HVAC Lifecycle Cost SIR Calculation

[kaconnol]

I posted in here because I wasn't sure if anyone would see it in the engineering economics forum. I'm having trouble with the Savings to Investment Ratio (SIR) for a government project.

From NIST Handbook 135, Sec. 6.2.2 Link

SIR (Alt1 to Baseline) = Delta Energy / (Delta Investment + Delta Replacement Cost)
-Delta Energy = Energy savings for alternative compared to Baseline
-Delta Investment = Additional initial investment cost for alternative compared to baseline
-Delta Replacement = Additional replacement cost for alternative compared to baseline

All numbers are in present value, O&M are equal between alternatives, Water and Resale are not applicable.

When I plug in the number for my evaluation I get a negative SIR.

Alt 1
-Initial = 477,000
-Energy = 518,000
-Replacement = 161,000

Baseline
-Initial = 497,000
-Energy = 545,000
-Replacement = 158,000

SIR = (545-518) / [(477-497)+(161-158)]
SIR = 27 / (-20+3)
SIR = -1.59

I can't find any discussion on a negative SIR value. Do I even need to calculate the SIR since there is no additional investment cost associated with the more efficient alternative design? Or do I set the additional investment cost to 0 and calculate it that way?


Kevin Connolly, PE

 

[RossABQ]

Why does Alt 1 cost less initially, but has a higher replacement cost?

 

[kaconnol]

Because some of the system components have to be replaced more frequently in the 30 year study period.

Kevin Connolly, PE