hecm phase 6 cost and prioritisation workshop 24 th september 2010
Post on 11-Jan-2016
47 Views
Preview:
DESCRIPTION
TRANSCRIPT
HECM Phase 6
Cost and Prioritisation Workshop
24th September 2010
Agenda
Session 1: Introduction and context– Timeline– Where are we now?– HEFCE Guide– The Carbon Management Plan (CMP)– Estimating Capital Cost of Projects – Understanding Financial and Carbon Metrics
Session 2: Prioritising and the CMPR– Prioritising Projects Using Combined Carbon &
Financial Metrics – Getting to Grips with the CMPR– Recap Progress Against Target– Next steps
Timeline
HECM6 – the timeline
We are here
November
Where are we now?
Key Statistics
Baseline 2008/9 - 42.43 tonnes2005 Baseline – 29.08 tonnes
Target 2008 to 2015 – 35%Target 2008 to 2020 – 45%
Total Carbon To Identify in CMP (to 2015)–14.85 tonnes
Summary of Carbon Emissions and Targets
-
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
30,000,000
35,000,000
40,000,000
45,000,000
50,000,000
2005 2010 2015 2020
Year
Ca
rbo
n (
kg
)
Carbon Emission to Date CMP Planned ReductionCIF2 Target ReductionConstuction Lines
Summary of Carbon Emissions and Targets
-
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
2005 2010 2015 2020
Year
Ca
rbo
n (
kg
)
Projected emissions in 2020 Target Year –
xxx tonnes
Emissions in 2005/06
Baseline Year
xxx tonnes
Emissions in 2009/10
xxx tonnes
Difference between 2009/10 emissions and projected 2020 emissions (Percentage Reduction – xx %)
Difference between emissions in 2005/06 and projected 2020 emissions (Percentage Reduction – XX%)
Projected emissions in 2014/15 xx tonnes
Where are we now?
Current Projects
Number of ProjectsTotal Carbon IdentifiedWho is responsible for each project?How close do these projects bring you to your target?Are there any current projects we’ve missed?
Target 35%Target 35%
Current Projects xx%
Current Projects xx%
RAPProjects YY%
RAPProjects YY%
Opps WorkshopProjects YY%
Opps WorkshopProjects YY% Gap
Projects from the Opportunities Workshop
Number of ProjectsTotal Carbon Identified So FarWhich projects are you investigating?Who is responsible for each project?How close do these projects bring you to your target?
Target 35%Target 35%
Current Projects xx%
Current Projects xx%
RAPProjects YY%
RAPProjects YY%
Opps WorkshopProjects YY%
Opps WorkshopProjects YY% Gap
RAP Tool Projects
Top 10 RAP Tool ProjectsTotal Carbon Identified So FarWho is responsible for each project?How close do these projects bring you to your target?
Target 35%Target 35%
Current Projects xx%
Current Projects xx%
RAPProjects YY%
RAPProjects YY%
Opps WorkshopProjects YY%
Opps WorkshopProjects YY%
Gap
Closing the Gap
What actions need to be completed to close the gap?
