Life Cycle Cost (LCC)/ Life Cycle Assessment (LCA) Final report - Dantes Task 4
Dag Ravemark, ABB 2005
ABSTRACT This report was made within the project DANTES that is supported by the EU Life Environment Program. This report “Final report on experiences from using the WEB based LCA/LCC tool” is a formal delivery in Dantes in Task 4 – “Integrated LCA and Life Cycle Cost tool”. This report summarizes the work done in the task and the achievements made. Much has been accomplished in Task 4; one M.Sc. thesis where two colorants and the BASF eco-efficiency method have been applied on the same data, one general LCC tool and five problem-specific LCC/LCA tools have been developed. A state-of-the-art study of LCC/LCA tools and an external cost study have also been conducted. To document the work in the task ten reports have been written. The chapters in this report handles: Chapter 1 gives an introduction. Chapter 2 describes task 4 Chapter 3 is a description of the report (a formal delivery to the EU) on different tools evaluated in the stateof-the-art study Chapter 4 gives a summary of the report (a formal delivery to the EU) on external environmental cost Chapter 5 describes the experience of ANSC of using LCC/LCA Chapter 6 describes the experience of ABB of developing and using LCC/LCA tools Chapter 7 lists all the reports written in task4. Chapter 8 analyses the objective of the task and compares it with the achieved result. This report summarizes all ten reports written in this task and all reports are available at the site www.dantes,info under publications/LCC. The deliverables were on time and fulfilled the requirements. The milestones were done on time. Three dedicated meetings were held in task 4 and they were all constructive and goal oriented. On several other project meetings, discussions and result presentations where held. Task 4 was successful!
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TABLE OF CONTENT ABSTRACT ............................................................................................................................................................................. 2 1.
INTRODUCTION.......................................................................................................................................................... 4
2.
DANTES TASK 4........................................................................................................................................................... 4 2.1 2.2 2.3 2.4 2.5 2.6
3.
DELIVERY: STATE OF THE ART LCC AND LCA TOOLS ................................................................................. 6 3.1 3.2
4.
TOOLS EXAMINED.................................................................................................................................................... 6 CONCLUSION ........................................................................................................................................................... 7
DELIVERY: EXTERNAL ENVIRONMENTAL COSTS IN LCC .......................................................................... 7 4.1 4.2 4.3
5.
TASK 4 TEAM ........................................................................................................................................................... 4 TASK 4 IN RELATION WITH OTHER TASKS ................................................................................................................ 4 THE OBJECTIVE ........................................................................................................................................................ 5 THE DELIVERABLES AND DATES OF TASK 4 ............................................................................................................. 5 MILESTONES AND DATES ......................................................................................................................................... 5 TASK 4 MEETINGS ................................................................................................................................................... 5
LCC AND LCA........................................................................................................................................................ 7 EXTERNAL ENVIRONMENTAL COST.......................................................................................................................... 7 CONCLUSION ........................................................................................................................................................... 8
DELIVERY: EXPERIENCES BY ANSC.................................................................................................................... 8 5.1 ENVIRONMENTAL COSTS AND ENVIRONMENTAL IMPACTS IN A CHEMICAL INDUSTRY ............................................. 8 5.1.1 LCA and eLCC on Colorants ............................................................................................................................. 8 5.1.2 Environmental costs considered ........................................................................................................................ 8 5.1.3 Comparison of LCA and eLCC .......................................................................................................................... 9 5.1.4 Result and discussion and conclusion.............................................................................................................. 10 5.2 THE BASF ECO-EFFICIENCY ANALYSIS METHOD ................................................................................................. 10 5.2.1 Case study: eLCC and LCA on two colorants. ................................................................................................ 11 5.2.2 Conclusion of the BASF method for Akzo Nobel.............................................................................................. 11
6.
DELIVERY: EXPERIENCES ABB........................................................................................................................... 12 6.1 TOOLS DEVELOPED ................................................................................................................................................ 12 6.1.1 General LCC tool............................................................................................................................................. 12 6.1.2 Special LCC/LCA tools .................................................................................................................................... 13 6.1.3 Development story of one of the tools .............................................................................................................. 14 6.1.4 Conclusion ....................................................................................................................................................... 14
7.
REPORTS IN TASK 4................................................................................................................................................. 14
8.
TASK 4 – MEETING ITS GOALS? .......................................................................................................................... 15 8.1 8.2
EVALUATION OF OBJECTIVE .................................................................................................................................. 15 THE DELIVERABLES ............................................................................................................................................... 15
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1.
