating system. The analysis is performed by Jim Rehfeldt, P.E. of Alaska Energy Engineering, LLC.

METHODOLOGY Energy Analysis The energy analysis uses Carrier Corporation’s Hourly Analysis Program (HAP) to develop a computer model of building energy use. The model calculates hourly energy use by the lighting, electrical equipment, and heating, ventilating, and air-conditioning systems. The computer model is based on the design drawings developed by the design team. The most challenging component of predicting energy use is to estimate how the building will be used. Dan Austin, General Manager of St. Vincent de Paul Society, was instrumental in estimating building use. Life Cycle Cost Analysis The life cycle cost analysis method is based on the National Institute of Standards and Technology (NIST) Handbook 135—Life Cycle Cost Analysis. The life cycle cost analysis (LCCA) sums construction, maintenance, and energy costs to compare the life cycle cost of each heating system. The analysis converts costs over a 25-year period into the net present worth of each heating system. Economic factors such as interest and inflation rates and present and future energy costs are used to convert future costs to present value.

Life Cycle Cost Analysis

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Haines Assisted Living Facility

Alaska Energy Engineering LLC

Economic Criteria The analysis is based on the following economic criteria. •

Nominal Discount Rate: This is the nominal rate of return on an investment without regard to inflation. The analysis uses a rate of 5.5% which is the rate St. Vincent de Paul is currently able to borrow money for capital improvements.

•

Inflation Rate: This is the average inflationary change in cost over time. The analysis uses an inflation rate of 3% which is the average increase in the Consumer Price Index over the past 25 years.

•

Real Discount Rate: This is the actual rate of return when the inflation rate is considered. The analysis uses a real discount rate of 2.4% which is a calculated value derived from the nominal interest rate and the inflation rate.

•

Economic Period: This is the period of time in which costs are considered. The analysis is based on a twenty-five year economic period which is the standard period used for buildings. Construction of the two buildings will start in 2008 and will be complete in 2010. The analysis has been simplified—with no quantifiable change in the results—by assuming construction costs and occupancy occur in 2009.

Electricity Costs Electricity will be supplied by Alaska Power & Telephone (AP&T) under their Rate No. A-3, Bulk Power Rates for Large Customers, which includes charges for both electrical consumption (kWh) and peak electric demand (kW). Electrical consumption is the amount of energy consumed while electric demand is the maximum rate of consumption. The following table lists the current electric charges that are incorporated into the analysis: AP&T Rate No. A-3, Bulk Power Rates for Large Customers Item

Charge

Energy Charge

15.28¢ per kWh

Demand Charge

$5.42 per kW

Service Charge

$134.10 per month

An energy analysis of the facility resulted in an effective cost of 17.7¢ per kWh when energy and demand charges and combined. Most of Haines' power comes from the Goat Lake hydroelectric project which supplies the Haines/Skagway service area. In 2006, for the first time since Goat Lake came on-line, supplemental diesel generation was needed to power the communities. AP&T is constructing another hydroelectric project at Kasadaya Creek that will come on-line in 2008. This is a run-of-the-river project that will primarily generate power from April to November, allowing Goat Lake to remain full for winter generation. Once Kasadaya comes on-line, Haines/Skagway will have a surplus of power. AP&T does not have a prediction of how long the surplus will be available because too many factors affect this prediction. In a small service area, a moderate change in load can have a significant impact on future availability.

Life Cycle Cost Analysis

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Haines Assisted Living Facility

Alaska Energy Engineering LLC

AP&T currently predicts that the cost of buying hydroelectric power will increase over the next 25years by 0.8% per year and operating and maintenance costs will increase by 1% per year. This results in a combined electric inflation rate of 1.8% per year. No rate increases are anticipated prior to 2009. Fuel Oil Costs Delta Western currently sells No.2 fuel oil in Haines at $4.74 per gallon. The analysis uses a nominal fuel oil inflation rate of 6.3% per year which is the average increase in heating oil costs over the past 15 years. The analysis inflates the current price at a nominal fuel oil inflation rate of 6.3% to derive a 2009 fuel oil cost of $5.04 per gallon. Summary The life cycle cost analysis uses the following economic and energy factors. Economic and Energy Factors Factor

Rate or Cost

Nominal Discount Rate

5.5%

General Inflation Rate

3.0%

Real Discount Rate

2.4%

Electricity Rate

17.7¢ per kWh

Electricity Inflation

1.8%

Fuel Oil Cost (2009)

$5.04/gal

Fuel Oil Inflation

Life Cycle Cost Analysis

6.3%

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Alaska Energy Engineering LLC

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Life Cycle Cost Analysis

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Section 2

Heating System Analysis INTRODUCTION Fuel oil has traditionally been the lowest cost energy source for heating buildings in Southeast Alaska. However, recent increases in fuel oil costs have spurred interest in renewable energy sources. Geothermal heating has several potential advantages over fuel oil. Over two-thirds of the building heating load will be supplied from the ground over the life of the building. This energy can be obtained with a substantial initial investment in a well field and modest pumping costs over the life of the building. The system will use electricity which is a good long term source in Haines. The local utility is predicting a surplus of power over the life of building, which is likely to continue the recent trend of electricity inflation being substantially lower than fuel oil inflation. In addition, Haines’ hydroelectric power is more environmentally friendly than burning fuel oil and emitting greenhouse gases.

