Civil Engineering Reference
In-Depth Information
19.3.1 Present Worth Method
The net present worth of a project is defined as the difference between the
present worth of the total project revenues (energy cost saving + other
cost savings
additional operating costs) and the present capital cost of
the project:
X
n
1
PW
¼
j
C
pel
Q
el
j
þ
C
p
th
Q
th
j
C
pa
Q
a
j
I
p
j
ð
1
þ
r
Þ
1
where
C
p
¼
present monetary value (at year zero) of each unit of revenue (
C
pel
:
value of unit of electrical energy saving;
C
p
th
: value of unit of thermal energy
saving;
C
pa
: value of unit of additional saving or cost of materials and working
hours), and
Q
j
¼
annual revenues in physical units (
Q
el
j
: amount of electric energy
saving;
Q
th
j
: amount of thermal energy saving;
Q
a
j
: amount of additional or saved
materials and working hours, etc.). It is usually assumed that they become effective
in year 1 (
j
present investment at year zero. If the investment has been
made in different years, the present investment can be calculated by using the PWF
factor:
¼
1);
I
p
¼
X
n
I
j
¼
I
o
þ
j
j
ð
1
þ
r
Þ
1
In the case of energy-saving investments, all savings and additional operating
costs can also be expressed as a percentage of the energy saving by increasing or
decreasing the present monetary value of the energy (
C
pel
,
C
p
th
).
The present investment
I
p
can be simply the effective capital cost if it is
concentrated in the year zero or the present worth of the investment calculated by
means of the present worth factor if it is made in several years.
The expression given above can be adapted for wider use if a different inflation
rate is introduced for each item of the revenues and for the capital investment. A
widely accepted criterion takes into account two different values of the inflation
rate for the energy and related revenues (
f
*) and for the investment (
f
).
