PROBLEM 2 (50 PTS) EVALUATION OF ENERGY EFFICIENCY PROJECTS An industrial facility is evaluating two independent energy efficiency improvement projects. Each has a lifetime of 15 years and will have a salvage value of zero at the end of this period. The company uses a MARR of 10% Project A This project involves installing high-efficiency motors in the air-conditioning system. Replacing old standard efficiency motors with an efficiency of 92.5% and an annual electrical energy consumption of 3'000,000 kWh by new high efficiency motors with an efficiency of 96 %. An initial investment of $36,000 is required to purchase and install these motors. The Annual Maintenance cost for high-efficiency motors is $500. Project B. This project involves installing a heat exchange unit in the current ventilation system. During the winter, the heat exchange unit transfers heat from warm room air to the cold ventilation air before the air is sent back into the building. This will save 3 '000,000 cubic feet (cf) of fuel (natural gas) per year used by heating system. In the summer, the heat exchange unit removes heat from the hot ventilation air before it is added to the cooler room air for recirculation This saves 37,500 kWh of Electrical Energy annually. The cost of the heat exchange unit is $45,000 and the Annual maintenance costs is $4,500. Current electricity and fuel prices are: Electric Energy : $0.0875 per kWh (UEC=0.0875 $/kWh) Fuel: $4.15 per Million Btu of natural gas (UFC=4.15 $/MMBtu). Natural gas energy Content= 1,000 Btu/cf a) Calculate the Simple Payback period (SPP) and Net Present Value(NPV) of both projects. Based on your calculations would both projects be feasible? If available budget allows to invest in one project only, which one would you choose? Justify your answer based on NPV SPPA= SPPB= NPVA= $. NPV8= $ 7 b) If UEC=0.0875 $/kWh , what value of Unif Fuel Cost (UFC) would result in the same Net Present Value (NPV) for both projects?. Report value of UFC' and the resulting NPV (N P V) UFC = = USD/MMBtu NPV' = $ c) If UFC=4.15 $/MMBtu , what value of Unit Electric Energy Cost (UEC') would result in the same Net Present Value (NPV) for both projects?. Report value of UEC' and the resulting NPV UEC = $/kWh NPV = $ 10% 10% n 1 2 3 1 2 3 4 5 5 6 7 8 9 10 Single Payment Compound Present Amount Worth Factor Factor Find F Find P Given P Given F F/P P/F 1.100 .9091 1.210 .8264 1.331 .7513 1.464 .6830 1.611 .6209 1.772 .5645 1.949 .5132 2.144 .4665 2.358 .4241 2.594 .3855 2.853 .3505 3.138 .3186 3.452 .2897 3.797 .2633 4.177 .2394 4.595 .2176 5.054 .1978 5.560 .1799 6.116 .1635 6.728 .1486 7.400 8.140 .1228 8.954 .1117 9.850 .1015 10.835 .0923 Sinking Fund Factor Find A Given F A/F 1.0000 .4762 .3021 .2155 .1638 1296 .1054 .0874 .0736 .0627 .0540 .0468 .0408 .0357 .0315 .0278 .0247 .0219 .0195 .0175 .0156 .0140 .0126 .0113 .0102 Compound Interest Factors Uniform Payment Series Capital Compound Recovery Amount Factor Factor Find A Find F Given P Given A A/P F/A 1.1000 1.000 5762 2.100 .4021 3.310 3155 4.641 2638 6.105 2296 7.716 2054 9.487 .1874 11.436 .1736 13.579 .1627 15.937 .1540 18.531 .1468 21.384 .1408 24.523 .1357 27.975 .1315 31.772 .1278 35.950 .1247 40.545 .1219 45.599 .1195 51.159 .1175 57.275 .1156 64.003 .1140 71.403 .1126 79.543 .1113 88.497 .1102 98.347 Present Worth Factor Find P Given A P/A 0.909 1.736 2.487 3.170 3.791 4.355 4.868 5.335 5.759 6.145 6.495 6.814 7.103 7.367 7.606 7.824 8.022 8.201 8.365 8.514 8.649 8.772 8.883 8.985 9.077 Arithmetic Gradient Gradient Gradient Uniform Present Series Worth Find A Find P Given G Given G A/G P/G 0 0 0.476 0.826 0.937 2.329 1.381 4.378 1.810 6.862 2.224 9.684 2.622 12.763 3.004 16.029 3.372 19.421 3.725 22.891 4.064 26.396 4.388 29.901 4.699 33.377 4.996 36.801 5.279 40.152 5.549 43.416 5.807 46.582 6.053 49.640 6.286 52.583 6.508 55.407 6.719 58.110 6.919 60.689 7.108 63.146 7.288 65.481 7.458 67.696 6 7 8 9 10 11 12 13 14 15 11 12 13 14 15 16 17 18 19 20 16 17 18 19 20 .1351 21 22 23 24 25 21 22 23 24 25 