DESCRIPTION OF SYSTEMS The analysis determines the life cycle cost of a fuel oil heating scheme and a ground source heat pump heating scheme. The attached drawings provides schematic layouts of both schemes. The same ventilation system is used for both schemes and consists of: •

Building Ventilation: Each building is ventilated by a heat recovery unit (HRU). The HRU continuously supplies tempered outside air to each regularly occupied area and exhausts air from the bathrooms, janitors closet, laundry room and kitchen/dining area. Heat is recovered from the exhaust air and transferred to the supply air.

•

Kitchen Exhaust Hood: The kitchen hood is exhausted by an exhaust fan. Tempered makeup air is supplied by makeup air fan.

Heating Systems Fuel Oil Boiler Heating System This system is the traditional method of heating buildings. Each building is heated by two fuel oil boilers supplying 80-120°F water for in-floor radiant heat and tempering ventilation air. Domestic hot water is produced and stored in indirect domestic hot water heaters. Ground Source Heat Pump System This system uses heat pumps to extract heat from the ground to heat the buildings. Each building has two water-to-water heat pumps coupled to a ground loop consisting of closed vertical wells. The heat pumps extract heat from the ground and supply it to hydronic heating tank. A hydronic heating distribution loop is coupled to the hydronic heating tank and supplies heating coils in ventilation systems and in-floor radiant heating manifolds.

Life Cycle Cost Analysis

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Haines Assisted Living Facility

Alaska Energy Engineering LLC

Each building has a domestic hot water heat pump that is also coupled to the ground loop and supply two electric hot water heaters. The hot water heaters supplement the heat pumps during periods of high water demand or extremely cold outside temperatures. Supplementing with electric hot water heaters allows downsizing of the well field by 21%, yet the heat pumps will supply 94% of the facilities heating and domestic hot water loads.

LIFE CYCLE COST ANALYSIS The life cycle cost comparison of a fuel oil heating system and a ground source heat pump system determined that the ground source heat pump system has a significantly lower life cycle cost. The following table shows the life cycle cost comparison. Life Cycle Cost Comparison, $K Cost

Fuel Oil Boilers

Heat Pumps

Construction

$1,030K

$ 2,190K

Maintenance

130K

250K

2,340K

740K

$ 3,500K

$ 3,200K

Energy Total Cost

The ground source heat pump system has a 9% lower life cycle cost. In today’s dollars, an added initial investment of $1.2M will result in $1.5M in savings, providing a 5.5% return on the investment plus an additional $300K over the 25-year economic period. The following points are relevant to the findings. • • •

Construction Costs: The higher capital costs of the ground source heat pump system are due to the cost of coupling to the ground. Maintenance Costs: The higher maintenance costs of the ground source heat pump system are due to heat pump replacement at 20 years of the 25-year economic period. Energy Costs: The lower energy costs of the ground source heat pump system result because the system is 210% efficient at converting purchased energy into heat. The fuel oil plant has an efficiency of 78.7%.

Life Cycle Cost Analysis

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Haines Assisted Living Facility

Alaska Energy Engineering LLC

Summary The ground source heat pump system uses a mature technology. These systems are growing in popularity in SE Alaska and are likely to be the system of choice in the future. It is less of a known commodity than the other systems because a subsurface investigation has not been performed. For this analysis, the cost of the system was estimated based on the cost to install a comparable system in Juneau, Alaska. A site investigation is needed to finalize the system configuration and cost estimate. This will be performed during the design phase of the project. The investigation will establish the following: •

The site has sufficient area for a vertical well field. The actual layout of the field will be determined during the investigation.

•

The analysis assumed that the site has a 150’ layer of silt/clay over bedrock. This was derived from subsurface drilling performed in the vicinity of the site in the 1960s. Test borings are required to confirm this assumption.

•

The analysis assumed the well field will require 250 feet of well per ton of heating. This is considered the likely thermal conductivity of the soils, but will need to be confirmed during the site investigation.

