Life Cycle Cost Analysis

For Water and Wastewater Treatment Facilities, this Analysis Can Result in Lower Costs and Higher Quality Projects

Undertaking large capital projects like water and wastewater treatment plants can be intimidating. These projects often involve large sums of money, long term financing, and increased rates to pay for the improvements. With a desire for fiscal responsibility, there is often a great deal of pressure to implement the lowest cost alternative. But if that “low cost” alternative only considers capital costs, you may be missing the mark.

Capital costs are the one-time, upfront costs that it takes to get a project completed. These can include not only construction cost, but also design, permitting, legal, and land purchase.  A life cycle cost analysis calculates the total cost of a project over its anticipated life.  It takes into account not only the capital costs associated with a project, but also the on-going operation, maintenance, and repair costs, as well as final “end of life” costs.  This includes such things as labor, energy, chemicals, preventative maintenance, repairs, equipment replacement, and waste disposal.

When considering life cycle costs, it’s important to establish an appropriate time period over which to conduct the evaluation. If the period is too long, it may not account for changing conditions, regulations, or needs. Too short and it may unjustly skew the analysis to favor lower capital cost options.

This turbo blower was installed at the Council Bluffs WWTP to improve energy efficiency.

This turbo blower was installed at the Council Bluffs WWTP to improve energy efficiency.

An appropriate discount rate must also be used to account for the time value of money.  After an appropriate time period and discount rate have been identified, the annual costs for a facility are then converted to a net present value for comparison with other alternatives. Those alternatives with the lowest capital cost may not have the lowest life cycle cost, and may end up costing more on an equivalent annual cost basis.

For water and wastewater treatment plants, energy costs can account for as much as 30% of the operation and maintenance costs of the facility.  Pumping and aeration are usually the largest energy users in wastewater treatment plants, so improvements in efficiency can significantly reduce energy costs. Considering things such as high efficiency diffusers, dissolved oxygen controls, turbo blowers, or higher efficiency pumps are often worthwhile. While there may be higher associated capital costs, the reduced energy costs can often exceed the initial cost over the life of the project. Energy efficiency improvements in water and wastewater treatment plants not only provide “green” benefits, but can often result in lower life cycle costs.

Chemical usage can also be a large portion of operating costs, especially for water plants. Comparing biological and/or physical processes to remove target constituents may prove beneficial. Chemical feed systems generally have lower capital costs than other processes, but the on-going costs of chemicals can far outweigh the capital investment. On the other hand, biological or physical processes such as biologically active filters, biological phosphorous removal, reverse osmosis, or aeration/oxidation can be much more capital intensive, but have lower operational costs.  An appropriate life cycle cost analysis will take into account those costs. In some cases, making a much larger capital investment to reduce chemical usage can result in lower equivalent annual costs.

When water or wastewater treatment plants are new, it is difficult to think in terms of equipment replacement. While specifying and purchasing lower-cost, lower-quality equipment reduces the capital cost of a project, it can result in higher operating, maintenance, and replacement costs.  Often, specifying high quality equipment and components can help reduce the overall life cycle cost of a project.

Major equipment replacement should be considered in LCCA. These ultrafiltration membranes have an expected life of 7 – 10 years.

Major equipment replacement should be considered in LCCA. These ultrafiltration membranes have an expected life of 7 – 10 years.

Even with high quality equipment, there will likely be a need to replace some major pieces of equipment during the life of the project. The life cycle cost analysis will need to consider the costs associated with major equipment replacement. For example, pumps may have an anticipated life of ten to fifteen years, and replacement should be planned for during the life of the project. For some equipment, a large capital expenditure should be anticipated when it comes due for replacement. This is the case for membrane plants. The life of the membranes may only be five to ten years, and the capital cost to replace them can be significant.  Planning for that replacement in the life cycle cost analysis is crucial.  In addition, putting money aside each year for the anticipated capital need is a wise practice that can alleviate the pain of major equipment replacement.

Waste disposal is another component that must be considered in a life cycle cost analysis. For water plants, wastes can include brine solutions, filter backwash water, lime sludge, alum sludge, or reverse osmosis concentrate solutions. For wastewater plants, biosolids processing and disposal can be a large cost.

Accounting for the costs associated with these wastes may tip the scales in favor of one alternative. Considering different methods of handling or disposing of these wastes can also help reduce life cycle costs for a facility. For example, biosolids disposal through the use of holding ponds or tanks and liquid land application may have a relatively low capital cost and higher operational costs. Conversely, installing sludge thickening or dewatering facilities can result in higher capital cost, but the reduced volume to dispose of can greatly reduce the hauling and disposal costs.  But the resulting savings can be reduced by higher energy and chemical costs associated with dewatering. Each situation is different, and a unique analysis must be conducted to determine the most cost-effective solution over the life of the project.

Pilot testing can also be beneficial to help better predict the actual operating costs.  The more accurate the input data, the more accurate the life cycle cost analysis will be.

Pilot testing, like this biosolids dewatering system, can help define operating parameters and better predict life cycle cost.

Pilot testing, like this biosolids dewatering system, can help define operating parameters and better predict life cycle cost.

Water and wastewater treatment facilities are capital intensive, long term projects. When planning for major improvements or replacement, capital costs are a major consideration. Failing to consider on-going operation and maintenance costs, such as energy requirements, chemical usage, and equipment replacement, can result in higher overall costs. A good life cycle cost analysis should be conducted to help determine the best alternative and minimize the equivalent annual cost of a project.

FOX Engineering is an environmental engineering firm based in Ames, Iowa. We specialize in water and wastewater solutions for our diverse municipal and industrial clients. Our work varies in size and scope and can be found throughout the Midwest and beyond.