ETL 1110-1-181

12 Jan 98

(0 x 13.09).

i. Simple Payback. The first cost difference divided by the

incremental savings is the simple payback. Typically, the point at

which an alternative becomes attractive is where the simple payback is

equal to 10 years or less. Simple payback, however, does not take into

account any increases in energy costs nor any increases in interest

rates over time. Because of this, simple payback should only be used as

an initial indicator as to the selection of an alternative (the SIR

should be the decisive comparison). In Table C4 for example, the simple

payback for selecting a chiller with an efficiency of 0.65 kW/ton verses

selecting a chiller with an efficiency of 0.70 kW/ton (both operate with

an energy cost of 0.02 $/kWh) is equal to 10 years (,000 / 0).

j. Net Present Value (NPV). The first cost of a chiller minus the

total discounted savings is the NPV. In Table C4 for example, the NPV

of a chiller with an efficiency of 0.58 kW/ton operating with an energy

cost of 0.02 $/kWh is equal to ,717 (,000 - ,618 -
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,571 -

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,047 -
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,047). In comparing alternatives using NPV the alternative

with the smaller NPV is typically the one selected, however, for these

calculations the primary decision of choosing a particular alternative

is based upon the Savings-to-Investment Ratio (SIR) as defined in the

following paragraph.

k. Savings-to-Investment Ratio (SIR). The discounted savings

divided by the first cost difference is the SIR. In the example

calculations, the SIR was the value that was used to determine when one

alternative was more economical than another. The optimum alternative

is established when the SIR first exceeds the value of 1.00.

C-4. SUMMARY OF RESULTS. Figures C1 and C2 as shown on the following

pages are graphical representations of the results of these

calculations. Note in Figure C1 that the optimum efficiencies varies

significantly with EFLH and the chiller capacities. For example, the

optimum IPLV to specify for a 200 ton chiller that operates for 1,000

EFLH at 0.03 $/kWh is 0.62 whereas the optimum IPLV to specify for a 200

ton chiller that operates for 4,000 EFLH at 0.08 $/kWh is 0.58. Table

C2 is a numerical representation of the results of these calculations.

Note in Figure C2 that the optimum efficiency for all EFLHs and energy

costs is 0.58. The high efficiency chiller was alway economical because

of the demand charge factors that were included. Designers performing

economical comparisons between different efficiency liquid chillers

should always research and incorporate applicable demand charges due to

their large impact on the comparisons.

C-3

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