CONCLUSION It is recommended that the building be heated by a ground source heat pump system. The system has the lowest life cycle cost as well as the lowest annual operating costs. Investment in the system will minimize the risk of high future energy inflation by extracting “free” heat from the ground. A site investigation is needed at the outset of design to verify the conservative assumptions that were used in the analysis. The investigation may allow additional optimization of the system that will reduce construction and life cycle costs.

Life Cycle Cost Analysis

7

Haines Assisted Living Facility

Alaska Engineering & Energy Consultants, LLC 25200 Amalga Harbor Road Juneau, Alaska 99801

Life Cycle Cost Analysis

Tel/Fax: 907-789-1226 Email: [email protected]

October 20, 2006

Haines Assisted Living Facility

Fuel Oil Boiler Heating System Basis 25 5.5% 2.4%

Study Period (years) Nominal Discount Rate Real Discount Rate

3.0% 6.0% 2.0%

General Inflation Fuel Oil Inflation Electricity Inflation

Construction Costs Item

Year

Qty

Unit

0 0 0 0 0

2 4 60 4 20

ea ea lnft ea cuyd

20,700.00 1,300.00 47.00 100.00 15.00

41,400 5,200 2,820 400 300

0 0 0 0 0 0 0

4 4 2 4

ea ea ea ea

11,000.00 3,700.00 3,700.00 9,700.00

44,000 14,800 7,400 38,800

4 2

ea lot

4,700.00 13,800.00

18,800 27,600

0 0 0 0 0

2 26 26,120 2 2

lot ea lnft lot lot

52,000.00 1,300.00 3.00 9,200.00 9,200.00

104,000 33,800 78,360 18,400 18,400

0

4

ea

4,800.00

19,200

0 0

1 1

job job

22,000.00 25,000.00

22,000 25,000

16% 42% 15% 4%

83,309 253,675 128,650 39,453

Total Construction Costs

$1,026,000

Base Cost

Year 0 Cost

Hydronic Heating System Heating Plant Fuel Oil System Buried fuel oil tank Fuel oil piping and appurtenances to boilers Containment piping Connections Trenching Primary Loop Fuel oil boilers Boiler stacks Boiler control panel Primary piping, pumps, and appurtenances Secondary loop Secondary pumps Secondary piping and appurtenances (boiler room) Building Loop Hydronic piping loop Radiant heat zone valves and manifolds Radiant slab piping HRV heating coil branch Kitchen Makeup air fan heating coil branch Domestic Hot Water System 120 gallon indirect HW heater, hw pump, piping, etc. Completion Test, balance, and commission Control system Contingencies Subcontractor overhead and profit General requirements, general contractor overhead & profit Estimator's contingency and volatile market Escalation to 2009

0 0 0 0

Page 1

Alaska Engineering & Energy Consultants, LLC 25200 Amalga Harbor Road Juneau, Alaska 99801

Life Cycle Cost Analysis

Tel/Fax: 907-789-1226 Email: [email protected]

October 20, 2006

Haines Assisted Living Facility

Fuel Oil Boiler Heating System Maintenance and Replacement Costs

Years

Qty

Unit

Maintenance Costs Boiler maintenance: 8 hrs per boiler Pump maintenance: $200 per pump Hot water tank maintenance: 2 hrs per yr Hydronic system maintenance Parts

1 1 1 1 1

32 8 8 10 1

hrs ea hrs hrs lot

-

25 25 25 25 25

Energy Costs

Years

Qty

Unit

Fuel oil Electricity

1 - 25 1 - 25

16,604 9,410

gal kWh

Base Cost 104.00 200.00 104.00 104.00 500.00

60,344 29,011 15,086 18,857 9,066

Total Annual Costs

$132,000

Base Cost

Present Value

5.02 0.1770

2,216,384 27,648

Total Energy Costs

$2,244,000

Total Present Worth

Page 2

Present Value

$3,402,000

Alaska Energy Engineering LLC

Life Cycle Cost Analysis

25200 Amalga Harbor Road Tel/Fax: 907.789.1226 Juneau, Alaska 99801 [email protected]

October 7, 2008

Haines Assisted Living Facility

Ground Source Heat Pump Heating System Basis 25 5.5% 2.4%

Study Period (years) Nominal Discount Rate Real Discount Rate

3.0% 6.0% 2.0%

General Inflation Fuel Oil Inflation Electricity Inflation

Construction Costs Item SITE WORK Closed loop vertical well field Vertical ground exchange wells Mob/Demob to/from barge lines Shipping Drill rig transportation and down time from Juneau Per Diem; 3 people, 90 days Drill cased hole, install 1" HDPE loop, remove casing, backfill Grout plug at surface Exterior piping Excavate and backfill trench and wells Install 3" HDPE, SDR 11 mains in trench Install 2-1/2" HDPE, SDR 11 in trench Install 2" HDPE, SDR 11 in trench Install 1-1/2" HDPE, SDR 11 in trench Install 1" HDPE, SDR 11 in trench Connect supply and return to well Fill hole with thermo conductive grout Contingencies Subcontractor overhead and profit Estimator's contingency and volatile market Escalation to 2009