PROBLEM 2 (50 PTS) EVALUATION OF ENERGY EFFICIENCY PROJECTS An industrial facility is evaluating two independent energy efficiency improvement projects. Each has a lifetime of 15 years and will have a salvage value of zero at the end of this period. The company uses a MARR of 10% Project A This project involves installing high-efficiency motors in the air-conditioning system. Replacing old standard efficiency motors with an efficiency of 92.5% and an annual electrical energy consumption of 3'000,000 kWh by new high efficiency motors with an efficiency of 96 %. An initial investment of $36,000 is required to purchase and install these motors. The Annual Maintenance cost for high-efficiency motors is $500. Project B. This project involves installing a heat exchange unit in the current ventilation system. During the winter, the heat exchange unit transfers heat from warm room air to the cold ventilation air before the air is sent back into the building. This will save 3 '000,000 cubic feet (cf) of fuel (natural gas) per year used by heating system. In the summer, the heat exchange unit removes heat from the hot ventilation air before it is added to the cooler room air for recirculation This saves 37,500 kWh of Electrical Energy annually. The cost of the heat exchange unit is $45,000 and the Annual maintenance costs is $4,500. Current electricity and fuel prices are: Electric Energy : $0.0875 per kWh (UEC=0.0875 $/kWh) Fuel: $4.15 per Million Btu of natural gas (UFC=4.15 $/MMBtu). Natural gas energy Content= 1,000 Btu/cf a) Calculate the Simple Payback period (SPP) and Net Present Value(NPV) of both projects. Based on your calculations would both projects be feasible? If available budget allows to invest in one project only, which one would you choose? Justify your answer based on NPV SPPA= SPPB= NPVA= $. NPV8= $ 7 b) If UEC=0.0875 $/kWh , what value of Unif Fuel Cost (UFC) would result in the same Net Present Value (NPV) for both projects?. Report value of UFC' and the resulting NPV (N P V) UFC = = USD/MMBtu NPV' = $ c) If UFC=4.15 $/MMBtu , what value of Unit Electric Energy Cost (UEC') would result in the same Net Present Value (NPV) for both projects?. Report value of UEC' and the resulting NPV UEC = $/kWh NPV = $ 10% 10% n 1 2 3 1 2 3 4 5 5 6 7 8 9 10 Single Payment Compound Present Amount Worth Factor Factor Find F Find P Given P Given F F/P P/F 1.100 .9091 1.210 .8264 1.331 .7513 1.464 .6830 1.611 .6209 1.772 .5645 1.949 .5132 2.144 .4665 2.358 .4241 2.594 .3855 2.853 .3505 3.138 .3186 3.452 .2897 3.797 .2633 4.177 .2394 4.595 .2176 5.054 .1978 5.560 .1799 6.116 .1635 6.728 .1486 7.400 8.140 .1228 8.954 .1117 9.850 .1015 10.835 .0923 Sinking Fund Factor Find A Given F A/F 1.0000 .4762 .3021 .2155 .1638 1296 .1054 .0874 .0736 .0627 .0540 .0468 .0408 .0357 .0315 .0278 .0247 .0219 .0195 .0175 .0156 .0140 .0126 .0113 .0102 Compound Interest Factors Uniform Payment Series Capital Compound Recovery Amount Factor Factor Find A Find F Given P Given A A/P F/A 1.1000 1.000 5762 2.100 .4021 3.310 3155 4.641 2638 6.105 2296 7.716 2054 9.487 .1874 11.436 .1736 13.579 .1627 15.937 .1540 18.531 .1468 21.384 .1408 24.523 .1357 27.975 .1315 31.772 .1278 35.950 .1247 40.545 .1219 45.599 .1195 51.159 .1175 57.275 .1156 64.003 .1140 71.403 .1126 79.543 .1113 88.497 .1102 98.347 Present Worth Factor Find P Given A P/A 0.909 1.736 2.487 3.170 3.791 4.355 4.868 5.335 5.759 6.145 6.495 6.814 7.103 7.367 7.606 7.824 8.022 8.201 8.365 8.514 8.649 8.772 8.883 8.985 9.077 Arithmetic Gradient Gradient Gradient Uniform Present Series Worth Find A Find P Given G Given G A/G P/G 0 0 0.476 0.826 0.937 2.329 1.381 4.378 1.810 6.862 2.224 9.684 2.622 12.763 3.004 16.029 3.372 19.421 3.725 22.891 4.064 26.396 4.388 29.901 4.699 33.377 4.996 36.801 5.279 40.152 5.549 43.416 5.807 46.582 6.053 49.640 6.286 52.583 6.508 55.407 6.719 58.110 6.919 60.689 7.108 63.146 7.288 65.481 7.458 67.696 6 7 8 9 10 11 12 13 14 15 11 12 13 14 15 16 17 18 19 20 16 17 18 19 20 .1351 21 22 23 24 25 21 22 23 24 25