Civil Engineering Reference
In-Depth Information
Factors such as PWF and PFA can be evaluated either by using tables (see
Tables
19.1
and
19.2
) or by calculation on personal computers, with any software
available.
Table
19.3
shows an example of PW calculation by using both the general and
the simplified expressions.
19.3.2 Internal Rate of Return (IRR)
IRR is the value of
i
) such that PW
¼
0
¼
NACF
PAF
I
.
It follows that PW
¼
0 if PAF
¼
NACF/
I
¼
PAYBACK.
IRR is the internal interest rate that reduces to zero the present worth of
the project at the end of the life of the project (
n
years).
This parameter, named IRR, can easily be compared with the company interest
rate to evaluate the merit of the project. The calculation of IRR requires an iterative
approach: selecting different values of the parameter
i
) and calculating the PW,
generally using the basic expression.
19.4
Case Studies
Several examples discussed from the technical point of view in the previous
chapters are here examined to evaluate the economic validity of the correlated
investment from the cost energy-saving angle.
The basic methods reported in Sects.
19.2
and
19.3
are used and the results for all
the case studies examined throughout the topic are shown in Table
19.4
.
To facilitate the understanding the table provides example values for the energy
costs and for the investment. Notice that the ratio between electric and thermal
energy costs, which is introduced as an example, has a general validity because this
ratio is roughly the same for many countries. The cost of unit of energy (MWh for
electric energy, TOE for thermal energy) is expressed as kU/MWh or kU/TOE
where U can be any currency; a reference cost of 0.1 kU/MWh and 0.16 kU/TOE of
thermal energy is assumed.
For each case, Table
19.4
shows the annual energy saving, both electrical and
thermal, and the corresponding cost saving. Expected investment life is also
introduced; investment
I
is expressed in kU units.
The different kinds of investment are compared by using payback and IRR
parameters.
Notice that only energy cost and saving have been considered; for a more
detailed analysis, additional costs and savings (working hours, maintenance,