Target 35%Target 35%
Current Projects xx%
Current Projects xx%
RAPProjects YY%
RAPProjects YY%
Opps WorkshopProjects YY%
Opps WorkshopProjects YY%
Gap
HEFCE Guide
Alignment with CIF2
Baseline
Mobilisation and Objective Setting
Carbon Management Plan
Prioritisation of Opportunities
Costing
Opportunities Identification
Target Setting
Implement Plan
Approve Plan
Identification and Quantification
Baseline, Forecasts, Targets
Mobilise Organisation
Baseline
Mobilisation and Objective Setting
Carbon Management Plan
Prioritisation of Opportunities
Costing
Opportunities Identification
Target Setting
Implement Plan
Approve Plan
Identification and Quantification
Baseline, Forecasts, Targets
Mobilise Organisation
HEFCE Good Practice Guide
Costing– CAPEX, OPEX– Need for life-cycle costing– Established investment appraisal protocols
and procedures need to be applied– Simple payback as a minimum, need for
NPV for larger projects– Need also to look at cost of inaction
Prioritisation– Need internally agreed criteria– Need to consider cost/affordability and impact/savings– Overlap and interaction with other strategies and priorities– MACC
The Carbon Management Plan (CMP)
The Carbon Management Plan (CMP)Section 4 - Projects
Capital OperationalFinancial (Gross) tCO2
Net Present Cost(£)
1Secondary glazing - Offices £450,000 £8,010 54.5 tCO2
does not payback £300,854 0.72% 2012
2Voltage optimisation - Block A £90,000 £24,440 133. tCO2 3.7 -£215,756 1.76% 2009
3Cavity wall insulation - Research Centre £100,000 £15,000 102.1 tCO2 6.7 -£179,300 1.35% 2010
4
Upgrade to condensing boilers - Swimming pool hall £200,000 £22,291 151.7 tCO2 9.0 -£215,061 2.00% 2013
5Video and web conferencing £9,000 £2,049 £6,058 14.6 tCO2 2.2 -£9,625 0.19% 2010
6 Automatic Meter Reading £90,000 £28,545 £123,484 753.8 tCO2 0.9 -£738,249 9.96% 2010
7Lighting upgrades - Residential Hall A £100,000 £90,000 489.8 tCO2 1.1 -£695,825 6.47% 2012
Ref Project Lead
Cost Annual Savings (yr 1)
Pay back (yrs) % of TargetImplementation
Year
2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 TOTAL
Annual cost saving
£0 £215,743 £384,936 £434,897 £442,473 £450,047 £843,991 £2,772,087
Annual tCO2 saving
113 2,510 3,435 4,171 4,242 5,975 7,923 28,369
% of baseline CO2 saving 0.46 10.27 14.05 17.06 17.35 24.44 32.41
2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 TOTAL
Annual costs:
£1,114,032 £65,590£858,61
3£858,962 £178,096 £0 £0 £0 £3,075,293
Committed funding:
£1,114,032 £65,590£670,03
4£783,096 £178,096 £0 £0 £0 £2,810,848
Unallocated funding
£0 £0£188,57
9£75,866 £0 £0 £0 £0 £264,445
Savings
Funding
The Carbon Management Plan (CMP)Section 5 - Financing
CMPR flowchart
Import baseline
Review payback graphic
Check cost estimates
Initial analysis
Advanced analysisReview MACC
Review Reduction
Plan
Complete Project List
Review summary page and
CMP outputs
Estimating capital costs
Estimating Costs of Projects
RAP toolSalixRules of ThumbCarbon Trust SurveysOrganisation’s own experience – use your teamQuotes from suppliers
Understanding financial and carbon metrics
Metrics for analysing project effectiveness
Initial Analysis– Simple payback– Salix £/tonne CO2 lifetime
Advanced Analysis– Net present cost– Cost effectiveness ratio (£/tonne CO2)
– Internal rate of return (IRR)
Use to……. 1. establish financial case2. prioritise projects
Costs
Capex – capital expenditure/costs– Single one off costs in year 0, usually includes
design, materials, technologies, installation, commissioning etc.
Opex – Operational expenditure/costs– Usually annual costs for running a project, e.g.
maintenance and servicing, lease costs or staff resource costs. Does not normally include energy costs for carbon reduction projects as these are accounted for in the savings data
– There may also be opex savings through some projects
Basic metrics
CO2 savings in year 1 (tCO2 or kgCO2)– The amount of carbon savings expected from a
project in the first full year of operation.
Simple Payback (yrs)– How long a project takes to pay the Capex back
through the financial savings achieved (yrs)
Capex(£)Annual financial savings (£/yr) – Opex (£/yr)
-£40,000
-£20,000
£0
£20,000
£40,000
£60,000
£80,000
£100,000
0 1 2 3 4 5 6
Year
Cas
h f
low
Simple payback
Best output Value tends to zero
Worst output Does not pay back – savings not realised during the lifetime of project
No financial savings – need to update p/kWh costs in the Conversion Assistant tab.