INTRODUCTION DANTES is an acronym for “Demonstrate and Assess New Tools for Environmental Sustainability”. The DANTES project is co-funded by EUs Life Environment program. Responsible for project management and beneficiary of the project is: • Akzo Nobel Surface Chemistry AB (ANSC). Partners are: • ABB Group Services Center AB/Corporate Research (ABB), • Stora Enso AB/Stora Enso Environment (StoraEnso), • Chalmers University of Technology (Chalmers). The main purpose of the DANTES project is to bridge the gap between existing and relevant research results in the environmental sustainability area and their large-scale application in companies.
2.
DANTES TASK 4 This chapter describes the stated objectives of Task 4 and the deliverables promised in the project agreement with EU.
2.1
Task 4 team Task 4 members • Lennart Karlson, Dag Ravemark (ABB) • Johan Widheden (ANSC) • Bengt Steen, Karolina Flemström (Chalmers) • Ola Svending (StoraEnso)
2.2
Task 4 in relation with other tasks Task 4, LCC/LCA, delivers input to the to the web platform and for the tools integration and demonstration. How the different tasks are linked to Task 4 and depend on each other is displayed in the organigram in Figure 1.
Figure 1 Organigram for the DANTES project
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2.3
The objective The objective of task 4 (from project agreement with EU); “Development and marketing of eco-efficient products and services is one important part of the sustainability concept. The development of ecoefficient products however demands an optimization of both environmental and economical aspects, to be competitive on the market. The objective here is to integrate tools for environmental assessment and cost assessment into one operative tool. Critical aspects that will be addressed are the economical valuation of external environmental costs as well as company specific costs, with regards to environment. The results will be an important input to the total Tool integration and demonstration plan”
2.4
The deliverables and dates of Task 4 • State of the art study of LCA and LCC tools - 01/03/2003 • External environmental costs report 01/09/2003 • WEB based LCA/LCC tool up and running 01/01/2004 • Final report on experiences from using the WEB based LCA/LCC tool 01/05/2005 (this report)
2.5
Milestones and dates • • • •
2.6
State of the art study of LCA and LCC tools 01/03/2003 External environmental costs in Euro calculated for relevant environmental impacts 01/09/2003 Demonstration of the tool by testing and evaluation 01/03/2005 User experiences - input to the report and the final manual 01/09/2005
Task 4 Meetings LCC and LCA have been discussed or different results have been presented at a number of project meetings. Since the work proceeded in different companies, not much coordination was needed. Three meeting have been dedicated to task 4. • 2003-06-12 Meeting in Västerås where following topics where discussed; LCC/LCA- planned activities, Background external costs, ABB Motors experiences, action plan for external cost study and other LCC activities • 2003-10-22 Meeting where following topics where discussed; ABB transformer tool presented, M.Sc. thesis on a combined LCA/LCC, external cost study report presented, Work plan • 2004-02-06 Meeting where following topics where discussed; Conducted/planned activities, structuring the cases by using the strategy model, transformer management tool report.
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3.
DELIVERY: STATE OF THE ART LCC AND LCA TOOLS The state of the art study of LCA and LCC tools was a starting point for task 4 and the work with LCC/LCA tools in DANTES. This report was also the first formal deliverable of task 4. The literature and the web were searched for tools but no web-based combined LCA-LCC tools were found. One proprietary, combined LCALCC excel tool is described in the report. Ten LCC tools (2 web based, 7 excel, one PC program) found on the internet are described. The LCC tools are developed to address specific problems in many different areas and a tool developed and structured for one area cannot generally be used in another area. It seems that the LCC methodology is more application dependent than LCA methodology.
3.1 Tools examined LCC/LCA excel tool • ENECO – a proprietary tool developed by ABB for Bombardier Transportation. It combines the LCALight (excel version, developed by ABB) and MiniMarvel (simplified LCC excel tool developed by Bombardier Transportation). The tools were combined to one excel-tool, allowing comparison of life cycle environmental impact and life cycle cost of two different components. Web based LCC tools • Konsumentverkets energianalys – A web based calculation tool mainly focusing on reducing the energy use of residential homes. The tool also calculates payback time for selected energy saving measures. • A Ready Reckoner for Maintenance v. Refurbishment Costs – Web tool to calculate the optimum time to refurbish equipment. Excel LCC tools • NORSOK – oil industry • STEM – residential home • Barringer & Associates, Inc – engineering, manufacturing • The Pump Life Cycle Costs – engineering of pumps • CAL-B/C – infrastructure, highway and transit • Bicycle-IV – power generation • LCCA Cal State – building costs PC tool • lccWare3.0 – software for big LCC calculations.
