aLosses given in Btu/hr lin. ft of bare pipe at various temperature differences and Btu/hr-ft2 for flat surfaces. Heat losses were calculated for still air and e = 0.95 (plain, fabric or dull metals).

should also be included based on the material and application involved. The variations in labor costs due to both time and base rate should be evaluated for each particular insulation system design and locale. In other words, insulation costs tend to be job specific as well as being differentiated by product.

Lost Heat Costs

Reducing the amount of unwanted heat loss is the function of insulation, and the measurement of this is in Btu. The key to economic analyses rests in the dollar value assigned to each Btu that is wasted. At the very least, the energy cost must include the raw-fuel cost, modified by the conversion efficiency of the equipment. For example, if natural gas costs $2.50/million Btu and it is being converted to heat at 70% efficiency, the effective cost of the Btu is 2.50/0.70 = $3.57/million Btu.

The cost of the heat plant is always a point of discussion. Many calculations ignore this capital cost on the basis that a heat plant will be required whether insulation is used or not. On the other hand, the only purpose of the heat plant is to generate usable Btus. So the cost of each Btu should reflect the capital plant cost ammortized over the life of the plant. The recent trend that seems most reasonable is to assign an incremental cost to increases in capital expenditures. This cost is stated as dollars per 1000 Btu per hour. This gives credit to a well-insulated system that requires less Btu/hr capacity.

Other Costs

As the economic calculations become more sophisticated, other costs must be included in the analysis. The major additions are the cost of money and the tax effect of the project. Involving the cost of money recognizes the real fact that many projects are competing for each investment dollar spent.

Therefore, the money used to finance an insulation project must generate a sufficient after-tax return or the money will be invested elsewhere to achieve such a return. This topic, together with an explanation of the use of discount factors, is discussed in detail in Chapter 4.

The effect of taxes can also be included in the analysis as it relates to fuel expense and depreciation. since both of these items are expensed annually, the after-tax cost is significantly reduced. The final example in Section 15.5.3 illustrates this.

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