Faculty of Science, Engineering, and Technology

Engineering Practice Academy

Cost-Benefit Analysis
CAPA0012-BUD-3

Mitchell MacIsaac 101090989

16 September 2019
1. Executive Summary

Air services Australia has tasked this group with determining the most optimised way of cooling
telecommunication systems in the area of Kalgoorlie. The project undertaken at Kalgoorlie has one potential
design to reduce the active cooling components. When put into a cost-benefit analysis the environmental,
timesaving, greenhouse gas emissions and spare part requirement reductions the cost-benefit analysis states
that the total NPV of the solution is $32,643. The analysis was unable to assign a dollar value to cost of material
transport to site and reduction in water usage.

2. Introduction

The best solution for Air Services Australia is one that effectively deals with the issues that they face at as small a
cost as possible and with as many benefits as well. To know what is an effective solution and what isn’t, a cost-
benefit analysis is done. A cost-benefit analysis allows the valuation of benefits or costs that might not
necessarily have a value associated with it. The process allows for insights beyond the immediate economic
advantages. In order for the Cost-Benefit analysis to be effective, the sourcing and details of where and why
things were given specific values must be determined.

3. Project Objectives

The scope of the project was to reduce the maintenance costs of running the shelters over its lifespan. In the
case of Kalgoorlie; solutions that looked at utilising passive cooling to reduce the active cooling components and
hence reduce cost were prioritised. The reason for a passively cooled system is due to the temperate conditions
that Kalgoorlie exists in; a dessert. The typical desert is hot during the day and cold during the night, with
temperatures in the tolerable range for the technology present in the area. The only issue of Kalgoorlie is the
large presence of dust, that can interfere with technology functions as it causes an increase in static electricity
present in the air. The presence of dust means that the shelter has to remain in a sealed box in order to not be
subjected to the dust that prevails over the surrounding areas.

4. Options analysed

The baseline solution has been analysed against the proposed solution.
There exists benefits and costs common to both choices, the benefits are similar as they refer to the reliability
and life span of the equipment that is being cooled in the shelters. Ensuring that equipment stay within
temperature by having an automatic temperature sensor allows not only for the technology within the shelter to
last as long as possible but increase reliability by ensuring the air conditioner is only on when it is required. The
reliability of the fan system has also been given a benefit as not needing replacement parts means that the cost
of the system does not have to be replaced where the baseline potentially might have extraneous costs.
There exists overlap in the costs of the solutions; Running the air conditioner counts as an active cooling
component, the cost of maintenance, greenhouse emissions and spare parts. The difference in costs primarily
resides in the reduced cost of maintenance with the solution that adds the heat vents and pipes. It also reduces
how often the air conditioner is running. The solution brings with it its own costs, in the cost of pipes, fans,
running the pipes and transport to site.

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5. Costs & Benefits
5.1. Baseline Case

Year
Benefits 1 2 3 4 5 6 7 8 9 10

Equipment stays
within temp 8000 8000 8000 8000 8000 8000 8000 8000 8000 8000
Automatic
temperature
response 8000 8000 8000 8000 8000 8000 8000 8000 8000 8000
Total Benefits 16000 16000 16000 16000 16000 16000 16000 16000 16000 16000

Year
Costs 1 2 3 4 5 6 7 8 9 10

Running Active
Cooling (Energy) 730 730 730 730 730 730 730 730 730 730
Maintainence
Labour 14400 14400 14400 14400 14400 14400 14400 14400 14400 14400
Greenhouse
Pollution 62.415 62.415 62.415 62.415 62.415 62.415 62.415 62.415 62.415 62.415
Spare Parts 75 75 75 75 75 75 75 75 75 75
Total Costs 15267.415 15267.415 15267.415 15267.415 15267.415 15267.415 15267.415 15267.415 15267.415 15267.415

Net Benefits 732.585 732.585 732.585 732.585 732.585 732.585 732.585 732.585 732.585 732.585
NPV @3.5% $6,092.62
BCR 1.05

BCR has been calculated as NPV of just benefits over NPV of just costs.
table 1.0 - NPV Table of the baseline solution

