[BLDG-SIM] life cycle costing assumptions for non-federal projects

Pat Bailey pbailey at greenbuildingstudio.com
Fri May 5 10:04:31 PDT 2006


The escalation assumptions that come from the Energy Information Administration are, as Renee stated, negative for many years, and from our perspective very conservative.  I think that people use the EIA numbers because most engineers have a difficult time even estimating what the price of energy will be 15 years from now, or 5 for that matter.
 
We have done a little research to try and find escalation factors that agree more closely with recent experience.  For California have been using 2% based on a look back at utility rates.  The difficulty is that EIA never projects discontinuities (they can't), but a lot of the increases over the past 30 years have been in the form of spikes.  For example, next year the price of natural gas may drop, but it will drop from historic highs which were not captured by any escalation assumptions in the recent past.
 
I would be curious to know if any large corporate entities have an energy cost assumption built into their corporate budgeting process.  I have to believe that energy intensive industries, certainly the airlines, and probably others have economists or consultants dedicated to assessing this issue/risk.
 
_____________________________________
Pat Bailey, PE
Green Building Studio, Inc.
444 Tenth Street, Suite 300
Santa Rosa, CA 95401

707-569-7373 x101 - voice
707-569-7313 - fax


 
 

________________________________

From: BLDG-SIM at GARD.COM [mailto:BLDG-SIM at GARD.COM] On Behalf Of Renee J. Azerbegi
Sent: Thursday, May 04, 2006 7:29 PM
To: BLDG-SIM at GARD.COM
Subject: [BLDG-SIM] life cycle costing assumptions for non-federal projects



I was using BLCC for life cycle costing and the end life cycle cost results were less than if I took the maintenance costs, energy costs, and first costs and added them together over the 25 year study period I was examining! Then I noticed the NIST/DOE fuel escalation factors which have negative values for many of the years. This I believe contributed to this error. My first question is, doesn't this seem odd that the fuel escalation factors are negative at a time like now?

 

Also, as this was a non-federal project, I used a default factor of 2% instead. But my other questions are, for life cycle costing analysis, what are the most commonly used sources you might have found for inflation rates, real or nominal discount rates, or fuel escalation rates? I made some assumptions based on doing some web research but is there an acceptable method of choice other than using defaults in BLCC which are designed more for federal projects?

 

Thanks in advance for your feedback!

 

Renée

 


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