Outline which options is the best choice. Be sure to let them know the annual fuel cost for each option. They will also want to know the unit cost per steam pound for each option. (Assume i = 10%) Which options is the most economical?

Let's pretend for a moment that I was asked to evaluate building a new boiler at an existing micro station. I really only have two options for fuel, coal or gas, since in the Midwest solar does not output enough MW for the amount of physical space that I have. Because of current environmental regulations, the coal fired option would be required to be built with a precipitator. Because of state regulations, the gas option would require switch-over equipment, allowing me to switch between oil and gas. Which should I recommend? After working with the project for a while, I have gathered the following material quotes: Cost to build the coal fired option: $2,570,300 Cost for electrostatic precipitator: $145,000 Current cost of coal: $125 per metric ton Cost to build gas fired option w/ oil switch: $1,289,340 Current cost of gas is $14.50/MCF Current cost of oil is $2.93 per gallon Salvage value of equipment is $1000 I am going to assume that I am using in house labor, with no overtime. This means that the labor cost is a "sunk cost" and should not be taken into consideration when evaluating the project. The company will have to pay the labor regardless of I am going to assume that I am using in house labor, with no overtime. This means that the labor cost is a "sunk cost" and should not be taken into consideration when evaluating the project. The company will have to pay the labor regardless of the project and that cost is already budgeted. Both manufactures have indicated that the useful life of the boiler equipment is 20 years. My company typically pushes this to the limit and gets many more years out of our equipment. But for the sake of this exercise, let's stick with 20 years. Next, I have to take efficiency of the fuel into consideration. I've done some research and came up with these rules of thumb: * One pound of coal yields 14,300 BTU * 1 pound of steam equates to about 1,000 BTU * 1 cubic foot of gas equates to about 1,000 BTU Next, I have to take efficiency of the fuel into consideration. I've done some research and came up with these rules of thumb: * One pound of coal yields 14,300 BTU * 1 pound of steam equates to about 1,000 BTU * 1 cubic foot of gas equates to about 1,000 BTU * The typical boiler efficiency for a coal fired boiler is 0.75 * The typical boiler efficiency for a gas fired boiler is 0.78 * The typical boiler efficiency for a oil fired boiler is 0.81 * The heat value of oil is 139,400 BTU / gal (million cubic feet) My company relies on this location to output 145,000,000 pounds of steam a year. This is then turned into electricity using a generator, but for the purposes of this exercise we will be looking at required steam output versus required MW output. When a recent study was conducted, we found that for a year we would count on using gas 94% of the time and oil 6% of the time. Your job as a project engineer is to determine which option is the best. Should we build the coal fired unit or the gas fired unit? Let's pretend for a moment that I was asked to evaluate building a new boiler at an existing micro station. I really only have two options for fuel, coal or gas, since in the Midwest solar does not output enough MW for the amount of physical space that I have. Because of current environmental regulations, the coal fired option would be required to be built with a precipitator. Because of state regulations, the gas option would require switch-over equipment, allowing me to switch between oil and gas. Which should I recommend? After working with the project for a while, I have gathered the following material quotes: Cost to build the coal fired option: $2,570,300 Cost for electrostatic precipitator: $145,000 Current cost of coal: $125 per metric ton Cost to build gas fired option w/ oil switch: $1,289,340 Current cost of gas is $14.50/MCF Current cost of oil is $2.93 per gallon Salvage value of equipment is $1000 I am going to assume that I am using in house labor, with no overtime. This means that the labor cost is a "sunk cost" and should not be taken into consideration when evaluating the project. The company will have to pay the labor regardless of I am going to assume that I am using in house labor, with no overtime. This means that the labor cost is a "sunk cost" and should not be taken into consideration when evaluating the project. The company will have to pay the labor regardless of the project and that cost is already budgeted. Both manufactures have indicated that the useful life of the boiler equipment is 20 years. My company typically pushes this to the limit and gets many more years out of our equipment. But for the sake of this exercise, let's stick with 20 years. Next, I have to take efficiency of the fuel into consideration. I've done some research and came up with these rules of thumb: * One pound of coal yields 14,300 BTU * 1 pound of steam equates to about 1,000 BTU * 1 cubic foot of gas equates to about 1,000 BTU Next, I have to take efficiency of the fuel into consideration. I've done some research and came up with these rules of thumb: * One pound of coal yields 14,300 BTU * 1 pound of steam equates to about 1,000 BTU * 1 cubic foot of gas equates to about 1,000 BTU * The typical boiler efficiency for a coal fired boiler is 0.75 * The typical boiler efficiency for a gas fired boiler is 0.78 * The typical boiler efficiency for a oil fired boiler is 0.81 * The heat value of oil is 139,400 BTU / gal (million cubic feet) My company relies on this location to output 145,000,000 pounds of steam a year. This is then turned into electricity using a generator, but for the purposes of this exercise we will be looking at required steam output versus required MW output. When a recent study was conducted, we found that for a year we would count on using gas 94% of the time and oil 6% of the time. Your job as a project engineer is to determine which option is the best. Should we build the coal fired unit or the gas fired unit