Step 13 Life Cycle Financial Analysis

To evaluate the sum total of project incremental costs and benefits over the life of the project for each potential system option, a cash flow analysis should be performed for every year of each potential measure's life. Total project cash flow will be determined for each year of the project life as the sum of all measures combined. Any alternate measures, measure groups, or equipment or supply options should be analyzed individually. Integrated programs may allow for combining certain measures that in and of themselves do not necessarily satisfy the financial screening requirements. This may enable projects that are desired by the host facility, such as central plant upgrades, building envelope architectural and structural improvements, or alternative technology applications with marginal project economics to be fully funded as part of the overall integrated cost reduction program. The cash flow presentation will show total cost savings and total performance payments and will break each into its component parts. The financial analysis will be formatted to meet the host facility's specifications. Life-cycle costing assumptions, such as escalation and discount factors, will be clearly stated so they can be reviewed.

The type of financial analysis performed and the results will be largely influenced by the types of contract and funding vehicles being contemplated for project implementation. The following two chapters present detail on contract types, financial analysis techniques, and project financing options. Chapter 42 provides an introduction to basic financial analysis techniques that are widely used for project evaluation. Chapter 43 focuses on the various standardized and customized performance-based contract vehicles available for implementing an integrated energy optimization project and presents details on various conventional and non-conventional financing options that may be used to fund project implementation. These contract and financing options and analytical methods should be considered in advance by the study team so that financial results can be analyzed and reported in a format that is compatible with that of the host facility.

Renewable Energy 101

Renewable Energy 101

Renewable energy is energy that is generated from sunlight, rain, tides, geothermal heat and wind. These sources are naturally and constantly replenished, which is why they are deemed as renewable. The usage of renewable energy sources is very important when considering the sustainability of the existing energy usage of the world. While there is currently an abundance of non-renewable energy sources, such as nuclear fuels, these energy sources are depleting. In addition to being a non-renewable supply, the non-renewable energy sources release emissions into the air, which has an adverse effect on the environment.

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