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3.2 Conclusion Only one, proprietary, LCC/LCA tool was found and this could not be used in the Dantes toolbox. LCC tools are made for specific application/problem areas and there does not seem to be an LCC tool for a general type of problem. The conclusion was that Dantes could develop a simple, general LCC support tool to do cost analysis. Such a tool is now available at Dantes.info 4.
DELIVERY: EXTERNAL ENVIRONMENTAL COSTS IN LCC In the report “External environmental cost LCC”, the potential use of LCA to estimate life cycle environmental costs is discussed. This report was the second formal deliverable to EU from task 4.
4.1 LCC and LCA LCA (Life Cycle Assessment) and LCC (Life Cycle Costing) both are methods that emerged from the energy crisis in the mid 70ies. LCC was developed by economists, LCA by engineers. LCC developed quickly as a methodological framework existed: economy. The main problem was to find which items to include in the assessment and to estimate their values. LCA data may be troublesome to make public and LCC data are even worse. 4.2 External environmental costs The report discusses how external environmental cost could be estimated in different ways with LCA or LCA-like investigations. It also discusses the driving forces for internalizing external costs, such as the “polluter pays principle”. Examples of internal environmental costs that could be estimated are: • Process costs – e.g. Control equipment, Environmental permit, Environmental monitoring, Certification cost, Labeling costs, Environmental management • Sales • Accidents • Goodwill change e.g. Impact on sales, recruiting, mortgage rates • Taxes and fees on emissions and resource consumption LCA may be used to estimate risks, especially together with those LCA impact assessment methods that model damage. Such an item in the LCC can be dealt with as an insurance fee or in case the risk is too high, as a way to include necessary preventive actions. The environmental protection costs in Swedish process industry can be divided into (percentage of total environmental protection costs); • process external investments (17%) • process integrated investments (17%) • company internal protection work (33%) 7
•
purchases services and fees (33%)
The environmental protection costs in Swedish industry are on average 0.7% of sales and in the chemical process industry it can be 1.4% of the sales volume. 4.3 Conclusion It is obvious that there is a potential for using LCA for identifying and estimating environmentally related cost items in an LCC, but the methodology is immature. It seems reasonable to start an improvement of the methodology by looking at future costs that can be estimated without new methodology 5.
DELIVERY: EXPERIENCES BY ANSC
5.1 Environmental costs and environmental impacts in a chemical industry The aim of the report “Environmental costs and environmental impacts in a chemical industry” by Stefan Bengtsson and Li Sjöborg was to determine the properties of “environmental costs” for the products of a chemical company. The study was focused on the production of two colorants. The surfactant Berol 09, used in the older colorant formulation, contains nonyl phenol ethoxylate, a substance with potentially harmful properties. The newer colorant formulation contains another surfactant (Bermodol SPS 2532) that was developed as a more environmentally favorable alternative to Berol 09. Both surfactants are manufactured at the Akzo Nobel production site in Stenungsund, Sweden. This substitution is studied both from a traditional LCA perspective and from a perspective of monetary environmental costs. An attempt is also made to develop a method that combines the LCA perspective and the perspective of environmental costs (Environmental LCC, eLCC). 5.1.1
LCA and eLCC on Colorants As no standardized procedure on LCC has yet been developed neither is there any standard on the eLCC (environmental LCC) procedure. The eLCC method used in this study was been developed only for the purpose of this study. Since the eLCC study was performed in combination with an LCA study the eLCC procedure was based on the LCA procedure with some alterations in order to be more suitable for studying environmental costs. The life cycles that the LCA and the eLCC are based on in this study differ from each other. The LCA life cycle includes all the steps involved in the everyday production and use of the product. The eLCC life cycle, on the other hand, considers the product’s life cycle from a viewpoint where all costs during the existence of the product are considered.