Exercise 1
Payback exerciseProject Capex Opex £ Savings
(gross)Payback (yrs)
Secondary glazing - Offices
£450,000 £8,010
Voltage optimisation - Block A
£90,000 £24,440
Cavity wall insulation - Research Centre
£100,000 £15,000
Upgrade to condensing boilers - Swimming pool hall
£200,000 £22,291
Video and web conferencing
£9,000 £2,049 £6,058
Automatic Meter Reading £90,000 £28,545 £123,484
Lighting upgrades - Residential Hall A
£100,000 £90,000
ExamplesProject Capex Opex £ Savings
(gross)Payback (yrs)
Secondary glazing - Offices
£450,000 £8,010 does not payback in project lifetime
(25 yrs)
Voltage optimisation - Block A
£90,000 £24,440 3.68
Cavity wall insulation - Research Centre
£100,000 £15,000 6.67
Upgrade to condensing boilers - Swimming pool
£200,000 £22,291 8.97
Video and web conferencing
£9,000 £2,049 £6,058 2.24
Automatic Meter Reading £90,000 £28,545 £123,484 0.95
Lighting upgrades - Residential Hall A
£100,000 £90,000 1.11
Payback
0.95 1.11
2.24
3.68
6.67
8.97
-
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
10.00
6 7 5 2 3 4
Project Ref. Number
Pay
bac
k
Simple Payback Graph in CMPR
Project Ref. Number Description of Project
Simple Payback (years)
6 Automatic Meter Reading 0.95
7Lighting upgrades - Residential Hall A 1.11
5 Video and web conferencing 2.24
2 Voltage optimisation - Block A 3.68
3Cavity wall insulation - Research Centre 6.67
4Upgrade to condensing boilers - Swimming pool hall 8.97
Further metrics
Pounds per tonne CO2 (£/tCO2)
– Capex per tonne of CO2 saved in year 1
Capex (£)Tonnes CO2 saved year 1 (tCO2)
Lifetime CO2 savings (tCO2)– The amount of carbon likely to be saved over the
lifetime of a project
Tonnes CO2
(year 1)x Project lifetime
(yrs)Adjusted to account for ‘persistence’ of CO2
savings in CMPR. (default 0%)
Salix metrics
Best output Value tends to zero (low £, high CO2)
Worst output Large positive number (high £, low CO2)
Persistence factor
Capex (£)=
• Provided by Salix (see References and lookup tab in CMPR)• Effectively a reduced lifetime of the technology
=£↓
↑CO2Tonnes CO2
(year 1)x
Salix pounds per tonne CO2 lifetime (£/tCO2 LT)
Financial metrics
Net Present Value (NPV)– The present value of an investment's future net
cash flows minus the initial investment.
Net Present Cost– The negative value of the NPV – Works better for energy saving projects as a larger
negative number shows greater savings
= Capital Cost + Operating Cost – Savings (discounted over project lifetime)
Financial Metrics
Discount rate– The interest rate used in determining the present value
of future cash flows, or – Multiplier that converts anticipated returns from an
investment project to their present value.
– For the public sector this is usually 3.5% as set by UK Treasury Green Book, 2008
Example
you expect £1,000 in one year's time. To determine the present value of this (what it is worth to you today) you would need to discount it by a particular rate of interest. Assuming a discount rate of 10%, the £1,000 in a year's time would be the equivalent of £909.09 to you today
(£1000/[1.00 + 0.10]).
