1. Life-cycle cost analysis (LCCA)
Group: Mikael Lindqvist, Milla Mattila, Wu Nan, Tuomas Ruponen, Eero-Matti Vainio, Jouni Virtanen

2. General Purpose: to estimate total costs of owning a facility
Life-cycle cost analysis (LCCA)
General
Purpose: to estimate total costs of owning a facility
Measures such as Lowest Life-cycle Cost (LCC)
Useful in comparison of alternative designs
Performed early in the design phase
Challenge: estimating costs and making assumptions
Only economic aspect is evaluated

3. Costs Initial costs Energy and water cost
Life-cycle cost analysis (LCCA)
Costs
Initial costs
includes all possible initial investment costs
for example land acquisition, construction, renovation, equipment
estimated by historical data from similar facilities or by using different databases, such as rakennusosien kustannukset 2015
Energy and water cost
based on consumption, current rates and price projections
hard to predict at early state of project - can be calculated during design phase
Energy suppliers provide information about prices and price projections

4. Costs Non fuel operation, maintenance and repair costs
Life-cycle cost analysis (LCCA)
Costs
Non fuel operation, maintenance and repair costs
Depend on operating schedules and maintenance standards
Estimating requires engeneering judgement
Published guidebooks and suppliers provide information
Replacement costs
Timing and amount lifetime of a system and owning period
Same sources of information for costs as when estimating the initial costs
Base date’s value, LCCA will discount the value to occurrence date’s value

5. Costs Residual value (RV) Other costs Life-cycle cost analysis (LCCA)
Monetary value of the building at the end of the owning period
Can be determined in many ways depending on the condition of the building
One example:
Other costs
Non-monetary benefits
Investments that improve the productivity but the benefits are hard to quantify
Financial charges and taxes

6. Present-value analysis
Life-cycle cost analysis (LCCA)
Present-value analysis
Present-value analysis takes into account the time value of money
Future cash flows are discounted to a base date to enable better decision making
Discount rate represents the rate by which ‘future money’ becomes less valuable
Investor’s opportunity cost
Inflation

7. Present-value analysis
Life-cycle cost analysis (LCCA)
Present-value analysis
Method 1: When the cash flow and interest rate are assumed to stay the same during the study period
Method 2: The cash flow of each year is discounted separately

8. Calculation Life-cycle cost analysis (LCCA)
When all the costs of a building during the whole life-cycle has been identified and discounted to present value, total life-cycle costs can be counted according to formula.
Several variations of this formula, but the basic idea of life-cycle cost assessment calculation is equal.

9. Application Life-cycle cost analysis (LCCA) Investment analysis
Calculations and decisions
Especially
when initial costs are traded for reduced future cost
when different kind of building design alternatives are compared
Buildings may have different initial investment costs, different operating and maintenance and repair costs, and sometimes totally different lives or use
Exceedingly precise assessment method in evaluation of the long-term cost-effectiveness of building or project, comparing in alternative short-term economic calculations which are often only based on early stage costs

10. Example of LCCA used in Denmark
Life-cycle cost analysis (LCCA)
Example of LCCA used in Denmark
LCCA used to determine most cost-effective and energy efficient way to build a multi-storey residential net zero energy building
study included three levels of energy demand and three alternatives of energy supply systems
energy levels 0, 1 and 2
energy level 0 has lowest U-values
energy level 2 has highest U-values

11. Summary of costs in Denmark
Life-cycle cost analysis (LCCA)
Summary of costs in Denmark
Construction costs decreases with lower thermal properties
Lower thermal properties leads to higher costs of energy supply systems
Total costs increases with larger energy supply systems

12. Uncertainty Assessment in LCCA
Life-cycle cost analysis (LCCA)
Uncertainty Assessment in LCCA
Some techniques:
Deterministic techniques (not use probility)
- conservative benefit and cost estimating
- Breakeven Analysis
- Sensitivity Analysis
- risk-adjusted discount rate
- certainty equivalent technique
Probabilistic techniques (use probility)

13. Sensitivity Analysis Breakeven Analysis
Life-cycle cost analysis (LCCA)
Sensitivity Analysis
measures the impact on project outcomes of changing one or more key point values
advantages: a single input variable output variability (range)
Breakeven Analysis
benefits = costs
advantage: simplifies project evaluation and quickly
common disadvantage: no probability is used; no explicit treatment of risk attitude