Life-cycle costing (LCC) is used with building energy simulation in order to justify energy efficiency upgrades. Many alternative building technologies that result in energy savings cost more initially, or may cost more to maintain, than traditional solutions. In order to justify selecting these energy savings technologies, it is essential to combine both initial and future costs in the decision process. Using life-cycle costs provides a framework to combine initial costs and future costs into a single combined measure, called the “present value.” Present value is a metric that combines all costs and reduces (or discounts) those costs that occur in the future. Discounting future costs is based on the principal of the time value of money.
The calculations are based on discounting the future values according to normal life-cycle costing techniques as described in NIST Handbook 135 Life-Cycle Costing Manual for the Federal Energy Management Program.
The following is a list of life-cycle costing related data that provide a way to describe the parameters and costs associated with the life-cycle of a building or building system. These objects are organized by tabs on the Life Cycle Cost dialog:
The utility costs and first costs are used along with other current and future costs input using the Recurring costs and Non-recurring cost data and these are combined into the present value life-cycle cost metric. The Parameters object establishes the set of assumptions for the analysis along with Use price escalation (often from databases) and Use adjustment objects.
The results of using the LCC analysis are included automatically in the Summary report under “Life Cycle Cost Report.” This report shows the costs and the timing of costs, often called “cash flows,” along with the present value in several different tables. The tabular results show the present value of all current and future costs.