Option ADiscount rate (r ) 3.5%
Year (n) 0 1 2 3 4 5factor [=1/(1+r)^n] 1.00 0.97 0.93 0.90 0.87 0.84Capex 9,000OpexSavings -3,000 -3,000 -3,000 -3,000 -3,000Net cash flow 9,000 -3,000 -3,000 -3,000 -3,000 -3,000Discounted cash flow 9,000 -2,899 -2,801 -2,706 -2,614 -2,526 -4,545
Net Present CostOption BDiscount rate (r ) 3.5%
Year (n) 0 1 2 3 4 5factor [=1/(1+r)^n] 1.00 0.97 0.93 0.90 0.87 0.84Capex 9,000OpexSavings -1,500 -1,500 -1,500 -1,500 -1,500Net cash flow 9,000 -1,500 -1,500 -1,500 -1,500 -1,500Discounted cash flow 9,000 -1,449 -1,400 -1,353 -1,307 -1,263 2,227
Net Present Cost
Net Present Cost examplesfactor [=1/(1+r)^n]
Other rates in the CMPR
Inflation rate– 3.1% (Consumer Prices Index, CPI – July 10)– Use an appropriate rate to reflect rising energy
costs, not just overall inflation
‘Persistence’ rate– How quickly the opportunities’ energy savings
degrade over time . – E.g. a draught proofing project saves 1,000 kgCO2
in year 1, but thereafter saves 3% less each year due to deterioration. So year 2 will save 970 kgCO2
Amending the rates in the CMPR
Cost effectiveness ratio (£/tonne CO2)
Best output Large negative number
Worst output Large positive number
Lifetime CO2 Savings
Net Present Cost= =
-£
↑CO2
Cost effectiveness ratio (£/tonne CO2)
Cost effectiveness ratioProject Capex Opex £ Savings
(gross)Cost effectiveness ratio(£/tonne CO2)
Secondary glazing - Offices
£450,000 £8,010 £248.40
Voltage optimisation - Block A
£90,000 £24,440 -£115.92
Cavity wall insulation - Research Centre
£100,000 £15,000 -£79.05
Upgrade to condensing boilers - Swimming pool hall
£200,000 £22,291 -£63.81
Video and web conferencing
£9,000 £2,049 £6,058 -£134.64
Automatic Meter Reading £90,000 £28,545 £123,484 -£102.42
Lighting upgrades - Residential Hall A
£100,000 £90,000 -£148.59
Understanding Financial Metrics
Internal Rate of Return (IRR)– The discount rate often used in capital budgeting that
makes the net present value of all cash flows from a particular project equal to zero.
– The higher a project's IRR the more desirable it is to undertake the project.
– IRR can be used to rank several prospective projects being considering.
Break
Agenda
Session 1: Introduction and context– Timeline– Where are we now?– HEFCE Guide– The Carbon Management Plan (CMP)– Estimating Capital Cost of Projects – Understanding Financial and Carbon Metrics
Session 2: Prioritising and the CMPR– Getting to Grips with the CMPR– Prioritising Projects Using Combined Carbon &
Financial Metrics – Recap Progress Against Target– Next steps
Getting to grips with the Carbon Management projects Register (CMPR)
CMPR flowchart
Import baseline
Review payback graphic
Check cost estimates
Initial analysis
Advanced analysisReview MACC
Review Reduction
Plan
Complete Project List
Review summary page and
CMP outputs
Initial analysis
Advanced Analysis
Prioritising Projects Using Combined Carbon & Financial Metrics
CMPR flowchart
Import baseline
Review payback graphic
Check cost estimates
Initial analysis
Advanced analysisReview MACC
Review Reduction
Plan
Complete Project List
Review summary page and
CMP outputs
Sort by Payback
Payback
0.070.50 0.61
1.16
1.85 1.85 2.05
2.692.98 3.03
3.58 3.703.98 4.05 4.28
4.695.10
6.82
7.588.09
8.559.11
-
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
10.00
16 46 26 45 37 31 41 28 17 14 40 33 27 29 13 35 39 36 15 44 42 32
Project Ref. Number
Pay
bac
k
Implement
Marginal Abatement Cost Curve(MACC)
Implement
Marginal Abatement Cost Curve for top 100 opportunities
129
16 14 10 8 13 3 18
5 7 6 15 11 201 4 19 17
2
-£500.00
-£400.00
-£300.00
-£200.00
-£100.00
£-
£100.00
£200.00
12
Project reference
Net
Sp
ecif
ic C
ost
£/t
C0
2
0
500
1000
1500
2000
2500
Cu
mu
lati
ve C
02
Sav
ing
s
Cost effectiveness ratio (£/tonneCO2)
Cumulative CO2 Savings(tonnes)
Cost
eff
ecti
ven
ess r
ati
o £
/tC
O2
Exercise 2
Draw a MACCProject Cost effectiveness
ratio(£/tonne CO2) CO2 savings in yr 1 (tonnes)
Secondary glazing - Offices
£248.40 54.5
Voltage optimisation - Block A
-£115.92 133.0
Cavity wall insulation - Research Centre
-£79.05 102.1
Upgrade to condensing boilers - Swimming pool hall
-£63.81 151.7
Video and web conferencing
-£134.64 14.6
Automatic Meter Reading -£102.42 753.8
Lighting upgrades - Residential Hall A
-£148.59 489.8
Something like this…..
