Preparing a Cost Analysis

1. Preparing a Cost Analysis March 10, 2009 John Calcagni

2. Preparing a Cost Analysis Overview • Identify all capital costs necessary to get control device operational • Annualize capital costs • Identify all annually recurring costs associated with control device • Identify and value any recovered product (energy, sulfuric acid, gypsum, etc)

3. Direct Capital Expenses • Purchased Equipment • Auxiliary Equipment (including instrumentation and ductwork) • Buildings, foundations and supports • Site Preparation • Direct Installation (electrical, piping, insulation, painting) • Sales Tax • DO NOT INCLUDE LAND

4. Indirect Capital Expenses • Engineering • Contractor fees • Start-up • Performance testing • Contingencies

5. Direct Cost Factors for Fabric Filters • Purchased Equipment As Estimated, A • Instrumentation 0.10A • Sales Tax 0.03A • Freight 0.05A • Purchased Equipment Cost 1.18A, B

6. Direct Capital Cost Factors for Fabric Filters (Cont.) Direct Installation Costs • Foundation and Supports 0.04B • Erection 0.50B • Electrical 0.08B • Piping 0.01B • Insulation for auxiliaries 0.07B • Painting 0.04B • Site Prep As estimated • Buildings As Estimated Total Direct Installation Cost 1.74 B + SP + Bldg.

7. Indirect Capital Cost Factors for Fabric Filters • Engineering 0.10B • Construction and Field 0.20B • Contractor Fees 0.10B • Start-up 0.01B • Performance Tests 0.01B • Contingencies 0.03B Total Indirect Capital Cost 0.45B Total Capital Investment 2.19B + SP + Bldg.

8. Direct Equipment Cost Factors for ESP • Purchased Equipment As Estimated, A • Instrumentation 0.10A • Sales Tax 0.03A • Freight 0.05A • Total PEC 1.18A, B

9. Direct Capital Cost Factors for ESP (Cont.) Direct Installation Costs • Foundation and Supports 0.04B • Erection 0.50B • Electrical 0.08B • Piping 0.01B • Insulation for auxiliaries 0.02B • Painting 0.02B • Site Prep As estimated • Buildings As Estimated Total Direct Installation Cost 1.67 B + SP + Bldg.

10. Indirect Capital Cost Factors for ESP • Engineering 0.20B • Construction and Field 0.20B • Contractor Fees 0.10B • Start-up 0.01B • Performance Tests 0.01B • Model Study 0.02B • Contingencies 0.03B Total Indirect Capital Cost 0.57B Total Capital Investment 2.24B + SP + Bldg.

11. Adjusting Purchased Equipment Estimates • Sometimes Purchased Equipment Cost estimates for similar projects are used with adjustment for size and/or inflation • Size - 0.6 power rule • PEC1=PEC2[gas flow rate1/gas flow rate2]0.6 • Inflation – Use industrial construction cost inflation index such as CEN, Marshall and Swift, or Vatavuk index Limit adjustments to ~20% or 3-4 years

12. Annualizing Capital Costs • Capital costs need to be annualized to be useful in calculating $/ton • Key Parameters • Useful life ~20 years for most equipment. • DO NOT USE IRS depreciation life for equipment (~10 -15 years) • Cost of Capital ~7% for large firms, slightly higher for smaller firms. • DO NOT USE company internal expected rates of return or hurdle rates (~15-20%)

13. Annualizing Capital Costs • Applied like mortgage amortization table • Multiply Total Capital Investment by appropriate amortization rate for time and interest rate • Examples: • 15 years @ 7% = 0.1098 @ 9% = 0.1241 • 20 years @ 7% = 0.0944 @ 9% = 0.1096 • 25 years @ 7% = 0.0858 @ 9% = 0.1018 • DO NOT ALLOW: • 10 years @ 15% = 0.1993

14. Direct Annual Costs • Materials • Operating Labor • Supervisory Labor • Maintenance • Electricity • Water • Fuel • Waste Disposal

15. Indirect Annual Costs • Property Taxes • Insurance • Overhead • Administrative

16. Estimating Direct Annual Costs for Fabric Filters • Operating Labor – 2-4 hrs/shift • Supervisory Labor - 15% of Operator • Materials – N/A • Maintenance • Labor – 1-2 hrs/shift • Materials – 100% of Maintenance Labor

17. Estimating Direct Annual Costs for Fabric Filters (cont.) • Replacement Parts – filter bag cost depends on design • Cost of replacement bags and labor for replacement should be amortized 2-4 yrs • Utilities – local factors based on design and/or experience • Dust Disposal – often reused otherwise local landfill cost

18. Estimating Indirect Annual Costs for Fabric Filters • Overhead – 60% of labor costs (operating, supervisory, and maintenance) • Administrative – 2% of TCI • Property Tax – 1% of TCI • Insurance – 1% of TCI

19. Estimating Direct Annual Costs for ESP • Operating Labor – 3 hrs/day + Coordinator time • Supervisory Labor - 15% of Operator • Materials – N/A • Maintenance • Labor – ~15 hr/week • Materials – 1% of PEC

20. Estimating Direct Annual Costs for ESP (cont.) • Utilities – local factors based on design and/or experience • Dust Disposal – often reused otherwise local landfill cost

21. Estimating Indirect Annual Costs for ESP • Overhead – 60% of labor costs (operating, supervisory, and maintenance) • Administrative – 2% of TCI • Property Tax – 1% of TCI • Insurance – 1% of TCI

22. Recovery of Product Recovered products often have value • Ash – Road Bed Aggregate • CaSO4 – Gypsum/Wallboard, kiln feed • Metal fines – reprocessed • H2SO4 – Saleable product Recovered product should be added back at market price

23. References • EPA Cost Manual: http://www.epa.gov/ttn/catc/products.html#cccinfo • Clean Air Technology Center: • http://www.epa.gov/ttn/catc/products.html