Page 174 - Sustainable On-Site CHP Systems Design, Construction, and Operations

CHP Economic Analysis 147

is taken out of service; market value of the equipment (either resale or scrap), which in
turn can be affected strongly by the advance of related technologies new (stricter) regu-
lations; and the cost of demolition/removal of the item.

Equivalent Uniform Annualized Cost
Equivalent uniform annualized cost (EUAC) is an annual amount that is equivalent to
the sum of all of the cash flows of an alternative. EUAC can be useful metric in comparing
alternatives with different project cash flows.

Calculating Estimated Energy Use and Cost
The largest portion of the annual costs in the LCC analysis of a CHP plant (or the base
case) is the energy costs. The energy usage is determined from computer modeling.
Energy use is in the form of electricity or natural gas consumption. The electricity and
natural gas pricing or rate schedules may be complicated with respect to time of year,
location, type of use, on-peak, mid-peak, or off-peak periods. Electricity rates are
normally expressed in dollars per kilowatthour ($/kWh), while price of natural gas is
usually expressed in terms of dollars per therm or dollars per million Btu ($/therm or
$/MMBtu). Electricity rate schedules also include demand charge, which is an addi-
tional charge separate from the rate charge. Demand charge depends on the maximum
power usage during on-peak period, also referred to as demand period. The purpose of
demand charge is due to the cost of providing utility and distribution capacity to meet
a facility’s peak electrical requirement. Demand may be “ratcheted” back to a period of
greater use in order to provide the utility with revenues to maintain the production
capabilities to fulfill the greater-use requirement.
Utility-supplying companies use different methods to tailor their rates specific to
the needs of their consumers. The charge rate structure for gas and electricity cost for a
facility or plant is location-specific. Some of the different electrical rate structures used
are as follows (Maor 2008):

• Seasonal pricing. Utility charges usually vary by season for most utilities. These
variations may be indicated in their rate schedules through different demand
and energy charges in the winter and summer.
• Block pricing. Energy and demand charge may be structured in one of three
ways or combination of
• An inverted block pricing structure where the rate increases with increase in
consumption
• A declining block pricing method where the rate decreases with increase in
consumption
• A flat structure where the rate does not change with consumption
Most utility companies offer rates with more than one block pricing structure.
A utility provider may offer some combination of inverted, declining and flat
block rates, often reflecting seasonal energy cost differentials as well as use
differentials.
• Time of use rates (TOU). TOU is used for pricing of electricity only. The purpose
of the TOU is to inform the consumer regarding the cost of energy during off-peak,