Marginal Abatement Cost Curve for top 100 opportunities
7 5 2 63 4
1
-£200.00
-£150.00
-£100.00
-£50.00
£-
£50.00
£100.00
£150.00
£200.00
£250.00
£300.00
7
Project reference
Co
st E
ffec
tive
nes
s R
atio
£/
tC0 2
0
200
400
600
800
1000
1200
1400
1600
1800
Cu
mu
lati
ve C
02
Sav
ing
s
Cost effectiveness ratio (£/tonneCO2)
Cumulative CO2 Savings(tonnes)
Recap progress against target
CMPR flowchart
Import baseline
Review payback graphic
Check cost estimates
Initial analysis
Advanced analysisReview MACC
Review Reduction
Plan
Complete Project List
Review summary page and
CMP outputs
The Quantification Process Map
Check Progress
Is there a short fall?
Consider IncreasingTarget
Quantify Highest Priority Opportunity
Do you have opportunities
to quantify?Generate More Ideas
Yes
Yes
No
No
Project Maturity
What stage are your projects at now? – RAP Tool Estimates?– Quantified energy?– Etc…
80% or more
Reduction plan
Carbon progress against target
-
5,000
10,000
15,000
20,000
25,000
30,000
35,000
2008 2009 2010 2011 2012 2013 2014
YearPredicted Business as Usual Emissions
Target Emissions
Emissions in chosen plan
Financial progress
-£4,000,000
-£2,000,000
£-
£2,000,000
£4,000,000
£6,000,000
£8,000,000
2008 2009 2010 2011 2012 2013 2014
Capex for year
Total net cost savings for this year (Incl OpEx)
Cumulative net present cost
Next steps
Linking to the CMP
‘CMP outputs’ tab
Capital OperationalFinancial (Gross) tCO2
Net Present Cost(£)
1Secondary glazing - Offices £450,000 £8,010 54.5 tCO2
does not payback £300,854 0.72% 2012
2Voltage optimisation - Block A £90,000 £24,440 133. tCO2 3.7 -£215,756 1.76% 2009
3Cavity wall insulation - Research Centre £100,000 £15,000 102.1 tCO2 6.7 -£179,300 1.35% 2010
4
Upgrade to condensing boilers - Swimming pool hall £200,000 £22,291 151.7 tCO2 9.0 -£215,061 2.00% 2013
5Video and web conferencing £9,000 £2,049 £6,058 14.6 tCO2 2.2 -£9,625 0.19% 2010
6 Automatic Meter Reading £90,000 £28,545 £123,484 753.8 tCO2 0.9 -£738,249 9.96% 2010
7Lighting upgrades - Residential Hall A £100,000 £90,000 489.8 tCO2 1.1 -£695,825 6.47% 2012
Ref Project Lead
Cost Annual Savings (yr 1)
Pay back (yrs) % of TargetImplementation
Year
Project Definition Template‘Appendix B’
Project:
Reference:
A short name for the project
It would help the Carbon Trust if you also use the following reference:
LA7-[first three letters of your authority]–[sequence number, e.g. 001]
but you may choose to use a unique reference of your own.
Owner (person) Name of the person responsible for delivering the project
Department Which part of the organisation the project sits within
Description A short description of the project, no more than a paragraph
Benefits Financial savings: £ [x]
Payback period: [x] years
CO2 Emissions reduction: [x] tonnes of CO2
% of target – the percentage of your CO2 saving target will this project annually contribute
Give an idea of how confident these estimates are, eg 1st pass using rules of thumb, costed by suppliers etc.
Funding Project cost, e.g. the initial cost of implementing the project
Operational costs, e.g. annual maintenance or running costs
Source of funding: internal, external, investment criteria to be met etc.
Say how /when decision on funding will be made
Resources Additional resource (e.g. people) requirements to enable delivery and where these will come from
If this project will be delivered within current resources, say so
Ensuring Success
Key success factors, or things that will need to happen for this project to succeed
Principal risks: technical, financial (eg what happens if the project is insufficiently resourced), etc.
Measuring Success
Metrics for displaying performance or achievement
When success will be measured / evaluated
Timing Milestones / key dates e.g.
o start date: dd/mm/yyyy
o completion date (when it will deliver savings): dd/mm/yyyy
o interim deliverable / decision points
[you could also lay these out as a milestone chart for ease and clarity]
Notes
Thank you
top related