Year

Qty

Unit

0 0 0 0 0 0

1 1 2 270 17,750 142

rt lot days days lnft holes

4,000.00 12,000.00 5,000.00 175.00 26.00 100.00 100 00

4,000 12,000 10,000 47,250 461,500 14,200 14 200

0 0 0 0 0 0 0 0

2,400 1,800 1,000 600 400 4,500 292 100

cuyd lnft lnft lnft lnft lnft ea ea

11.00 13.50 12.00 10.00 7.60 6.10 125.00 161.80

26,400 24,300 12,000 6,000 3,040 27,450 36,500 16,180

0 0

16% 15%

112,131 121,943

1

4%

Base Cost

Site Construction Subtotal BUILDING Hydronic Ground Source System Source manifold 6" HDPE SDR 11 manifold 3" HDPE SDR 11 ground loop piping Manifold valves, gauges, appurtenances Source pump, 175 gpm @ 77' head, 7.5 HP Expansion tank, separator, glycol mixing tank Insulated hydronic HDPE piping, supports, seismic Hydronic Heating System Heating water-to-water heat pump: 210 MBH Manifold piping, valves and gauges Load pumps, 35 gpm @ 35' head, 3/4 HP Electric hot water heater, 200 gallons

Year 0 Cost

37,396 $972,290

0 0 0 0 0 0

80 60 2 4 2 150

lnft lnft ea ea job lnft

55.70 37.20 3,500.00 5,000.00 4,500.00 35.00

4,456 2,232 7,000 20,000 9,000 5,250

0 0 0 0

4 4 4 2

ea ea ea ea

26,000.00 2,750.00 2,500.00 6,500.00

104,000 11,000 10,000 13,000

Page 3

Alaska Energy Engineering LLC

Life Cycle Cost Analysis

25200 Amalga Harbor Road Tel/Fax: 907.789.1226 Juneau, Alaska 99801 [email protected]

October 7, 2008

Haines Assisted Living Facility

Ground Source Heat Pump Heating System Construction Costs Item

Year

Qty

Unit

0 0 0 0 0 0

4 2 26 26,120 2 2

ea lot ea lnft lot lot

2,500.00 52,000.00 1,300.00 3.00 9,200.00 9,200.00

10,000 104,000 33,800 78,360 18,400 18,400

0 0 0 0

2 4 2 4

ea ea ea lot

26,000.00 2,500.00 4,000.00 7,500.00

52,000 10,000 8,000 30,000

0 0

1 1

job job

26,000.00 35,000.00 35 000 00

26,000 35,000 35 000

0

2

ea

5,000.00

10,000

0 0

16% 42%

99,184 302,014

Estimator's contingency and volatile market

0

15%

153,164

Escalation to 2009

1

4%

Building Loop Building pumps, 20 gpm @ 40' head, 1/2 HP, VFD Hydronic piping loop Radiant heat zone valves and manifolds Radiant slab piping HRV heating coil branch Kitchen Makeup air fan heating coil branch Domestic Hot Water System DHW water-to-water heat pump: 210 MBH HW pumps, 35 gpm @ 20' head, 1/2 HP Manifold piping, valves and gauges, HW pumps 120 gallon electric HW tank Completion Test, balance, and commission Control system Electrical Increase electrical service Contingencies Subcontractor overhead and profit General requirements, general contractor overhead & profit

Base Cost

Building Construction Subtotal

Replacement Costs Water-to-water heat pump Maintenance Costs Pump maintenance: $200 per pump Hot water tank maintenance: 2 hrs per yr Hydronic system maintenance Heat pumps: 4 hrs per year Parts

46,970 $1,221,231

Total Construction Costs

Maintenance and Replacement Costs

Year 0 Cost

$2,193,520

Years

Qty

Unit

20

6

ea

26,000

96,512

14 8 10 24 1

ea hrs hrs hrs lot

200.00 104.00 104.00 104.00 1,000.00

50,770 15,086 18,857 45,258 18,132

Total Annual Costs

$245,000

1 1 1 1 1

-

25 25 25 25 25

Energy Costs

Years

Qty

Unit

Fuel oil Electricity

1 - 25 1 - 25

0 258,000

gal kWh

Base Cost

Base Cost

Present Value

5.02 0.1770

0 758,047

Total Energy Costs

$758,000

Total Present Worth Page 4

Present Value

$3,196,520