5.1.2
Environmental costs considered The following costs have been included; 8
•
•
•
5.1.3
Environmental taxes o Sulfur tax on emissions of SO2 o Carbon dioxide tax o Energy tax Environmental permits or certificates o Environmental permits needed in order for a company to be allowed to operate o Environmental report o Certificate cost Environmental fees o Supervision fee o NOX-fee o Registration fee o Environmental damage and clean-up insurance
Comparison of LCA and eLCC The LCC and LCA methods are originally designed to answer very different questions. An LCC is performed to measure the costs that a specific company or organization has for the studied product. An LCA normally concerns the environmental impact caused by a specific product from the extraction of raw materials, through production, transportation and use, to the disposal of the product and all materials and processes needed. Ever since stating the aim, to study and compare environmental costs and impacts, the goal has been to perform this study in accordance with the LCA viewpoint. To study environmental costs from an “LCA-like” perspective, LCC studies that only consider environmental costs are performed for all raw materials and processes that would normally be included in an LCA study of the system. A combination of LCA and eLCC studies could be useful to evaluate the efficiency of environmental investments and can assist in the decisionmaking process when different environmental improvements are considered.
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5.1.4
Results, discussion and conclusion
Figure 2 A comparison of environmental impact, using the EPS method to aggregate environmental impact data to one unit, and the total environmental cost of the colorants, including the estimated costs for raw materials outside of Akzo Nobel.
The substitution has lead to a decrease in the environmental impacts and an increase in the environmental costs of the colorant. The increased environmental costs can be considered as a “payment” to decrease the environmental impact of colorants. 5.2 The BASF Eco-Efficiency Analysis method The BASF Eco-Efficiency Analysis method is not an alternative to a standard LCA study but rather an extension of it. The method comprises use of environmental impact data and cost data to calculate eco-efficiency. Eco-efficiency is defined as the ratio of economic creation to ecological destruction from the perspective of the end consumer. The environmental impact data is considered depending on its impact on the following six environmental impact categories. o Consumption of energy o Consumption of resources o Land use o Emissions into air, water and soil (wastes) o Toxic potential of used and released substances o Risk potential The BASF Eco-Efficiency Analysis method has been applied on the study of the environmental impacts and environmental costs of the two colorants described in Chapter 5.1 “Environmental costs and environmental impacts in a chemical industry”
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5.2.1
Case study: eLCC and LCA on two colorants.
Figure 3 Results from the BASF Eco-Efficiency Analysis method applied to the LCA results
An eco-efficiency analysis using the BASF method could be a valuable addition to any LCA study where the properties of two or more products or processes are compared. The method is developed and widely used by one of the largest chemical companies in the world and has gotten a lot of attention even outside of BASF.
Figure 4 “The Ecological fingerprint” of the two colorants.
5.2.2
Conclusion of the BASF method for Akzo Nobel. Performing an eco-efficiency study on already prepared LCA data is not a time consuming task and could be a valuable addition to LCA studies performed at Akzo Nobel. The overall results from the new eco-efficiency study are very similar to the results of the original study, even though the BASF method and the method used in the original study consider different environmental impact categories.
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6.
DELIVERY: EXPERIENCES ABB
6.1 Tools developed In Dantes several different LCC/LCA tools have been developed, one general LCC tool and five specialized LCC/LCA tools for different applications. General LCC tool LCCLight is a simple excel based tool provided at the Dantes.info site. It consists of five input sheets and one result sheet. The sheets are; • General data – Input for general cost data and general project data • Initial costs – Costs at the start of the project • Operation – Costs that arise during normal operation • Failures-Breakdown – Cost arising from breakdown (and possibly standstill) • End-of-life – Costs that arise at the end of the life • Results – Resulting costs from input Some graphical results from LCCLight are shown below. end-of-life
Yearly costs
consequence breakdown
160000
service
140000
work
120000
energy
100000
initial
80000 60000 40000 20000
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20
18
16
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12
10
8
6
4
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0 0
6.1.1
Figure 5 The graphical result from LCCLight over the lifetime Costs in lifecycle phases 1 400 000 1 200 000 1 000 000 800 000 600 000 400 000 200 000 0 Initial
Operation
End-of-life
Total
Figure 6 The graphical result from LCCLight over the lifecycle phases
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6.1.2
6.1.2.1
Special LCC/LCA tools A number of LCC/LCA tools have been developed by ABB and these tools are limited to evaluating some choices on a specific problem. This is probably how tools like these always will be made. Into the tool go a number of assumptions and pre-set data in order to simplify the input for the user Anaerobic digestion plant (Biogas, wet process) [The wet fermentation LCC/LCA Report] The purpose of the LCC/LCA tool on anaerobic digestion plant is to allow designers to evaluate the costs and environmental impact of potential “wet” biogas plant designs and do some parameter studies. Anaerobic digestion is a biochemical process by which organic matter is decomposed by bacteria in the absence of oxygen, producing methane and other byproducts.