5.2. Option 1

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1. Vents/Pipes Option

Year
Benefits 1 2 3 4 5 6 7 8 9 10
Reduction in
Active 254.347177 254.347177
Cooling costs 254.3471773 3 254.3471773 254.3471773 254.3471773 254.3471773 254.3471773 3 254.3471773 254.3471773
Reduction in
Maintenance
Labour 7200 0 7200 0 7200 0 7200 0 7200 0
Reduction in
Spare Parts 75 45 75 45 75 45 75 45 75 45
Reduction in
greenhouse 21.7466836 21.7466836
gases 21.74668366 6 21.74668366 21.74668366 21.74668366 21.74668366 21.74668366 6 21.74668366 21.74668366
Total
Benefits 7551.093861 321.093861 7551.093861 321.093861 7551.093861 321.093861 7551.093861 321.093861 7551.093861 321.093861

Year
Costs ($) 1 2 3 4 5 6 7 8 9 10
Running the
two fans 58.4 58.4 58.4 58.4 58.4 58.4 58.4 58.4 58.4 58.4
Parts Fans 30 30 30 30 30
Total Costs 58.4 88.4 58.4 88.4 58.4 88.4 58.4 88.4 58.4 88.4

Net Benefits 7492.693861 232.693861 7492.693861 232.693861 7492.693861 232.693861 7492.693861 232.693861 7492.693861 232.693861
NPV @3.5% $32,643.73
BCR 54.66445411
BCR has been calculated as NPV of just benefits over NPV of just costs.
table 1.1 - NPV table of the proposed solution (Vents and Pipes)

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6. Costs and Benefits not monetised

Every attempt was made to monetise the costs and benefits of the solution, however, there exists
areas that can’t be monetised without detailed modelling. Some of these include a detailed look at
the cost of implementation of the solution and the secondary life of equipment post use. The
analysis also can’t look at the use of water from the air conditioner.

7. Assumptions

Baseline:
- $8,000 every year was assumed for the benefit of the equipment inside the shelter staying at
a good temperature, due to the automatic temp response to keep it there, as this is very
expensive
- Offsetting carbon is approximately $10 per tonne
- A split system will emit about 5.7kg of per 8 hours (Kumar, N/A). This has been used to
equate the greenhouse pollution figure per year.
- A given value of $2 per day to run the active cooling was given by correspondent, and as
they run 24/7, 365 days a year, this equals to $730 a year to run the air conditioners
- There is a given value of $150 per hour per technician to do the maintenance on the system,
this also takes three full 8-hour days. This is conducted 2 times a year. Thus $14400 per year.
- An assumption of $75 every year for the active cooling system has been guessed based on
the value of an air conditioner.
Vent w fans and Heat Pipes
- $8,000 every year was assumed for the benefit of the equipment inside the shelter staying at
a good temperature, due to the automatic temp response to keep it there, as this is very
expensive
- Offsetting carbon is approximately $10 per tonne
- A split system will emit about 5.7kg of per 8 hours (Kumar, N/A). This has been used to
equate the greenhouse pollution figure per year.
- As the maintenance of the system is effectively reduced by 67%, the scheduled maintenance
of the system can be done 3 times every two years, this means that the cost of maintenance
can be equated to $7200 for year 1 and $14400 for year 2. This then continues this pattern.
- The above $730 per year for energy cost has been multiplied by 0.651579209151952 as this
is how effective the solution is at reducing the energy required by the air conditioner to cool
the room as determined by experimentation. where 100% (1) is the energy required in the
baseline version.
- This percentage decrease has also been used in greenhouse gas emissions and the air
conditioner parts as reducing the use of the active components has led to reductions in the
emission of CO2 and replacement of parts.
- The running cost of the two fans has been calculated as running 24/7, 365 days a year at
$0.16 for the two fans. This cost has been calculated previously.
- The parts for the fans are an assumed replacement of fan blades every two years as the
units will not need to be replaced themselves for at least 10 years.

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8. Conclusion & Recommendation

The Cost-benefit analysis above dictates that the most suitable option to save money is the passive
cooling one. This is due to the design options showing an NPV of $32,643.73 over the period of 10
years. This is due to all the decreased maintenance costs of the passive cooling design being
approximately a third reduction from the baseline.
The suggestion made comes with quite a few assumptions made as the actual cost of the machinery
is hard to determine, it is with great confidence that the optimised solution involves the
implementation of heat pipes though as this is backed up with theoretical and experimental data
suggesting that the ventilation pipe can cut the usage of the air conditioner by 34.84%. This has
been rounded down to the one third reduction as a contingency for errors. The environmental
impact of having a passive solution also helps the marketing of the company for environmental
friendliness and reaching carbon emission targets.

9. References

Kumar, R., Aggarwal, R.K., Gupta, D., Sharma, J.D. (N/A) Carbon Emissions from air-Conditioning.
American Journal of Engineering Research (AJER). vol. 2, no. 4, pp. 72-74.

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