Economic analysis

The economic analysis brings together what arose separately in the preceding steps: the set of quantities from the annual simulation, the costs of the components and the revenues from the use of electricity and heat. The order is not arbitrary – first the technology is settled, then the calculation follows. Only once operating hours, fuel consumption, self-consumption and grid supply are fixed is it clear which quantities are to be valued at all; anyone recording costs earlier calculates with values that shift again with the next simulation run. Tie the recording of costs to a saved simulation result for this reason.

This page describes the working sequence in the program. The methodology behind it is described by Fundamentals › Economic analysis, the system of cost types by Cost calculation; the income side is dealt with by the subpage Revenue calculation.

Contents of this page

Recording costs per component

The cost module is divided into investment costs, operating costs and energy costs. For every component present in the project any number of items can be recorded, each with amount, unit, service life in years and a range between the favourable and the unfavourable case. The plant costs stored in the technical module can be adopted as a planning value. Totals are shown continuously per component and for the project as a whole. The list also has to include items that cannot be assigned to a machine – hydraulics, electrical installation, planning and commissioning – with their own, usually longer service lives.

Heat pump. In addition to the machine there are the development of the heat source and the hydraulic and electrical integration. On the consumption side the entire electricity consumption counts, including the back-up heater, which the evaluation reports separately. Lock-out periods and a separate tariff for heat pump electricity change the working price to be applied and therefore belong to the energy prices, not to the operating costs.

Boilers and electric boilers. Besides boiler, flue gas system and integration there are the fuel costs from the consumption reported separately by energy carrier, as well as operation-related items such as maintenance, chimney sweep and metering. An electric boiler is modelled through the energy carrier electricity; its costs therefore arise on the electricity side.

CHP. The maintenance of engine-driven plants is usually applied as an amount per kilowatt hour generated and is thus directly coupled to the operating hours. The service life of an engine is considerably shorter than that of a boiler, so that an engine overhaul or a replacement of the unit falls within the assessment period as a replacement investment. Against this the electricity revenues from the revenue calculation have to be set.

Solar thermal. The costs are almost entirely capital-related: collector array, mounting, connection to the store and control. Consumption-related there remains only the auxiliary electricity for pumps and control, operation-related essentially the maintenance.

Photovoltaics. Modules, mounting structure, inverter, cabling and metering equipment make up the investment. Because the inverter has a shorter service life than the modules, its replacement has to be applied as a replacement investment. Running costs are usually limited to insurance, metering and repairs.

Buffer tank. Tank, insulation and integration are a one-off investment with a long service life, considerably longer than that of the generators; running costs hardly arise. Economically the tank acts indirectly, because it shifts operating times – longer CHP running times, less cycling of the boiler, more PV electricity in the heat pump.

Battery storage. Here degradation determines the service life; if it is shorter than the assessment period, a replacement belongs in the calculation. The benefit arises solely through the additional electricity used on site, which is why a battery always calls for the additional investment and the additional self-consumption to be set against each other.

Energy prices and price history

Energy prices are maintained under Administration › Energy carriers and cost parameters. For every energy carrier the working price, the standing price and – where applicable – the demand price are stored, plus net and gross calorific value, the unit conversion and the emission factors. Every set carries a validity date, so that it remains traceable later with which price status a variant was calculated.

For electricity three quantities have to be distinguished that weigh very differently in the assessment: the purchase price, the avoided purchase through self-consumption and the feed-in remuneration. Where heat is bought instead of generated on site – in a local heating network or under contracting – the heat price with working, standing and, where applicable, demand price takes the place of the fuel costs. How the quantities generated are valued on the income side is described by the subpage Revenue calculation.

Boundary conditions of the calculation

Before the assessment the general assumptions have to be settled. The assessment period follows the service life of the main components; 15 to 20 years are usual. The discount rate reflects capital costs and the expected return. Price escalation rates have to be applied separately for fuel, electricity, maintenance and other costs, because experience shows that energy prices and labour costs develop differently. Replacement investments falling within the period – engine overhaul, inverter replacement, replacement of the battery – belong in the calculation just as much as a residual value for components whose service life extends beyond it. These assumptions have to be kept identical for all variants compared, otherwise the calculation does not compare technology but assumptions.

Assessment by net present value and annuity method

On this basis the variants are assessed by the net present value or the annuity method. The net present value brings together all future payments discounted to the time of the investment; it is the appropriate quantity where payments fluctuate or are limited in time – as with remunerations and bonuses. The annuity distributes the same payments evenly and yields annual costs. From these follow the heat generation costs per kilowatt hour, which make variants comparable most directly, provided the same reference quantity and the same system boundary apply to all of them. The payback period completes the picture but does not carry a decision on its own.

Reference variant and comparison of variants

Every comparison needs a reference point. A simple reference variant has proved its worth, for instance boiler-only supply or the existing situation before refurbishment. Against it, additional investment, energy costs saved and additional revenues can be set in relation. For the comparison the same rule applies as on the technical side: change only one quantity at a time – machine size, storage volume, operating mode, order of generators – and simulate and assess again. Because all variants are based on the same demand and climate data, they remain directly comparable. The simulation result can be saved for every project; for a comparison in tabular form all time series are available as a CSV export.

Sensitivity through ranges

In early project phases cost figures are uncertain, and nobody knows price developments over twenty years. The ranges recorded per item are therefore the simplest entry into a sensitivity study: calculate the variants once with the favourable and once with the unfavourable values and check whether the ranking remains stable. The same is worthwhile for the discount rate and the price escalation rates. If the order remains unchanged, the decision is robust. If it tips within the range already, it cannot be taken by calculation – then criteria such as security of supply, space requirement, operating effort or emissions decide.

Notes for practice

Adopt the plant costs as a planning value instead of typing them in – that keeps technical and cost status consistent if the design changes once more. For quoted prices, document the price status through the validity date; without a date a calculation is no longer reliable after a year. With a CHP unit, check the operating hours before you calculate: at considerably fewer than 4,000 full-load hours per year the calculation will rarely rescue the design. Subsidies, bonuses and tax effects enter the calculation as a system; rates, deadlines and conditions depend among other things on capacity class, commissioning date, fuel and operator model and have to be checked for the specific project.

In all of this: the calculation assesses assumptions, not facts. It shows under which conditions a variant is advantageous, and it does not replace tax or legal advice. Where the economic analysis sits in the overall sequence is shown by the Program workflow overview; the income side is dealt with by the Revenue calculation, the environmental effect by the subpage Emissions, the output of the results by Creating the report. The engineering background is collected under Fundamentals › Economic analysis, Cost calculation and Energy balance comparison, worked cases under Examples.