6.1.2.2
Dry fermentation (Biogas, dry process) [The dry fermentation LCC/LCA Report] The purpose of the LCC/LCA tool on dry fermentation is to allow designers to evaluate the costs and environmental impact of potential dry fermentation biogas plant designs and do parameter studies. Dry fermentation is an aerobic digestion but instead of waste water, as in the process above, the input to the process is solid organic waste which is fermented in a tank/container to produce biogas (mostly CH4 – methane) and the process is used to gain energy from waste as opposed to discarding the solid waste on a landfill.
6.1.2.3
Transformer management tool (Transformer selection) [The Transformer LCC/LCA Report] The purpose of the LCC/LCA tool “Life Cycle Transformer Management” is to allow comparison of the costs and environmental impacts of two distribution transformers and do parameter studies (on load, costs, interest rates, shortcuts, failure rates, service/maintenance,…). A transformer is an electrical device consisting of a magnetic core and one or more windings, used to change the voltage of an AC circuit.
6.1.2.4
AX1 LCP tool (MV Switchgear selection) [The Switchgear LCC/LCA Report] The purpose of the LCC/LCA tool for AX1 evaluation is to allow designers to compare the costs and environmental impacts of the new medium voltage switchgear AX1 and a conventional medium voltage switchgear. The function of a medium voltage switchgear is to turn electric power on and off, similar to a light switch, but for voltages of 1kV – 70kV. 13
6.1.2.5
Battery (Battery selection for backup power) [The Battery LCC/LCA Report] The purpose of the LCC/LCA tool for battery evaluation is to allow designers to compare the costs and environmental impacts of four different battery types and do parameter studies. The batteries studied are for large power applications and back up systems. Typical energy content stored in these types of batteries would be 10 – 10000 kWh.
6.1.3
Development story of one of the tools The report on experiences of LCC/LCA has a chapter on the development of one of the tools, describing how the project started, iterations back and forward, who the tool was presented to and feedback. The main points are; • The process to develop the tool takes longer time than originally anticipated, both in calendar time and in work time, due to the number of people that have to give feedback and input. • The stakeholders have to be included early in the discussions to ensure that the development is on the right track • Discussions have to be initiated with many different stakeholders (some with conflicting views, some with negative view) • The objectives may have to be changed as the work goes forward • Once the tool is developed it has to be reviewed by stakeholders in several cycles • Feedback from the “other side” – the customer – is valuable • Even if the tool fulfill the expectations, immediate success is not guaranteed • Environmental evaluation of differences played a minor role in this work but received some interest
6.1.4
Conclusion The developments of the LCC tools have provided valuable knowledge about the process of applying the methods and developing these tools and also some insights in how they can be introduced. There is a future for tools like these to give sales and marketing people good selling arguments for a superior product with a higher purchasing price and these tools have a potential to be used in other business areas of ABB.
7.
REPORTS IN TASK 4 State of the art LCC and LCA tools External environmental costs in LCC Environmental costs and environmental impacts in a chemical industry. eLCC and LCA on two colorants. The BASF Eco-Efficiency Analysis method - applied on environmental impact data from an LCA study of two colorants. LCC/LCA experience - developing and working with LCC tools. LCC-LCA Battery 14
LCC-LCA Dry fermentation LCC-LCA Transformer LCC-LCA Wet fermentation LCP tool AX1 (links) 8.
TASK 4 – MEETING ITS GOALS?
8.1 Evaluation of objective The Objective of task 4; Development and marketing of eco-efficient products and services is one important part of the sustainability concept. The development of eco-efficient products however demands an optimization of both environmental and economical aspects, to be competitive on the market. The objective here is to integrate tools for environmental assessment and cost assessment into one operative tool. Critical aspects that will be addressed are the economical valuation of external environmental costs as well as company specific costs, with regards to environment. The results will be an important input to the total Tool integration and demonstration plan. Achieved; The tools show that one can develop integrated LCC/LCA tools that can be used for design, optimization or giving sales arguments. The form and input for an LCC is much more domain specific so one operative tool could not be developed. A standalone, general LCC tool was developed within the project and is available as a Dantes tool. A report on an LCA and eLCC on colorants show how external environmental costs can be included in an eco-efficiency analysis. 8.2 The deliverables • • • •
Report; State of the art study of LCA and LCC tools. Report; External environmental costs. WEB based LCA/LCC tool up and running. Final report on experiences from using the WEB based LCA/LCC tool – This report.
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