life-cycle costing (LCC) approach

Introduction
The cost of energy and water is a major component of building operating costs. Replacement or upgrading of M & E system in the occupation phase of a building life cycle can be costly to an asset/fund manager. Therefore, an economic evaluation of these costs is necessary to give those involved in the design and ownership of a building some basis for selecting the best investment in buildings or building systems prior to the start of development.

To date, literatures have suggested several methods being used to evaluate the economic performance of investment projects over a period of time. Life-cycle costing (LCC) is one method now being considered for such an evaluation of building investment projects.

Definition
The term "Life-Cycle Costing" is quite broad and encompasses all those techniques that take into account both initial costs and future costs and benefits (savings) of an investment over some period of time. They differ, however, in their applications, which depend on various purposes of investment projects.

Examples
Some examples on how LCC can be applied to building energy efficiency in different situations:

• For new buildings
  The LCC technique can be used to evaluate (or rank) the options concerning design, sites, and materials on the basis of life-cycle costs for building energy efficiency.
  
  
• For existing buildings
  · how to select the best energy conservation feature among various options,
  · how much investment should be made in a single energy conservation feature, and
  · which is the most desirable combination of various energy conservation features.

Further Explanation Note On Energy Conservation

1. A choice can be made among various options of the energy conservation measure that fetches maximum savings in the form of reduction in the life-cycle costs. For instance, a choice can be made between double-glazed and triple-glazed windows. Similarly, a life-cycle cost comparison can be made between a solar heating system and a conventional heating system. The one that maximizes the life-cycle costs of providing a given level of comfort should be chosen.
   
   
2. This application of the LCC techniques to energy conservation is related to determining the optimum level of the chosen energy conservation measure.
   
   
3. Sometimes energy conservation measures involve the combination of several features. The best combination can be determined by evaluating the net life-cycle costing effects associated with successively increasing amounts of other energy conservation measures. The best combination is found by substituting among the choices until each is used to the level at which its additional contribution to energy cost reduction per additional dollar is just equal to that for all the other options.